BILL NUMBER: SB 1530	CHAPTERED
	BILL TEXT

	CHAPTER   963
	FILED WITH SECRETARY OF STATE   SEPTEMBER 29, 1998
	APPROVED BY GOVERNOR   SEPTEMBER 29, 1998
	PASSED THE SENATE   AUGUST 30, 1998
	PASSED THE ASSEMBLY   AUGUST 27, 1998
	AMENDED IN ASSEMBLY   AUGUST 25, 1998
	AMENDED IN ASSEMBLY   AUGUST 24, 1998
	AMENDED IN ASSEMBLY   JULY 8, 1998
	AMENDED IN SENATE   MAY 27, 1998
	AMENDED IN SENATE   APRIL 28, 1998
	AMENDED IN SENATE   APRIL 23, 1998
	AMENDED IN SENATE   APRIL 13, 1998

INTRODUCED BY   Senator Hayden
   (Principal coauthor:  Senator Kopp)
   (Coauthors:  Senators Solis and Watson)
   (Coauthors:  Assembly Members Aroner, Bustamante, Davis,
Hertzberg, Kuehl, Lempert, Martinez, Migden, Murray, Shelley,
Sweeney, Villaraigosa, and Washington)

                        FEBRUARY 10, 1998

   An act to amend Section 1523 of the Code of Civil Procedure, and
to amend Section 12936 of, and to add Sections 790.15 and 12967 to,
the Insurance Code, relating to insurance practices, making an
appropriation therefor, and declaring the urgency thereof, to take
effect immediately.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1530, Hayden.  Insurance practices:  suspension for nonpayment
of claims.
   Under existing law, it is an unfair claims practice for an insurer
to knowingly or with frequency fail to attempt in good faith to
effectuate prompt, fair, and equitable settlements of claims in which
liability has become reasonably clear.  Existing law provides for
civil penalties and administrative sanctions for violations.
   This bill would provide that if an insurer or any affiliate of an
insurer has failed to pay any valid claim from Holocaust survivors,
as defined, the certificate of authority of the insurer shall be
suspended until the insurer, or its affiliates, pays the claim or
claims.
   Under existing law, the Insurance Commissioner and the Department
of Insurance have various duties with respect to the investigation of
insurers.
   This bill would require the department to develop and implement a
coordinated approach to gather, review, and analyze the archives of
affected insurance groups, and other archives and records, using
onsite teams and an oversight committee, to provide for research and
investigation into insurance policies, unpaid insurance claims, and
related matters of victims of the Holocaust or of the Nazi-controlled
German government or its allies, and the beneficiaries and heirs of
those victims, and for losses arising from the activities of the
Nazi-controlled German government or its allies for insurance
policies issued before and during World War II by insurers who have
affiliates or subsidiaries authorized to do business in California.
The bill would also provide that the department has an affirmative
duty to play an independent role in representing the interests of
Holocaust survivors.
   Existing law provides that if an insurer is unable to locate and
deliver a Proposition 103 rebate, the funds attributable to the
rebate escheat to the state and are required to be transferred to the
Insurance Fund to be used to repay a specified loan that was made to
the Insurance Fund.
   This bill would also provide for the transfer of $4,000,000 of
that money to the Insurance Fund for expenditure for the above
purposes for the 1998-1999 fiscal year relating to Holocaust claims,
and would provide that the money is appropriated to the Insurance
Commissioner for that purpose.  For subsequent fiscal years the bill
would provide that the funding of these provisions would be subject
to the Budget Act, and based on a plan for reimbursement of
department expenses submitted by the commissioner, as specified.
   The bill would declare that it is to take effect immediately as an
urgency statute.
   Appropriation:  yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 1523 of the Code of Civil Procedure is amended
to read:
   1523.  If an insurer, after a good faith effort to locate and
deliver to a policyholder a Proposition 103 rebate ordered or
negotiated pursuant to Section 1861.01 of the Insurance Code,
determines that a policyholder cannot be located, all funds
attributable to that rebate escheat to the state and shall be
delivered to the Controller.  The funds subject to escheat on or
after July 1, 1997, shall be transferred by the Controller to the
Department of Insurance for deposit in the Insurance Fund in the
following amounts and for the following purposes:
   (a) Up to the amount that will repay principal and interest on the
General Fund loan authorized by Item 0845-001-0001 of the Budget Act
of 1996 for expenditure as provided in Section 12936 of the
Insurance Code.
   (b) The sum of four million dollars ($4,000,000) for expenditure
during the 1998-1999 fiscal year as provided in Section 12967 of the
Insurance Code.
  SEC. 2.  Section 790.15 is added to the Insurance Code, to read:
   790.15.  (a) If an insurer or any affiliate of an insurer has
failed to pay any valid claim from Holocaust survivors, the
certificate of authority of the insurer shall be suspended until the
insurer, or its affiliates, pays the claim or claims.
   (b) As used in this section:
   (1) "Holocaust survivor" means any person who is the beneficiary
of an insurance policy, if the insurance policy insured a person's
life, property, or other interest, and the insured person was killed,
died, was displaced, or was otherwise a victim of persecution of
Jewish and other peoples preceding and during World War II by
Germany, its allies, or sympathizers.
   (2) "Beneficiary" means any person or entity entitled to recover
under any policy of insurance, including any named beneficiary, any
heir of a named beneficiary, and any other person entitled to recover
under the policy.
   (3) "Claim" means any claim submitted by a Holocaust survivor or
other beneficiary arising under an insurance policy for any loss or
damage caused by or arising because of discriminatory practices or
persecution by the Nazi-controlled German government or its allies,
or by insurers that refused to pay claims because of a claim that
policies of insurance or records were missing or confiscated because
of actions by the Nazi-controlled German government or its agents or
allies.  Claim also includes any claim by Holocaust survivors or
beneficiaries to collect proceeds from dowry or education policies or
from annuities.
   (4) An "affiliate" of, or person "affiliated" with, a specific
person, means a person who directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under
common control with, the person specified.
   (5) "Control" includes the terms "controlling," "controlled by,"
and "under common control with," and means the possession, direct or
indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, by contract other than a commercial contract for
goods or nonmanagement services, or otherwise, unless the power is
