1390. Any person who willfully violates any provision of this
chapter or of any rule or order thereunder shall upon conviction be
fined not more than ten thousand dollars ($10,000) or imprisoned in
the state prison, or in a county jail for not more than one year, or
be punished by both such fine and imprisonment, but no person may be
imprisoned for the violation of any rule or order if it is proven
that such person had no knowledge of the rule or order.
1391. (a) (1) The director may issue an order directing a plan,
solicitor firm, or any representative thereof, a solicitor, or any
other person to cease and desist from engaging in any act or practice
in violation of the provisions of this chapter, any rule adopted
pursuant to this chapter, or any order issued by the director
pursuant to this chapter.
(2) If the plan, solicitor firm, or any representative thereof, or
solicitor, or any other person fails to file a written request for a
hearing within 30 days from the date of service of the order, the
order shall be deemed a final order of the director and shall not be
subject to review by any court or agency, notwithstanding subdivision
(b) of Section 1397.
(b) If a timely request for a hearing is made by a licensed plan,
the request shall automatically stay the effect of the order only to
the extent that the order requires the cessation of operation of the
plan or prohibits acceptance of new members by the plan or both.
However, no automatic stay shall be issued if any examination or
inspection of the plan performed by the director discloses, or
reports or documents submitted to the director by the plan on their
face show, that the plan is in violation of any fiscal requirement of
this chapter or in violation of any requirement of Section 1384 or
1385. In the event of an automatic stay, only that portion of the
order requiring cessation of operation or prohibiting enrollment
shall be stayed and all other portions of the order shall remain
effective. If a hearing is held, and a finding is made that the
health or safety of the members and potential members of the plan
might be adversely affected by its continued operation, the stay
shall be terminated. This finding shall be made, if at all, not later
than 30 days after the date of the hearing.
(c) If a timely request for a hearing is made by an unlicensed
plan, the director may stay the effect of the order to the extent
that the order requires the cessation of operation of the plan or
prohibits acceptance of new members by the plan, for that period and
subject to those conditions that the director may require, upon a
determination by the director that the action would be in the public
interest.
1391.5. (a) If, after examination or investigation, the director
has reasonable grounds to believe that irreparable loss and injury to
the plan's enrollee or enrollees occurred or may occur as a result
of any act or practice unless the director acts immediately, the
director may, by written order, addressed to that person, order the
discontinuance of the unsafe or injurious act or practice. The order
shall become effective immediately, but shall not become final except
in accordance with this section.
(b) No order issued pursuant to this section shall become final
except after notice to the affected person of the director's
intention to make the order final and of the reasons for the finding.
The director shall also notify that person that upon receiving a
request for hearing by the plan, the matter shall be set for hearing
to commence with 15 business days after receipt of the request,
unless that person consents to have the hearing commence at a later
date.
(c) If no hearing is requested within 15 days after the mailing or
service of the required notice, and none is ordered by the director,
the order shall become final on the 15th day without a hearing and
shall not be subject to review by any court or agency notwithstanding
subdivision (b) of Section 1397.
(d) If a hearing is requested or ordered, it shall be held in
accordance with the provisions of the Administrative Procedure Act
(Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of
Title 2 of the Government Code), and the director shall have all of
the powers granted under that act.
(e) If, upon conclusion of the hearing, it appears to the director
that the affected person has conducted business in an unsafe or
injurious manner, the director shall make the order of discontinuance
final.
(f) For purposes of this section, "person" includes any plan,
solicitor firm, or any representative thereof, a solicitor, or any
other person defined in subdivision (j) of Section 1345.
1392. (a) (1) Whenever it appears to the director that any person
has engaged, or is about to engage, in any act or practice
constituting a violation of any provision of this chapter, any rule
adopted pursuant to this chapter, or any order issued pursuant to
this chapter, the director may bring an action in superior court, or
the director may request the Attorney General to bring an action to
enjoin these acts or practices or to enforce compliance with this
chapter, any rule or regulation adopted by the director pursuant to
this chapter, or any order issued by the director pursuant to this
chapter, or to obtain any other equitable relief.
(2) If the director determines that it is in the public interest,
the director may include in any action authorized by paragraph (1) a
claim for any ancillary or equitable relief and the court shall have
jurisdiction to award this additional relief.
