Home Protection Company
Formation of a Home Protection Company under the Laws of the State of California
The fiscal requirements for a home protection company are set forth in Insurance Code §§ 12750-12752.
At the outset, the applicant should address a letter to the Insurance Commissioner, attention of the Name Approval Unit, at 1901 Harrison Street, 6th Floor, Oakland, California 94612, requesting approval of the name under which the applicant intends to transact its business pursuant to the provisions of Insurance Code Section 881. Said name approval requests for domestic companies in the process of formation must be accompanied by a disclosure of the company's principals. An application may list up to three names, in order of preference, and must be accompanied by a filing fee payable to the California Department of Insurance. See the "Name Approval/Change" fee category on the Schedule of Fees and Charges.
Customarily, the next requirement for organization of a home protection company in California is the drafting of articles of incorporation and filing thereof with the Secretary of State. After the corporation has been formed and duly qualified, it is in position to apply to this Department for a securities permit so that it can raise necessary capitalization to commence its operations. The composition of such application for stock permit usually is a most important procedure in the qualification of the home protection company, for such application and its exhibits set out in considerable detail biographical material of the officers and directors, contemplated plan of operation of the corporation, a projection of anticipated income and disbursements for a substantial period of years, and other essential data.
The admission procedure involving the licensing of a new home protection company is necessarily quite detailed and time consuming. In addition to the procedures enumerated hereinabove, it encompasses detailed actuarial and financial studies and projections indicating the company's anticipated income and disbursements over a period of time; it requires detailed field investigation of the background of each officer, director, and key management personnel of the applicant so as to determine their fitness and capability to engage in the home protection company business; and it includes a detailed description and analysis of the applicant's proposed plan of operation in the State of California.
Other essential legal requirements and provisions applicable to a newly formed home protection company corporation may be found in the latest edition of the California Insurance Code, in Title 10 of the California Code of Regulations, Sections 2570, et seq., and in California Corporations Code Sections 300 and following. Further information about the form and substance of securities permits appears in Title 10 of the California Code of Regulations, Sections 2600, et seq. In addition to the exemplar permit in Section 2613.04, files containing examples of home warranty security permits may be viewed at the Department's Oakland Legal Division office.
A copy of the California Insurance Code may be purchased from West Publishing Company at 1-800-328-9352. A copy of the Title 10, Chapter 5 of the California Code of Regulations May be purchased from Barclays Law Publishers, P.O. Box 3066, South San Francisco, CA 94083, (415) 244-6611.
Instructions and Checklist for Admission of a Home Protection Company
INSTRUCTIONS FOR FILING
If the Applicant is a foreign corporation presently transacting in another state, reference should be made to the seasoning requirements in California Insurance Code Section 716. If the Applicant is to be formed under California law, reference should be made to the form letter on formation included with these instructions. Please note that there is a separate fee for an organizational stock permit in addition to the admission fee. See the "Stock Permits" and "License" fee categories on the Schedule of Fees and Charges.
Application for a license to do a home protection company business in the State of California may be made by paying the fee, filing the papers required, providing the information requested herein and otherwise following these instructions. Aside from the documents, statements, reports, affidavits and other papers which an Applicant itself furnishes, forms needed to be completed, executed and filed are supplied herewith in sufficient numbers so that Applicant may retain one for its records and meet filing requirements by filing the remaining copies. Except as otherwise indicated hereinafter, applications and supporting papers filed should include an original and one copy. Note directions in each paragraph.
Please remember that the California Department of Insurance normally carries a sizeable backlog of applications in process. Applications are reviewed in the order received. An Applicant's waiting time can be minimized if all the necessary filing materials are submitted promptly and are in proper order. Inquiries regarding the status of pending applications divert our analysts from the work itself. Your cooperation and understanding in this regard would be appreciated.
Insurance documents and papers accompanying a formal application for license must be identified numerically in the same sequence shown on the checklist, not only on the document itself, but also in the accompanying letter of transmittal. Please note the filing instructions found in Section 2570.09, Title 10, California Code of Regulations.
Any reference in the documents provided to the Applicant by the Commissioner to "insurer", "insured", "premium" or "policy" shall be interpreted as "home protection company", "home protection contract holder", "home protection contract fee" and "home protection contract" respectively, except in the biographical affidavits.
- NAME APPROVAL. You may, before filing an application for a license, write a letter to the Insurance Commissioner, attention Name Reservation Unit, at 1901 Harrison Street, 6th Floor, Oakland, California 94612 requesting approval of company name pursuant to Insurance Code Sections 881, 881.1, 882 and 882.5. See the "Name Approval/Change" fee category on the Schedule of Fees and Charges. The filing for the approval of each name of marketing representative is $54.00, regardless of the time of filing. We advise procuring home protection company name approval before filing for admission. In the absence of a name conflict or other noncompliance with the Code, names of foreign Applicants are customarily reserved for 120 days from the date of the approval letter, and, if an application for admission is timely filed, until (a) the application is denied or (b) Applicant fails to pursue the same in good faith. A copy of the Commissioner's name reservation and approval letter is automatically mailed to the California Secretary of State, 1230 J Street, Sacramento, CA 95814. Approval, at least informally, should be likewise obtained from the Secretary of State pursuant to California corporations Code § 2106(b) before the application is filed.
