(a) For purposes of this section, the following definitions shall apply:
(1) “License” includes any type of license issued by the commissioner pursuant to this chapter, Chapter 5A (commencing with Section 1759), Chapter 6 (commencing with Section 1760), Chapter 6.5 (commencing with Section 1781.1), Chapter 7 (commencing with Section 1800), and Chapter 8 (commencing with Section 1831) of Part 2 of Division 1, Chapter 4 (commencing with Section 12280) of Part 5 of Division 2, and Chapter 1 (commencing with Section 14000) and Chapter 2 (commencing with Section 15000) of Division 5.
(2) “Licensee” includes applicants for, and holders of, individual and organization licenses. With respect to organization licenses, the term also includes the organization’s officers, directors, partners, members, and controlling persons, as defined in subdivision (b) of Section 1668.5.
(3) “Minor misstatement” means an incorrect statement on one of the insurance license application background questions that does not affect the licensee’s ability to satisfy his or her duties under the license or his or her suitability for licensure.
(4) “Notify” means mailing a notice to the licensee at the address the licensee most recently filed with the commissioner.
(b) If the commissioner determines that a licensee has violated any section listed in subdivision (g), other than subparagraph (B) of paragraph (1) of subdivision (g), and elects to proceed on the violation, the commissioner shall notify the licensee of the violation. Within 21 calendar days, which may be extended to 45 calendar days if the licensee is temporarily incapacitated due to illness or injury, or is on vacation, the licensee must establish to the commissioner’s satisfaction that the violation has been corrected. If, after the licensee responds, or after 45 calendar days have passed, the licensee fails to establish to the commissioner’s satisfaction that the violation has been corrected, the commissioner shall, in lieu of proceeding pursuant to Section 1668 or Section 1738, issue a citation and order to the licensee and notify the licensee that a citation and order have been issued.
(c) If the commissioner determines that a licensee has made a minor misstatement in an application for a new license or an application to renew a license, or in a document filed in support of an application, and elects to proceed on the violation, the commissioner shall notify the licensee requesting a justification for the misstatement. Within 21 calendar days, which may be extended to 45 calendar days if the licensee is temporarily incapacitated due to illness or injury or is on vacation, the licensee shall provide the justification in writing. If, after the licensee responds, or 45 calendar days have passed, the licensee fails to justify the misstatement to the commissioner’s satisfaction, the commissioner shall, in lieu of proceeding pursuant to subdivision (h) of Section 1668 or Section 1738, issue a citation and order to the licensee and notify the licensee that the citation and order have been issued.
(d) Notwithstanding subdivisions (b) and (c), the commissioner may proceed against a licensee pursuant to Section 1668 or 1738 for violations of offenses listed in subdivision (g) or when the commissioner determines that the licensee has made a minor misstatement in an application for a new license or an application to renew a license, or in a document filed in support of an application, under any of the following circumstances:
(1) The department has issued two or more prior notices pursuant to subdivision (b) or (c) to the licensee within the preceding 36 months.
(2) The department files an action against the licensee under Section 1668 or 1738 containing allegations that are in addition to an allegation of a violation of an offense listed in subdivision (g) or a minor misstatement.
(3) The department, within the preceding 36 months, has disciplined a licensee under Section 1668 or 1738.
(4) The licensee has violated Section 1727 in a manner that gives the commissioner good cause to proceed under Section 1738 or Section 1747.
(e) A notice issued pursuant to either subdivision (b) or (c) shall specify all of the following:
(1) The section violated.
(2) The time or period of the violation.
(3) The facts supporting the determination of the violation.
(4) The amount of the penalty for the violation if it is not corrected, or for the misstatement if it is not justified.
(5) A telephone number and address for the unit in the department issuing the notice. The unit listed shall respond in a timely manner to any communication from the licensee regarding the notice.
(f) (1) A citation and order issued pursuant to this section shall specify all of the following:
(A) The section violated.
(B) The time or period of the violation.
(C) The facts supporting the determination of the violation.
(D) The amount of the penalty for the violation.
(E) The date payment of the penalty is required, which shall not be less than 21 calendar days from the date of the notice.
(F) Instructions for paying the penalty.
(G) The licensee’s right to contest, and the procedure for contesting, the citation and order.
(H) A telephone number and address for the unit in the department issuing the notice or citation. The unit listed shall respond in a timely manner to any communication from the licensee regarding the notice or citation and order. The department shall assign personnel sufficient to carry out these responsibilities.
(2) A citation and order shall become final 21 calendar days after the date of the notice, unless the licensee requests a hearing. All of the following shall apply to these hearings:
(A) The hearing shall be held within 60 calendar days following receipt of the request for the hearing. The licensee may request one continuance, not to exceed 21 calendar days.
