AB 826 Automobile Insurance: Notice of Cancellation or Nonrenewal
BILL NUMBER: AB 826 AMENDED 06/30/97
AMENDED IN SENATE JUNE 30, 1997
AMENDED IN ASSEMBLY MAY 19, 1997
AMENDED IN ASSEMBLY APRIL 24, 1997
INTRODUCED BY Assembly Member Thomson
FEBRUARY 27, 1997
An act to amend Section 1861.03 of the Insurance Code, relating to
insurance.
LEGISLATIVE COUNSEL’S DIGEST
AB 826, as amended, Thomson. Automobile insurance: notice of
cancellation or nonrenewal.
Existing law provides that a notice of cancellation or nonrenewal of a
policy of automobile insurance shall be effective only if it is based
upon specified reasons one of which may be a substantial increase in the
hazard insured against, except as specified.
This bill would provide that a violation of certain alcohol related
offenses is, per se, a substantial increase in the hazard insured
against. The bill would also make a statement of legislative intent.
The bill amends a provision contained in Proposition 103 which
provides for amendment only to further its purposes and by a 2/3
vote.
Vote: 2/3. Appropriation: no. Fiscal committee: no. State-mandated
local program: no.
SECTION 1. Section 1861.03 of the Insurance Code is amended to
read:
1861.03. (a) The business of insurance shall be subject to the laws of
California applicable to any other business, including, but not limited
to, the Unruh Civil Rights Act (Sections 51 to 53, inclusive, of the
Civil Code), and the antitrust and unfair business practices laws (Parts
2 (commencing with Section 16600) and 3 (commencing with Section 17500)
of Division 7 of the Business and Professions Code).
(b) Nothing in this section shall be construed to prohibit (1) any
agreement to collect, compile and disseminate historical data on paid
claims or reserves for reported claims, provided such data is
contemporaneously transmitted to the commissioner, (2) participation in
any joint arrangement established by statute or the commissioner to
assure availability of insurance, (3) any agent or broker, representing
one or more insurers, from obtaining from any insurer it represents
information relative to the premium for any policy or risk to be
underwritten by that insurer, (4) any agent or broker from disclosing to
an insurer it represents any quoted rate or charge offered by another
insurer represented by that agent or broker for the purpose of
negotiating a lower rate, charge, or term from the insurer to whom the
disclosure is made, or (5) any agents, brokers, or insurers from
utilizing or participating with multiple insurers or reinsurers for
underwriting a single risk or group of risks.
(c) (1) Notwithstanding any other provision of law, a notice of
cancellation or nonrenewal of a policy for automobile insurance shall be
effective only if it is based on one or more of the following reasons:
(A) nonpayment of premium; (B) fraud or material misrepresentation
affecting the policy or insured; (C) a substantial increase in the hazard
insured against. A violation of any alcohol related offense specified in
Sections 23152 and 23153, or Section 23220, 23221, 23222, 23224, or 23226
of the Vehicle Code, shall, per se, be deemed a substantial increase in
the hazard insured against, provided the person does not otherwise
qualify to purchase a good driver discount policy pursuant to Section
1861.025.
(2) This subdivision shall not prevent a reciprocal insurer, organized
prior to November 8, 1988, by a motor club holding a certificate of
authority under Chapter 2 (commencing with Section 12160) of Part 5 of
Division 2, and which requires membership in the motor club as a
condition precedent to applying for insurance, from issuing an effective
notice of nonrenewal based solely on the failure of the insured to
maintain membership in the motor club. This subdivision shall also not
prevent an insurer which issues private passenger automobile coverage to
members of groups that were in existence prior to November 8, 1988,
whether membership, franchise, or otherwise, and to those who are not
members of groups from issuing an effective notice of nonrenewal for
coverage provided to the insured as a member of the group based solely on
the failure of the insured to maintain that membership if (i) the insurer
offers to renew the coverage to the insured on a nongroup basis, or (ii)
to transfer the coverage to an affiliated insurer. The rates charged by
the insurer or affiliated insurer shall have been adopted pursuant to
this article. However, all of the following conditions shall be
applicable to that insurance:
(A) Membership, if conditioned, is conditioned only on timely payment
of membership dues and other bona fide criteria not based upon driving
record or insurance, provided that membership in a motor club may not be
based on residence in any area within the state.
(B) Membership dues are paid solely for and in consideration of the
membership and membership benefits and bear a reasonable relationship to
the benefits provided. The amount of the dues shall not depend on whether
the member purchases insurance offered by the membership organization.
None of those membership dues or any portion thereof shall be transferred
by the membership organization to the insurer, or any affiliate of the
insurer, attorney-in-fact, subsidiary, or holding company thereof,
provided that this provision shall not prevent any bona fide transaction
between the membership organization and those entities.
(C) Membership provides bona fide services or benefits in addition to
the right to apply for insurance. Those services shall be reasonably
available to all members within each class of membership.
Any insurer that violates subparagraphs subparagraph (A), (B), or (C)
shall be subject to the penalties set forth in Section 1861.14.
SEC. 2. In enacting this act, it is the intent of the Legislature that
a substantial increase in the hazard insured against exists with respect
to a violation of Sections 23220, 23221, 23222, and 23226 of the Vehicle
Code referred to in paragraph (1) of subdivision (c) of Section 1861.03
of the Insurance Code, as amended by this act, only where a person is
driving upon, or the vehicle is upon, a highway.
