California Enacts Legislation, Effective Jan. 1st

California Enacts Legislation, Effective Jan. 1st

On September 18, 2022, Governor Gavin Newsom signed the following legislation into law, effective January 1, 2023:

Criminal Liability for Coverage of Cannabis Businesses

Assembly Bill No. 2568 is an act to add Section 26261 to the Business and Professions Code, relating to cannabis. Specifically, the bill provides it is not a crime solely for individuals and firms to provide insurance and related services to persons licensed to engage in commercial cannabis activity. 

California Insurance Guarantee Association (CIGA)

Assembly Bill No. 2154 amends laws related to CIGA and issuance of bonds to CIGA. Among other things, the bill:

  • Repeals provisions relative to bonds issued to discharge claims after a natural disaster and revises provisions relative to bonds issued to discharge workers’ compensation to additionally authorize CIGA to ask the California Infrastructure and Economic Development Bank to issue bonds if CIGA determines the insolvency of member insurers writing homeowners’ and automobile insurance and other insurance will result in covered claim obligations in excess of CIGA’s capacity to pay from current funds;
  • Authorizes CIGA to levy an assessment on member insurers writing homeowners’ and automobile insurance and other insurance to pay the principal of, and interest on, the bonds issued for that claims category, which would be recouped through a surcharge on applicable policies, thereby imposing a tax; 
  • Specifies that obligations under a policy issued to cover cybersecurity are covered claims, as long as CIGA’s total liability does not exceed $1,000,000 or the policy limits, whichever is less; and
  • Requires CIGA's plan of operation to require a member insurer to recoup the premium charge amount, as determined by CIGA, through a surcharge on premiums, even if a premium charge has not yet been paid to CIGA because the member insurer had no direct written premium for that category of insurance for the prior year. 

 

Link to AB 2568

Link to AB 2154