Current through Register 2024 Notice Reg. No. 12, March 22, 2024
In the application submitted pursuant to section
791.7, financial responsibility
must be demonstrated by an applicant using the methods described below:
(a) Insurance.
(1) Applicants may demonstrate financial
responsibility by submitting any of the following:
(A) An insurance policy or other
documentation, and a certificate of insurance that is acceptable to the
Administrator specifying the nature, type, and amount of insurance. At a
minimum, the insurance policy must include the following information:
1. Name and address of insured;
2. Name and principal characteristics of
tankers, tank barges, nontank vessels, or facilities covered;
3. Name and address of insurer(s);
4. Policy number(s);
5. Effective date and term of
coverage;
6. All conditions and
limitations of the policy or certificate which may affect coverage in the event
of a spill of oil;
7. Language that
the policy covers damages as specified in Government Code section
8670.56.5,
except as provided in subsection (a)(1)(D) of this section:
8. Evidence of dollar amounts of the
insurance policy or certificate of insurance;
9. Amount of deductibles and/or self-insured
retention; and
10. Language that
termination or cancellation of this policy, insofar as it serves as proof of
the insured's financial responsibility pursuant to section
795, shall not become effective
until 30 calendar days after a notice of termination or cancellation has been
submitted to the Administrator. However, this policy shall only remain in
effect for 10 calendar days after a notice of termination or cancellation for
failure to pay the premium by the due date has been submitted in writing by the
insurer to the insured and to the Administrator, and the notice was issued
after the date the premium was due.
(B) A certificate of insurance that is
acceptable to the Administrator and an endorsement executed by the underwriter
or insurer which contains the language set forth in the California standard
endorsement. Refer to the California Endorsement for Oil Spill Liabilities,
form DFW 1962 (06/21/17) for endorsements to policies for facilities,
incorporated by reference herein.
(C) Similar or comparable evidence of
insurance acceptable to the Administrator.
(D) If an insurance policy is being submitted
as evidence for excess coverage over and above a Protection and Indemnity Club
policy, then one of the following is required:
1. Language that the policy covers damages as
specified in Government Code section
8670.56.5;
or
2. The insurance policy shall be
signed by the underwriter and shall state that the insurance policy covers the
assured's legal liability for oil pollution claims, and is issued under the
same terms and conditions as the underlying Protection and Indemnity Club
policy; or
(E) If an
insurance policy is being submitted for excess coverage over and above the
primary policy, then one of the following is required:
1. Language that the policy covers damages as
specified in Government Code section
8670.56.5;
or
2. A copy of the "following
form" language which states that the policy is issued under the same terms and
conditions as the primary or underlying policy or
policies.
(2)
At the Administrator's discretion, a deductible provision or self-insured
retention which is greater than $250,000, is only acceptable if:
(A) The applicant shows supplemental coverage
for the amount of the deductible or self-insured retention by means of other
acceptable insurance, surety, guaranty, self-insurance, letter of credit, or
other proof of financial responsibility acceptable to the Administrator;
or
(B) The deductible provision
provides for a loss reimbursement plan which contains language guaranteeing
that the insurer will be responsible for payment of all claims on a first
dollar basis, without waiting for the insured to pay the amount of the
deductible.
(3)
(A) No later than 30 calendar days following
the expiration of the current policy period, a certificant using insurance as
evidence of financial responsibility shall submit a certificate of insurance,
or other written documentation acceptable to the Administrator evidencing that
the renewal of certificant's insurance policy occurred on or before the
previous policy's expiration date. Failure to submit the certificate of
insurance or other acceptable written documentation within 30 calendar days
following the expiration of the current policy period, or at least 10 calendar
days before operating in waters of the state, may result in the revocation of
the certificate as outlined in section
796 of this chapter.
(B) No later than 45 calendar days following
the expiration of the current policy period the certificant shall also submit a
copy of that portion of the renewal policy that includes language that the
policy covers damages as specified in Government Code section
8670.56.5;
an endorsement form (Refer to California Endorsement for Oil Spill Liabilities,
form DFW 1962 (06/21/17); other documentation which contains the minimum
information set forth in subsection (a)(1) of this section; or similar or
comparable evidence of insurance acceptable to the Administrator. Any
additional terms or limitations which may affect coverage, including the
renewal and new expiration dates, shall be included. Failure to submit the
endorsement or other acceptable written documentation within 45 calendar days
following the expiration of the current policy period, or at least 10 calendar
days before operating in waters of the state, may result in a revocation of the
certificate as outlined in section
796 of this
chapter.
