2007 California Insurance Code Article 13. Disciplinary Actions

CA Codes (ins:1737-1748.5)

1737.  The purpose of this chapter is to protect the public by
requiring and maintaining professional standards of conduct on the
part of all persons licensed hereunder.



1738.  The commissioner may suspend or revoke any permanent license
issued pursuant to this chapter on any of the grounds set forth in
Article 6 hereof on which he may deny an application.  Whenever in
such grounds the word "applicant" is used, such word shall for the
application of this section be the words "the holder of a permanent
license."  A suspension or revocation based upon a ground set forth
in Section 1669 may be without notice or hearing.  Suspension or
revocation of any permanent license, except a restricted license, on
a ground other than that set forth in Section 1669 shall be after
notice and hearing conducted in accordance with Chapter 5, Part 1,
Division 3, Title 2 of the Government Code, and the commissioner has
all of the powers granted therein.



1738.5.  A proceeding held pursuant to Section 1668, 1668.5, 1738,
1739, or 12921.8 that involves allegations of misconduct perpetrated
against a person age 65 or over shall be held within 90 days after
receipt by the department of the notice of defense, unless a
continuance of the hearing is granted by the department or the
administrative law judge.  When the matter has been set for hearing,
only the administrative law judge may grant a continuance of the
hearing.  The administrative law judge may, but need not, grant a
continuance of the hearing, only upon finding the existence of one or
more of the following:
   (a) The death or incapacitating illness of a party, a
representative or attorney of a party, a witness to an essential
fact, or of the parent, child, or member of the household of any of
these persons, when it is not feasible to substitute another
representative, attorney, or witness because of the proximity of the
hearing date.
   (b) Lack of notice of hearing as provided in Section 11509 of the
Government Code.
   (c) A material change in the status of the case where a change in
the parties or pleadings requires postponement, or an executed
settlement or stipulated findings of fact obviate the need for
hearing.  A partial amendment of the pleadings shall not be good
cause for continuance to the extent that the unamended portion of the
pleadings is ready to be heard.
   (d) A stipulation for continuance signed by all parties, or their
authorized representatives, that is communicated with the request for
continuance to the administrative law judge no later than 25
business days before the hearing.
   (e) The substitution of the representative or attorney of a party
upon showing that the substitution is required.
   (f) The unavailability of a party, representative, or attorney of
a party, or witness to an essential fact, due to a conflicting and
required appearance in a judicial matter if, when the hearing date
was set, the person did not know and could neither anticipate nor at
any time avoid the conflict, and the conflict, with the request for
continuance, is immediately communicated to the administrative law
judge.
   (g) The unavailability of a party, a representative or attorney of
a party, or a material witness due to an unavoidable emergency.
   (h) Failure by a party to comply with a timely discovery request
if the continuance request is made by the party who requested the
discovery.


1739.  Where a permanent license is held by an organization both the
organization itself and any natural persons named thereon shall, for
the purposes of this article, be deemed to be the holders thereof.
If that natural person commits any act or fails to perform any duty
which is a ground for suspension or revocation of the license held by
the organization, that action may be taken against the organization.
  If any natural person named under an organization license commits
any act or fails to perform any duty which is a ground for the
suspension or revocation of any license held by the organization, the
commissioner may suspend or revoke the license of the organization,
or the license of the natural person, or may take all of those steps.




1740.  The certificate of the commissioner certifying any facts
found after a hearing held under this chapter shall be prima facie
evidence of the facts set forth therein.



1741.  If the commissioner finds, after a hearing, that there be
grounds for the denial of an application for a license to act in any
capacity set forth in Article 1 of this chapter or if he finds, after
a hearing, that any licensee has violated the provisions of this
code and that such violation would justify the suspension or
revocation of any license held by such person, the commissioner may
order him to prove his qualifications by taking and passing the
qualifying examination for any such license held or applied for.  The
commissioner shall set the time for the taking of such examination.
Failure thereof by any licensee shall result in the termination of
all licenses of such licensee to which the examination is applicable.
  An order to take such examination may be in lieu of any other
action in respect to the application or the license, or, except in
the case of revocation, may be in addition to any other action.