- APPLICATION FOR LICENSE. The application should be completed in its entirety, stating "NONE" where appropriate. Payment of the filing fee is a condition prerequisite to filing the application. See the "License" fee category on the Schedule of Fees and Charges. Make check payable to the Insurance Commissioner of the State of California. The filing fee is not refundable in the event the application for any reason does not succeed. Before filing, Applicant should make sure it complies with California minimum capital, investment and seasoning requirements. Acceptance of an application for filing or approval of name is not a representation that Applicant qualifies for admission.
- ARTICLES OF INCORPORATION. At least one copy must bear the original true copy certificate of Applicant's home state official having custody of the original. Articles as amended to date or as currently restated are sufficient. It is unnecessary to include all past amendments if the currently complete articles are filed (Insurance Code § 708).
- BY LAWS. To be certified by Secretary over corporate seal as a true copy of by laws currently in force.
- APPOINTMENT OF AGENT AND ATTORNEY FOR CALIFORNIA AND STIPULATION AS REQUIRED BY LAW FOR FOREIGN APPLICANTS. (Insurance Code §§ 1600-1604). Appointment of an individual with a California address, preferably with an established place of business, who can be readily located and served with notices, legal process and papers is mandatory. Do not appoint the Insurance Commissioner or a corporation. Company's execution must be acknowledged. Date of agent's acceptance must be on or after the appointment/execution date.
- MANAGEMENT, CONSULTANT OR EMPLOYMENT CONTRACTS, if any. To be certified by corporation secretary or assistant secretary over corporate seal to be true copy of same currently in force. This includes a copy or description of any management and cost sharing arrangements between affiliated companies.
- REINSURANCE CONTRACTS, if any, ceding home protection business. File one copy of each certified by corporate secretary or assistant secretary over corporate seal to be a true copy of the contract currently in force.
- A BIOGRAPHICAL/ORGANIZATIONAL AFFIDAVITS. Biographical affidavits may also be required of the principal owners of any holding corporation controlling Applicant. (Insurance Code §§ 717, 718). The terms "insurer", "insurance company", "insurance law", "insurance employers" should be interpreted as references to both the insurance industry and the home protection industry. Information should be supplied as to the affiant's experience relative to both the insurance industry and the home protection industry.
- A STATEMENT OR RETALIATORY CERTIFICATE by Applicant's domiciliary state regulatory officer as to the taxes, fees, deposit requirements and other obligations, prohibitions or restrictions which are imposed by law or by administrative rule or practice upon a California home protection company of the same age and kind as Applicant applying to Applicant's home state for authority to transact a home protection company business as Applicant seeks to do in this State. (Insurance Code § 685).
- FOREIGN APPLICANTS QUALIFY WITH SECRETARY OF STATE, Capitol Building, Sacramento, California 95814, to do an intrastate business in California. This may be done after admission but before company transacts any business in California; write the Secretary of State for the forms to be filed and for instructions and filing fee amount. See California Corporations Code § 2105.
- SEC REGISTRATION. If Applicant has made a filing or registration with the Securities and Exchange Commission in connection with a public offering of its shares since January 1 of the third calendar year preceding the filing of the application herein, attach a copy of Applicant's most recent registration statement, including any supplements and amendments thereto and the (final) prospectus.
- HOLDING COMPANY SYSTEM FORM "B" REGISTRATION STATEMENT. If your company is a member of a holding company system (Insurance Code § 1215(c)), file a completed registration statement Form "B" as part of your application for admission. Form should follow promulgated Form "B" in § 2683.23, Articles 3, Subchapter 5, Chapter 5, Title 10, California Administrative Code and the instructions for completion thereof. If the holding company has filed a Form 10K with SEC, please provide copy of such filing and attach exhibits.
- AUTHORIZATION FOR DISCLOSURE OF FINANCIAL RECORDS. To be completely filled out and signed by Applicant's President or Vice President and filed with the Department. See Insurance Code § 904, Bulletin No. 76-8 and Government Code § 7473.
- FUNCTIONAL STAFFING ORGANIZATION CHART. Provide a functional staffing organization chart showing the name and title of all directors, officers and key managerial personnel.
- INTERLOCKING DIRECTORATES. The name of each director of the Applicant who is a director of any insurer or other home protection company together with the name of all such other insurers or home protection companies.
- CONFLICT OF INTEREST PROCEDURES. Procedures of the Applicant to determine the existence of possible conflicts of interest with each director, officer or key managerial personnel.
- PLAN OF OPERATIONS. Plan of Operation as specified in Title 10, California Code of Regulations Section 2570.06(f).
- FINANCIAL REPORTING REQUIREMENTS. Financial reporting requirements as specified in Title 10, California Code of Regulations Section 2570.06(g).
- ADDITIONAL REQUIREMENTS FOR FOREIGN APPLICANTS. A foreign Applicant shall also file the following exhibits. Latest annual and quarterly statements to date filed with Applicant's home state regulatory official and latest examination report by Applicant's home state regulatory official or substitute filing specified in California Insurance Code Section 12744(e).
- UPDATE. Inform the Department of any significant changes which occur or are discovered during the pendency of the application. Supply revised forms if such a change materially affects the accuracy of the forms filed in support of the application.
NOTICE: Submit an original and duplicate copy of your application and supporting documents. The duplicate filings will facilitate a simultaneous review of the application by the Department's Legal and Financial Analysis Division.