The definitions in this section apply to the following terms when used in this article.

(a) “Adoption date” means the date the board of directors adopts the plan of conversion.

(b) “Converted company” means the converted insurer or converted mutual holding company, as the case may be.

(c) “Converted insurer” means the incorporated stock insurer into which a medical malpractice mutual insurer has been converted or merged or redomiciled in accordance with the provisions of this article.

(d) “Converted mutual holding company” means the stock corporation into which a mutual holding company has been converted in accordance with this article.

(e) “Converting mutual company” means, for a plan of conversion under this article, the medical malpractice mutual insurer or mutual holding company that is converting under the plan.

(f) “Demutualization” means the conversion of a medical malpractice mutual insurer into a stock insurer without the establishment of a mutual holding company or the conversion of a mutual holding company into a stock corporation.

(g) “Effective date” means, for the conversion of a medical malpractice mutual insurer, the date upon which the conversion of the mutual insurer is effective, as specified in the commissioner‘s amendment to the mutual insurer’s certificate of authority issued in accordance with Section 4097.11, as a result of conversion proceedings under this article. For the conversion of a medical malpractice mutual holding company, “effective date” means the date upon which the conversion of a mutual holding company is effective, as specified in the amended articles of incorporation of the mutual holding company filed with the Secretary of State in accordance with Section 4097.11, as a result of conversion proceedings under this article.

(h) “Eligible members” means, for the conversion of a mutual insurer, members of the mutual insurer who are of record, fully paid-up and otherwise in good standing on the mutual insurer’s adoption date and on its effective date, but shall not include those persons covered solely under a reporting endorsement to a claims made policy on either date. For the conversion of a mutual holding company, “eligible members” means the members of the mutual holding company who are of record, fully paid-up with respect to policies in effect issued by the converted insurer and are otherwise in good standing on the mutual holding company’s adoption date and on its effective date.

(i) “Medical malpractice mutual insurer” means a mutual insurer organized under this chapter that writes predominantly medical malpractice insurance, as that class of insurance is defined in subdivision (d) of Section 108. A mutual insurer shall be considered to write predominantly medical malpractice insurance if, for each of the most recent five calender years, its direct written premiums for medical malpractice insurance, as reported in the annual statement filed with the commissioner pursuant to Section 900, is not less than 50 percent of its aggregate direct premiums for all classes of insurance.

(j) “Member” means a person who, by the records of the mutual company and by its articles of incorporation or bylaws, is deemed to be a holder of a membership interest in the mutual company. On and after the effective date of a plan of conversion that creates a mutual holding company, the term “member” means a member of a mutual holding company, as provided in Section 4097.12.

(k) “Membership interests” means the interests of members arising under this code and the articles of incorporation and bylaws of the mutual company or otherwise by law. Membership interests include the right to vote for directors of the mutual company and the right to vote on any plan of merger, consolidation, reinsurance, or transfer of assets and liabilities of the mutual company.

(l) “Mutual company” means, in the case of a plan of conversion, the medical malpractice mutual insurer or mutual holding company that is converting pursuant to the plan.

(m) “Mutual holding company” means a corporation organized under the laws of this state subject to the general corporation law as set forth in the Corporations Code. The articles of incorporation of a mutual holding company shall contain provisions stating the following:

(1) It is a mutual holding company organized under this article.

(2) One purpose of the mutual holding company is to hold not less than 51 percent of the voting stock of a stock holding company, which in turn holds all of the voting stock of a converted insurer. In addition, the mutual holding company shall own not less than 51 percent of the total stockholders’ equity of the stock holding company at all times.

(3) It is not authorized to issue voting stock.

(4) Its members have the rights specified in Section 4097.12 and in its articles of incorporation and bylaws.

(5) Its assets and liabilities are subject to inclusion in the estate of the converted insurer in any proceedings successfully prosecuted against the converted insurer under Article 14 (commencing with Section 1010) or Article 14.3 (commencing with Section 1064.1) of Chapter 1 of Part 2 of Division 1.

(n) “Mutual holding company independent director” means a member of the board of directors of the mutual holding company who does not own shares, options, or any other equity interests in the stock holding company.

(o) “Mutual insurer” means, in the case of a plan of conversion under this article, the medical malpractice mutual insurer that is converting pursuant to the plan.

(p) “Person” means an individual, partnership, firm, association, corporation, joint-stock company, limited liability company, trust, government or governmental agency, state or political subdivision of a state, public or private corporation, board, association, estate, trustee, or fiduciary, or any similar entity.

(q) “Plan of conversion” or “plan” means a plan adopted by a mutual company in compliance with this article.

(r) “Policy” means an individual or group policy of insurance issued by a mutual insurer or a converted insurer. If a policy takes a form other than an individual form but holders of certificates or other interests under the policy are treated by the mutual insurer as if they were holders of individual policies, the mutual insurer may provide in its plan of conversion under this article that such a certificate or other interest is deemed to be a policy and deem the holder of the certificate or other interest to be an owner of a policy. Such a provision shall be for the sole purpose of determining the rights, if any, of policyholders of the mutual insurer to vote upon and receive consideration under the plan of conversion and shall not affect the other voting rights and qualifications of members of the mutual insurer.

(s) “Policyholder” means the holder of a policy other than a reinsurance contract.

(t) “Rights in surplus,” for a mutual insurer, means rights of members of the insurer to a return of that portion of the surplus that has not been apportioned or declared by the board of directors for policyholder dividends. “Rights in surplus” includes rights of members of the insurer to a distribution of surplus in liquidation, conservation or demutualization of the insurer under this code, or in a dissolution or winding up. “Rights in surplus,” for a mutual holding company, means rights of members of the company to a return of any surplus that has not been apportioned or declared by its board of directors for member dividends. “Rights in surplus” includes rights of members of the mutual holding company to a distribution of surplus in liquidation, conservation, or demutualization of the insurer under this code, or in a dissolution or winding up. “Rights in surplus” does not include any right expressly conferred solely by the terms of an insurance policy.

(u) “Stock holding company” means a corporation authorized to issue one or more classes of capital stock, the corporate purposes of which include holding all of the voting stock in an insurer that has been converted from a mutual insurer to a stock insurer in proceedings under Section 4097.05 in which a mutual holding company is formed.

(v) “Voting stock” means securities of any class or any ownership interest having voting power for the election of directors, trustees, or management of a person, other than securities having voting power only because of the occurrence of a contingency. All references to a specified percentage of voting stock of any person mean securities having the specified percentage of the voting power in that person for the election of directors, trustees, or management of that person, other than securities having voting power only because of the occurrence of a contingency.

(Added by Stats. 1998, Ch. 421, Sec. 4. Effective January 1, 1999.)