Title INS — California Ins. Code

A member shall have the right to vote in person or by his written proxy filed with the corporate secretary not less than five days prior to the meeting. No such proxy shall be made irrevocable, nor be valid beyond the earliest of the following dates: (a) The date of expiration se…

No member’s vote upon any proposal to divest the insurer of its business or assets, or the major part thereof, shall be registered or taken except in person or by proxy newly executed and specific as to the matter to be voted upon.

This chapter does not apply to a mutual insurer that has converted to a mutual legal reserve insurer pursuant to former Chapter 9 (commencing with Section 10810) of Part 2 of Division 2. Except for Section 4016.2, this chapter does not apply to (a) a mutual insurer that has compl…

The affairs of every domestic mutual insurer shall be managed by a board of directors consisting of not less than 5 directors nor more than 15 directors.

Directors shall be elected by the members of a domestic mutual insurer at the annual meeting of members. Directors may be elected for terms of not more than five years each and until their successors are elected and have qualified, and if to be elected for terms of more than one …

A director of a mutual insurer shall be a policyholder thereof.

As to an insurer operating as an authorized insurer only in the State of California, a majority of the members of the insurer’s board of directors shall be citizens of and shall actually reside in this State.

A domestic mutual insurer shall not hereafter make any contract whereby any person is granted or is to enjoy in fact the management of the insurer to the substantial exclusion of its board of directors or to have the controlling or preemptive right to produce substantially all in…

Any such contract shall provide that any such manager or producer of its business shall within 90 days after expiration of each calendar year furnish the insurer’s board of directors a written statement of amounts received under or on account of the contract and amounts expended …

The commissioner shall disapprove any such contract if he finds that it: (a) Subjects the insurer to excessive charges; or (b) Is to extend for an unreasonable length of time; or (c) Does not contain fair and adequate standards of performance; or (d) Contains other inequitable pr…

The commissioner may, after a hearing held thereon, withdraw his approval of any such contract theretofore approved by him, if he finds that the bases of his original approval no longer exist, or that the contract has, in actual operation, shown itself to be subject to disapprova…

The holder of any such contract described in this Article shall be subject to examination by the commissioner pursuant to Article 4 (beginning with Section 730), Chapter 1, Part 2, Division 1 of this code.

A mutual insurer may borrow money to defray the expenses of its organization, provide it with surplus funds, or for any purpose of its business, upon a written agreement that the money is required to be repaid only out of the insurer’s surplus in excess of that stipulated in the …

The issuance of any document evidencing any such loan shall require the commissioner’s securities permit under Article 8 of Chapter 1, Part 2, Division 1 (commencing with Section 820).

This section shall not apply to loans obtained by the insurer in ordinary course of business from banks and other financial institutions, nor to loans secured by pledge or mortgage of assets.

The directors of a domestic mutual insurer may from time to time apportion and pay or credit to its members dividends only out of that part of its surplus funds which represents net realized savings, net realized earnings, and net realized capital gains, all in excess of a surplu…

A dividend otherwise proper may be payable out of such savings, earnings, and gains even though the insurer’s total surplus is then less than the aggregate of contributed surplus remaining unpaid by the insurer.

The payment of any such dividends on a workers’ compensation policy shall be subject to the provisions of Section 11738 and for that purpose a mutual policy shall be considered to be a participating policy.

A domestic mutual insurer while maintaining unimpaired surplus funds not less in amount than one and one-half times the minimum paid-in capital stock required of a domestic stock insurer formed under this code for authority to transact the same class or classes of insurance, may,…

The commissioner shall not authorize a domestic insurer to extinguish the contingent liability of any of its members or in any of its policies to be issued, unless it qualifies to and does extinguish such liability of all its members and in all such policies for all kinds of insu…

A foreign or alien mutual insurer may issue nonassessable policies to its members in this State pursuant to its charter and the laws of its domicile.

The commissioner shall revoke the certificate of a domestic mutual insurer to issue policies without contingent liability if (a) At any time the insurer’s assets are less than the sum of its liabilities and the surplus required for such certificate, or (b) The insurer, by resolut…

During the absence of such certificate the insurer shall not issue any policy without providing therein for the contingent liability of the policyholder, nor renew any policy which is then in force without endorsing the same to provide for such contingent liability.

Such an insurer is insolvent if its surplus becomes less than the amount of paid-in capital required of a capital stock company to qualify to transact the same classes of insurance.

