Insolvency (Ins. Code §985) has two tests: the insurer's required minimum paid-in capital is impaired, or the insurer cannot meet its obligations when they are due. An insurer cannot escape insolvency just by providing for all its liabilities and reinsuring all outstanding risks; it must also hold additional assets equal to the paid-in capital the Code requires (§985(b)). Paid-in capital is generally measured as the lower of assets over liabilities, or the par value of the shares issued (§36).
Conservation (§§1011, 1013, 1016):
The superior court vests title to the insurer's property in the Commissioner as conservator (§1011).
When immediate action is needed, the Commissioner may take possession first, without notice and before applying to the court (§1013).
Refusing to deliver books, records or assets after a seizure order is a misdemeanor: a fine up to $1,000, up to one year in prison, or both (§1013).
If going on as conservator would be futile, the Commissioner applies to the court for an order to liquidate (§1016). Liquidation still goes through the court.
California Life and Health Insurance Guarantee Association (CLHIGA): protects California residents, within its limits, when a member insurer cannot pay. Covered health contracts include major medical, disability income and long-term care insurance (§1067.02(b)(1)). Excluded: the self-funded or uninsured portion of a plan, because no insurer guaranteed it (§1067.02(b)(2)(E)), Medicare Part C and Part D contracts, and claims based on marketing materials rather than the written policy.
Fraud:
The Legislature's findings (§1871) cover auto, workers' compensation and health insurance fraud.
The Fraud Division sits inside the Department of Insurance (§1872).
Every admitted insurer, unless exempted, must keep a continuously operating unit to investigate possible fraudulent claims, often called a special investigative unit (SIU) (§1875.20).
Knowingly false statements to obtain workers' compensation benefits are a crime (§1871.4).
An insured who signs a false claim form may be guilty of perjury (CDI outline).
Replacing group health coverage (§§10128.2, 10128.3): when a carrier replaces group hospital, medical or surgical coverage within 60 days of the old policy's discontinuance, it must immediately cover everyone validly covered under the old policy who meets the new policy's eligibility definitions. Rules about active full-time employment, hospital confinement or pregnancy cannot delay that coverage. The new policy may not add a preexisting-condition limit unless the old policy would have applied one. A person totally disabled at discontinuance looks to the prior carrier's extension of benefits.
Discrimination (§§10140-10145):
National origin cannot be the basis for a higher rate, and genetic characteristics cannot be the basis for refusing hospital, medical and surgical expense coverage (§10140).
Coverage may not be refused, limited or rated solely because of a physical or mental impairment, unless the difference is based on sound actuarial principles or is related to actual and reasonably anticipated experience (§10144).
Blindness, including partial blindness, has no such exception: an insurer may not act solely because of it (§10145).