(3) Upon a proper showing, a permanent or preliminary injunction,
restraining order, writ of mandate, or other relief shall be granted,
and a receiver, monitor, conservator, or other designated fiduciary
or officer of the court may be appointed for the defendant or the
defendant's assets.
(b) A receiver, monitor, conservator, or other designated
fiduciary, or officer of the court appointed by the superior court
pursuant to this section may, with the approval of the court,
exercise any or all of the powers of the defendant's officers,
directors, partners, or trustees, or any other person who exercises
similar powers and performs similar duties, including the filing of a
petition for bankruptcy. No action at law or in equity may be
maintained by any party against the director, or a receiver, monitor,
conservator, or other designated fiduciary or officer of the court
by reason of their exercising these powers or performing these duties
pursuant to the order of, or with the approval of, the superior
court.
1393. (a) The superior court of the county in which is located the
principal office of the plan in this state shall, upon the filing by
the director of a verified application showing any of the conditions
enumerated in Section 1386 to exist, issue its order vesting title to
all of the assets of the plan, wherever situated, in the director or
the director's successor in office, in his or her official capacity
as such, and direct the director to take possession of all of its
books, records, property, real and personal, and assets, and to
conduct, as conservator, the business or portion of the business of
the person as may seem appropriate to the director, and enjoining the
person and its officers, directors, agents, servants, and employees
from the transaction of its business or disposition of its property
until the further order of the court.
(b) Whenever it appears to the director that irreparable loss and
injury to the property and business of the plan or to the plan's
enrollees has occurred or may occur unless the director acts
immediately, the director, without notice and before applying to the
court for any order, may take possession of the property, business,
books, records, and accounts of the plan, and of the offices and
premises occupied by it for the transaction of its business, and
retain possession until returned to the plan or until further order
of the director or subject to an order of the court. Any person
having possession of and refusing to deliver any of the books,
records, or assets of a plan against which a seizure order has been
issued by the director, shall be guilty of a misdemeanor and
punishable by a fine not exceeding ten thousand dollars ($10,000) or
imprisonment not exceeding one year, or both the fine and
imprisonment. Whenever the director has taken possession of any plan
pursuant to this subdivision, the owners, officers, and directors of
the plan may apply to the superior court in the county in which the
principal office of the plan is located, within 10 days after the
taking, to enjoin further proceedings. The court, after citing the
director to show cause why further proceedings should not be
enjoined, and after a hearing and a determination of the facts upon
the merits, may do any of the following:
(1) Dismiss the application after confirming the director's
authority to take possession of all of the plan's books, records,
property, real and personal, and assets, and to conduct, as
conservator, the business or portion of the business as the director
may deem appropriate, and enjoining the owners, officers, and
directors, and their agents and employees, from the transaction of
plan business or disposition of plan property until the further order
of the court.
(2) Enjoin the director from further proceedings and direct the
director to surrender the property and business to the plan.
(3) Make any further order as may be just.
(c) If any facts occur that would entitle the director to take
possession of the property, business, and assets of the plan, the
director may appoint a conservator over the plan and require any bond
of the conservator as the director deems proper. The conservator,
under the direction of the director, shall take possession of the
property, business, and assets of the plan pending further
disposition of its business. The conservator shall retain possession
until the property, business, and assets of the plan are returned to
the plan, or until further order of the director, except that the
conservator shall be able to pay necessary costs of the ongoing
operation without formal order of the director. Whenever the director
has taken possession of any plan pursuant to subdivision (b), the
director shall, within 10 days after the taking, apply to the
superior court in the county in which the principal office of the
plan is located for an order confirming the director's appointment of
the conservator. The order may be given after a hearing upon notice
that the court prescribes.
(d) (1) Subject to the other provisions of this section, a
conservator, while in possession of the property, business, and
assets of a plan, has the same powers and rights, and is subject to
the same duties and obligations, as the director under the same
circumstances, and during this time, the rights of a plan and of all
persons with respect to the plan are the same as if the director had
taken possession of the property, business, and assets of the plan,
for the purpose of carrying out the conservatorship.
