ASSIGNMENT 1 - SECTION A - CA INSURANCE ETHICS & CODE

Changes of Business Organization Part 2 of 2

*At least one person who exercised the agency or brokership powers of the predecessor co-partnership continues to exercise the agency or brokership powers of the surviving or continuing co-partnership.. * That application for registration be signed by a general partner. To return the old license with signatures of the original members to the commissions is not one of the required duties.

Filing of License Renewal Application

An application for the renewal of a license, filed on or before the last day of the period for which the previous license was issued, accompanied by the applicable renewal fee and subject to completion of all required continuing education, entitles the applicant to continue operation under the exciting license for 60 days after its specified expiration date, or until notified by the department that the renewal application id deficient, whichever comes first.

Alien Insurer

An insurer organized under the laws of any jurisdiction other than a state of the United States, such as Great Britain or Canada.

Person

Broadly defined as any person, association, organization, partnership, business trust, limited liability company or corporation.

Foreign Insurer

One not organized under the laws of California, whether or not admitted, with their home office in another state.

Hazard

Something that increases the risk. Hazards may be physical, moral or morale.

Purpose and Applications of the California Insurance Information and Privacy Protection Act (Purpose of Article)

* To establish standards for the collection, use and disclosure of information gathered in connection with insurance transactions by insurance institutions, agents or insurance-support organizations; * To maintain a balance between the need for information by those conduction the business of insurance and the public's need for fairness in insurance information practices, including the need to minimize intrusiveness; * To establish a regulatory mechanism to enable natural persons to ascertain what information is being or has been collected about them in connection with insurance transactions and to have access such information for the purpose of verifying or disputing its accuracy; * To limit the disclosure of information collected in connection with insurance transactions; and * To enable insurance applicants and policyholders to obtain the reasons for any adverse underwriting decision.

Code of Ethical Behavior

*Always place the customer's interest first * Identify customers' needs and recommend products and services that meet those needs * Accurately and truthfully represent products and services * Use simple language and answer questions immediately when asked * Stay in touch with customer and conduct periodic coverage reviews * Protect your confidential relationship with your client * Keep informed of an obey all insurance laws and regulations * Avoid unfair or inaccurate remarks about the competition

Loss Exposure

A condition or situation that present a possibility of financial loss, regardless of whether an actual loss occurs.

Insurance Policy

A written document in which the contract of insurance is set forth. Most policies have r parts: Declarations, Insuring Agreement, Conditions and Exclusion.

Pretext Interview

An interview in which a person, such as an agent, attempts to obtain information about another person, such as an applicant, by using one of another of the following: * Pretending to be someone he or she is not: * Pretending to represent a person he or she is not in fact representing; * Misrepresenting the true purpose of the interview; or * Refusing to identify himself or herself upon request.

Insurer

Any person (see definition of person to follow) capable of making a contract may be an insurer, subject to the requirements of the California Insurance Code (CIC).

Insurable Event

Any unforeseen or unknown event that may cause a loss to a person having an insurable interest, or create legal liability against such person.

Fraud Part 3 of 3

Anyone who violates these false and fraudulent claims provisions is punishable by imprisonment in the state prison or by fine, or both. Insurers are also required to display prominently on any liability insurance policy or rider the following statement: "Any person who knowingly present false or fraudulent claims for the payment of a loss is guilty of a crime and may be subject to fines confinement in state prison."

Transacting Insurance

Broadly defined to include any of the following: *Solicitation of insurance *Negotiations preliminary to executing of an insurance policy *Execution of a contract of insurance Insurance may be transacted by insurance agents, brokers and solicitors. A person must not act in any of these capacities unless he or she holds a valid license from the Commissioner. Any person who acts, offers to act, or assumes to act in a capacity for which a license ir required without a valid license is guilty of a misdemeanor.

Contract law vs. Tort law

Contract law, which governs the issuance of insurance policies, is concerned with the obligations agreed upon between parties and stipulated in a contract. Contract law ensures that a contract is legally valid and that the legal obligations of the contract are carried out. For a contract to be legally enforceable in court, there must have been an exchange of value (consideration), mutual agreement of the parties (offer and acceptance) and a legal purpose. Parties to the contract must also have the legal capacity to enter into such contract. Further, under the doctrine of 'Adhesion', any ambiguous language int eh contract is always construed against the insurer, since they wrote it. Tort law, on the other had, is concerned with the obligations people have that are imposed upon them by common law. Tort law provides for compensating an individual for losses resulting from the conduct of others that is considered socially unreasonable. A 'tort' is defined as civil injury or wrong to others, such as negligence, which is the failure to act as a reasonable person

Requirement for Fraud Unit

Every insurer admitted to do business in this state must maintain a unit or division to investigate possible fraudulent claims by insureds or by person making claims for services or repairs against policies held by insureds.

Change of Address

Every licensee and every applicant for a license shall immediately notify the Commissioner in writing of any change of address.

Printing of License Number

Every licensee must prominently have his or her license number affixed, typed, or printed on all business cards, written price quotations for insurance products, and printed advertisements distributed in California. The license number must be included in the same size type as any indicated telephone number, address or fax number.

Examination of Records

Insurers and their agents, while they are investigating suspected fraud claims, must be give access to all relevant public records that are required to e open for inspection.

