NASBP Efforts Pay Off with CA "Locality" Requirement Eliminated

Califstatebear.jpgSometimes advocacy efforts take years to pay off, and NASBP, with dogged determination, just achieved another victory—after 11 years of effort! At the behest of frustrated producers, in 2006 NASBP first began a campaign to eliminate the “place in California where executed” requirement for the surety or the attorney-in-fact for the surety, its authorized bond producer, in certain state of California bond forms. The campaign included NASBP letters written to the California Department of Insurance (DOI), the Office of the Attorney General, and the Department of Justice.

The letters highlighted that such a “locality” requirement does not comport with modern business practices and treats licensed nonresident bond producers differently from licensed resident bond producers. Each letter stressed the anti-competitive and protectionist nature of the “locality” requirement, which added cost and delays to the insurance business with no corresponding benefit to consumers. And each letter noted that California had repealed its resident agent countersignature statute years before. While the locality requirement is not the same as the resident agent countersignature requirement, they are both outdated protectionist measures to provide a competitive advantage to resident agents/producers.

For various reasons, including people leaving their specific governmental positions, the issue had not been properly addressed until 2015. In response to NASBP’s campaign, the California Department of Insurance decided to remove the requirement. Last week NASBP was notified by the Deputy Attorney General of California that the DOI’s surety bond forms have been revised to eliminate the locality requirement and the revised bond forms have been filed with the California Secretary of State and the Office of Administrative Law, with an effective date of July 1, 2017.