1887, p. 19. 6. By Stats. 1905, p. 379. 7. Repealed by Stats. 1907, p. 141, in repealing Article XVI. 8. Present section enacted by Stats. 1907, p. 149. 9. Amended by Stats. 1909, p. 915. See ante, tit. "Legistion Article XVI."

§ 602a. Estimate of indebtedness of liability insurance companies. In estimating the condition of any company engaged in the business of liability insurance under the provisions of this article the insurance commissioner shall charge as liabilities all outstanding indebtedness of such company, and the premium reserve of policies in force, equal to the unearned portions of the gross premiums charged for covering risks, computed on each respective risk from the date of the issuance of the policy. The indebtedness for outstanding losses under insurance against loss or damage resulting from accident to or injuries suffered by an employee or other person and for which the insured is liable, and under insurance against loss from liability on account of the death of or injury to an employee not caused by the negligence of the employer, shall be determined as follows: Each corporation which writes policies covering any of the said kinds of insurance shall include in the annual statement a schedule of its experience thereunder, in the United States and foreign countries in the case of corporations organized in the United States, and in the United States only in the case of corporations organized outside of the United States giving each calendar year's experience separately, and crediting or charging each item to the year in which the policy to which it relates was written, as follows: (1) the earned premiums on all such policies written during the period of ten years immediately preceding the date as of which the statement is made, being the gross premiums on all such policies including excess and additional premiums and premiums in course of collection, less return premiums on canceled policies, and less the unearned premiums on policies in force as shown in such annual statement; (2) the amount of all payments of whatsoever nature made by reason or on account of injuries covered by such policies written during said period. This amount shall include medical and surgical attendance, payments to claimants, legal expenses, salaries and expenses of investigators, adjusters, and fieldmen, rents, stationery, telegraph and telephone charges, postage, salaries and expenses of office employees, home office expenses, and all other payments made on account of such injuries, whether such payments are allocated to specific claims or are unallocated; (3) the number of suits being defended at the date as of which the statement is made under policies written during said period, except suits in which liability is not dependent upon negligence of the insured, and a charge of seven hundred and fifty dollars for each suit; (4) the number of deaths for which the insured are liable without proof of negligence, covered by policies written during said period, and not paid for at the date as of which the statement is made and a charge of the amount necessary to pay for such deaths; (5) the number of unpaid claims at the date as of which the statement is made on account of nonfatal injuries for which the insured are liable without proof of negligence, covered by policies. written during said period, and a charge equal to the present value of the estimated future payments; (6) the loss ratio determined from the foregoing as to each year separately using as the divisor the

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earned premiums shown in item (1) and as the dividend the amount of payments shown in item (2) plus the amounts charged in items (3), (4) and (5); (7) the number of suits being defended at the date as of which the statement is made under policies written more than ten years prior to such date, except suits in which liability is not dependent upon negligence of the insured; (8) the number of deaths for which the insured are liable without proof of negligence, covered by policies written more than ten years prior to the date as of which the statement is made, and not paid for at such date; (9) the number of unpaid claims at the date as of which the statement is made oa account of nonfatal injuries for which the insured are liable without proof of negligence, covered by policies written more than ten years prior to such date. All unallocated payments in item (2) made in a given calendar year subsequent to the first four years in which a corporation has been issuing such policies shall be distributed as follows: thirty-five per centum shall be charged to the policies written in that year, forty per centum to the policies written in the preceding year, ten per centum to the policies written in the second year preceding, ten per centum to the policies written in the third year preceding, and five per centum to the policies written in the fourth year preceding, and such payments made in the first four calendar years in which a corporation has been issuing such policies shall be distributed as follows: in the first calendar year one hundred per centum shall be charged to the policies written in that year, in the second calendar year fifty per centum shall be charged to policies written in that year and fifty per centum to the policies written in the preceding year, in the third calendar year forty per centum shall be charged to the policies written in that year, forty per centum to the policies written in the preceding year, and twenty per centum to the policies written in the second year preceding, and in the fourth calendar year thirty-five per centum shall be charged to the policies written in that year, forty per centum to the policies written in the preceding year, fifteen per centum to the policies written in the second year preceding, and ten per centum to the policies written in the third year preceding, and a schedule showing such distribution shall be included in such annual statement. Each such corporation shall be charged with indebtedness for outstanding losses upon such policies determined as follows: (10) for all suits being defended under policies written more than ten years prior to the date as of which the statement is made, except suits in which liability is not dependent upon negligence of the insured, one thousand dollars for each suit; (11) for all suits being defended under policies written more than five years and less than ten years prior to the date as of which the statement is made, except suits in which liability is not dependent upon negligence of the insured, seven hundred and fifty dollars for each suit; (12) for all deaths for which the insured are liable without proof of negligence, covered by policies written more than five years prior to the date as of which the statement is made, the amount necessary to pay for such deaths; (13) for all unpaid claims on account of nonfatal injuries for which the insured are liable without proof of negligence under policies written more than five years prior to the date as of which the statement is made, the present value of the estimated future payments; (14) for the policies written in the

