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California Insurance Commissioner Dave Jones is urging the Legislature to give him unprecedented new powers to punish broker-agents and other licensees “in all instances” where he finds any violation of the California Insurance Code.
Senate Bill 631 would authorize the Commissioner to order broker-agents and other licensees to pay “restitution”—defined to include not only money damages that a licensee owes but has not paid, but also:
· “out-of-pocket expenses incurred or economic harm” suffered as a result of a violation of any law or regulation enforced by the CDI
· attorney's fees and costs of the department and
· future costs of the department to ensure compliance with the settlement, or order requiring restitution or other remedies.
Persons entitled to receive restitution are defined so broadly as to include insurance companies—meaning broker or agents could conceivably be required to pay “restitution” to their own insurers in the event of even minor violations of Insurance Code or regulatory provisions.
IBA West is gravely concerned about several aspects of this legislation, including its failure to include any meaningful limitation on a Commissioner’s ability to impose financially devastating punishments—in addition to all of the powers he now holds to suspend or revoke licenses—on licensees. The bill would permit parties who’ve been ordered to pay restitution to file a civil lawsuit against the Department of Insurance, but that remedy would be beyond the financial ability of many broker-agents to exercise, said Steve Young, IBA West general counsel.
Young said IBA West and other industry groups were invited to discuss the proposal with CDI officials earlier this week. Young and others have asked the Department to provide additional information.
“IBA West will strongly oppose this legislation unless the Commissioner can explain not only why it is needed, but also why he should be given unfettered discretion to impose arbitrary and excessive penalties,” Young said.
LEGISLATIVE COUNSEL'S DIGEST
SB 631, as amended, Evans. Insurance Commissioner:
Existing law requires the Insurance Commissioner to perform all
duties imposed upon him or her by the provisions of the Insurance
Code and other laws regulating the business of insurance in this
state, and to enforce the execution of those provisions and laws.
This bill would additionally authorize the commissioner, in the
exercise of his or her discretion to take enforcement action, to
impose upon an insurer, licensee, or other entity or person subject
to the commissioner's authority specified remedies, either by way of
settlement or following a hearing, whenever the commissioner finds
that there has been a violation of an applicable insurance provision,
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 12926.15 is added to the
Insurance Code , to read:
12926.15. (a) The Legislature finds and declares all of the
(1) Existing law permits the commissioner to order restitution
only in limited circumstances.
(2) The commissioner regularly finds that, as a result of legal
violations, Californians are entitled to refunds or restitution, but
in many circumstances, the commissioner has no specific authority to
order refunds or restitution.
(3) This section is intended to provide the commissioner the
authority to order refunds or restitution in all instances where he
or she finds that an insurer, licensee, or other entity or person has
violated the code.
(b) In addition to any other remedy provided in this code, and
notwithstanding Sections 12921, 12926.1, and 12975.7, in the exercise
of his or her discretion to take enforcement action, the
commissioner may impose upon an insurer, licensee, or other entity or
person subject to the commissioner's authority the remedies provided
in this section. Whenever the commissioner finds, either by way of
settlement or following a hearing, that an insurer, licensee, or
other entity or person subject to this code has violated any of the
provisions of this code, he or she may order the following remedies:
(1) The commissioner may order an insurer, licensee, or other
entity or person subject to this code to pay restitution to a person.
Restitution shall mean quantifiable monetary sums that an insurer,
licensee, or other entity or person owes to a person, but did not
pay, in violation of a law or regulation enforced by the
commissioner. Restitution, as defined herein, shall also include
out-of-pocket expenses incurred or economic harm suffered by a person
because of an insurer's, licensee's, or other entity's or person's
violation of a law or regulation enforced by the commissioner.
(2) In matters where the commissioner finds a violation of the
provisions of this code, the commissioner may order an insurer,
licensee, or other entity or person to pay attorney's fees and costs
of the department and future costs of the department to ensure
compliance with the settlement, or order requiring restitution or
(c) Where restitution is ordered and paid to a person pursuant to
the provisions of this section, the amount paid shall be credited to
any subsequent judgment obtained by that person in a civil action
arising from the same facts and circumstances.
(d) Nothing in this section is intended to limit or restrict
actions, remedies, or procedures otherwise available to the
department or any person pursuant to any other provision of law.
(e) It shall not be a defense in an administrative or private
civil action that the commissioner did not order an insurer,
licensee, or other entity or person to pay restitution.
(f) For proceedings not required to be conducted in accordance
with the Administrative Procedure Act (Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code), the following provisions shall apply:
(1) An order requiring restitution shall become effective 45 days
after it is delivered or mailed to the insurer, licensee, or other
entity or person unless a stay of execution is granted.
(2) Judicial review of an order requiring restitution may be had
by filing a petition for a writ of mandate in accordance with the
provisions of the Code of Civil Procedure. Notwithstanding those
provisions, the petition shall be filed within 45 days after the
delivery or mailing of the order requiring restitution.
(g) If restitution is not paid to a person within 10 days after an
order becomes effective, the commissioner shall proceed in
accordance with Section 12976 for the purpose of recovering those
moneys due to that person.
(h) As used in this section, "person" shall have the same meaning
as set forth in Section 19.