2005 California Insurance Code Sections 790-790.15 :: :: :: Article 6.5. :: Unfair Practices (2024)

INSURANCE CODE
SECTION 790-790.15

790. The purpose of this article is to regulate trade practices inthe business of insurance in accordance with the intent of Congressas expressed in the Act of Congress of March 9, 1945 (Public Law 15,Seventy-ninth Congress), by defining, or providing for thedetermination of, all such practices in this State which constituteunfair methods of competition or unfair or deceptive acts orpractices and by prohibiting the trade practices so defined ordetermined.790.01. This article applies to reciprocal and interinsuranceexchanges, Lloyds insurers, fraternal benefit societies, fraternalfire insurers, grants and annuities societies, insurers holdingcertificates of exemptions, motor clubs, nonprofit hospitalassociations, life agents, broker-agents, surplus line brokers andspecial lines surplus line brokers as well as all other personsengaged in the business of insurance.790.02. No person shall engage in this State in any trade practicewhich is defined in this article as, or determined pursuant to thisarticle to be, an unfair method of competition or an unfair ordeceptive act or practice in the business of insurance.790.03. The following are hereby defined as unfair methods ofcompetition and unfair and deceptive acts or practices in thebusiness of insurance. (a) Making, issuing, circulating, or causing to be made, issued orcirculated, any estimate, illustration, circular or statementmisrepresenting the terms of any policy issued or to be issued or thebenefits or advantages promised thereby or the dividends or share ofthe surplus to be received thereon, or making any false ormisleading statement as to the dividends or share of surpluspreviously paid on similar policies, or making any misleadingrepresentation or any misrepresentation as to the financial conditionof any insurer, or as to the legal reserve system upon which anylife insurer operates, or using any name or title of any policy orclass of policies misrepresenting the true nature thereof, or makingany misrepresentation to any policyholder insured in any company forthe purpose of inducing or tending to induce the policyholder tolapse, forfeit, or surrender his or her insurance. (b) Making or disseminating or causing to be made or disseminatedbefore the public in this state, in any newspaper or otherpublication, or any advertising device, or by public outcry orproclamation, or in any other manner or means whatsoever, anystatement containing any assertion, representation or statement withrespect to the business of insurance or with respect to any person inthe conduct of his or her insurance business, which is untrue,deceptive, or misleading, and which is known, or which by theexercise of reasonable care should be known, to be untrue, deceptive,or misleading. (c) Entering into any agreement to commit, or by any concertedaction committing, any act of boycott, coercion or intimidationresulting in or tending to result in unreasonable restraint of, ormonopoly in, the business of insurance. (d) Filing with any supervisory or other public official, ormaking, publishing, disseminating, circulating, or delivering to anyperson, or placing before the public, or causing directly orindirectly, to be made, published, disseminated, circulated,delivered to any person, or placed before the public any falsestatement of financial condition of an insurer with intent todeceive. (e) Making any false entry in any book, report, or statement ofany insurer with intent to deceive any agent or examiner lawfullyappointed to examine into its condition or into any of its affairs,or any public official to whom the insurer is required by law toreport, or who has authority by law to examine into its condition orinto any of its affairs, or, with like intent, willfully omitting tomake a true entry of any material fact pertaining to the business ofthe insurer in any book, report, or statement of the insurer. (f) Making or permitting any unfair discrimination betweenindividuals of the same class and equal expectation of life in therates charged for any contract of life insurance or of life annuityor in the dividends or other benefits payable thereon, or in anyother of the terms and conditions of the contract. This subdivision shall be interpreted, for any contract ofordinary life insurance or individual life annuity applied for andissued on or after January 1, 1981, to require differentials basedupon the sex of the individual insured or annuitant in the rates ordividends or benefits, or any combination thereof. This requirementis satisfied if those differentials are substantially supported byvalid pertinent data segregated by sex, including, but notnecessarily limited to, mortality data segregated by sex. However, for any contract of ordinary life insurance or individuallife annuity applied for and issued on or after January 1, 1981, butbefore the compliance date, in lieu of those differentials based ondata segregated by sex, rates, or dividends or benefits, or anycombination thereof, for ordinary life insurance or individual lifeannuity on a female life may be calculated as follows: (a) accordingto an age not less than three years nor more than six years youngerthan the actual age of the female insured or female annuitant, in thecase of a contract of ordinary life insurance with a face valuegreater than five thousand dollars ($5,000) or a contract ofindividual life annuity; and (b) according to an age not more thansix years younger than the actual age of the female insured, in thecase of a contract of ordinary life insurance with a face value offive thousand dollars ($5,000) or less. "Compliance date" as used inthis