Information Practices 1 of 8

No insurance institution, agent or insurance-support organization shall use or authorize use of pretext interviews to obtain information in connection with an insurance transaction. An exception may be made3 if no privileged relationship exist between the interviewer and the interviewee and there is a bases for suspecting criminal activity, fraud, material misrepresentation or material nondisclosure in connection with a claim. An insurance institution or agent shall provide a Notice of Information Practices to all applicants or policyholders. The purpose of the notice is to explain the methods that may be used to gather information about the applicant or policyholder, including the types of sources and investigative techniques used. The notice must be in writing. An insurance institution or agent must clearly specify which questions in connection with an insurance transaction, if any, are designed to obtain information solely for marketing or research purposes. A disclosure authorization form used in connection with an insurance transaction and which authorizes the disclosure of personal or privileged information about an individual must conform to the following;

Nonadmitted Inusrer

One not entitled to transact insurance business in California, whether by reason of failure to comply with the required conditions, or being exempt from such requirements. It is unlawful for an insurer to transact business in this state without a Certificate of Authority, with certain exceptions, such as Surplus lines insurers.

Domestic Insurer

One organized under the laws of California, whether or no admitted, with their home office in this state.

Residual Market Mechanism

The California FAIR Plan Association and the California Automobile Assigned Risk Plan (CAARP)

Risk

The chance, uncertainty or possibility of loss.

Denial of Applications Par 1 of 2

The commissioner may deny and application for license after a hearing for any of the following reasons: * The applicant is not properly qualified to perform the duties of a person holding such a license * The granting of the license will be against the public interest; * The applicant does not intend to actively and in good faith carry business with the general public; * The applicant is not of good business reputation; * The applicant is lacking in integrity; * The applicant has been refused a professional, occupational or vocational license or had such a license suspended or revoked by any licensing authority; * The applicant has knowingly or willfully made a misstatement in an application to the Commissioner for a license, or in a related filing, or has made a false statement in testimony; * The applicant has previously engaged in a fraudulent practice or act or has conducted any business in a dishonest way

Objective of Insurance Regulation (not primary objective)

The interpretation of policy provisions is not a primary objective of insurance regulation.

24-Hour Coverage

The joint issuance of workers' compensation policy with a health (disability) insurance policy or other medical insurance policy that provides coverage for nonoccupational injuries and illnesses. This product cannot include a life insurance policy, although 24 hour coverage may be sold by licensed Accident & Health agents.

Arson Information Reporting System Part 2 of 2

The use of the information deposited pursuant to this article will be made available to law enforcement agencies, fire investigative agencies, district attorneys and insures for the purpose of investigating and prosecuting arson and arson-related insurance fraud or evaluating the validity and payment of fire-related insurance claims, Information acquired pursuant to this section will not be a part of any public record. Information submitted to the State Fire Marshal concerning active cases shall be confidential.

Inactive License

Upon the termination of all appointments (and the cancellation of the required bond if acting as a broker), a licensee's permanent license will not be canceled; however, it will become inactive. It may be renewed in the same manner as an active license. It may be reactivated at nay time prior to its expiration by the filing of a new appointment or a new bond. An inactive license does not permit its holder to transact any insurance for which a valid, active license is required.

Creation of Fraud Bureau

A Bureau of Fraudulent Claims exist within the Insurance Department. Its purposes are: * To enforce the provisions of this code regarding unlawful solicitations and referrals and false and fraudulent claims; and * To administer and implement Insurance Fraud Reporting

Required Policy Information

A policy must specify: * The parties between whom the contract is made; * The property or life insured; * The interest of the insured in property insured; * The risks insured against; * The period during which the insurance is to continue; * A statement of the premium, or if the exact premium is only determinable upon the termination fo the contract, a statement of the basis and rates upon which the final premium is to be determined The financial rating of the insurer is not required to be specified in the insurance policy.

Prohibited Misrepresentations Part 1 of 2

An insurer or its agent, or an insurance broker or solicitor must not make any misrepresentation of the following: * The terms of a policy to be issued by the insurer * The benefits or privileges promised; or * The future dividends payable. A person shall not make any misrepresentations for the purpose of: * Inducing a person to take out a policy of insurance, or * Inducing the lapse, forfeit or surrender of insurance. A person shall not make any representation or comparison of insurers or policies to an insured which is misleading for the purpose of inducing the insured to lapse, forfeit, change or surrender insurance, whether on a temporary or permanent plan. This is known as 'twisting' the facts. Any person violating these rules is guilty of a misdemeanor and punishable by a fine or by imprisonment not exceeding six months.

Notice by Mail

Any notice required to be given to any person may be given by mailing notice to his or her residence or principal place of business in California. The affidavit of the person who mail the notice, stating the facts of the mailing, is sufficient evidence that the notice was mailed. Proof of mailing of a cancellation notice is considered to be proof that it was received.

Administrator

Any person (other than an adjuster or sale representative who collects any charge or premium from, or who adjusts or settles claims on, residents of this state in connection with insurance. Administrators often perform clerical functions on behalf of self funded plans. They do not sell insurance. Also known as Third Party Administrators. An administrator may NOT be: * An employer on behalf of its employees; * A union on behalf of its members; * An insurance company; or * A life or health agent or broker licensed in this state, whose activities are limited exclusively to the sale of insurance; No administrator may act as such without a written agreement between the administrator and the insurer.