(2) Subject to the other provisions of this section, a
conservator, while in possession of the property, business, and
assets of a plan, shall have all of the rights, powers, and
privileges of the plan, and its officers and directors, for the
purpose of carrying out the conservatorship. All expenses of any
conservatorship shall be paid from the assets of the plan, and shall
be a lien on the plan which shall be prior to any other lien.
(3) No action at law or in equity may be maintained by any party
against the director or a conservator by reason of their exercising
or performing the privileges, powers, rights, duties, and obligations
pursuant to the order, or with the approval, of the superior court.
(e) Upon appointing a conservator, the director shall cause to be
made and completed, at the earliest possible date, an examination of
the affairs of the plan as shall be necessary to inform the director
as to the plan's financial condition.
(f) If the director becomes satisfied that it may be done safely
and in the public interest, the director may terminate the
conservatorship and permit the plan for which the conservator was
appointed to resume its business under the direction of its board of
directors, subject to any terms, conditions, restrictions, and
limitations the director prescribes.
1393.5. (a) A person who violates Section 1349, or any person who
directly or indirectly participates in the direction of the
management or policies of the person in violation of Section 1349,
including, but not limited to, any officer, director, partner, or
other person occupying a principal management or supervisory
position, shall be liable for civil penalties as follows:
(1) A sum not more than two thousand five hundred dollars
($2,500), and (2) a sum not exceeding five hundred dollars ($500) for
each subscriber under an individual or group plan contract which was
entered into or renewed while such person was in violation of
Section 1349.
(b) The penalty specified in paragraph (2) of subdivision (a)
shall be imposed only if one or more of the following occurs:
(1) The solicitation of the entry into or renewal of such
contract, or of any subscription or enrollment thereunder, included
the use by the plan or a representative of the plan of any
advertising, evidence of coverage, or disclosure form which was
untrue, misleading, or deceptive.
(2) The contract is not in compliance with this chapter, or the
rules adopted pursuant to this chapter.
(3) The plan does not have a financially sound operation and
adequate provision against the risk of insolvency.
(4) The plan has operated in violation of the provisions of
subdivision (a), (b), (c), (d), or (e) of Section 1367.
(5) The plan has not complied with the provisions of Section 1379.
(c) The civil penalty may be assessed and recovered only in a
civil action. The cause of action may be brought in the name of the
people of the State of California by the Attorney General or the
director, as determined by the director.
1393.6. For violations of Article 3.1 (commencing with Section
1357) and Article 3.15 (commencing with Section 1357.50), the
director may, after appropriate notice and opportunity for hearing,
by order levy administrative penalties as follows:
(a) Any person, solicitor, or solicitor firm, other than a health
care service plan, who willfully violates any provision of this
chapter, or who willfully violates any rule or order adopted or
issued pursuant to this chapter, is liable for administrative
penalties of not less than two hundred fifty dollars ($250) for each
first violation, and of not less than one thousand dollars ($1,000)
and not more than two thousand five hundred dollars ($2,500) for each
subsequent violation.
(b) Any health care service plan that willfully violates any
provision of this chapter, or that willfully violates any rule or
order adopted or issued pursuant to this chapter, is liable for
administrative penalties of not less than two thousand five hundred
dollars ($2,500) for each first violation, and of not less than five
thousand dollars ($5,000) nor more than ten thousand dollars
($10,000) for each second violation, and of not less than fifteen
thousand dollars ($15,000) and not more than one hundred thousand
dollars ($100,000) for each subsequent violation.
(c) The administrative penalties shall be paid to the Managed Care
Administrative Fines and Penalties Fund and shall be used for the
purposes specified in Section 1341.45.
(d) The administrative penalties available to the director
pursuant to this section are not exclusive, and may be sought and
employed in any combination with civil, criminal, and other
administrative remedies deemed advisable by the director to enforce
the provisions of this chapter.
1394. The civil, criminal, and administrative remedies available to
the director pursuant to this article are not exclusive, and may be
sought and employed in any combination deemed advisable by the
director to enforce the provisions of this chapter.
1394.1. Notwithstanding any other provision of law, the director
may file a verified complaint for involuntary dissolution of a health
care service plan on any one or more of the grounds specified in
subdivision (b) of Section 1386. The complaint shall be filed in the
superior court of the county where the principal executive office of
the health care service plan is located or, if the principal
executive office of the health care service plan is not located in
this state, or the health care service plan has no such office, the
County of Sacramento.
