Article 1. Formation And Organization of California Insurance Code >> Division 2. >> Part 1. >> Chapter 5. >> Article 1.

Two hundred fifty (250) or more persons residing in one county of this State may incorporate for the purpose of forming a mutual fire insurer upon all such persons agreeing to:
  (a) Secure fire insurance from such insurer when organized through policies to be issued by such insurer having face amounts aggregating one million five hundred thousand dollars ($1,500,000) or more covering their property of the same or greater value. Such insurer shall retain net of reinsurance aggregate amounts on such policies at least equal to such amount.
  (b) Pay the premium for such insurance immediately upon notification by such insurer that it is prepared to issue such policies providing such insurance.
  (c) Pay to the insurer immediately upon its incorporation a special deposit of at least one dollar ($1) on each one hundred dollars ($100) of insurance applied for under (a) above, such special deposit to be applied to future premiums payable by such persons either after the expiration of three years or upon the commissioner determining that the insurer has a surplus earned by insurance operations in the amount of at least fifteen thousand dollars ($15,000), whichever occurs first.

If such persons have not performed all acts and secured all agreements necessary to complete the incorporation of such insurer within one year from the date of their first securing an agreement from any person, all proceedings and agreements in connection with such incorporation shall become null and void and all persons entering into such agreements shall be released therefrom.

Any county mutual fire insurer heretofore or hereafter incorporated and doing business under the provisions of this chapter may, if it has issued an insurance policy against fire, and as long as it maintains an excess of admitted assets over liabilities of at least fifty thousand dollars ($50,000), endorse such policy to extend the coverage thereof to include insurance of the kinds included in Sections 107, 112, 120 and 122 (excluding liability insurance).

Upon the payment in advance of two thousand nine hundred fifty dollars ($2,950) cash, lawful money of the United States, to the commissioner for all services to be rendered by him in the matter of organization of the insurer, such persons shall file with the commissioner a declaration of their intention to incorporate for the purposes expressed in Section 5050. The declaration shall be signed by all of such persons, and shall contain a copy of the articles of incorporation proposed to be adopted.

The commissioner shall examine the proposed articles of incorporation. If they conform to this chapter he shall deliver to such persons a certificate permitting them to incorporate such insurer. The certificate shall be directed to the clerk of the county in which such insurer is proposed to be organized and shall contain a copy of the proposed articles of incorporation.

The duly executed articles of incorporation and a copy of the certificate of the commissioner shall be filed with the Secretary of State in conformity with Section 200 of the Corporations Code. Upon organizing under the articles of incorporation and obtaining from the commissioner a certificate of authority, the county mutual fire insurer may carry on a fire insurance business as provided by this chapter. The term and nature of the certificate of authority, annual renewal fee therefor, the due date and delinquent date of the fee shall be the same as prescribed by Article 3 (commencing with Section 699) of Chapter 1 of Part 2 of Division 1 for stock and mutual insurers governed by that article.

The articles of incorporation and certificate obtained by any county mutual fire insurer operating under the provisions of this chapter are subject to control and modification by the Legislature of this State.

The by-laws and all amendments thereto shall be filed with the commissioner within sixty days after their adoption.

Such insurer shall have not less than seven, nor more than 11 directors, a majority of whom shall constitute a quorum to do business. The by-laws or the articles may provide or be amended to provide for either concurrent terms of one year for all directors or staggered terms of not more than five years. If provision is made for staggered terms, such terms shall, except for the first directors elected for staggered terms, be uniform for all directors and so arranged that as nearly equal a number of directors as is feasible shall be elected each year. The directors shall be elected by ballot from the members of the insurer. They shall hold office for the terms for which they were elected, and until their successors are elected and qualified.

The annual meeting of the members of the insurer shall be held on the second Monday of February of each year, unless its board of directors fixes the time for the annual meeting in which event the board may select any day between the second and third Mondays of February.

In the election of the first board of directors each member shall be entitled to one vote. At every subsequent election each member shall be entitled to as many votes as there are directors to be elected.

A member may cast his votes in person or by proxy, distributing them among the directors to be elected, or among a less number of the directors, or cumulating them upon one candidate, as he sees fit.

The directors shall elect, from their own number, a president and a vice president. They shall also elect a treasurer and a secretary, who need not be members of the insurer nor natural persons. All of such officers hold their office for one year from the date of their election, and until their successors are elected and qualified.

The treasurer and secretary shall give bonds to the insurer for the faithful performance of their duties, in such amounts as are prescribed by the board of directors.

No incorporators or persons acting in their behalf or other persons participating in the management of such insurer shall advance to or for the subscribers or members any premium, special deposit or assessment required to be paid. It is the intent of this chapter that no person shall have a proprietary interest in such insurer, except equally with all other members.

No such insurer may enter into any general agency or management contract whereby it authorizes or delegates to a person the right to assume virtual control of its operations or of the production of business for it in this State or any specified portion thereof.