1742.  Where a person who is or has been licensed under this chapter
has been found by the commissioner to have violated any provision of
this code which would justify the suspension or revocation of a
license held, or where a person is applying for a license under this
chapter and there exists grounds for the denial by the commissioner
of his application, the commissioner may, after hearing, revoke the
license held or deny the application for an unrestricted license, and
in lieu thereof issue to such a person a restricted license.  The
commissioner may impose any reasonable conditions upon the
acquisition of such restricted license or the conduct of the holder
thereof.  The holder of the restricted license has no property right
therein and the commissioner may, with or without either hearing or
cause, suspend or revoke a restricted license.  If a hearing is held
under this section, it shall be conducted in accordance with Chapter
5, Part 1, Division 3, Title 2 of the Government Code.  The holder of
a restricted license is subject to all the provisions of this code
and such license shall be kept in force and renewed in the same
manner, at the same time, and subject to the same conditions and fees
as are applicable to an unrestricted license to act in the same
capacity.



1742.2.  The department shall promulgate regulations necessary to
comply with the requirements of Section 1033 of Title 18 of the
United States Code no later than January 1, 2001.



1743.  The lapse or suspension of any license by operation of law,
by failure to renew or by its voluntary surrender shall not deprive
the commissioner of jurisdiction or right to institute or proceed
with any disciplinary proceeding against such license, to render a
decision suspending or revoking such license or to establish and make
a record of the facts of any violation of law for any lawful
purpose.  No such disciplinary proceeding shall be instituted against
any license after the expiration of five years from the termination
of such license.


1744.  The filing of a statement of issues pursuant to Chapter 5,
Part 1, Division 3, Title 2 of the Government Code specifying grounds
for denial of an application for a license to act in any capacity
under this chapter shall automatically suspend any certificate of
convenience issued with respect to any such application until the
decision and order in the matter of such statement of issues becomes
final, and if the order in such matter is for the denial of the
application for any such license, the certificate of convenience with
respect thereto shall automatically terminate on the effective date
of such denial.


1745.  A first failure to keep or maintain the books and records
required under Section 1727 may be considered by the commissioner to
be a minor offense if committed by a licensee described in Section
1746 and the commissioner may, in lieu of notice and hearing referred
to in Section 1738, take disciplinary proceedings and action as set
forth in Section 1746.



1746.  If the commissioner has been informed and believes that a
licensed fire and casualty broker-agent or life agent has committed
any offense referred to in Section 1745, the commissioner may,
without prior notice or hearing, mail to that licensee at his or her
last address filed with the commissioner an order reprimanding the
licensee.  That order shall specify the statute violated and the time
of the violation; and shall further state that the order shall
become effective commencing at a date specified therein not less than
15 days from the date of mailing, unless the licensee, prior to the
effective date, advises the commissioner in writing that formal
notice and hearing are requested, in which case the order shall
become void and of no effect, and the commissioner may initiate
proceedings pursuant to Chapter 5 (commencing with Section 11500) of
Part 1 of Division 3 of Title 2 of the Government Code.



1747.  Whenever the commissioner may determine or have good cause to
believe that any fire and casualty broker-agent has failed to keep
or maintain the records required by Sections 1727 and 1727.5, in
connection with or in lieu of any other disciplinary action against
the license of the licensee, the commissioner may issue his or her
order requiring the licensee to establish and currently complete
those records within sixty (60) days from the date of the order.
When the order is given in lieu of other disciplinary action, notice
of the order may be given by certified mail addressed to the office
of the licensee.  Failure of the licensee to comply with the order
within the time specified therein shall be grounds for the suspension
or revocation of the license or licenses of the licensee, and the
proceeding shall be conducted in accordance with Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of
the Government Code.


