11120-11146

INSURANCE CODE
SECTION 11120-11146




11120.  When a society, or a class or section thereof, has assets
equal to the reserves and credits on its policies, it may collect
periodical or other contributions from the members of the society,
class or section which, with interest accretions, will be sufficient
to accomplish all the following:
   (a) Pay the claims arising from its policies.
   (b) Pay for the expense of management of the society.
   (c) Maintain a fund sufficient to meet its accrued liabilities.
   (d) Maintain assets equal to the reserves and credits.
   Societies not operating pursuant to this section shall comply with
Section 11121.


11121.  Unless it operates under Section 11120, a society, or class
or section thereof, shall collect from its members both stated
contributions expressly segregated for the mortuary or disability
funds and stated contributions expressly segregated for the expense
or management funds. Both of such contributions may be included in
the member's periodical payment to the society. The society shall not
use the money in the mortuary or disability funds nor the interest
accretions thereon for expense purposes.



11122.  Any society may create, maintain, invest, disburse and apply
any special fund or funds necessary to carry out any purpose
permitted by the laws of the society. The funds may include hospital
and help, sanitaria, home, thrift, pension for the society's
employees, patriotic, educational and relief funds, in accordance
with the society's laws.



11122.1.  A society may, if authorized by a resolution of its
supreme legislative or governing body, establish and operate one or
more separate accounts and issue contracts on a variable basis to
persons as specified in Section 11041, subject to compliance with the
applicable laws. To the extent a society finds it necessary to
comply with federal or state law, or regulations issued under state
or federal law, a society may do the following:
   (a) Adopt special procedures for conducting the business of the
separate account.
   (b) Provide special voting and other rights for a person with a
beneficial interest in the special account, including, but not
limited to, rights and procedures relating to investment policy,
investment advisory services, selecting certified public accountants,
and selecting a committee to manage the account.
   (c) Issue contracts on a variable basis that are exempted from the
requirements of Sections 11062, 11064, and 11065.




11123.  Any such society may own real estate and buildings within or
without the state of its incorporation, for any purposes for which
it may use funds. It may receive gifts and bequests for such purposes
and may be named in policies as beneficiary in trust for such
purposes.



11124.  Unless otherwise provided in the contracts of the members,
such funds shall be held, invested, and disbursed for the use and
benefit of the society, and no member or beneficiary shall have or
acquire individual rights therein or become entitled to any
apportionment thereof.



11125.  Every domestic society shall invest its funds only in
securities permitted by the laws of this State for the investment of
the assets of life insurers issuing nonassessable policies on a
reserve basis. Such securities shall be valued according to the
methods used in valuing similar securities held by such insurers.




11126.  An admitted foreign society shall invest its funds either
under the same restrictions as domestic societies or in accordance
with the laws of the state in which it is incorporated. Any admitted
foreign society may deposit securities in accordance with the laws of
any state.


11127.  An admitted foreign society organized under the laws of any
jurisdiction other than a state of the United States shall at all
times maintain with a trustee in the United States, in trust for the
benefit and security of all its policyholders and creditors in the
United States, assets as prescribed in Section 11128. Such assets are
designated "trusteed assets."



11128.  The value of the trusteed assets referred to in Section
11127 shall be equal to the sum of all of the following:
   (a) All of the indebtedness of that society in the United States
having a fixed maturity.
   (b) The percentage, specified in subdivision (c), of that part of
the tabular reserve which is applicable to its United States business
in force.
   (c) If the valuation report prescribed by Section 11133 indicates
that the degree of actuarial solvency of the society is 100 percent
or greater, the percentage prescribed in subdivision (b) is 100
percent. Otherwise the percentage prescribed in subdivision (b) is
that percentage, less than 100 percent, which is indicated in the
valuation report to be the degree of that society's actuarial
solvency. The society may maintain those trusteed assets in excess of
the value herein prescribed.



11129.  The provisions of Sections 1596 to 1598, inclusive, shall
apply to such society specified in Section 11127 and to the matters
set forth in Sections 11127 and 11128.



11130.  The commissioner may require any society specified in
Section 11127 to file with him annually and at such other times as he
may determine, and in such form as he may prescribe, a statement
showing the extent to which such society's policyholders and
creditors in the United States are protected by trusteed assets in
the United States.



