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INSURERS: Rule Making Process

Overview

In accordance with Government Code Section 11340, et seq., the California Department of Insurance (CDI) must comply with the procedures prescribed in the Administrative Procedure Act (the Act). The Act provides the procedures the CDI must undertake in order to adopt regulations. This process is also called the "rulemaking" process. The purpose of the Act is to provide information to the public regarding regulations that are proposed by the CDI. The public is then able to provide written comments on the regulations during the rulemaking process. After the rulemaking process is complete, the regulations go through an adoption process. When the regulations are adopted, they are binding and have the force of law. The CDI can then promulgate the regulations where applied in Title 10.

The Act

The Act defines regulations as "every rule, regulation, order or standard of general application . . . adopted by any state agency to implement, interpret, or make specific the law enforced or administered by it, or to govern its procedure . . .." Government Code Section 11342.600. When the CDI's policies involve only internal management, these policies are exempt from the Act's rulemaking process.

The Procedure

When the CDI proposes regulations, the Act requires that the CDI publish a notice of its proposed regulatory change in the California Regulatory Notice Register at least 45 days prior to the agency's hearing or decision to adopt the change. This includes the adoption of new regulations, an amendment to an existing regulation or the repeal of an existing regulation.

The notice must include the following:

  • A reference to the CDI's legal authority for adopting the regulatory change.
  • An informative digest containing a concise and clear summary of what the regulatory change would do.
  • The deadline for submission of written comments on the agency's proposal.
  • The name and telephone number of an agency contact person who will provide the agency's initial statement of reasons for proposing the change.
  • The exact text of the proposed change.
  • Further information about the proposal and the procedure for its adoption.
  • The notice may also include the date, time, and place of a public hearing to be held by the agency for receipt of oral testimony on the proposed regulatory change.

Public hearings are generally optional; however, an interested member of the public can compel the CDI to hold a public hearing on any proposed regulatory changes by requesting a hearing in writing no later than 15 days prior to the close of the written comment period (Government Code Section 11346.8(a)).

The public may petition the CDI to conduct a rulemaking hearing. Under Government Code Section 11340.6 et seq., any person may file a written petition requesting the adoption of an amendment, or repeal of a regulation. Within 30 days, the CDI must notify the petitioners in writing indicating whether (and why) it has denied the petition, or granting the petition or scheduling a public hearing on the matter.

The Adoption

Following the close of the written comment period, the CDI must formally adopt the proposed regulatory changes and prepare the final "rulemaking file." Although this file contains many pieces of information, the rulemaking file - which is a public document - must contain a final statement of reasons, a summary of each comment made on the proposed regulatory changes, and a response to each comment.

The Office of Administrative Law

The CDI then submits the rulemaking file to the Office of Administrative Law (OAL), which is an independent state agency that is authorized to review agency regulations for compliance with the procedural requirements of the Act and for six specific criteria.

The OAL's compliance criteria are authority, clarity, necessity, consistency, reference and notification. The OAL must approve or disapprove the proposed regulatory changes within thirty working days of submission of the rulemaking file.

If the OAL approves the regulatory changes, it forwards the rulemaking file to the Secretary of State for filing and publication in the California Code of Regulations (CCR). The CCR is the official compilation of all state regulations.

If the OAL disapproves the regulatory changes, it returns the rulemaking file to the CDI with a statement of reasons. The CDI then has 120 days to correct the deficiencies cited by the OAL and resubmit the regulatory file to the OAL.

Emergency Regulations

The CDI may temporarily avoid the Act's rulemaking process by adopting regulations on an emergency basis, but only if the CDI makes a finding that the regulatory changes are, among other things, necessary to address "a situation that calls for immediate action to avoid serious harm to the public peace, health, safety or general welfare." (Government Code Section 11342.545) The OAL must review the emergency regulations within ten days to see the "finding of emergency" and for compliance with the six criteria noted above. (Government Code Section 11346.1(b)). Emergency regulations are effective for only 120 days.

[References: Government Code Section 11340 et seq., Government Code Section 11342.545 and Government Code Section 11346 et seq.]

Last Revised - January 25, 2011

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