1394.2. Notwithstanding any other provision of law, in any
involuntary dissolution of a health care service plan as provided for
in Section 1394.1, or other insolvency proceeding involving a health
care service plan, the following expenses and claims have priority
in the following order:
(a) First, administrative expenses allowed by the superior court
and any fees and charges assessed against the estate of the dissolved
health care service plan in conjunction with the dissolution of the
estate.
(b) Second, taxes due the State of California.
(c) Third, claims having preference by the laws of the United
States and by the laws of this state.
(d) Fourth, claims of health care service plan subscribers and
enrollees for reimbursement for services rendered by noncontracting
providers. Upon proper showing, the superior court may make an order
relieving subscribers and enrollees from liability or stay any
proceeding to secure payment for any services rendered by a
noncontracting provider upon payment, in whole or in part, of the
claim or claims of those noncontracting providers.
(e) Fifth, claims of health care service plan group contract
holders for reimbursement for services rendered by noncontracting
providers to subscribers and enrollees under the group contract.
(f) Sixth, any and all claims, including all officers' and
directors' claims for indemnity, arising against the estate of the
dissolved health care service plan.
1394.3. Except as provided for in Section 1394.1, and 1394.2, the
involuntary dissolution of a health care service plan shall be in
accordance with either of the following:
(a) Chapter 18 (commencing with Section 1800) of Division 1 of
Title 1 of the Corporations Code, if the plan is incorporated under
the General Corporation Law.
(b) Chapter 15 (commencing with Section 8510) of Part 3 of
Division 2 of Title 1 of the Corporations Code if the plan is
incorporated under the Nonprofit Corporation Law.
1390. Any person who willfully violates any provision of this
chapter or of any rule or order thereunder shall upon conviction be
fined not more than ten thousand dollars ($10,000) or imprisoned in
the state prison, or in a county jail for not more than one year, or
be punished by both such fine and imprisonment, but no person may be
imprisoned for the violation of any rule or order if it is proven
that such person had no knowledge of the rule or order.
1391. (a) (1) The director may issue an order directing a plan,
solicitor firm, or any representative thereof, a solicitor, or any
other person to cease and desist from engaging in any act or practice
in violation of the provisions of this chapter, any rule adopted
pursuant to this chapter, or any order issued by the director
pursuant to this chapter.
(2) If the plan, solicitor firm, or any representative thereof, or
solicitor, or any other person fails to file a written request for a
hearing within 30 days from the date of service of the order, the
order shall be deemed a final order of the director and shall not be
subject to review by any court or agency, notwithstanding subdivision
(b) of Section 1397.
(b) If a timely request for a hearing is made by a licensed plan,
the request shall automatically stay the effect of the order only to
the extent that the order requires the cessation of operation of the
plan or prohibits acceptance of new members by the plan or both.
However, no automatic stay shall be issued if any examination or
inspection of the plan performed by the director discloses, or
reports or documents submitted to the director by the plan on their
face show, that the plan is in violation of any fiscal requirement of
this chapter or in violation of any requirement of Section 1384 or
1385. In the event of an automatic stay, only that portion of the
order requiring cessation of operation or prohibiting enrollment
shall be stayed and all other portions of the order shall remain
effective. If a hearing is held, and a finding is made that the
health or safety of the members and potential members of the plan
might be adversely affected by its continued operation, the stay
shall be terminated. This finding shall be made, if at all, not later
than 30 days after the date of the hearing.
(c) If a timely request for a hearing is made by an unlicensed
plan, the director may stay the effect of the order to the extent
that the order requires the cessation of operation of the plan or
prohibits acceptance of new members by the plan, for that period and
subject to those conditions that the director may require, upon a
determination by the director that the action would be in the public
interest.
1391.5. (a) If, after examination or investigation, the director
has reasonable grounds to believe that irreparable loss and injury to
the plan's enrollee or enrollees occurred or may occur as a result
of any act or practice unless the director acts immediately, the
director may, by written order, addressed to that person, order the
discontinuance of the unsafe or injurious act or practice. The order
shall become effective immediately, but shall not become final except
in accordance with this section.