11131.  Every society transacting business in this state shall
annually, on or before the first day of March, unless for cause shown
such time has been extended by the commissioner, file with the
commissioner, in such form as he may require, a statement under oath
of its president, secretary or treasurer, or corresponding officers,
of its affairs, financial condition and operations during the
calendar year ending on the thirty-first day of December last
preceding. Such statement shall contain items showing the reserve
liabilities on all outstanding certificates classified according to
the various mortality standards and interest assumptions for such
certificates. The commissioner is authorized and empowered to address
any additional inquiries to any such society in relation to its
doings or condition, or any other matter connected with its
transaction relative to the business contemplated by this chapter,
and such officers of such society, as the commissioner may require,
shall promptly reply in writing, and under oath, if so required to
all such inquiries.



11132.  A synopsis of its annual statement and valuation report
providing an explanation of the facts concerning the condition of the
society thereby disclosed shall be printed and mailed to each
benefit member of the society not later than June 1st of each year,
or, in lieu thereof, such synopsis may be published in the society's
official paper and the issue containing same mailed to each benefit
member of the society.



11133.  In addition to the annual report required by Section 11131,
each society shall annually, on or before the first day of March,
file with the commissioner a valuation of its certificates in force
on December 31st last preceding: Provided, the commissioner may, in
his discretion for cause shown, extend the time for filing such
valuation for not more than two calendar months. Such report of
valuation shall show, as reserve liabilities, the difference between
the present mid-year value of the promised benefits provided in the
certificates of such society in force and the present mid-year value
of the future net rates as the same are in practice actually
collected, not including therein any value for the right to make
extra assessments and not including any amount by which the present
mid-year value of future net contributions exceeds the present
mid-year value of promised benefits on individual certificates. At
the option of any society, in lieu of the above, the valuation may
show the net tabular value which, in the case of monthly
contributions, may be the means of the terminal reserve values for
the end of the preceding and of the current certificate years. Such
net tabular value as to certificates issued prior to the effective
date of this chapter shall be determined in accordance with the
provisions of law applicable thereto as of the date of issuance
thereof and as to certificates issued on or after said date shall be
not less than the reserves determined according to the commissioners'
reserve valuation method as hereinafter defined. If the rate or
payment (by whatever name known) charged is less than the tabular net
rate according to the basis of the valuation used, an additional
reserve equal to the present value of the deficiency in such rates
shall be set up and maintained as a liability.



11134.  Except as otherwise provided in Section 10489.6, reserves
according to the commissioners' reserve valuation method, for the
life insurance and endowment benefits of certificates providing for a
uniform amount of insurance and requiring the payment of uniform
rates shall be the excess, if any, of the present value, at the date
of valuation, of such future guaranteed benefits provided for by such
certificates, over the then present value of any future modified net
rates therefor. The modified net rates for any such certificate
shall be such uniform percentage of the respective contract payment
for such benefits that the present value, at the date of issue of the
certificate, of all such modified net rates shall be equal to the
sum of the then present value of such benefits provided for by the
certificate and the excess of (a) over (b), as follows:
   (a) A net level annual payment equal to the present value at the
date of issue, of such benefits provided for after the first
certificate year, divided by the present value, at the date of issue,
of an annuity of one per annum payable on the first and each
subsequent anniversary of such certificate on which a payment falls
due; provided, however, that such net level annual payment shall not
exceed the net level annual payment on the 19-year payment whole life
plan for insurance of the same amount at an age one year higher than
the age at issue of such certificate.
   (b) A net one-year term payment for such benefits provided for in
the first certificate year.
   Provided that for any certificate issued on or after January 1,
1986, for which the contract premium in the first policy year exceeds
that of the second year and for which no comparable additional
benefit is provided in the first year for such excess and which
provides an endowment benefit or a cash surrender value or a
combination thereof in an amount greater than such excess premium,
the reserve according to the commissioners reserve valuation method
as of any policy anniversary occurring on or before the assumed
ending date defined herein as the first policy anniversary on which
the sum of any endowment benefit and any cash surrender value then
available is greater than such excess premium shall be the greater of
the reserve as of such policy anniversary calculated as described in
the preceding paragraph and the reserve as of such policy
anniversary calculated as described in that paragraph, but with (i)
the value defined in subdivision (a) of that paragraph being reduced
by 15 percent of the amount of such excess first year premium, (ii)
all present values of benefits and premiums being determined without
reference to premiums or benefits provided for by the policy after
the assumed ending date, (iii) the policy being assumed to mature on
such date as an endowment, and (iv) the cash surrender value provided
on such date being considered as an endowment benefit. In making the
above comparison the mortality and interest bases stated in Sections
11136 and 11136.1 shall be used.
   Reserves according to the commissioners' reserve valuation method
for (1) life insurance certificates providing for a varying amount of
insurance or requiring the payment of varying rates, (2) group
annuity and pure endowment contracts purchased under a retirement
plan or plan of deferred compensation, established or maintained by
an employer (including a partnership or sole proprietorship) or by an
employee organization, or by both, other than a plan providing
individual retirement accounts or individual retirement annuities
under Section 408 of the Internal Revenue Code, as now or hereafter
amended, (3) disability and accidental death benefits in all
certificates and contracts, and (4) all other benefits, except life
insurance and endowment benefits in life insurance certificates,
shall be calculated by a method consistent with the principles of the
first paragraph of this section, except that any extra premiums
charged because of impairments or special hazards shall be
disregarded in the determination of modified net premiums.




