California Code of Regulations
Title 10 - Investment
Chapter 1 - Commissioner of Business Oversight, Division of Financial Institutions
Subchapter 40 - Industrial Loans
Article 8 - Insurance
Section 40.815 - Reasonable Cause: Right to Approve or Disapprove of the Issuer Selected to Underwriter Insurance

Universal Citation: 10 CA Code of Regs 40.815

Current through Register 2024 Notice Reg. No. 38, September 20, 2024

(a) Any person engaged in the business of financing the purchase of real or personal property or of lending money on the security of real or personal property and the trustee, director, officer, agent or other employee or affiliate of any such person shall have the right to approve or disapprove, for reasonable cause, the insurer selected to underwrite any insurance required by the contract of sale or deed of trust or other loan agreement. This regulation includes insurance covering damage to or destruction of real or personal property and it includes title insurance.

(b) Reasonable cause is defined as the failure of the insurer to:

(1) Be licensed by the State of California to transact the line of insurance afforded.

(2) Provide the insurance in conformity with all requirements of the California Insurance Code and the Regulations issued thereunder.

(3) Afford the customary coverage required by the lender for the class of property involved including the loss payable endorsement required by the lender.

(4) Provide, at the option of the lender, coverage equal to the lesser of the market value or the replacement value of the property or the agreed value when the property insured is real property, or the actual cash value of the property when the property is personal property.

(5) Provide coverage with a deductible not exceeding $100 or 1% of the amount of insurance, whichever is greater. If the custom of the insurance business is to afford a higher deductible in conjunction with the coverage provided (including the deductibles used in conjunction with earthquake insurance), the insurer may provide such higher deductible.

(6) Deliver evidence of insurance to the lender which includes those provisions of the contract which have a bearing on the coverage afforded the property securing the loan.

Notwithstanding any other provisions of these regulations, the California FAIR Plan Association shall not be rejected as an insurer.

1. Change without regulatory effect renumbering former section 1198 to new section 40.815 filed 8-19-97 pursuant to section 100, title 1, California Code of Regulations (Register 97, No. 34).

Note: Authority cited: Section 18347, Financial Code. Reference: Section 18294, Financial Code.

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