1748.  The commissioner, in any proceeding under the provisions of
this article, may, by an alternative order, permit a licensee to
elect in writing to pay a specified money penalty, within a specified
time in lieu of a license suspension or other permitted action.  If
the licensee so elects, the sum of money specified shall be paid to
the commissioner for the use of the State of California.  The sum
specified shall not exceed:
   (a) Four thousand dollars (,000) for each offense.
   (b) Twenty thousand dollars (,000) in the aggregate for all
offenses involved in any one proceeding.
   (c) Thirty percent of the gross commissions on insurance
transacted by the licensee in the preceding calendar year.
   (d) Any amount proven, or admitted, in the proceeding to have been
received and retained by the licensee in violation of this code.
   The commissioner shall determine the monetary penalty to be paid
in any given case and in so doing shall not be limited to the
selection of the penalty specified in any one of the above
subdivisions, as compared with the penalty in any of the other three
subdivisions, that will result in the payment by the licensee of the
least amount.
   The amount of reimbursement the commissioner orders shall be the
amount that fully reimburses the commissioner for the commissioner's
costs, or any lesser amount that the commissioner determines is the
most the subject of the order can pay in the event the subject is
financially unable to fully reimburse the commissioner.
   If a licensee fails to pay a monetary penalty or reimbursement
within the time specified in the order, the commissioner, unless the
order is lawfully stayed, may deny a pending application for a
license, or may revoke or suspend the license of the subject of the
order for a period of time as determined by the commissioner.  If,
for any reason, an application is denied, or a license is revoked or
suspended, before the subject of the order has paid the full amount
of an ordered monetary penalty or reimbursement, the balance owed
shall be paid before a license may be reinstated or an application
for any new license may be granted.