Appointment as Insurance Agent 1 of 2

Every applicant for an insurance license to act as an insurance agent shall have filed on his or her behalf with the Commissioner a Notice of Appointment to act as an agent executed by an insurer admitted to transact one or more classes of insurance included within the scope of the license sought, appointing the applicant, upon licensing, its agent within the state. Every applicant for a license to act as a Fire and Casualty insurance solicitor shall have filed on his or her behalf with Commissioner a notice executed by a Fire and Casualty broker-agent agreeing to employ the applicant and appointing the applicant, upon licensing, as the Fire and Casualty broker-agent's employee within this sate. A person licensed as a Fire and Casualty broker-agent or a Life & Health only agent may be authorized to transact disability insurance on behalf of any insurer that is authorized to transact disability insurance by filing a Notice of Appointment for that purpose.

Fiduciary Responsibilities

Fiduciary refer to the trust that is placed in an agent with regard to the handling of fund; that those funds will be handled in capable, responsible and hones manner. All funds received by a licensee are received and held in a fiduciary capacity. Anyone who diverts or appropriates those fiduciary funds to his or her own use is guilty of theft. A licensed person receiving fiduciary funds shall: * Remit any premiums, less commissions, to the insurer or whoever is entitled to the money, or * Maintain fiduciary funds on California business in a trustee bank account in California separate from any other account, received and yet to be paid to those entitled to them. In maintaining fiduciary funds, agents must obtain written agreement from each insurer or individual entitled to the funds authorizing maintenance and retention of any earnings (interest) that may accrue.

Purpose of Fraud Legislatin

Fraud legislation is intended to permit the full utilization of the expertise of the Commissioner and the department so that they may more effectively investigate and discover insurance frauds, halt fraudulent activities, and assist and receive assistance from federal, state, local and administrative law enforcement agencies in prosecution of persons who are parties in insurance fraud.

Insolvency and Conservation Proceedings 2 of 2

If the insurer is determined to be insolvent the commissioner shall take possession of the property, business, books, records and accounts of such person, and of the offices and premises occupied by it for the transaction of its business, and retain possession subject to the order of the court. Any person having possession of and refusing to deliver any of the books, records, or assets of a person against whom a seizure order has been issued by the commissioner, shall be guilty of misdemeanor and punishable by fine not exceeding one thousand dollars or imprisonment not exceeding one year, or both such fine and imprisonment. Whenever it becomes apparent to the Commissioner that an insolvency cannot be remedied, the Commissioner may apply to the court for an order to liquidate and wind up the business of the insolvent entity. Whenever it becomes apparent to the Commissioner that an insolvency can be remedied, the Commissioner may apply to the court to become the conservator of the insolvent entity. The court may agree to such application and direct the Commissioner to take possession of the insolvent entity's books, records, property and assets. This activity ir referred to as summary seizure.

Insolvency and Conservation Proceedings 1 of 2

Insurer insolvency means any financial impairment of minimum "paid-in capital" or "capital paid in," required of an insurer by the provisions of this code for the class, or classes, of insurance which it transacts. An insurer cannot escape insolvency by being able to provide for all its liabilities and for reinsurance of all outstanding risks. An insurer must also be possessed of additional assets equivalent to such aggregate "paid-in capital" or "capital paid in" required by this code after making provision for all such liabilities and for such reinsurance. When an admitted insurer becomes insolvent, the Commissioner prepares a report that becomes a public record, that explains the causes and factors contributing to the insolvency. The report must be submitted to the Governor and Legislature.

Free Insurance

Insurers must not offer any kind of insurance as inducement to the purchase or rental by the public of any property or services without any separate charge to the insured for such insurance. Likewise, agents, brokers, and solicitors must not arrange the sale of any such insurance.

Immunity from Civil Actions

No insurer, or the employees or agents or any insurer, shall be subject to civil liability for libel, slander or any other relevant tort cause of action by virtue of providing without malice any information or reports relating to suspected fraudulent insurance transaction furnished to law enforcement officials or licensing officials.

Admitted Insurer

One entitled to transact insurance business in California, having obtained a Certificate of Authority from the Commissioner. May be domestic, foreign or alien.

Suspension or Revocation

The Commissioner may suspend or revoke any permanent license on the same grounds that he or she may deny issuance of a license, including whether or not hearing must be held.

Pure Risk

The chance of loss without any chance of gain. Only pure risk is insurable. Speculative risk, which consists of the chance of loss or gain, is uninsurable.

Concealment

The failure to disclose a material fact that a party knows and ought to communicate. concealment, whether intentional or unintentional, entitles the inured party to rescind or void the insurance contract, meaning that no coverage would exist. Each party to a contract of insurance shall communicate to the other, in good faith, all facts within his or her knowledge which are material to the contract. Neither party to a contract of insurance is bound to communicate information of the following matters, except in answer to the inquiries of the other: *Those which the other party knows; *Those which, in the exercise of ordinary care, the other party ought to know; *Those which the other party waives communication; or *Those which relate to a risk excluded from insurance and which are not otherwise material.