(4) If an
insurance policy is submitted which states for any reason that it cannot be
used or offered as evidence of financial responsibility, then the applicant
must simultaneously submit a declaration from the underwriter, or a broker
designated and authorized by the underwriter, containing the information
required in subsection (a)(1) of this section.
(5) For insurance coverage to be acceptable,
the insurer providing coverage must be licensed or approved by the California
Insurance Commissioner to do business in the State of California (i.e., be an
admitted company), or must be on the list of eligible surplus line insurers
pursuant to section
1765.1 of
the California Insurance Code. The insurer providing coverage must also have a
current AM Best rating of at least A.
(b) Qualification as a Self-Insurer.
(1) Applicants may demonstrate financial
responsibility by meeting the self-insurance requirements specified in this
subsection. If another entity, such as a parent corporation, is assuming
financial responsibility for the applicant by self-insurance, then that other
entity must meet the self-insurance requirements. To qualify as a self-insurer,
the applicant or other entity must meet the criteria of either of the following
two tests -- (A) Test I, or (B) Test II:
(A)
Test I -- The applicant must have:
1. One of
the following two ratios:
a. A ratio of total
liabilities to net worth less than 1.5; or
b. A ratio of cash flow (the sum of net
income, after taking into consideration the effect of any extraordinary items,
plus depreciation, depletion, and amortization) minus $20 million ($20,000,000)
to total liabilities greater than 0.1; and
2. Worldwide owners' equity minus intangible
assets (i.e., "tangible net worth") equal to at least $20 million ($20,000,000)
plus two times the amount of self-insurance to be established as set forth in
section 791.7 of this chapter;
and
3. Assets in the United States
amounting to at least 90 percent of total assets or at least two times the
amount of self-insurance to be established as set forth in section
791.7 of this
chapter.
(B) Test II --
The applicant must have:
1. A current rating
of the applicant's most recent bond issuance of AAA, AA, A, or BBB- stable or
better as issued by Standard and Poor's or, Aaa, Aa, A, or Baa or better as
issued by Moody's, or commercial paper rating of A1, A2 or the equivalent;
and
2. Worldwide owners' equity
minus intangible assets (i.e., "tangible net worth") of at least $20 million
($20,000,000) plus two times the amount of self-insurance to be established;
and
3. Assets in the United States
amounting to at least 90 percent of total assets or at least two times the
amount of self-insurance to be established as set forth in section
791.7 of this
chapter.
(2)
Applicants or entities assuming financial responsibility for the applicant that
are relying upon self-insurance as evidence of financial responsibility shall
submit the following additional documentation:
(A) A letter signed by a financial officer, a
general partner, the proprietor of a sole proprietorship, or an authorized
representative of the aforementioned, stating:
1. He or she is a financial officer, general
partner, proprietor, or authorized representative of the organization or
business entity; and
2. That the
letter supports the use of a financial test to demonstrate financial
responsibility by self-insurance pursuant to this section; and
3. State whether the applicant, parent entity
of the applicant, or a subsidiary of the applicant is the owner or operator of
the vessels or facilities described in the applications or is the owner of the
oil.
(B) If another
entity will assume financial responsibility for the applicant, then the other
entity must provide the Guaranty form DFW 1928 (06/21/17) as referenced in this
subsection, upon the request of the Administrator. The Guaranty shall include
the signature of an authorized representative of the other entity.
(C) The applicant or other entity agrees to
notify the Administrator by certified mail within seven calendar days if, at
any time, the applicant fails to meet the self-insurance test
criteria.
(D) A letter stating that
the certificant expects to meet the self-insurance test criteria for the
upcoming year shall be submitted annually, at least five calendar days prior to
the close of the certificant's fiscal year.
(E) Annual financial statements audited by an
independent certified public accountant must be submitted every year after the
close of the certificant's fiscal year. The applicant or other entity may
submit, in lieu of audited financial statements, copies of the most recent Form
10-K and any subsequent Forms 10-Q filed pursuant to the Securities Exchange
Act of 1934 providing that the Form 10-K includes audited financial statements.
These documents shall be submitted every year within 90 calendar days after the
close of certificant's fiscal year. However, the Administrator may agree to
accept these documents at the earliest date that the independent certified
public accountant declares in writing that the audited financial statements
will be issued. The certificant must submit to the Administrator a written
request for an alternate date within 60 calendar days after the close of the
certificant's fiscal year. The Administrator will respond to this request
within 15 calendar days of receipt. If agreed to, it is the certificant's
responsibility to ensure the documents are submitted by that
date.