Such an insurer shall be subject to all the provisions of this code and all the applicable rules and regulations of the commissioner. Such code provisions and such rules and regulations, when applied to such insurers, shall be construed in accordance with the fundamental nature o…

Any county mutual fire insurer, or two or more such insurers, may merge into a general mutual insurer described in this chapter by following the procedure in Article 9.5 (commencing with Section 7040) of Chapter 5, Part 1, Division 2 of this code. Such general mutual insurer shal…

By following the procedure specified in this article, any domestic mutual insurer described in this article may merge, consolidate, or otherwise unite with or become a part of, or may reinsure all of its policies with and, upon assumption of all of its liabilities, may transfer a…

The plan and agreement by which any such transaction is to be effected shall be approved by a resolution of the majority of the board of directors of each domestic mutual insurer reciting the reasons for and the purposes of the proposed transaction and the manner in which the tra…

When any such plan and agreement shall have been approved by the commissioner, with any changes required by him, the same shall be approved in the case of each domestic mutual insurer that is a party to the transaction by not less than two-thirds of the votes cast by the members …

If the vote is in the affirmative, a certified copy of all proceedings relating to the proposed transaction shall be filed with the commissioner. If one of the insurers that is a party to the transaction is a foreign corporation there shall also be filed with the commissioner evi…

Any plan of merger, consolidation, or other unification under this article shall provide that all rights and properties of the parties to the plan of merger, consolidation or other unification shall accrue to and become the rights and properties of the surviving or consolidated o…

In the event a mutual insurer is merged, consolidated, or part of a reorganization under the procedures specified in this article, and the surviving, consolidated, or continuing company is an incorporated stock insurer, the plan shall provide for the manner of converting or excha…

In the event a domestic mutual insurer is merged, consolidated, or a part of a reorganization under the procedures specified in this article, and the surviving, consolidated, or continuing company is a nonadmitted insurer, the plan of merger shall provide either for that insurer …

(a) A domestic incorporated medical malpractice mutual insurer, issuing nonassessable policies on a reserve basis may be converted into an incorporated stock insurer issuing, on a reserve basis, nonassessable policies either by demutualization or by establishing a mutual holding …

The definitions in this section apply to the following terms when used in this article. (a) “Adoption date” means the date the board of directors adopts the plan of conversion. (b) “Converted company” means the converted insurer or converted mutual holding company, as the case ma…

The plan of conversion shall include appropriate proceedings for amending the mutual company’s articles of incorporation to give effect to the conversion from a nonstock corporation into a stock corporation. The plan shall be: (a) Approved by a resolution of two-thirds of the boa…

For the conversion of a medical malpractice mutual insurer, the plan of conversion shall provide for either a demutualization in compliance with Section 4097.04 or for a mutual holding company in compliance with Section 4097.05. For the conversion of a mutual holding company, the…

For the demutualization of a mutual insurer into a stock insurer or for the demutualization of a mutual holding company into a stock corporation, the plan for conversion shall include the following: (a) A fair, just, and equitable formula, approved by the commissioner, for determ…

A plan of conversion adopted by a medical malpractice mutual insurer to establish a mutual holding company shall provide that the medical malpractice mutual insurer will become a stock insurer, that the members of the medical malpractice mutual insurer will become members of a mu…

(a) The commissioner shall examine the plan submitted pursuant to subdivision (b) of Section 4097.02. If the plan provides for the establishment of a mutual holding company under Section 4097.05, the mutual insurer shall demonstrate that the issuance of stock: (1) Will not requir…

The meeting of members prescribed by subdivision (c) of Section 4097.02 shall be called by the board of directors, the chairperson of the board, or the president of the mutual company. Notice of the meeting shall be given to eligible members by mail at least 45 days prior to the …

Nothing in this article shall be deemed to prohibit the inclusion in the plan of conversion of provisions under which the insurer’s officers, directors, employees, agents, and employee benefit plans for their benefit may be entitled, in accordance with reasonable classifications …

No director, officer, agent, or employee of the mutual company shall receive any fee, commission, or other valuable consideration whatsoever, other than regular salary and compensation, for in any manner aiding, promoting, or assisting in the conversion except as set forth in the…

At any time before that plan of conversion becomes effective as provided in Section 4097.11, the mutual company may, by resolution of at least two-thirds of the board of directors, amend the plan of conversion or withdraw the plan of conversion. Any plan amendment shall require t…

(a) Upon consent by the commissioner to the plan of conversion of a mutual insurer and filing of the plan of conversion in accordance with the provisions of this article, the commissioner shall issue a new certificate of authority to the converted insurer. Upon issuance of the ce…

(a) Upon the effective date of a plan of conversion in accordance with Section 4097.05, the mutual insurer immediately becomes a stock corporation, the membership interests and rights in surplus of its members are extinguished, the members of the mutual insurer immediately become…

(a) Prior to, and for a period of five years following, the effective date of the plan of conversion, no person or group of persons acting in concert shall directly or indirectly offer to acquire or acquire in any manner the beneficial ownership of 5 percent or more of any class …

Unless otherwise provided in the plan of conversion, the directors and officers of the mutual company shall serve as directors and officers of the converted company until new directors and officers have been duly elected and qualified pursuant to the articles of incorporation and…

(a) Notwithstanding any other provision of law and except as otherwise provided in subdivision (b), actions concerning any plan of conversion, proposed plan of conversion, plan amendment, or proposed plan amendment under this article or any acts taken or proposed to be taken unde…

The offer or sale of securities, including any debt securities, issued pursuant to the plan of conversion developed and approved in accordance with the provisions of this article, shall be exempt from Article 8 (commencing with Section 820) of Chapter 1 of Part 2 of Division 1.