(B) The licensee shall have the choice of a hearing by mail, telephone, or in person. An in-person hearing shall be conducted in whichever of the following offices of the Department of Insurance is closest to the business or residence address of the licensee, at the election of the licensee: Fresno, Los Angeles, Sacramento, San Diego, or San Francisco. If the licensee requests a hearing in Fresno or San Diego, the commissioner may defer the hearing for up to an additional 60 calendar days if necessary in order to schedule at least five hearings in a single day.
(C) The hearing shall be conducted in accordance with written procedures established by the commissioner. The written procedures shall comply with Sections 11445.40 to 11445.60, inclusive, of the Government Code.
(D) The hearing shall provide an independent, objective, fair, and impartial review of the citation and order. The hearing officer shall be trained and qualified to conduct the hearing in an objective, fair, and impartial manner. The hearing officer shall not be, or be managed or controlled by, a person whose primary duties are investigating violations, issuing citations, collecting citation penalties, or otherwise processing citations. The hearing officer’s continued employment, performance evaluation, compensation, or benefits, shall not, directly or indirectly, be linked to the amount of citations and orders affirmed by the hearing officer.
(E) The employee who issued the citation and order may, but shall not be required to, participate in the hearing. The citation and order shall be prima facie evidence of the violation, and the department shall not be required to produce any evidence other than the citation and order.
(F) Within 14 calendar days following the conclusion of the hearing, the hearing officer shall notify the licensee and the appropriate person within the department of the decision.
(3) The hearing officer’s decision, if adopted by the commissioner, shall constitute a final order of the commissioner, from which judicial review may be obtained pursuant to subdivision (a) of Section 1094.5 of the Code of Civil Procedure.
(g) (1) For the first penalty imposed upon a licensee for a single offense, if the licensee has not provided evidence to the commissioner showing that the offense was corrected within 45 days, or if the last penalty for the same single offense was imposed three years or more prior to the imposition of the current penalty, the commissioner shall levy penalties in accordance with the following schedule:
(A) For a violation of Section 1647.5, five hundred dollars ($500).
(B) For the commission of a minor misstatement, three hundred dollars ($300).
(C) For a violation of Section 1724.5, five hundred dollars ($500).
(D) For a violation of Section 1725, two hundred dollars ($200).
(E) For a violation of Section 1727, five hundred dollars ($500).
(F) For a violation of Section 1729, two hundred dollars ($200).
(G) For a violation of Section 1729.2, five hundred dollars ($500).
(H) For a violation of Section 1729.5, two hundred dollars ($200).
(2) The commissioner may double the fine listed above for a single offense if the offense was committed within three years of the commission of the same single offense for which the licensee was previously notified of a violation.
(3) Any money collected as a result of the imposition of a penalty shall be deposited into the General Fund, after reimbursement to the commissioner of costs incurred in investigating and prosecuting the violation.
(h) Any citation and order issued pursuant to this section, and any proceeding to impose a penalty conducted by the department pursuant to Article 10 (commencing with Section 11445.10) of Chapter 4.5 of Part 1 of Division 3 of Title 2 of the Government Code, are exempt from the requirements of Section 1738, Section 12968, and paragraph (1) of subdivision (b) of Section 12921, and shall not be reported to the National Association of Insurance Commissioner’s Regulatory Information Retrieval System (RIRS) database or similar databases. However, the citation and order shall become part of the licensee’s licensing file. The issuance of a notice, citation, or order under this section shall not constitute a disciplinary action against the licensee, and shall not be construed as an administrative action for purposes of Section 1729.2.
(i) If a licensee has exhausted the administrative remedies provided in this section and failed to pay a penalty imposed by a citation and order, the commissioner may, without providing an additional hearing, suspend, refuse to issue, or refuse to renew, a license. Before acting pursuant to this subdivision, the commissioner shall send a delinquency notice advising the licensee that his or her license may be suspended, not issued, or not renewed, if the penalty is not paid within 21 calendar days. If, after the 21st calendar day, the penalty remains unpaid, the commissioner may suspend, refuse to issue, or refuse to renew the licensee’s license until the licensee pays the delinquent penalty. A suspension, refusal to issue, or refusal to renew pursuant to this subdivision shall be reported to the National Association of Insurance Commissioner’s Regulatory Information Retrieval System (RIRS) database or similar databases.
(Repealed and added by Stats. 2008, Ch. 300, Sec. 9. Effective January 1, 2009.)
Last modified: October 25, 2018