Arson Information Reporting System Part 1 of 2

The purpose of the Arson Information Reporting System is to permit insurers, law enforcement agencies, fire investigative agencies, and district attorneys to deposit arson case information in a common database within the Department of Justice, The State Fire Marshal will oversee the establishment, operation, and maintenance of the Arson Information Reporting System. The Department of Justice will implement the Arson Information Reporting System in consultation with the State Fire Marshal. The purpose of the database is to identify utilization patterns by individual claimants and to identify the methods of operation of individuals, groups or businesses engaged in the commission of arson, and to prevent the commission of insurance fraud by arson.

Rescission

When a material misrepresentation or concealment occurs, the company has the right to void (cancel) the contract as though it never existed. An insurer's right to rescind a contract is called a right or rescission. Concealment, whether intentional or unintentional, entitles the inured party to rescind insurance. The violation of a material warranty or other material provision of a policy, on the part of either party thereto, also entitles the other to rescind. The materiality of a representation is determined by the same rule as the materiality of concealment.

Prohibited Misrepresentations Part 2 of 2

Whenever any insurance agent, broker or solicitor knowingly violates these rules, the Commissioner, after a hearing, may suspend the license of any such person up to three years. If an insurer knowingly violates these rules, or knowingly permits any of its officers, agents or employees to do so, the Commissioner, after a hearing, may suspend insurer's Certificate of Authority. Any person may be compelled to testify and produce books and writing at the trial or hearing of nay persons charged with violating these rules regarding misrepresentation even though such testimony or evidence may incriminate him or her. A person shall not be prosecuted for any act concerning which he or she is compelled so to testify or produce evidence, except for perjury committed in so testifying. Any person licensed by the Commissioner who misrepresent to any surplus line broker any material fact regarding insurance coverage, or misrepresent to such surplus line broker facts with regards to the rules of submission or rates, or in any way conspires to procure nonadmitted insurance, is in violation of these rules and subject to penalties as provided by law.

Information Practices 4 of 8

Within 30 business days from the date or receipt or a written request form an individual to correct, amend or delete any recorded personal information, and insurance institution, agent or insurance-support organization must either correct, amend or delete the portion of the recorded personal information in dispute or notify the individual of its refusal to make such correction, amendment or deletion and of the reasons for refusal. In the event of an adverse underwriting decision the insurance institution or agent responsible for the decision must: * Either provide the applicant, policyholder of individual proposed for coverage with the specific reason or reasons for the adverse underwriting decision in writing or advise such person that upon written request he or she may receive the specific reason or reasons in writing; or

Unfair Trade Practices Part 2 of 5

* Entering into an agreement to do anything resulting in unreasonable restraint of, or monopoly in, the business of insurance; * Making public any false statement of financial condition of any insurer with the intent to deceive; * Making or permitting any unfair discrimination between person of the same class and life expectancy with regard to rates charged for insurance, dividends or any other terms and conditions of the insurance contract, although supportable differentials based on gender may be permitted; *Advertising insurance on behalf of a nonadmitted insurer * Knowingly committing or practicing the following Unfair Claims Settlement practices: a) Misrepresenting to claimants pertinent facts or insurance policy provisions relating to any coverage at issue; b) Failing to acknowledge and act with reasonable promptness upon communications regarding claims; c) Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims; d) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss requirements have been completed and submitted by the claimant;

Information Practices 3 of 8

* It must advise the individual that he or she is entitled to receive a copy of the authorization form. In order for an insurer or agent ot prepare or request an investigative consumer report about an individual in connection with an insurance transaction involving application, renewal, reinstatement or change in policy benefits, the individual must be informed that he or she may request to be interviewed in connection with the report; and that he or she is entitled to receive a copy of the report. If an individual requests an interview, every reasonable attempt should be made to conduct such an interview by whomever is preparing the report. If an individual request in writing access to recorded personal information about himself or herself held by an insurance company or agent, that company or agent has 30 days to respond by informing the individual of the nature and substance of the information, permitting the individual to see and copy the information, disclosing to the individual the identity of those to whom the information has been disclosed, providing the individual with the procedures by which he or she may request correction, amendment or deletion of information.

Information Practices 2 of 8

* It must be written in plain language; * It must be dated; * It must specify the types or persons authorized to disclose information about the individual; * It must specify the nature of the information authorized to be disclosed; * It must name the insurance company or agent and identify by generic reference representatives of the insurance company to whom the individual is authorizing information to be disclosed; * It must specify the purpose for which the information is collected; * It must specify the length of time the authorization shall remain valid; and

Unfair Trade Practices Part 3 of 5

* Knowingly committing or practicing the following Unfair Claims Settlement practices: e) Not attempting in good faith to effectuate prompt, fair, equitable settlements of claims in which liability has become reasonably clear; f) Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by the insureds when the insureds have made claims for amounts reasonably similar to those ultimately recovered; g) Attempting to settle a claim by an insured for less than the amount that could reasonable expect to be recovered by reference to written or printed advertising accompanying or made part of an application; h) Attempting to settle claims on the basis of any application which was altered without notice to, or knowledge or consent of, the insured; i) Failing, after payment of a claim to inform insureds or beneficiaries, upon request made by them, of the coverage under which payment was made; j) Making known to insureds or claimants a practice of insurer of appealing from arbitration awards in favor of insureds of claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;

Unfair Trade Practices Part 4 of 5

* Knowingly committing or practicing the following Unfair Claims Settlement practices: k) Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either, to submit a preliminary claim report, and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information; l) Failing to settle claims promptly, where liability has become apparent, under one portion of the insurance policy in order to influence settlements under other portions of the insurance policy coverage; m) Failing to provide promptly a reasonable explanation of the basis relied on in the insurance policy, in relation to the facts or applicable law, for denial of a claim or for the offer of a compromise settlement; n) Directly advising a claimant not to obtain the services of an attorney; o) Misleading a claimant as to the applicable statue of limitations; or p) Delaying the payment or provision of hospital, medical, or surgical benefits for services provided with respect to AIDS for more than 60 days after insurer has received claim for those benefits, where delay is for the purpose of investigating whether the condition preexisted the coverage.