(c)
Surety Bond.
(1) An applicant may demonstrate
financial responsibility by obtaining and submitting to the Administrator a
surety bond which conforms to the requirements of this chapter. The surety bond
form shall be in the form prescribed by this section. Refer to Surety Bond for
Oil Spill Response and Damages, form DFW 1948 (06/21/17), incorporated by
reference herein. The surety company issuing the bond must, at a minimum, be
among those listed as acceptable sureties on Federal bonds in Circular 570 of
the U.S. Department of the Treasury.
(2) Upon written request, the Administrator
may waive the 30 calendar day notice period for terminations prior to the
bond's expiration date pursuant to item 10 of the form DFW 1948 with respect to
any unloaded tanker(s), tank barge(s) or nontank vessel(s), covered by the
surety bond.
(3) The bond shall not
contain additional terms or conditions which limit the surety company's
obligation to pay for costs and damages arising under Government Code section
8670.56.5.
(4) Under the terms of the bond, the bond
shall be subject to and governed by the laws of the State of
California.
(5) An applicant
utilizing a surety bond to demonstrate evidence of financial responsibility
shall establish a standby trust fund. The trust agreement shall be in the form
prescribed by this chapter. Refer to Trust Agreement, form DFW 1961 (06/21/17),
incorporated by reference herein. Under the terms of the bond, all payments
made thereunder shall be deposited by the surety directly into the standby
trust fund in accordance with the Administrator's
instructions.
(d) Letter
of Credit.
(1) An applicant may demonstrate
financial responsibility by obtaining and submitting to the Administrator an
Irrevocable Letter of Credit in favor of the State of California, and which
conforms to the requirements of this chapter. The issuing institution must be
an entity which is acceptable to the Administrator and which has the authority
to issue letters of credit and whose letter of credit operations are regulated
and examined by a federal or state agency. The letter of credit shall be in the
form prescribed by this section. Refer to the Irrevocable Letter of Credit,
form DFW 1927 (3/97), incorporated by reference herein. The Irrevocable Letter
of Credit shall:
(A) Be effective on or
before the approval date of the certificate of financial responsibility;
and
(B) Be subject to and governed
by the laws of the State of California.
(2) The letter of credit shall not contain
additional terms or conditions which limit the issuing institution's obligation
to make funds available to pay for costs and damages arising under Government
Code section
8670.56.5.
(3) An applicant utilizing a letter of credit
to demonstrate evidence of financial responsibility shall establish a standby
trust fund. The trust agreement shall be in the form prescribed by this
chapter. Refer to Trust Agreement, form DFW 1961 (06/21/17), incorporated by
reference herein. Under the terms of the letter of credit, all payments made
thereunder shall be deposited by the issuing institution directly into the
standby trust fund in accordance with the Administrator's
instructions.
(e)
Guaranty.
(1) An applicant may demonstrate
financial responsibility by obtaining and submitting to the Administrator a
written guaranty which conforms to the requirements of this chapter. The
guaranty shall be in the form prescribed by this section. Refer to Guaranty of
Financial Responsibility for Oil Spill Response and Damages, form DFW 1928
(06/21/17), incorporated by reference herein. The Guaranty shall:
(A) Indicate the expiration date of the
guaranty or that it is a 'continuing' guaranty;
(B) Have a designated agent for service of
process by the guarantor. The agent for service of process must be located in
California; and
(C) Be subject to
and governed by the laws of the State of California.
(2) Upon written request, the Administrator
may waive the 30 calendar day notice period for terminations prior to the
guaranty's expiration date pursuant to item nine of the form DFW 1928 with
respect to any unloaded tanker(s), tank barge(s) or nontank vessel(s) covered
by the guaranty.
(3) The guaranty
shall not contain additional terms or conditions which limit the guarantor's
obligation to pay for costs and damages arising under Government Code section
8670.56.5.
(4) Except in circumstances where the
guarantor itself is a responsible party, no guarantor shall be held liable for
any cleanup costs and damages which exceed the amount of financial
responsibility that the guarantor has provided.
(5) An applicant utilizing a guarantee to
demonstrate evidence of financial responsibility shall establish a standby
trust fund.
(A) The trust agreement shall be
in the form prescribed by this chapter. Refer to Trust Agreement, form DFW 1961
(06/21/17), incorporated by reference herein.
(B) Under the terms of the guaranty, all
payments made thereunder shall be deposited by the guarantor directly into the
standby trust fund in accordance with the Administrator's
instructions.
(C) Where the
guarantor is the parent corporation of the applicant, the requirement to
establish a standby trust fund is waived.