paragraph shall mean the date or dates established as theoperative date or dates by future amendments to this code directingand authorizing life insurers to use a mortality table containingmortality data segregated by sex for the calculation of adjustedpremiums and present values for nonforfeiture benefits and valuationreserves as specified in Sections 10163.5 and 10489.2 or successorsections. Notwithstanding the provisions of this subdivision, sex-baseddifferentials in rates or dividends or benefits, or any combinationthereof, shall not be required for (1) any contract of life insuranceor life annuity issued pursuant to arrangements which may beconsidered terms, conditions, or privileges of employment as theseterms are used in Title VII of the Civil Rights Act of 1964 (PublicLaw 88-352), as amended, and (2) tax sheltered annuities foremployees of public schools or of tax exempt organizations describedin Section 501(c)(3) of the Internal Revenue Code. (g) Making or disseminating, or causing to be made ordisseminated, before the public in this state, in any newspaper orother publication, or any other advertising device, or by publicoutcry or proclamation, or in any other manner or means whatever,whether directly or by implication, any statement that a namedinsurer, or named insurers, are members of the California InsuranceGuarantee Association, or insured against insolvency as defined inSection 119.5. This subdivision shall not be interpreted to prohibitany activity of the California Insurance Guarantee Association orthe commissioner authorized, directly or by implication, by Article14.2 (commencing with Section 1063). (h) Knowingly committing or performing with such frequency as toindicate a general business practice any of the following unfairclaims settlement practices: (1) Misrepresenting to claimants pertinent facts or insurancepolicy provisions relating to any coverages at issue. (2) Failing to acknowledge and act reasonably promptly uponcommunications with respect to claims arising under insurancepolicies. (3) Failing to adopt and implement reasonable standards for theprompt investigation and processing of claims arising under insurancepolicies. (4) Failing to affirm or deny coverage of claims within areasonable time after proof of loss requirements have been completedand submitted by the insured. (5) Not attempting in good faith to effectuate prompt, fair, andequitable settlements of claims in which liability has becomereasonably clear. (6) Compelling insureds to institute litigation to recover amountsdue under an insurance policy by offering substantially less thanthe amounts ultimately recovered in actions brought by the insureds,when the insureds have made claims for amounts reasonably similar tothe amounts ultimately recovered. (7) Attempting to settle a claim by an insured for less than theamount to which a reasonable person would have believed he or she wasentitled by reference to written or printed advertising materialaccompanying or made part of an application. (8) Attempting to settle claims on the basis of an applicationwhich was altered without notice to, or knowledge or consent of, theinsured, his or her representative, agent, or broker. (9) Failing, after payment of a claim, to inform insureds orbeneficiaries, upon request by them, of the coverage under whichpayment has been made. (10) Making known to insureds or claimants a practice of theinsurer of appealing from arbitration awards in favor of insureds orclaimants for the purpose of compelling them to accept settlements orcompromises less than the amount awarded in arbitration. (11) Delaying the investigation or payment of claims by requiringan insured, claimant, or the physician of either, to submit apreliminary claim report, and then requiring the subsequentsubmission of formal proof of loss forms, both of which submissionscontain substantially the same information. (12) Failing to settle claims promptly, where liability has becomeapparent, under one portion of the insurance policy coverage inorder to influence settlements under other portions of the insurancepolicy coverage. (13) Failing to provide promptly a reasonable explanation of thebasis relied on in the insurance policy, in relation to the facts orapplicable law, for the denial of a claim or for the offer of acompromise settlement. (14) Directly advising a claimant not to obtain the services of anattorney. (15) Misleading a claimant as to the applicable statute oflimitations. (16) Delaying the payment or provision of hospital, medical, orsurgical benefits for services provided with respect to acquiredimmune deficiency syndrome or AIDS-related complex for more than 60days after the insurer has received a claim for those benefits, wherethe delay in claim payment is for the purpose of investigatingwhether the condition preexisted the coverage. However, this 60-dayperiod shall not include any time during which the insurer isawaiting a response for relevant medical information from a healthcare provider. (i) Canceling or refusing to renew a policy in violation ofSection 676.10.790.031. The requirements of subdivision (b) of Section 790.034,and Sections 2071.1 and 10082.3 shall apply only to policies ofresidential property insurance as defined in Section 10087, policiesand endorsem*nts containing those coverages prescribed in Chapter 8.5(commencing with Section 10081) of Part 1 of Division 2, policiesissued by the California Earthquake Authority pursuant to Chapter 8.6(commencing with Section 10089.5) of Part 1 of Division 2, policiesand endorsem*nts that insure against property damage and are issuedto common interest developments or to associations managing commoninterest developments, as those terms are defined in Section 1351 