five years immediately preceding the date as of which the statement is made an amount determined as follows: multiply the earned premiums of each of such five years as shown in item (1) by the loss ratio ascertained as in item (6) on all the policies written in the first five years of the said ten-year period using as the divisor the sum of the earned premiums shown in item (1) for such first five years, and as the dividend the sum of the payments shown in item (2) for such first five years plus the sum of the charges in items (3), (4) and (5) for such first five years, but the ratio to be used shall in no event be less than fifty-two per centum at and after December thirty-first, nineteen hundred and thirteen, nor less than fifty-three per centum at and after December thirty-first, nineteen hundred and fourteen, nor less than fifty-four per centum at and after December thirty-first, nineteen hundred and fifteen, nor less than fifty-five per centum at and after December thirty-first, nineteen hundred and sixteen; provided, furthermore, that in the case of insurance covering liability for workmen's compensation the ratio to be used shall in no event be less than seventy per centum at and after December thirty-first, nineteen hundred and thirteen, nor less than seventy-two per centum at and after December thirty-first, nineteen hundred and fourteen, nor less than seventy-four per centum at and after December thirty-first, nineteen hundred and fifteen, nor less than seventy-five per centum at and after December thirty-first, nineteen hundred and sixteen, and from the amount so ascertained in each of the last five years of said ten-year period deduct all payments made under policies written in the corresponding year as shown in item (2), and the remainder in the case of each year shall be deemed the indebtedness for that year; provided, however, that if the remainder in the case of any year of the first three years of the five years immediately preceding the date as of which, the statement is made shall be less than the sum of the three following items for that year at that date (a) the number of suits, except suits in which liability is not dependent upon negligence of the insured, being defended under policies written in that year and a charge of seven hundred and fifty dollars for each suit, (b) the amount necessary to pay for all deaths for which the insured are liable without proof of negligence, covered by policies written in that year, and (c) the present value of the estimated unpaid elaims on account of nonfatal injuries for which the insured are liable without proof of negligence, covered by policies written in that yearthen the sum of said items (a), (b) and (c) shall be the indebtedness for that year. A corporation which has been issuing such policies for a period of less than ten years shall nevertheless include in its annual statement, a schedule as hereinbefore required for the years in which it shall have issued such policies, and shall be charged with an indebtedness determined in the same manner, but in determining the indebtedness for policies written in the five years immediately preceding the date as of which the statement is made, the minimum ratio herein before prescribed shall be used subject to the same deductions and provisions as in the case of corporations that have beeen issuing such policies for ten years or more. [Amendment approved 1913; Stats. 1913, p. 493.]

Legislation § 602a. 1. Added as § 612a by Stats. 1905, p. 380. 2. Repealed by Stats. 1907, p. 141. 3. Present section enacted by Stats. 1907

p. 151.

See ante, tit. "Legislation Article XVI." 4. Amended by Stats. 1913, p. 493. Another § 602a was passed on the same day, identical with this section excepting for the omission of a part of the first proviso. See Stats. 1913, p. 465.

§ 602b. Classification of risks and premium rates to be filed. Powers of insurance commissioner. Insurance at less than state rate. On or before September 1, 1915, the state compensation insurance fund and every corporation, mutual company, association, inter-insurance exchange or other insurance carrier licensed to transact business in this state, which insures employers or employees under the workmen's compensation, insurance and safety act, chapter 176, Laws of 1913, shall file with the state insurance commissioner its classification of risks and premium rates relating thereto with its system of schedule rating (or merit rating, so called) if any. The state insurance commissioner shall then hold a hearing to determine upon a uniform classification of risks and premium rates relating thereto and, in his discretion, a uniform system of schedule rating (or merit rating, so called).