11135.  The present value of deferred payments due under incurred
claims or matured certificates shall be deemed a liability of the
society and shall be computed upon the mortality and interest basis
assumed by the society for such valuation.




11136.  Except as otherwise provided in Section 10489.4, such
valuation shall be certified by a competent actuary or, at the
expense of the society, verified by the actuary of the insurance
supervisory official of the state of domicile of the society, and the
legal minimum standard of valuation shall be as follows:
   (a) All benefits promised by certificates issued prior to
September 22, 1952, and the rates therefor shall be valued in
accordance with the provisions of law applicable thereto as of the
date of issuance, but not lower than the standards and interest
assumptions used in the calculation of rates for such benefits.
   (b) The minimum standard for the valuation of all certificates
issued after September 21, 1952, and prior to January 1, 1972, shall
be 3 percent per annum interest; in the case of certificates issued
on and after January 1, 1972, and prior to January 1, 1980, the
minimum standard for the valuation of all such certificates shall be
4 percent per annum interest; and in the case of certificates issued
on and after January 1, 1980, the minimum standard for the valuation
of all single premium certificates shall be 5 1/2 percent per annum
interest and for the valuation of all other such certificates shall
be 4 1/2 percent per annum interest, and the following tables:
   (1) For all ordinary certificates of life insurance issued on the
standard basis, excluding any disability and accidental death
benefits in such certificates--the American Men Ultimate Table of
Mortality, with Bowerman's or Davis' Extension thereof, or, at the
option of the society, the Commissioners 1941 Standard Ordinary
Mortality Table or the Commissioners 1958 Standard Ordinary Mortality
Table, using actual age of the insured for male risks and an age not
more than six years younger than the actual age of the insured for
female risks, and for such policies issued on or after the operative
date of Section 10163.2 (i) the Commissioners 1980 Standard Ordinary
Mortality Table, or (ii) at the election of the company for any one
or more specified plans of life insurance, the Commissioners 1980
Standard Ordinary Mortality Table with Ten-Year Select Mortality
Factors, or (iii) any ordinary mortality table, adopted after 1980 by
the National Association of Insurance Commissioners, or its
successor, that is approved by regulation promulgated or bulletin
issued by the commissioner for use in determining the minimum
standard of valuation for such policies.
   (2) For all industrial life insurance certificates issued on the
standard basis, excluding any disability and accidental death
benefits in such certificates--the 1941 Standard Industrial Mortality
Table, for such certificates issued prior to the operative date of
Section 10163.2, and for such policies issued on or after such
operative date, the Commissioners 1961 Standard Industrial Mortality
Table or any industrial mortality table, adopted after 1980 by the
National Association of Insurance Commissioners, or its successor,
that is approved by regulation promulgated or bulletin issued by the
commissioner for use in determining the minimum standard of valuation
for such policies.
   (3) For annuity and pure endowment certificates, excluding any
disability and accidental death benefits in such certificates--the
1937 Standard Annuity Mortality Table, or the Annuity Mortality Table
for 1949 Ultimate, or the Individual Annuity Mortality Table for
1971, or any individual annuity mortality table, adopted after 1980
by the National Association of Insurance Commissioners, or its
successor, that is approved by regulation promulgated or bulletin
issued by the commissioner for use in determining the minimum
standard of valuation for such contracts, or any modification of any
of these tables approved by the commissioner.
   (4) For disability benefits in or supplementary to ordinary
certificates--Hunter's Disability Table or the Class 3 Disability
Table (1926), modified to conform to the contractual waiting period,
or the tables of Period 2 disablement rates and the 1930 to 1950
termination rates of the 1952 Disability Study of the Society of
Actuaries with due regard to the type of benefit, or the 1964
Commissioners Disability Table, or any tables of disablement rates
and termination rates, adopted after 1980 by the National Association
of Insurance Commissioners, or its successor, that are approved by
regulation promulgated or bulletin issued by the commissioner for use
in determining the minimum standard of valuation for such policies.
Any such table shall, for active lives, be combined with a mortality
table permitted for calculating the reserves for life insurance
certificates.
   (5) For accidental death benefits in or supplementary to
certificates--The Inter-Company Double Indemnity Mortality Table or
the 1959 Accidental Death Benefits Table, or any accidental death
benefits table, adopted after 1980 by the National Association of
Insurance Commissioners, or its successor, that is approved by
regulation promulgated or bulletin issued by the commissioner for use
in determining the minimum standard of valuation for such policies.
Any such table shall be combined with a mortality table permitted for
calculating the reserves for life insurance certificates.
   (6) For temporary accident and health benefits in or supplementary
to certificates--Class 3 Disability Table (1926) with Conference
Modifications or the 1964 Commissioners Disability Table, or any
tables of disablement rates and termination rates, adopted after 1980
by the National Association of Insurance Commissioners, or its
successor, that are approved by regulation promulgated or bulletin
issued by the commissioner for use in determining the minimum
standard of valuation for such policies.
   (7) For life insurance issued upon the substandard basis and other
special benefits--such tables as may be approved by the
commissioner.
   (c) The commissioner may, in his discretion, accept other
standards for valuation if he finds that the reserves produced
thereby will not be less in the aggregate than reserves computed in
accordance with the minimum valuation standard prescribed. Whenever
the mortality experience under the certificates valued on the same
mortality table is in excess of the expected mortality according to
such table for a period of three consecutive years, the commissioner
may require additional reserves when in his judgment deemed necessary
on account of such certificates.
   (d) Notwithstanding the provisions of subdivisions (a) and (b),
any society, with the consent of the insurance supervisory official
of the state of domicile of the society, and under such conditions,
if any, which he may impose, may establish and maintain reserves on
its certificates in excess of the reserves required thereunder, but
the contractual rights of any insured member shall not be affected
thereby.