Information Practices 5 of 8

* Provide the applicant, policy holder or individual proposed for coverage with a summary of the rights established under this section. Upon receipt of a written request within 90 business days from the date of the mailing of notice or other communication of an adverse underwriting decision to an applicant, policyholder or individual proposed for coverage, the insurance institution or agent must furnish the person with a response within 21 business days form the date or receipt of the request. The request must include: * the specific reason or reasons for the adverse underwriting decision, in writing, if such information was not initially furnished in writing; and * The specific interns of personal and privileged information that support those reasons. An insurance institution, agent, or insurance-support organization must not disclose any personal or privileged information about an individual collected or received in connection with an insurance transaction unless the disclosure is: * With the written authorization of the individual, is dated, is signed by the individual, and is obtained one year or less prior to the date the disclosure is sought;

Denial of Applications Par 2 of 2

* The applicant has shown incompetence or untrustworthiness in the conduct of any business; * The applicant has knowingly misrepresented the terms of effects of any insurance policy or contract; * Te applicant has been convicted of a felony, a misdemeanor or a public offense that included fraud or dishonesty in acceptance, custody or payment of money or property; * The applicant has permitted any person in his or her employ to violate any provisions of this code. The commissioner may, without a hearing, deny and application if the applicant has: * Committed a felony and been convicted of it; * Committed a misdemeanor denounced by this code or by other laws regulating insurance and been convicted of it; * Had a previous application denied for cause within five years before the filing of the application; or * Had a previously issued license suspended or revoked for cause within five years before the filing of the application.

Information Practices 7 of 8

* To a person whose only use of such information will be in connection with the marketing of a product or service, under restricted guidelines. The commissioner has the authority to examine every insurance institution or agent doing business in California to determine whether the insurance institution or agent has been or is engaged in any conduct in violation of this article. Whenever the Commissioner has reason to believe that an insurance institution, agent or insurance-support organization has been or is engaged in conduct that violates these rules, the Commissioner shall issue and serve a statement of charges and notice of hearing to be held not less than 30 days after the date or service. If, at this hearing, the Commissioner determines that the rules have indeed been violated, a cease and desist order may be issued.

Information Practices 6 of 8

* To person other than an insurance institution, agent, or insurance-support organization, provided such disclosure is reasonably necessary: 1) to enable such person to perform a business, professional or insurance function for the disclosing insurance institution, agent, or insurance-support organization or insured and such person agrees not to disclose the information further without the individual's written authorization; or -) to enable such person to provide information to the disclosing insurance institution, agent or insurance-support organization for the purpose of determining and individual's eligibility for an insurance benefit or payment or detecting or preventing criminal activity, fraud, material misrepresentation or material nondisclosure in connection with an insurance transaction. * To a medical-care institution or medical professional for the purpose or verifying insurance coverage or benefits, informing and individual or a medial problem of which the individual may not be aware; * To an insurance regulatory authority; * To a law enforcement or other governmental authority:

Appointment as disability Agent

A Fire and Casualty or Life & Helath or Health only agent may be authorized to transact disability insurance for a disability insurer by filing a notice of appointment. The appointment will be effective as of th date the notice is signed the insurer.

Insurance

A contract whereby one undertakes to indemnify another against loss, damage or liability arising from an unforeseen or unknown event. The transfer of pure risk to an insurance company in consideration of a premium paid.

Termination of License Issued to Individuals

A licensee may surrender a license for cancellation at any time. If the license is in the licensee's possession, surrender may be accomplished by the delivery of the document itself to the Commissioner. If the license is in the possession of the insurer or the licensee's employer, the licensee may still make such surrender by sending written notice to the Commissioner. All licenses issued to natural persons terminated upon the death of such person.

Warranty

A warranty may be either expressed or implied. A statement in a policy of a matter relating to the person or thing insured, or to the risk, as fact is an express warranty, Every express warranty made at or before execution of a policy, and made part of it. A representation in an insurance contract qualifies as an implied warranty. A warranty may relate to the past, the present, or the future. A statement in a policy, that warrants that there is an intention to do or not to do something which materiality affects the risk, is a warranty that such act or omission will take place. The violation of a material warranty or other material provision of a policy on the part or either party, entitles the other party to rescind (void) the contract.

Ethical Behavior and the Insurance Code

Agents have an ethical obligation to provide exemplary service to their clients. This includes staying in touch with customers and conducting periodic reviews of coverage and needs to assure that customers are adequately covered. When selling a new policy, it is not enough to merely review the customer's prior policy. Agents should conduct a thorough investigation of the customer's current insurance needs to make sure that the recommended coverages are proper. In addition, agents should be aware that they are in possession of considerable private information about their customers. They should take care to protect the confidential relationship they have with their clients. Unfair or inaccurate remarks about the competition must also be avoided. Remember, always place your customer's best interest above your own! Many of the ethical considerations go beyond the strict requirements of the law. While violating the code is certainly unethical, there is much more being ethical than simply staying within the law. Remember, insurance laws and regulation do not provide a complete guide to ethical behavior.