On or before October 1, 1915, the state insurance commissioner shall approve or issue, as adequate for all insurance carriers authorized by law or licensed to transact compensation insurance business in this state, a uniform classification of risks and premium rates relating thereto, and may, in his discretion, approve or issue a system of schedule rating (or merit rating, so called), which shall be a uniform system of schedule rating (or merit rating, so called) for all insurance carriers. Such premium rates or system of schedule rating (or merit rating, so called) shall take no account of any physical impairment of employees or the extent to which employees may have persons dependent upon them for support. The state insurance commissioner may subsequently approve or issue a uniform system of schedule rating (or merit rating, so called) for all insurance carriers, or may modify or change any such system previously approved or issued after holding a hearing to determine its effect upon the adequacy or inadequacy of rates, and may approve or issue additional uniform rates and classifications or uniform changes in rates and classifications after holding hearings to determine upon the adequacy or inadequacy of such additions or changes.

On or after October 1, 1915, no insurance carrier may issue, renew or carry beyond anniversary date insurance for employers or employees under the workmen's compensation, insurance and safety act at premium rates which are less than the rates previously approved or issued by the state insurance commissioner for all insurance carriers as adequate for the risks to which they respectively apply; provided, however, if the state insurance commissioner shall have previously approved or issued a uniform system of schedule rating (or merit rating, so called), insurance carriers may apply the same to any risks subject thereto, but basis rates no less than the rates previously approved or issued by the state insurance commissioner and any reductions therefrom on account of the application of such system of schedule rating (or merit rating, so called) shall be clearly set forth in the insurance contracts or indorsements attached thereto.

Nothing in this section shall affect the right of any insurance carrier to issue compensation participating policies; provided, however, that no

refund by reason of such participating provision may be made to policyholders by any insurance carrier except from surplus accumulated from premiums on compensation insurance policies insuring employers or employees under the workmen's compensation, insurance and safety act of this state.

The statistical and actuarial data compiled by the industrial accident commission and the state compensation insurance fund shall at all times be available to the state insurance commissioner for his use in judging the adequacy or inadequacy of rates and schedules filed, and it shall be the duty of the manager of the state compensation insurance fund, or other officers of the state compensation insurance fund who may be designated for such duty by the industrial accident commission, to render all possible assistance to the state insurance commissioner in carrying out the provisions of this section.

The state insurance commissioner may require every insurance carrier, which insures employers or employees under the workmen's compensation, insurance and safety act, to file with its annual statement a sworn report of its loss experience in such detail and form as may be prescribed by the state insurance commissioner.

The state insurance commissioner shall have power, after hearing, to suspend or revoke the certificate of authority of any insurance carrier to write liability insurance for violating any of the provisions hereof, and any insurance broker, or agent, or employee of any insurance carrier, who violates any provision of this section shall be guilty of a misde

meanor.

Legislation § 602b. Added by Stats. 1915, p. 1269.

§ 603. Insolvent companies, notice of revocation of certificate. Whenever the commissioner ascertains that any company engaged in the insurance business is insolvent within the meaning of this chapter, he must revoke the certificate of authority granted, and send by mail to such company, addressed to it at its principal place of business, or deliver to it, a notice of such revocation and cause a copy of such notice together with the proof of service to be filed in his office.

Legislation § 603. 1. Enacted as first sentence of § 600, March 12, 1872; based on Stats. 1867-68, p. 338, § 8. 2. § 600 repealed by Stats. 1907, p. 141, in repealing Article XVI. 3. Present section enacted by Stats. 1907, p. 152. For original code § 603, see ante, § 600. See ante, tit. "Legislation Article XVI."

§ 603a. Restoration of authority after revocation. If any insurance company (whose certificate of authority has been revoked by the insurance commissioner on the ground that such company is insolvent) within ninety days after the receipt of the notice of revocation, shall repair its capital to such an extent that such company is solvent within the provisions of section six hundred and two (602) of the Political Code, then upon such fact being made to appear to the insurance commissioner, he may issue a new certificate of authority in the same manner and to the same effect as an original certificate of authority.

Legislation § 603a. 1. Enacted as § 600a by Stats. 1907, p. 149. (Compare original code § 600, final sentence.) 2. § 600a repealed by Stats. 1909, p. 913. 3. Added as a new section by Stats. 1909, p. 913, by the act repealing § 600a, the latter section being merely renum