11137.  Whenever the commissioner finds from any financial statement
or valuation report made to him or her by any society authorized to
do business in this state or from a filed report on examination of
any such society that the admitted assets of the society are less
than the sum of its required reserves and accrued liabilities, the
commissioner shall determine the amount of that deficiency and shall
issue a written requisition to the society to remove, repair, or make
good that deficiency within such period as he or she shall
designate, not less than 30 days nor more than six months from the
service of the requisition, except that if the commissioner believes
the interests of the certificate holders of such society will best be
served by extending the period of time beyond six months, he or she
may do so for such period or periods of time as he or she in his or
her discretion deems best. The commissioner may also by official
order prohibit the society, while that deficiency exists, from
issuing any new contracts of insurance in this state, and in case of
a domestic society, from issuing any new contracts in this state or
elsewhere. If the society fails or is unable to make good the
deficiency within the time specified in the order, the commissioner
shall proceed against the society under the provisions of Article 14
(commencing with Section 1010) of Chapter 1 of Part 2 of Division 1
on the ground that its further transaction of business will be
hazardous to its certificate holders, its creditors, or the public.
In the case of a foreign society the commissioner may also, or in
lieu of that proceeding, revoke its certificate of authority to do
business in this state or refuse to issue a renewal certificate of
authority.