the result of an official position with or corporate office held by
the person.  Control shall be presumed to exist if any person,
directly or indirectly, owns, controls, holds with the power to vote,
or holds proxies representing, more than 10 percent of the voting
securities of any other person.
   (c) An action to suspend a certificate of authority under this
section shall 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), except that (1) if
the Office of Administrative Hearings is unable to assign an
administrative law judge to preside over a hearing that commences
within 30 days of the filing of an accusation or order initiating an
action under this section, the administrative law judge may be
appointed by the commissioner; and (2) if the commissioner determines
that it is necessary to protect the interests of Holocaust
survivors, he or she may issue an order of suspension pursuant to
this section prior to holding a hearing.
   (d) If the commissioner issues an order pursuant to paragraph (2)
of subdivision (c), he or she shall immediately issue and serve upon
the insurer a statement of reasons for the immediate action, as well
as a copy of the accusation or order containing the allegations that
support the order.  Any order issued pursuant to this subdivision
shall include a notice stating the time and place of a hearing on the
order, which shall not be less than 20, nor more than 30 days after
the order is served.
   (e) When considering an action to suspend a certificate of
authority under this section, the commissioner shall include
consideration of whether the insurer has participated in good faith
in an international commission on Holocaust survivor insurance
claims, and whether the commission is making meaningful and
expeditious progress toward paying claims to survivors and righting
the historic wrong done to Holocaust victims.
  SEC. 3.  Section 12936 of the Insurance Code is amended to read:
   12936.  (a) (1) Escheated funds deposited in the Insurance Fund
pursuant to subdivision (a) of Section 1523 of the Code of Civil
Procedure shall be transferred to the General Fund on June 30, 1998,
to repay the principal and interest on the General Fund loan provided
pursuant to Item 0845-001-0001 of the Budget Act of 1996, and such
funds are hereby continuously appropriated for that purpose.
   (2) If the Director of Finance determines that funds subject to
escheat for the 1997-98 fiscal year are insufficient to repay the
General Fund loan plus the interest owed, funds subject to escheat in
the 1998-99 fiscal year, up to the amount necessary to repay the
General Fund loan plus the interest owed, shall be available for
expenditure by the commissioner to repay the principal and interest
on the General Fund loan.  Notwithstanding the loan repayment date
specified in Item 0845-001-0001 of the Budget Act of 1996, such a
determination by the Director of Finance shall trigger an extension
of the loan repayment date to June 30, 1999.
   (b) A policyholder who was entitled to a rebate pursuant to
settlement or order of the commissioner and who has not received the
escheated rebate may submit a claim to the Controller.  The
Controller shall pay the claim from among the Proposition 103 refunds
that have escheated to the state and been deposited in the Unclaimed
Property Fund upon verification that the claim is valid.
  SEC. 4.  Section 12967 is added to the Insurance Code, to read:
   12967.  (a) (1) (A) The department shall develop and implement a
coordinated approach to gather, review, and analyze the archives of
insurers and other archives and records, using onsite teams and an
oversight committee, to provide for research and investigation into
insurance policies, unpaid insurance claims, and related matters of
victims of the Holocaust or of the Nazi-controlled German government
or its allies, and the beneficiaries and heirs of those victims, and
for losses arising from the activities of the Nazi-controlled German
government or its allies for insurance policies issued before and
during World War II by insurers who have affiliates or subsidiaries
authorized to do business in California.  Information compiled shall
be placed in a centralized data base for the retention of policy and
claimant data, and the data shall be used to implement this section
and Section 790.15.
   (B) The oversight committee referred to in paragraph (1) shall be
composed of qualified individuals with experience in Holocaust claims
cases, similar investigations, archival research, and international
law.  The oversight committee shall also include Holocaust survivors.
  No member of the oversight committee shall have a potential or
actual conflict of interest, or shall be employed by a person who has
a potential or actual conflict of interest.
   (2) The department has an affirmative duty to play an independent
role in representing the interests of Holocaust survivors where
necessary, including the duty to carry out research, investigations,
and advocacy.  The department shall cooperate with, participate in,
promote coordination with, and to the extent feasible and consistent
with the purposes of this section, work jointly with the National
Association of Insurance Commissioners and the international
commission on Holocaust survivor claims or any other entity involved
in the documentation, resolution, settlement, or distribution of
insurance claims, including documentation of unpaid claims and
distribution of proceeds, and establishment and maintenance of a data
base to contain information relevant to claimants and documents and
historical information.  The department shall work to recover
information and records that will strengthen the claims of California
residents.
   (3) The department shall employ insurance archaeologists,
economists, attorneys, accountants, and other specialists, in this
country and in Europe, to implement this section.  The department
shall work jointly with the National Association of Insurance
Commissioners and other organizations for this purpose.  The
department's cooperation with other states shall be for the purpose
of advancing survivors' claims while avoiding duplication of efforts,
and shall be dependent upon contributions by other states.
   (4) In order to assure that Holocaust survivors receive the most
aggressive and independent representation possible in pursuit of
their historic claims, in contracting with accounting firms, law
firms, economists, or others to implement this section, the
department shall, to the maximum extent possible, avoid any potential
or actual conflict of interest by doing the following:
   (A) Seek and give preference to firms that are entirely free of
any associations with firms representing insurers and nations from
which Holocaust survivors are seeking just treatment of their claims.