Insurance Claims Analysis Bureau

An insurance claims analysis bureau will perform the following functions: * Collect and compile information and data from members or subscribers concerning insurance claims. * Disseminate information to members or subscribers relating to insurance claims for the purpose of preventing and suppressing insurance fraud. * Promote training and education to further insurer investigation, suppression and prosecution of insurance fraud * Provide, without fee or charge, to the Commissioner, all California data and information contained in the records of the insurance claims analysis bureau in furtherance of the prevention and prosecution of insurance fraud..

Conditional Contract

An insurance contract is conditional in that it requires the insured to meet specific requirements before he or she can collect for losses. For example, the insured must give notice of claim within a specified period of time or as soon as practicable following the loss. In Liability policies, the insured must cooperate with the company in the investigation and settlement of the claim. The insurer may deny the claim if the insured fails to comply with the policy's conditions.

Prohibited Discrimination Part 2 of 2

An insurer may not pay a lower commission rate to agents or brokers for writing or renewing a Life or Disability policy solely because that applicant carries a gene that may cause the insured's children to have a disability even though the carrier has no adverse effects. An insurer issuing individual or group insurance for life, annuity or disability benefits may not refuse to insure, refuse to continue to insure or limit the amount, extent or kind of coverage or charge a different rate for the same coverage solely because of a physical or mental impairment EXCEPT where the refusal, limitation or rate differential is based on sound actuarial principles or is related to actual and reasonably anticipated experiences. An insurer issuing individual or group insurance for life, annuity or disability benefits may not refuse to insure, refuse to continue to insure or limit the amount, extent or kind of coverage or charge a different rate for the same coverage solely because of blindness or partial blindness.

Prohibited Discrimination Part 1 of 2

An insurer may not refuse to issue a policy, refuse to accept an application, or cancel a policy on the basis or a person's sexual orientation, nor may an insurer consider sexual orientation as part of its underwriting criteria, or use marital status, living arrangements, occupation, gender, beneficiary, designation, ZIP codes or other territorial classification or nay combination of these for the purpose of establishing and applicant's sexual orientation or determining whether to require to test for HIV. An insurer may not refuse ot sell or renew any policy of Life or Disability insurance properly applied for solely on the basis that the insured carries a gene that may cause their insured's children to have a disability even though the carrier has no adverse effects; nor may an insurer impose a higher premium, rate or charged for insurance because the applicant carries such a gene; nor may an insurer require an insured who carries such a gene to accept any sum or service less than the full value or amount o the policy in the event of a claim.

Terminations of Licenses Issued to Organizations (Agency Licenses)

An organization (insurance agency), such as a partnership, association or corporation, ceases to exist as an entity eligible to hold a license under the following circumstances: 1. Upon dissolution of a partnership or upon any change in the membership of the partnership; 2. Upon the termination of an association; or 3. Upon dissolution of a corporation. The termination of the existence of a licensed organization (agency) automatically terminates the right of that entity to transact insurance. The license of an organization licensed as a Fire and Casualty broker-agent or Life/Accident & Health agent becomes inoperative upon the removal or termination of the last person named thereon. Unless the license is reactivated by the correction of all deficiencies, the license will not be renewed.

Changes of Business Organization Part 1 of 2

An organization cease to exist as an entity eligible to hold a license when any of the following occur; * Dissolution of a co-partnership or upon any change in membership of a co-partnership * Upon the termination of an association * Upon dissolution of a corporation Should a change occur in the membership of a co-partnership the surviving or continuing co-partnership may continue to transact insurance under the license issued to the predecessor co-partnership until action is taken by the commissioner on the application herein prescribed if the following requirements are met: * The surviving or continuing co-partnership within 30 day files an application on a from prescribed by the commissioner for registration of the change in membership, and pays the lawful fee therefore and, if acting as an insurance broker, furnishes the bond required under Article 5 (commencing with Section 1662).

Personal Informaiton

Any individually identifiable information gathered in connection with an insurance transaction from which judgment can be made about an individual's character, habits, avocations, finances occupation, general reputation, credit, health or any other personal characteristics. Personal information includes an individual's name and address and medical record information but does not include privileged information.

Privileged Information

Any individually identifiable information that relates to a claim for insurance benefits or a civil or criminal proceeding involving and individual and is collected in connection with or in reasonable anticipation of a claim for insurance benefits or civil or criminal proceeding involving an individual.

Adverse underwriting decision

Any of the following actions with respect to insurance transactions involving insurance coverage which is individually underwritten: 1) a declination of insurance coverage; 2) a termination of insurance coverage: or 3) the failure of an agent to apply for insurance coverage with a specific insurance institution which the agent represent and which is requested by an applicant. In the case of Fire or Casualty insurance coverage, any of the following circumstances also constitute and adverse underwriting decision: * Placement by an insurance institution or agent or a risk with a residual market mechanism, with an unauthorized insurer, or with an insurance institution which provides insurance to other than preferred or standard risks, if the placement is at other than preferred or standard rate * The charging of higher rate on the basis of information which differs from that which the applicant or policyholder furnished In the case of Life, Health or Disability insurance coverage, an offer to insure at higher than standard rates constitutes and adverse underwriting decision.