11138.  The commissioner, or any person he may appoint, shall have
the power of visitation and examination into the affairs of any
domestic society. He may employ assistants for the purpose of such
examination, and he, or any person he may appoint, shall have free
access to all the books, papers and documents that relate to the
business of the society. The minutes of the proceedings of the
supreme governing or legislative body and of the board of directors
or corresponding body of a society shall be in the English language.
In making any such examination the commissioner may summon and
qualify as witnesses under oath and examine its officers, agents and
employees or other persons in relation to the affairs, transactions
and condition of the society. The report of the commissioner or in
his discretion a summary thereof, and such recommendations or
statements of the commissioner as may accompany such report, shall be
read at the first meeting of the board of directors or corresponding
body of the society following the receipt thereof, and if directed
so to do by the commissioner shall also be read at the first meeting
of the supreme legislative or governing body of the society following
the receipt thereof. The expense of each examination and of each
valuation, including compensation and actual expense of examiners,
shall be paid by the society examined or whose certificates are
valued, upon statements furnished by the commissioner.




11139.  No report of examination shall be adopted by the
commissioner or filed by him as an official document except after a
notice is given and a hearing held thereon, if demanded, in
accordance with the provisions of Section 11141. The commissioner in
his determination made upon the basis of his findings from the record
of such hearing may direct the society to comply with such
recommendations or take such other corrective steps as may be
contained therein. In any action or proceeding in the name of the
commissioner or instituted in his behalf against the society, such
report, if adopted by the commissioner and filed as an official
document shall be admissible in evidence and shall be prima facie
evidence of the facts stated therein. Nothing herein contained shall
preclude the commissioner from instituting any proceeding under
Section 11137 of this chapter at any time or from using as proof in
such proceeding any report of examination or part thereof, whether or
not such report has been adopted and filed.



11140.  The commissioner, or any person whom he may appoint, may
examine any foreign society, transacting or applying for admission to
transact business in this State. He may employ assistants and he, or
any person he may appoint, shall have free access to all books,
papers and documents that relate to the business of the society. He
may summon, qualify as witnesses under oath and examine any persons
in relation to the affairs, transactions and condition of the
society. He may in his discretion accept, in lieu of such
examination, the examination of the insurance department of the
state, territory, district, province or country where such society is
organized. The compensation and actual expenses of the examiners
making any examination or general or special valuation shall be paid
by the society examined or by the society whose certificates
obligations have been valued, upon statements furnished by the
commissioner.


11141.  Pending, during or after an examination or investigation of
a society, either domestic or foreign, the commissioner shall make
public no financial statement, report or finding, nor shall he permit
to become public any financial statement, report or finding
affecting the status, standing or rights of any society, until a copy
thereof shall have been served upon the society at its principal
office and the society shall have been afforded a reasonable
opportunity to answer any such financial statement, report or
finding, and to make such showing in connection therewith as it may
desire.


11142.  No person shall cause or permit to be made, issued or
circulated in any form:
   (a) Any misrepresentation or false or misleading statement
concerning the terms, benefits or advantages of any fraternal
insurance contract now issued or to be issued in this State; or the
financial condition of any society or the legal reserve system upon
which it operates; or any other matter concerning any society;
   (b) Any false or misleading estimate or statement concerning the
dividends or shares of surplus paid or to be paid by any society on
any insurance contract; or
   (c) Any incomplete comparison of an insurance contract of one
society with an insurance contract of another society or insurer for
the purpose of inducing the lapse, forfeiture or surrender of any
insurance contract.


11143.  A comparison of insurance contracts is incomplete if it does
not compare in detail:
   (a) The gross rates, and the gross rates less any dividend or
other reduction allowed at the date of the comparison;
   (b) Any increase in cash values, and all the benefit provided by
each contract for the possible duration thereof as determined by the
life expectancy of the insured.



11144.  A comparison of insurance contracts is incomplete if it
omits from consideration:
   (a) Any benefit or value provided in the contract,
   (b) Any differences as to amount or period of premiums or
payments,
   (c) Any differences in limitations or conditions or provisions
which directly or indirectly affect the benefits.




11145.  In any determination of the incompleteness or misleading
character of any comparison or statement, it shall be presumed that
the insured had no knowledge of any of the contents of the contract
involved.


11146.  Any person who violates any provision of Sections 11142 to
11145 or knowingly receives any compensation or commission by or in
consequence of such violation, shall upon conviction be punished by a
fine not exceeding one thousand dollars ($1,000), or by imprisonment
in the county jail for not more than six months, or by both fine and
imprisonment.