(f) Protection and Indemnity Club.
(1) Membership in a Protection and Indemnity
Club is acceptable evidence of financial responsibility if the following
documentation is provided:
(A) Proof of entry
of each tank vessel or nontank vessel into a Protection and Indemnity Club,
which also reflects that each entered tank vessel or nontank vessel is covered
for pollution risk in the amount set forth in section
791.7 of this subchapter and which
names the applicant as an assured or member; and
(B) All addenda which pertain to pollution
risk and deductibles; and
(C) A
copy of the applicable Protection and Indemnity Club rules.
(2) At the Administrator's discretion, an
applicant submitting evidence of Protection and Indemnity Club cover containing
a deductible or similar provision which is greater than $250,000 may be
required to submit the following additional proof before applicant's evidence
of financial responsibility shall be deemed acceptable:
(A) The applicant shows supplemental coverage
for the amount of the deductible by means of other acceptable insurance,
surety, guaranty, self-insurance, letter of credit, or other proof of financial
responsibility acceptable to the Administrator; or
(B) The deductible provision provides for a
loss reimbursement plan which contains language guaranteeing that the
Protection and Indemnity Club will be responsible for payment of all claims on
a first dollar basis, without waiting for the member to pay the amount of the
deductible.
(3) Renewal.
No later than 45 calendar days following expiration of the Protection and
Indemnity Club coverage, and at least 10 calendar days before operating in
waters of the state, certificants using Protection and Indemnity Club
membership as the method of evidence of financial responsibility shall submit a
copy of the addendum or renewal certificate of entry, both of which contain the
information required by subsection (f) of this section, and any additional
terms or conditions which may affect cover, including the renewal and new
expiration dates.
(g)
Other evidence of financial responsibility. Applicants may provide other
evidence of financial responsibility that is not specifically mentioned in this
chapter and which is acceptable to the Administrator.
(h) Combination of methods.
Any one or a combination of the above-described methods may
be utilized to establish the amount of financial responsibility required
pursuant to this chapter.
(i) At any time during the application
process or the period for which a certificate is issued, the Administrator may
require the applicant or certificant to demonstrate that the method used to
provide financial assurances remains current and in effect.
1. New
section filed 8-15-91 as an emergency; operative 8-15-91 (Register 92, No. 3).
A Certificate of Compliance must be transmitted to OAL 12-1-91 or emergency
language will be repealed by operation of law on the following
day.
2. Repealed by operation of law and new section filed 12-13-91
as an emergency; operative 12-14-91 (Register 92, No. 12). A Certificate of
Compliance must be transmitted to OAL 4-13-92 or emergency language will be
repealed by operation of law on the following day.
3. Certificate of
Compliance as to 12-13-91 order including amendment of subsections (a)(4),
(a)(5), (b)(1), (b)(1)(c), (c)(5), (c)(6), (d)(1), (d)(2), (e)(1)(E),
(e)(1)(H), (f)(1) and (f)(2) transmitted to OAL 4-10-92 and filed 5-22-92
(Register 92, No. 22).
4. Amendment of section and NOTE filed
3-23-95; operative 4-24-95 (Register 95, No. 12).
5. Renumbering of
subsections (b)(1)(A)1.-3., (b)(1)(B)1.-3., and (b)(2)(A)1.-4. filed 6-23-95;
operative 7-23-95 (Register 95, No. 25).
6. Change without
regulatory effect amending subsection (a)(1) filed 7-12-95 pursuant to section
100, title 1, California Code of
Regulations (Register 95, No. 28).
7. Change without regulatory
effect amending subsections (b)(3) and (f) filed 10-21-96 pursuant to Section
100, title 1, California Code of
Regulations (Register 96, No. 43).
8. Amendment filed 11-13-97;
operative 11-13-97 pursuant to Government Code section
11343.4(d)
(Register 97, No. 46).
9. Amendment of section and NOTE filed
12-28-99; operative 2-3-2000 (Register 99, No. 53).
10. Amendment of
subsection (a)(2) filed 2-4-2000 as an emergency; operative 2-4-2000 (Register
2000, No. 5). A Certificate of Compliance must be transmitted to OAL by
6-5-2000 or emergency language will be repealed by operation of law on the
following day.
11. Change without regulatory effect amending
subsections (a)(2)(B) and (a)(5) filed 6-30-2000 pursuant to section
100, title 1, California Code of
Regulations (Register 2000, No. 26).
12. Reinstatement of section as
it existed prior to 2-4-2000 emergency amendment by operation of Government
Code section
11346.1(f)
(Register 2000, No. 31).
