(a) (1) The plan of operation adopted pursuant to subdivision (c) of Section 1063 shall contain provisions whereby each member insurer is required to recoup, in the year following the premium charge, a sum calculated to recoup the premium charge paid by the member insurer under this article by way of a surcharge on premiums charged for insurance policies to which this article applies.

(2) Amounts recouped shall not be considered premiums for any other purpose, including the computation of gross premium tax or agents’ commission.

Terms Used In California Insurance Code 1063.14

  • Member insurer: means an insurer required to be a member of the association in accordance with subdivision (a) of Section 1063, except and to the extent that the insurer is participating in an insolvency program adopted by the United States government. See California Insurance Code 1063.1

(b) The plan of operation adopted pursuant to subdivision (c) of Section 1063 shall contain a provision requiring a member insurer to recoup the premium charge amount, as determined by the association, through a surcharge on premiums charged for insurance policies to which this article applies, even if a premium charge was not yet paid to the association because the member insurer had no direct written premium for insurance policies to which this article applies for the prior year. All surcharges collected in this manner shall be remitted to the association within 60 days of the end of the calendar year in which the surcharge is collected.

(c) (1) The amount of any surcharge shall be separately stated on either a billing or policy declaration sent to an insured. The association shall determine the rate of the surcharge and the collection period for each category, and these shall be mandatory for all member insurers of the association who write business in those categories.

(2) Each member insurer shall file a report in accordance with the provisions of the plan of operation indicating the amount of surcharges it has collected.

(A) Member insurers who collect surcharges in excess of premium charges paid in the preceding year pursuant to Section 1063.5 shall remit the excess to the association as an additional premium within 30 days after the association has determined the amount of the excess recoupment and given notice to the member insurer of that amount. The excess shall be applied to reduce future premium charges in the appropriate category.

(B) Member insurers who report surcharge collections that are less than what they paid in the preceding year’s premium charge shall receive reimbursement from the association for the shortfall in surcharge collection.

(C) Member insurers may amend their reports indicating the amount of surcharges collected for the prior five years if they discover there was an error in the original reports filed with the association.

(d) The plan of operation may permit a member insurer to omit collection of the surcharge from any of its insureds only if the expense of collecting the surcharge would exceed the amount of the surcharge, provided, however, that a member insurer is not entitled to reimbursement from the association pursuant to subparagraph (B) of paragraph (2) of subdivision (b) of any amount omitted from collection pursuant to this subdivision.

(e) This section applies only to premium charges paid on or after January 1, 2017.

(Amended by Stats. 2022, Ch. 408, Sec. 4. (AB 2154) Effective January 1, 2023.)