1748.5.  (a) For the purposes of this section, the following
definitions are applicable:
   (1) "Production agency" means any person or organization licensed
under Chapter 5 (commencing with Section 1621), Chapter 5A
(commencing with Section 1759), Chapter 6 (commencing with Section
1760), Chapter 7 (commencing with Section 1800), or Chapter 8
(commencing with Section 1831).
   (2) "Subject person" means any person who has participated or may
participate in any manner in the business of a production agency, or
any person licensed as a producer.
   (3) "Insurer" means any domestic insurer, and any insurer that is
admitted to transact insurance in this state, provided that if a
subject person of an insurer is not a resident of California, or
operating out of a place of business within California, then the
subject person shall be engaged in direct management, direction, or
conduct of the business of insurance in California in order to come
within the provisions of this section.
   (b) If, after notice and a hearing, the commissioner finds all of
the following, the commissioner may issue an order removing a subject
person from his or her office or employment with the production
agency and prohibiting the subject person from participating in any
manner in the conduct of the business of an insurer or production
agency, except with the prior consent of the commissioner:
   (1) (A) The subject person has engaged in misconduct with respect
to the business of insurance that has caused financial or other
injury to any person, or
   (B) The subject person has engaged in fraud, or willful acts or
omissions involving dishonesty that exposed a person to financial or
other injury; and
   (2) The subject person's conduct or practice demonstrates
unfitness to continue as a subject person.
   (c) (1) If the commissioner gives written notice pursuant to
subdivision (b) to a subject person, the commissioner shall
immediately issue an order prohibiting the subject person from
participating in any manner in the business of insurance, except with
the prior consent of the commissioner, if the commissioner: (A)
finds that failure to immediately issue the order threatens the
financial solvency of an insurer or may reasonably be expected to
cause irreparable injury to any person; (B) serves that subject
person and the production agency with written notice of the
suspension order; and (C) finds that all of the necessary factors are
present which would permit the commissioner, after notice and a
hearing, to issue an order pursuant to subdivision (b) removing a
subject person from his or her office or employment with the
production agency and prohibiting the subject person from
participating in any manner in the business of an insurer or
production agency.
   (2) Any suspension order issued pursuant to paragraph (1) of this
subdivision shall be effective until the date the commissioner
dismisses the charges contained in the notice served under
subdivision (b) or paragraph (1) of this subdivision, the effective
date of an order issued by the commissioner pursuant to subdivision
(b), or a court issues a stay of the order pursuant to subdivision
(d).
   (d) Within 10 days after a subject person has been served with an
order of suspension pursuant to subdivision (c), the person may apply
to the superior court of the county in which the principal office of
the production agency is located for a stay of the order pending
completion of the proceedings pursuant to subdivision (b), and the
court shall have jurisdiction to issue an order staying the
suspension.  Nothing in this subdivision shall be deemed to authorize
the court to issue a stay order on an ex parte basis.
   (e) (1) If the commissioner finds both of the following, he or she
shall immediately issue an order suspending a subject person from
his or her office or employment with a production agency and
prohibiting the subject person from participating in any manner in
the conduct of the business of an insurer or production agency,
except with the prior consent of the commissioner:  (A) the subject
person has been charged in an indictment issued by a grand jury, or
in an information, complaint, or similar pleading issued by a United
States Attorney, district attorney, or other governmental official or
agency authorized to prosecute crimes, with a crime punishable by
imprisonment for a term exceeding one year and which involves as one
of its necessary elements a fraudulent act or an act of dishonesty in
the acceptance, custody, or payment of money or property; and (B)
that a failure to immediately issue the order threatens the financial
solvency of an insurer or may cause financial or other injury to any
person.
   In the event the criminal proceedings are terminated other than by
judgment of conviction, an order issued pursuant to paragraph (1) of
this subdivision shall be deemed rescinded as if it had not been
issued.
   (2) If the commissioner finds both of the following, he or she may
immediately issue an order removing a subject person from his or her
office or employment with a production agency and prohibiting the
subject person from participating in any manner in the business of an
insurer or production agency, except with the prior consent of the
commissioner:  (A) the person has during the preceding five years
been convicted of a crime that is punishable by imprisonment for a
term exceeding one year and has as one of its necessary elements a
fraudulent act or an act of dishonesty in the accepting, custody, or
payment of money or property; and (B) that a failure to immediately
issue the order threatens the financial solvency of an insurer or may
cause financial or other injury to any person.
   (3) The fact that any subject person charged with a crime
involving as one of its necessary elements a fraudulent act or any
act of dishonesty in the acceptance, custody, or payment of money or
property is not convicted of that crime shall not preclude the
commissioner from issuing an order regarding the subject person
pursuant to other provisions of this code.
   (f) (1) Within 30 days after an order is issued pursuant to
subdivision (c) or (e), the subject person to whom the order is
issued may choose to do either of the following:  (A) file with the
commissioner an application for a hearing on the order.  The