Representation

As generally defined, a representation is a fact that an applicant for an insurance policy represents as true and accurate to the best of his or her knowledge and belief. A representation may be oral or written and may be made at the time of, or before, issuance of the policy. A representation may be altered or withdrawn before the insurance is effected, but not afterward. If a representation is false in a material point, the injured party is entitled to rescind the contract from the time the representation becomes false. A representation is false when the facts fail to correspond with its assertions or stipulations.

Filing True and Fictitious Names

Every individual and organization (agency) licensee and every applicant for such license shall file with the Commissioner in writing the true name of the individual or organization as well as all fictitious names under which he or she conducts or intends to conduct his or her business. Any changes in or discontinuance of such sames after licensing must also be filed with the Commissioner. The Commissioner may disapprove in writing of the use of any true or fictitious name (other than the bona fide natural name of an individual) on any of the following grounds: * The name is an interference with or too similar to a name already filed and in use by another licensee: * The use of the name may mislead the public in any respect; * The name states, infers or implies that the licensee is an insurance company, motor club, hospital service plan or entitled to engage in insurance activities not permitted under licenses held. Licensees may use the professional designations CLU (Chartered Life Underwriter) or CPCU (Charter Property Casualty Underwriter) if they are entitled to do so.

Transaction with Nonadmitted Insurers

Except when performed by a Surplus lines broker, the following acts are misdemeanors: * Acting as agent for a nonadmitted insurer in the transaction of insurance business in California * In any manner advertising a nonadmitted insurer in California In addition to any penalty levied for violating a misdemeanor a fine of $500, together with $100 for each month or fraction during which a person continues the violation shall be levied.

Continuing Education Requirements

Individuals holding a Life only, Health only, Property only and/or Casualty only License must earn 24 hour each licensing period (two years). The 24 hour per licensing period requirement is the same regardless of the number of licenses held. Individuals, who sell long-term care products must obtain eight hours every year for the first four years, then eight hours in very two-year license period. The courses must be California-approved long-term care courses. These are not additional hour since they also count toward the completion of the basic CE requirements. California CE requirements must be complied with by license renewal, which is every tow years. Excess hours may be carried over to the next 12-month period. CE courses may be either independent self-study courses or classroom study. Nonresident licensees are exempt from the California CE requirements if their home states require CE. Nonresidents must submit a letter of certification from their home state with every license renewal. Nonresidents are not exempt from the long-term care requirement.

Managing General Agent

Is a person, firm, association, partnership, or corporation who negotiates and binds ceding reinsurance contracts on behalf of an insurer or manages all of part of the insurance business of an insurer (including the management of a separate division, department or underwriting office) and acts as an agent for that insurer whether as an MGA, manager, or other similar term, who, with or without the authority, either separately or together with affiliates, produces, directly or indirectly, and underwrites an amount of gross direct written premium equal to or more than 5 percent of the policyholder surplus as reported in the last annual statement ot the insurer in any one quarter or year together wiht one or more of the following: * adjusts or pays claims in excess of an amount determined by the commissioner, or *negotiates reinsurance on behalf of the insurer

Fraud Part 2 of 3

It is unlawful to do any of the following: * Make or cause to be made any knowingly false or fraudulent material statement or material representation for the purpose of obtaining or denying any compensation; * Knowingly assist, abet, conspire with, or solicit any person in an unlawful act under this section; * Knowingly present or cause to be presented any false or fraudulent claim for the payment of a loss, including payment of a loss under a contract of insurance; * Knowingly present multiple claims for the same loss or injury including presentation of multiple claims to more than one insurer, with an intent to defraud; * Knowingly cause or participate in a vehicular collision, or any other vehicular accident, for the purpose of presenting any false or fraudulent claim; * Knowingly prepare, make or subscribe any writing in support of any false or fraudulent claim; or * Knowingly assist, abet, solicit or conspire with anyone to accomplish any of the above.

Materiality

Materiality is to be determined solely by the probable and reasonable influence of the fact upon the party to whom the communication is due, in forming his or her estimate of the disadvantages of entering into the proposed contract. In other words, if the information is important to the underwriting decision, it is 'material'. The rule used to determine the importance of a misrepresentation is the materiality of the concealment. The right to information of material facts may be waived either by the terms of insurance or by neglect to make inquiries as to such facts, where they are distinctly implied in other facts of which information is communicated. An intentional and fraudulent omission on the part of any insured to communicate material information in relationship to false warranties entitles the insurer to rescind or void the contract.

Information Practices 8 of 8

No cause of action claiming defamation, invasion of privacy or negligence will be entertained against any person for disclosing personal or privileged information in accordance with this section. In addition, no cause of action shall arise against any person for furnishing personal or privilege information to an insurance institution, agent or insurance-support organization. However, this section provides no immunity for disclosing or finishing false information with malice or willful intent to inure any person. Any person who knowingly and willfully obtains information about an individual from an insurance institution, agent or insurance-support organization under false pretenses shall fined or imprisoned for not more than one year, or both.