13. Amendment of subsection (a)(2)(B), new
subsections (a)(2)(E)-(a)(2)(E)2. and amendment of subsections (a)(4), (a)(5),
(b)(1)(B)1. and (f)(1) filed 9-17-2001; operative 9-17-2001 pursuant to
Government Code section
11343.4
(Register 2001, No. 38).
14. Change without regulatory effect
amending subsections (a)(2)(A)7., (a)(2)(D), (a)(2)(E)1. and (a)(5) and
amending NOTE filed 6-24-2002 pursuant to section
100, title 1, California Code of
Regulations (Register 2002, No. 26).
15. Amendment of NOTE filed
6-26-2003; operative 6-26-2003 (Register 2003, No. 26).
16.
Amendment of subsections (a)(2)(A)7., (a)(2)(B) and (a)(5) filed 4-17-2006;
operative 5-17-2006 (Register 2006, No. 16).
17. Amendment of
subsections (a)(2)(A)8.-9., new subsection (a)(2)(A)10., amendment of
subsections (a)(2)(B), (a)(2)(D)1., (a)(2)(E)1., (a)(5), (a)(8), (c)(1) and
(e)(1) and amendment of NOTE filed 10-9-2008; operative 11-8-2008 (Register
2008, No. 41).
18. Amendment filed 7-14-2011; operative 8-13-2011
(Register 2011, No. 28).
19. Amendment of subsections (a)(3) and
(f)(2) and amendment of NOTE filed 4-3-2012; operative 5-3-2012 (Register 2012,
No. 14).
20. Amendment of subsections (a)(1)(A)10. and
(a)(3)(A)-(B), new subsection (b)(2)(A)4., subsection renumbering and amendment
of subsections (b)(4)(B) and (f)(2) filed 12-16-2014; operative 4-1-2015
(Register 2014, No. 51).
21. Amendment of subsections (a)(1)(B),
(a)(3)(A)-(B), (c)(5), (d)(3) and (e)(6)(A) and amendment of NOTE filed
9-3-2015 as an emergency; operative 9-3-2015. Submitted to OAL for printing
only pursuant to Government Code section
8670.7.5,
which provides that the regulation shall be deemed an emergency, shall be
exempt from describing facts showing the need for immediate action, shall not
be subject to OAL review, and shall remain in effect for twelve months or until
readopted, whichever is earlier (Register 2015, No. 36).
22.
Amendment of subsections (a)(1)(B), (a)(1)(A)-(B), (a)(5), (d)(3) and (e)(6)(A)
and amendment of NOTE refiled 9-1-2016 as an emergency; operative 9-1-2016.
Submitted to OAL for printing only pursuant to Government Code section
8670.7.5,
which provides that the regulation shall be deemed an emergency, shall be
exempt from describing facts showing the need for immediate action, shall not
be subject to OAL review, and shall remain in effect for twelve months or until
readopted, whichever is earlier (Register 2016, No. 36).
23.
Amendment of subsections (a)(1)(B), (a)(1)(A)-(B), (a)(5), (d)(3) and (e)(6)(A)
and amendment of NOTE refiled 8-7-2017 as an emergency; operative 8-7-2017.
Submitted to OAL for printing only pursuant to Government Code section
8670.7.5,
which provides that the regulation shall be deemed an emergency, shall be
exempt from describing facts showing the need for immediate action, shall not
be subject to OAL review, and shall remain in effect for twelve months or until
readopted, whichever is earlier (Register 2017, No. 32).
24.
Amendment of subsections (a)(1)(B), (a)(1)(A)-(B), (a)(5), (d)(3) and (e)(6)(A)
and amendment of NOTE refiled 7-30-2018 as an emergency, including amendment of
subsections (a)(1)(D) and (e); operative 7-30-2018. Submitted to OAL for
printing only pursuant to Government Code section
8670.7.5,
which provides that the regulation shall be deemed an emergency and not subject
to OAL review, and shall remain in effect for twelve months or until readopted,
whichever is earlier (Register 2018, No. 31).
25. Certificate of
Compliance as to 7-30-2018 order, including amendment of section, transmitted
to OAL 10-31-2018 and filed 12-17-2018; amendments effective 1-1-2019 pursuant
to Government Code section
11343.4(b)(3)
(Register 2018, No. 51).
Note: Authority cited: Sections
8670.7.5,
8670.37.53,
8670.37.54
and
8670.37.58,
Government Code. Reference: Sections
8670.37.53
and
8670.37.54,
Government Code.