ofthe Civil Code, and to policies issued pursuant to Section 120 thatinsure against property damage to residential units or contentsthereof owned by one or more persons located in this state.790.034. (a) Regulations adopted by the commissioner pursuant tothis article that relate to the settlement of claims shall take intoconsideration settlement practices by classes of insurers. (b) (1) Upon receiving notice of a claim, every insurer shallimmediately, but no more than 15 calendar days after receipt of theclaim, provide the insured with a legible reproduction of Section790.03 of the Insurance Code, in at least 12-point type and a writtennotice containing the following: "In addition to Section 790.03 of the Insurance Code providedhere, Fair Claims Settlement Practices Regulations govern howinsurance claims must be processed in this state. These regulationsare available at the Department of Insurance Internet site,www.insurance.ca.gov. You may also obtain a copy of theseregulations free of charge from this insurer." (2) Every insurer shall provide, whether requested orally or inwriting by an insured, a copy of the Fair Claims Settlement PracticesRegulations as set forth in Sections 2695.5, 2695.7, 2695.8, and2695.9 of subchapter 7.5 of Chapter 5 of Title 10 of the CaliforniaCode of Regulations, unless the regulations are inapplicable to thatclass of insurer. These regulations shall be provided to the insuredwithin 15 calendar days of request. (3) The provisions of this subdivision shall apply to all insurersexcept for those that are licensed pursuant to Chapter 1 (commencingwith Section 12340) of Part 6 of Division 2, with respect topolicies and endorsem*nts described in Section 790.031.790.035. (a) Any person who engages in any unfair method ofcompetition or any unfair or deceptive act or practice defined inSection 790.03 is liable to the state for a civil penalty to be fixedby the commissioner, not to exceed five thousand dollars ($5,000)for each act, or, if the act or practice was willful, a civil penaltynot to exceed ten thousand dollars ($10,000) for each act. Thecommissioner shall have the discretion to establish what constitutesan act. However, when the issuance, amendment, or servicing of apolicy or endorsem*nt is inadvertent, all of those acts shall be asingle act for the purpose of this section. (b) The penalty imposed by this section shall be imposed by anddetermined by the commissioner as provided by Section 790.05. Thepenalty imposed by this section is appealable by means of any remedyprovided by Section 12940 or by Chapter 5 (commencing with Section11500) of Part 1 of Division 3 of Title 2 of the Government Code.790.036. (a) It is an unfair and deceptive act or practice in thebusiness of insurance for an insurer to advertise insurance that itwill not sell. (b) Nothing in this section shall be construed to prohibit anyinsurer from advertising insurance products for which it is licensedto sell in this state where the product is not available for sale solong as the unavailability is disclosed in the advertisem*nt. (c) A violation of this section is subject to the sanctionsprovided for by this article. (d) An intentional violation of this section is a misdemeanorpunishable by a fine not exceeding ten thousand dollars ($10,000). (e) This section does not apply to any insurer that refuses tosell a policy of insurance on the basis of its underwritingguidelines. (f) This section does not apply to advertisem*nts by an insurerwhere the advertisem*nts are broadcast and originate from outsidethis state. As used in this subdivision, "broadcast" includeselectronic media, television, and radio. As used in thissubdivision, "originate from outside this state" includes cabletransmittal of programs broadcast by stations located outsideCalifornia.790.04. The commissioner shall have power to examine andinvestigate into the affairs of every person engaged in the businessof insurance in the State in order to determine whether such personhas been or is engaged in any unfair method of competition or in anyunfair or deceptive act or practice prohibited by Section 790.03 ordetermined pursuant to this article to be an unfair method ofcompetition or an unfair or deceptive practice in the business ofinsurance. Such investigation may be conducted pursuant to Article 2(commencing at Section 11180) of Chapter 2, Part 1, Division 3,Title 2 of the Government Code.790.05. Whenever the commissioner shall have reason to believe thata person has been engaged or is engaging in this state in any unfairmethod of competition or any unfair or deceptive act or practicedefined in Section 790.03, and that a proceeding by the commissionerin respect thereto would be to the interest of the public, he or sheshall issue and serve upon that person an order to show causecontaining a statement of the charges in that respect, a statement ofthat person's potential liability under Section 790.035, and anotice of a hearing thereon to be held at a time and place fixedtherein, which shall not be less than 30 days after the servicethereof, for the purpose of determining whether the commissionershould issue an order to that person to, pay the penalty imposed bySection 790.035, and to cease and desist those methods, acts, orpractices or any of them. If the charges or any of them are found to be justified thecommissioner shall issue and cause to be served upon that person anorder requiring that person to pay the penalty imposed by Section790.035 and to cease and desist from engaging in those methods, acts,or practices found to be unfair or deceptive. The hearing shall be conducted in accordance with theAdministrative Procedure Act, Chapter 5 (commencing at Section 11500)of Part 1 of Division 3 of Title 2 of the