Fraud Part 1 of 3

Notice of loss or claim forms must contain the following statement, either printed on the form or attached to it: "For your protection, California law requires the following to appear on this form" or similar words of explanation. "Any person who Knowingly present a false or fraudulent claim for the payment of a loss is guilty of a crime and may be subject to fines and confinement in state prison." Prior to the settlement of a claim for stolen vehicle, insurers must secure from the insured a claim from containing a warning that false representations are subject to a penalty or perjury, the purchase location of the vehicle, the purchase date, the name of the seller and detailed statement of the circumstances surrounding the theft. The insured must either sign the claim form in the presence of an agent, broker, adjuster, or other claim representative who verifies the driver's license number of the signer, or submit a claim with a notarized signature. The insurer must retain for three years all settlement checks, the original claim from, and a legible copy of the police report.

Reports to National Theft Bureau

Private passenger automobile: A motor vehicle of the private passenger or station wagon type, any other four-wheel vehicle with a load capacity of 1,400 pounds less, or a motorcycle. Every insurer must report covered private passenger automobiles involved in theft and salvage total losses, including the vehicle identification number and any other information as may be required, ti National Automobile Theft Bureau or a similar central organization engaged in automobile loss prevention approved by the Commissioner. Prior to the payment of total theft losses, insurers must comply with verification procedures prescribed by the Commissioner.

California Insurance Statues and Rules

The California Insurance Code (CIC) is composed of statutes written and passed by the California Legislature and signed into law by the governor. This is the law governing the insurance business in the state of California. Statutes are changed when the legislature passes a new statute amending, modifying or repealing an existing one. The California Code or Regulations (CCR Title 10, Chapter 5) is composed of rules issued by the Insurance commissioner. The commissioner is authorized to issue there rules by various statutes, since the legislature realizes that regulations are often necessary to administer the general guidelines provided in the law. These rules then must be approved by the Office of Administrative Law before becoming effective. Although regulations aren't law, they have the same wight as law, meaning that a person violating a regulation is subject to the same penalties as someone violating a statute. In the process of generating regulations, the Commissioner will usually draft a proposed regulation and then hold hearing so that parties affected by the proposed regulation can respond to it. Although CIC and CCR identify many unethical and/or illegal practices, they are not a complete guide to ethical behavior.

Commissioner's Term and Duties

The Commissioner shall be elected by the people in the same time, place, and manner as the Governor. A Commissioner shall perform all duties imposed upon him by provisions of the CIC and other laws regulating the business of insurance in California and shall enforce the execution of those provisions and laws.

Appointment as Insurance Agent 2 of 2

The authority to transact insurance given to a licensee by an insurer by appointment shall be effective as of the date the Notice of Appointment is signed by the insurer. Each appointment will continue in force until cancellation by the insurer. Upon termination of all appointments, a permanent license is not canceled but becomes inactive. While inactive it may be renewed. It may be reactivated at any time prior to its expiration by the filing of a new appointment. An inactive license shall not permit its holder to transact any insurance for which a valid, active license is required.

Unfair Trade Practices Part 1 of 5

The code states that no one shall engage in any trade practice defined as an unfair method of competition or an unfair or deceptive act or practice in the business of insurance. Prohibited acts include; * Making public any statement that a named insurer is a member of the California Insurance Guarantee Association or is insured against insolvency; * Misrepresenting an insurance policy with respect to its terms, benefits, advantages, dividends to be paid or that were paid in the past; * Misrepresenting the financial condition or legal reserves of an insurer, or using the name or title of a policy or class of policies to conceal their true mature, or making a misrepresentation to policyholders to persuade them to lapse, forfeit or surrender their insurance; * Using advertising or other forms of publicity to spread information about the insurance business or anyone involved in it that is known to be untrue, deceptive or misleading;

Unfair Trade Practices Part 5 of 5

The commissioner has the authority to examine and investigate into the affairs of every person engaged in the business of insurance in California in order to determine whether such person has been or is engaged in any unfair method of competition or in any unfair or deceptive act or practice. Any person who engages in any unfair method of competition or any unfair or deceptive act or practice as defined in the code is subject to a civil fine fixed by the Commissioner. The Commissioner may also issue a cease and desist order. Whenever the Commissioner determines that an individual has violated a lawful cease and desist order, the Commissioner, after hearing, may order that individual to pay a fine. If the violation is determined to be willful, the fine may be higher. For any subsequent violation of the cease and desist order, the Commissioner, after a hearing, may suspend or revoke that individual's license for a period of up to one year. No order to cease and desist shall in any way relieve or absolve a person from any administrative action against the license or certificate of such person or from civil liability or criminal penalty under the laws of California.

Investigations

When an application is filed for an insurance license, the Commissioner may make an investigation and require additional information to help determine whether the prerequisites for the license have been met. If the Commissioner is satisfied, a certificate of convenience may be issued and, after meeting any examination requirements, may be followed by a permanent license.

Fraud Reporting

When an insurer reasonably believes it knows the identity of a person who the insurer believes has committed a fraudulent act relating to an insurance claim, policy or application; or has knowledge of such a fraudulent act that the insurer believes has not been reported to an authorized governmental agency then the insurer must notify the local district attorney's office and the Bureau of fraudulent Claims of the Department of Insurance of the suspected fraud and provide any additional information. In addition, the insurer may notify any other authorized governmental agency. The insurer must state the basis of the suspected fraud in its notice. If an insured signs a fraudulent claim form, the insured may be guilty of perjury.