Discussion

In Resolution TL 18877, adopted December 17, 1998, we adopted GO 160-A. Subsection (1) of GO 160-A specifies the liability insurance required for all private carriers of passengers² (as defined in § 4005):

For the payment of damages for bodily injury to, or death of, one person in any one accident in the amount of at least fifteen thousand dollars ($15,000); and subject to the limit for one person, in the amount of at least thirty thousand dollars ($30,000) for bodily injury to, or death of, two or more persons in any one accident; and for injury to or destruction of property of others in the amount of at least five thousand dollars ($5,000) for any one accident.

We further defined the source of such liability insurance as:

The protection required under Section (1) hereof shall be evidenced by the deposit with the Public Utilities Commission, covering each vehicle used or to be used in conducting the operation of each such private carrier, of the appropriate Commission-authorized certificate of bodily injury liability and property damage liability insurance issued by a company licensed to write such insurance in the State of California, or by nonadmitted insurers subject to Sections 1763 and 1765.1 of the Insurance Code, or of an original bond of a surety company licensed to write surety bonds in the State of California. (GO 160-A(3), emphasis added.)

The statute that authorizes NIAC to provide insurance pooling arrangements states:

(a) Except for a liability which may be insured against pursuant to Division 4 (commencing with Section 3200) of the Labor Code, an authorized corporation may do any of the following:

(1) Insure itself against all or any part of any tort liability.

(2) Insure any employee of the corporation against all or any part of his or her liability for injury resulting from an act or omission in the scope of employment.

(3) Insure any board member, officer, or volunteer of the corporation against any liability that may arise from any act or omission in the scope of participation with the corporation.

(4) Insure itself against any loss arising from physical damage to motor vehicles owned or operated by the corporation.

(b) The insurance authorized pursuant to this section shall only be available to an authorized corporation where that corporation has joined with two or more other authorized corporations in an arrangement providing for the pooling of self-insured claims or losses. The pooling arrangement shall not be considered insurance nor be subject to regulation under the Insurance Code.

(c) Nothing in this section shall be construed to authorize a corporation organized pursuant to this division to pay for, or to insure, contract, or provide for payment for, any part of a claim or judgment against an employee of the corporation for punitive or exemplary damages.

(d) Any insurance pool established pursuant to this section shall have initial pooled resources of not less than two hundred fifty thousand dollars ($250,000).

(e) All participating corporations in any pool established pursuant to this section must agree to pay premiums or make other mandatory financial contributions or commitments necessary to ensure a financially sound risk pool.

(f) For the purpose of this section, an authorized "corporation" means any corporation that meets all of the following criteria:

(1) Is organized chiefly to provide or fund health or human services, but does not include a hospital.

(2) Is exempt from taxation under paragraph (3) of subsection (c) of Section 501 of the United States Internal Revenue Code.

(Corporations Code, § 5005.1.)

Corporations Code § 5005.1(a)(4) authorizes NIAC to issue the very form of liability insurance GO 160-A requires of private carriers of passengers. Unfortunately, for purposes of GO 160-A, Corporations Code § 5005.1(b) also specifically provides that the coverage is not "insurance" and is not regulated under the Insurance Code. Thus, the coverage available from NIAC pursuant to Corporations Code § 5005.1 does not meet the definitional requirements of GO 160-A.

The Legislature has recently amended the Vehicle Code to resolve a similar inconsistency between the Vehicle Code and Corporations Code § 5005.1. Vehicle Code § 4000.37 mandates that when renewing a motor vehicle registration, the Department of Motor Vehicles (DMV) must require each applicant to submit documentation of insurance or other form of financial responsibility. Prior to its recent amendment, Vehicle Code § 4000.37 limited the DMV to accepting automobile liability coverage from companies regulated by the Insurance Code. Effective January 2, 2001, Vehicle Code § 4000.37 is amended to add subsection (a)(4)(C):

(C) An evidence form that indicates coverage is provided by a charitable risk pool operating under Section 5005.1 of the Corporations Code, if the registered owner of the vehicle is a nonprofit organization that is exempt from taxation under paragraph (3) of subsection (c) of Section 501 of the United States Internal Revenue Code. The evidence form shall include:

(1) The name and address of the vehicle owner or fleet operator.

(2) The name and address of the charitable risk pool providing the policy for the vehicle.

(3) The policy number, and the effective date and expiration date of the policy.


(4) A statement from the charitable risk pool that the policy meets the requirements of subdivision (b) of Section 16054.2.

As amended, Vehicle Code § 4000.37 directs the DMV to accept automobile insurance policies issued by NIAC, and any other Corporation Code § 5005.1 entity. Thus, the Legislature has determined that automobile insurance, in the proper amounts, issued by NIAC is equivalent to that issued by companies regulated by the Insurance Code.

Applicant requests that we determine that it is equivalent to a "company licensed to write such [liability] insurance in the State of California." Based on the recently adopted amendment to Vehicle Code § 4000.37, the requirements imposed on NIAC by Corporations Code § 5005.1, and NIAC's financial state, we will grant NIAC's request.

As quoted above, Corporations Code § 5005.1 requires an insurance pool to: (1) be composed of two or more corporations, (2) have an initial pool of resources of $250,000 or more, and (3) require members to pay premiums necessary to "ensure a financially sound risk pool."

NIAC's application shows that it meets these requirements. In fact, NIAC has a sizable $6 million reserve, which is currently increasing each year. Moreover, NIAC only covers the first $150,000 of each incident and obtains "re-insurance" coverage for losses above that amount.

While granting this application, we will impose certain conditions on NIAC in order to protect the public. First, since the maximum liability limit under GO 160-A is $5,000,000³ in any one accident, we will require NIAC to notify the Director of the Rail Safety and Carriers Division (RSCD) in writing (1) if its reserve amount falls below $5,000,000, or (2) if there is any change in the amount covered by NIAC (from $150,000), or any other change in its present reinsurance coverage arrangement.