Government Code, exceptthat the hearings may be conducted by an administrative law judge inthe administrative law bureau when the proceedings involve a commonquestion of law or fact with another proceeding arising under otherInsurance Code sections that may be conducted by administrative lawbureau administrative law judges. The commissioner and the appointedadministrative law judge shall have all the powers granted under theAdministrative Procedure Act. The person shall be entitled to have the proceedings and the orderreviewed by means of any remedy provided by Section 12940 of thiscode or by the Administrative Procedure Act.790.06. (a) Whenever the commissioner shall have reason to believethat any person engaged in the business of insurance is engaging inthis state in any method of competition or in any act or practice inthe conduct of the business that is not defined in Section 790.03,and that the method is unfair or that the act or practice is unfairor deceptive and that a proceeding by him or her in respect theretowould be in the interest of the public, he or she may issue and serveupon that person an order to show cause containing a statement ofthe methods, acts or practices alleged to be unfair or deceptive anda notice of hearing thereon to be held at a time and place fixedtherein, which shall not be less than 30 days after the servicethereof, for the purpose of determining whether the alleged methods,acts or practices or any of them should be declared to be unfair ordeceptive within the meaning of this article. The order shallspecify the reason why the method of competition is alleged to beunfair or the act or practice is alleged to be unfair or deceptive. The hearings provided by this section shall be conducted inaccordance with the Administrative Procedure Act (Chapter 5(commencing with Section 11500) of Part 1 of Division 3 of Title 2 ofthe Government Code), except that the hearings may be conducted byan administrative law judge in the administrative law bureau when theproceedings involve a common question of law or fact with anotherproceeding arising under other Insurance Code sections that may beconducted by administrative law bureau administrative law judges.The commissioner and the appointed administrative law judge shallhave all the powers granted under the Administrative Procedure Act.If the alleged methods, acts, or practices or any of them are foundto be unfair or deceptive within the meaning of this article thecommissioner shall issue and service upon that person his or herwritten report so declaring. (b) If the report charges a violation of this article and if themethod of competition, act or practice has not been discontinued, thecommissioner may, through the Attorney General of this state, at anytime after 30 days after the service of the report cause a petitionto be filed in the superior court of this state within the countywherein the person resides or has his or her principal place ofbusiness, to enjoin and restrain the person from engaging in themethod, act or practice. The court shall have jurisdiction of theproceeding and shall have power to make and enter appropriate ordersin connection therewith and to issue any writs as are ancillary toits jurisdiction or are necessary in its judgment to prevent injuryto the public pendente lite. (c) A transcript of the proceedings before the commissioner,including all evidence taken and the report and findings shall befiled with the petition. If either party shall apply to the courtfor leave to adduce additional evidence and shall show, to thesatisfaction of the court, that the additional evidence is materialand there were reasonable grounds for the failure to adduce theevidence in the proceeding before the commissioner, the court mayorder the additional evidence to be taken before the commissioner andto be adduced upon the hearing in the manner and upon the terms andconditions as to the court may seem proper. The commissioner maymodify his or her findings of fact or make new findings by reason ofthe additional evidence so taken, and shall file modified or newfindings with the return of the additional evidence. (d) If the court finds that the method of competition complainedof is unfair or that the act or practice complained of is unfair ordeceptive, that the proceeding by the commissioner with respectthereto is to the interest of the public and that the findings of thecommissioner are supported by the weight of the evidence, it shallissue its order enjoining and restraining the continuance of themethod of competition, act or practice.790.07. Whenever the commissioner shall have reason to believe thatany person has violated a cease and desist order issued pursuant toSection 790.05 or a court order issued pursuant to Section 790.06,after the order has become final, and while the order is still ineffect, the commissioner may, after a hearing at which it isdetermined that the violation was committed, order that person toforfeit and pay to the State of California a sum not to exceed fivethousand dollars ($5,000) plus any penalty due under Section 790.05,which may be recovered in a civil action, except that, if theviolation is found to be willful, the amount of the penalty may be asum not to exceed fifty-five thousand dollars ($55,000) plus thepenalty due under Section 790.05. For the purposes of this section, the failure to pay any penaltyimposed pursuant to Section 790.035 which has become final shallconstitute a violation of the cease and desist order. For any subsequent violation of the cease and desist order or ofthe court order or the order to pay the penalty, while the order isstill in effect, the commissioner may, after hearing, suspend orrevoke the license or certificate of that person