commissioner shall, upon the written request of the subject person,
extend the 30-day period by an additional 30 days provided the
request is filed with the commissioner within 30 days after the order
is issued.  If the commissioner fails to commence the hearing within
15 business days after the application is filed, or within a longer
period of time to which the subject person consents, the order shall
be deemed rescinded as if it had not been issued.  Within 30 days
after the hearing, the commissioner shall affirm, modify, or rescind
the order; otherwise, the order shall be deemed rescinded as if it
had not been issued, or (B) petition for judicial review of the order
pursuant to Section 1085 of the Code of Civil Procedure, where the
court shall exercise its independent judgment on the evidence.
   (2) The right of any subject person to whom an order is issued
pursuant to subdivision (c) or (e) to petition for judicial review of
the order shall not be affected by the failure of that subject
person to apply to the commissioner for a hearing on the order as
provided by this subdivision.
   (g) (1) Any person to whom an order is issued pursuant to
subdivision (b), (c), or (e) may apply to the commissioner to modify
or rescind the order.  The commissioner shall not grant the
application unless he or she finds that it is reasonable to believe
that the person will, if and when he or she becomes a subject person,
comply with all of the applicable provisions of this code and of any
regulation or order issued thereunder.
   (2) The right of any subject person to whom an order is issued
pursuant to subdivision (b), (c), or (e) to petition for judicial
review of the order shall not be affected by the failure of that
subject person to apply to the commissioner pursuant to paragraph
(1).
   (h) (1) It is unlawful for any subject person or former subject
person to whom an order is issued pursuant to subdivision (b), (c),
or (e) to do any of the following as long as the order is in effect,
except with the prior consent of the commissioner:  (A) to serve or
act as a subject person for any insurer or production agency; or (B)
to directly or indirectly vote any shares or other securities of an
insurer or production agency.
   (2) If, after notice and a hearing, the commissioner finds that
any subject person has violated paragraph (1) of this subdivision,
the commissioner may order that subject person to pay to the
commissioner a civil penalty, which may be recovered in a civil
action, in an amount the commissioner may specify; provided however,
that the amount of the civil penalty shall not exceed one thousand
dollars (,000) for each day for which the violation continues.
   In determining the amount of civil penalty to be paid to the
commissioner under this paragraph, the commissioner shall consider
the financial resources and good faith of the subject person charged,
the gravity of the violation, the history of previous violations by
the person, and other factors as in the opinion of the commissioner
may be relevant.
   (3) If, after notice and a hearing, the commissioner finds that
any production agency has knowingly aided and abetted a subject
person in a violation of paragraph (1) of this subdivision, or
subdivision (h) of Section 728, the commissioner may order that
production agency to pay to the commissioner a civil penalty in an
amount the commissioner may specify; provided however, that the
amount of the civil penalty shall not exceed one thousand dollars
(,000) for each violation or in the case of a continuing violation,
one thousand dollars (,000) for each day for which the violation
continues, up to a maximum of fifty thousand dollars (,000).
Continuation of the subject person's salary or other employee
benefits pending final disposition shall not be considered aiding and
abetting a subject person.
   In determining the amount of civil penalty to be paid to the
commissioner under this paragraph, the commissioner shall consider
the financial resources and good faith of the subject person charged,
the gravity of the violation, the history of previous violations by
the person, and other factors as in the opinion of the commissioner
may be relevant.
   (i) Except as otherwise provided by this section, any hearing
required by this section shall be conducted in accordance with
Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of
Title 2 of the Government Code, subject to the following:
   (1) At the option of the subject person, all hearings shall be a
closed session and private, and the records of the hearings shall not
be made public unless the hearing results in a final order adverse
to the subject person.
   (2) Where judicial review is sought by the subject person pursuant
to Section 1085 of the Code of Civil Procedure, the court shall
exercise its independent judgment upon the evidence.
   (3) When a subject person to whom an order has been issued
pursuant to subdivision (c) or (e) applies to the commissioner for a
hearing pursuant to subparagraph (A) of paragraph (1) of subdivision
(f), the Office of Administrative Hearings shall schedule the hearing
on a priority basis at the earliest possible time and once the
hearing is commenced, it shall not be continued for more than three
business days without the consent of the subject person.
   (4) If the Office of Administrative Hearings cannot schedule the
commencement of a hearing within 15 business days as provided by
paragraph (1) of subdivision (f), and the subject person does not
waive his or her right to a hearing commencing within 15 days, the
hearings may be conducted by administrative law judges appointed by
the commissioner; the hearing shall be completed within 45 days of
commencement, unless additional time is requested by the subject
person.  If the hearing is not completed within the 45 days, the
order shall be deemed rescinded as if it had not been issued.  The
scheduling of other hearings before the administrative law judge
shall not be considered good cause for purposes of this paragraph.
   (j) Nothing in this section is intended to or shall be construed
to create a private cause of action against an offending subject
person or insurer or production agency that aids and abets a subject
person, based on the standards established by this section or the
commissioner's findings or orders pursuant to this section.