   (B) If the department finds that is necessary to contract with a
firm or firms that have conflicts or potential conflicts of interest,
those conflicts or potential conflicts of interest shall be
disclosed to the commissioner, and the following requirements shall
apply:
   (i) The contract shall contain a provision that expresses a formal
commitment on the part of the firm to aggressively pursue a maximum
just settlement for Holocaust survivors and their families without
regard to any adverse impacts on insurers, affiliates of insurers,
nations, or others that may have employed the firm or affiliates of
the firm that is contracting with the commissioner to assist in
carrying out the commissioner's responsibilities under this section.

   (ii) If any conflict or potential conflict exists between the
firm, or an affiliate of the firm, and an insurer, an affiliate of an
insurer, a nation or others directly or indirectly involving
Holocaust claims, the firm shall disclose both the fact of the
conflict or potential conflict, and all relevant information
describing the nature of the conflict or potential conflict.
   (iii) If a conflict or potential conflict exists between the firm,
or an affiliate of the firm, and an insurer, an affiliate of an
insurer, a nation, or others that does not directly or indirectly
involve Holocaust claims, the firm shall disclose the fact of the
conflict or potential conflict and identify the source of the
conflict or potential conflict, but need not describe the particular
circumstances or facts that create the conflict or potential
conflict.
   (C) The department may take whatever special measures it deems
necessary to avoid either the appearance or the reality of conflicts
that may undermine public confidence in the integrity of the effort
to secure justice for Holocaust survivors.
   (b) The funding of the activities provided for by this section for
the 1998-1999 fiscal year shall be from funds transferred pursuant
to subdivision (b) of Section 1523 of the Code of Civil Procedure,
which funds are hereby appropriated to the commissioner for that
purpose.  The commissioner shall seek reimbursement of those funds as
provided in subdivision (c).
   Funding for subsequent fiscal years shall be subject to the Budget
Act and based on a plan submitted by the commissioner to the
Legislature outlining the plan for reimbursement of expenses of the
department by affected insurers.
   Funds made available to implement this section shall be used to
develop and implement a coordinated approach to gather, review, and
analyze the archives of affected insurance groups, and other archives
and records, using onsite teams and an oversight committee
consisting of individuals with expertise in accounting, law,
insurance archaeology, economics, and public information.  The
information compiled shall be placed in a centralized data base for
the retention of policy and claimant data, and that data shall be
used by the department to implement this section.
   (c) (1) Any funds recovered by the department for the purpose of
reimbursing the state for costs associated with investigation and
enforcement actions under this section shall not be deposited in the
Insurance Fund, but instead shall be delivered to the Controller for
deposit into the General Fund.
   (2) To the maximum extent possible, the department shall seek
reimbursement for its costs incurred in implementing this section,
including funds transferred pursuant to subdivision (b) of Section
1523 of the Code of Civil Procedure, from any settlements reached
with affected insurers.
   (d) The department shall report its progress in implementing this
section and its participation in the identification and resolution of
insurance claims of Holocaust survivors and their beneficiaries and
heirs.  The report shall also include an overview of current and
anticipated expenditures in implementing this section.  The
department shall make this report biannually to the insurance and
budget committees of the Legislature.
  SEC. 5.  This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect.  The facts constituting the necessity are:
   Many of the victims of the Holocaust are elderly.  In order to
permit testimony by and compensation to these persons, it is
necessary for this act to take effect immediately.