for a period notexceeding one year; provided, however, no proceeding shall be basedupon the subsequent violation unless the same was committed orcontinued after the date on which the order imposing the penaltypursuant to the preceding paragraph became final. The hearings provided by this section shall be conducted inaccordance with the Administrative Procedure Act, except that thehearings may be conducted by an administrative law judge in theadministrative law bureau when the proceedings involve a commonquestion of law or fact with another proceeding arising under otherInsurance Code sections that may be conducted by administrative lawbureau administrative law judges. The commissioner and the appointedadministrative law judge shall have all the powers granted under theAdministrative Procedure Act. The person shall be entitled to have the proceedings and the orderof the commissioner therein reviewed by means of any remedy providedby Section 12940 or by the Administrative Procedure Act.790.08. The powers vested in the commissioner in this article shallbe additional to any other powers to enforce any penalties, fines orforfeitures, denials, suspensions or revocations of licenses orcertificates authorized by law with respect to the methods, acts andpractices hereby declared to be unfair or deceptive.790.09. No order to cease and desist issued under this articledirected to any person or subsequent administrative or judicialproceeding to enforce the same shall in any way relieve or absolvesuch person from any administrative action against the license orcertificate of such person, civil liability or criminal penalty underthe laws of this State arising out of the methods, acts or practicesfound unfair or deceptive.790.10. The commissioner shall, from time to time as conditionswarrant, after notice and public hearing, promulgate reasonable rulesand regulations, and amendments and additions thereto, as arenecessary to administer this article.790.15. (a) If an insurer or any affiliate of an insurer has failedto pay any valid claim from Holocaust survivors, the certificate ofauthority of the insurer shall be suspended until the insurer, or itsaffiliates, pays the claim or claims. (b) As used in this section: (1) "Holocaust survivor" means any person who is the beneficiaryof an insurance policy, if the insurance policy insured a person'slife, property, or other interest, and the insured person was killed,died, was displaced, or was otherwise a victim of persecution ofJewish and other peoples preceding and during World War II byGermany, its allies, or sympathizers. (2) "Beneficiary" means any person or entity entitled to recoverunder any policy of insurance, including any named beneficiary, anyheir of a named beneficiary, and any other person entitled to recoverunder the policy. (3) "Claim" means any claim submitted by a Holocaust survivor orother beneficiary arising under an insurance policy for any loss ordamage caused by or arising because of discriminatory practices orpersecution by the Nazi-controlled German government or its allies,or by insurers that refused to pay claims because of a claim thatpolicies of insurance or records were missing or confiscated becauseof actions by the Nazi-controlled German government or its agents orallies. Claim also includes any claim by Holocaust survivors orbeneficiaries to collect proceeds from dowry or education policies orfrom annuities. (4) An "affiliate" of, or person "affiliated" with, a specificperson, means a person who directly, or indirectly through one ormore intermediaries, controls, or is controlled by, or is undercommon control with, the person specified. (5) "Control" includes the terms "controlling," "controlled by,"and "under common control with," and means the possession, direct orindirect, of the power to direct or cause the direction of themanagement and policies of a person, whether through the ownership ofvoting securities, by contract other than a commercial contract forgoods or nonmanagement services, or otherwise, unless the power isthe result of an official position with or corporate office held bythe 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 votingsecurities of any other person. (c) An action to suspend a certificate of authority under thissection shall be conducted in accordance with the AdministrativeProcedure Act (Chapter 5 (commencing with Section 11500) of Part 1 ofDivision 3 of Title 2 of the Government Code), except that (1) ifthe Office of Administrative Hearings is unable to assign anadministrative law judge to preside over a hearing that commenceswithin 30 days of the filing of an accusation or order initiating anaction under this section, the administrative law judge may beappointed by the commissioner; and (2) if the commissioner determinesthat it is necessary to protect the interests of Holocaustsurvivors, he or she may issue an order of suspension pursuant tothis 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 uponthe insurer a statement of reasons for the immediate action, as wellas a copy of the accusation or order containing the allegations thatsupport the order. Any order issued pursuant to this subdivisionshall include a notice stating the time and place of a hearing on theorder, which shall not be less than 20, nor more than 30 days afterthe order is served. (e) When considering an action to suspend a certificate ofauthority under this section, the commissioner shall includeconsideration of whether the insurer has participated in good faithin an international commission on Holocaust survivor insuranceclaims, and whether the commission is making meaningful andexpeditious progress toward paying claims to survivors and rightingthe historic wrong done to Holocaust victims.