(b) No order issued pursuant to this section shall become final
except after notice to the affected person of the director's
intention to make the order final and of the reasons for the finding.
The director shall also notify that person that upon receiving a
request for hearing by the plan, the matter shall be set for hearing
to commence with 15 business days after receipt of the request,
unless that person consents to have the hearing commence at a later
date.
(c) If no hearing is requested within 15 days after the mailing or
service of the required notice, and none is ordered by the director,
the order shall become final on the 15th day without a hearing and
shall not be subject to review by any court or agency notwithstanding
subdivision (b) of Section 1397.
(d) If a hearing is requested or ordered, it shall be held in
accordance with the provisions of the Administrative Procedure Act
(Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of
Title 2 of the Government Code), and the director shall have all of
the powers granted under that act.
(e) If, upon conclusion of the hearing, it appears to the director
that the affected person has conducted business in an unsafe or
injurious manner, the director shall make the order of discontinuance
final.
(f) For purposes of this section, "person" includes any plan,
solicitor firm, or any representative thereof, a solicitor, or any
other person defined in subdivision (j) of Section 1345.
1392. (a) (1) Whenever it appears to the director that any person
has engaged, or is about to engage, in any act or practice
constituting a violation of any provision of this chapter, any rule
adopted pursuant to this chapter, or any order issued pursuant to
this chapter, the director may bring an action in superior court, or
the director may request the Attorney General to bring an action to
enjoin these acts or practices or to enforce compliance with this
chapter, any rule or regulation adopted by the director pursuant to
this chapter, or any order issued by the director pursuant to this
chapter, or to obtain any other equitable relief.
(2) If the director determines that it is in the public interest,
the director may include in any action authorized by paragraph (1) a
claim for any ancillary or equitable relief and the court shall have
jurisdiction to award this additional relief.
(3) Upon a proper showing, a permanent or preliminary injunction,
restraining order, writ of mandate, or other relief shall be granted,
and a receiver, monitor, conservator, or other designated fiduciary
or officer of the court may be appointed for the defendant or the
defendant's assets.
(b) A receiver, monitor, conservator, or other designated
fiduciary, or officer of the court appointed by the superior court
pursuant to this section may, with the approval of the court,
exercise any or all of the powers of the defendant's officers,
directors, partners, or trustees, or any other person who exercises
similar powers and performs similar duties, including the filing of a
petition for bankruptcy. No action at law or in equity may be
maintained by any party against the director, or a receiver, monitor,
conservator, or other designated fiduciary or officer of the court
by reason of their exercising these powers or performing these duties
pursuant to the order of, or with the approval of, the superior
court.
1393. (a) The superior court of the county in which is located the
principal office of the plan in this state shall, upon the filing by
the director of a verified application showing any of the conditions
enumerated in Section 1386 to exist, issue its order vesting title to
all of the assets of the plan, wherever situated, in the director or
the director's successor in office, in his or her official capacity
as such, and direct the director to take possession of all of its
books, records, property, real and personal, and assets, and to
conduct, as conservator, the business or portion of the business of
the person as may seem appropriate to the director, and enjoining the
person and its officers, directors, agents, servants, and employees
from the transaction of its business or disposition of its property
until the further order of the court.
(b) Whenever it appears to the director that irreparable loss and
injury to the property and business of the plan or to the plan's
enrollees has occurred or may occur unless the director acts
immediately, the director, without notice and before applying to the
court for any order, may take possession of the property, business,
books, records, and accounts of the plan, and of the offices and
premises occupied by it for the transaction of its business, and
retain possession until returned to the plan or until further order
of the director or subject to an order of the court. Any person
having possession of and refusing to deliver any of the books,
records, or assets of a plan against which a seizure order has been
issued by the director, shall be guilty of a misdemeanor and
punishable by a fine not exceeding ten thousand dollars ($10,000) or
imprisonment not exceeding one year, or both the fine and
imprisonment. Whenever the director has taken possession of any plan
pursuant to this subdivision, the owners, officers, and directors of
the plan may apply to the superior court in the county in which the
principal office of the plan is located, within 10 days after the
taking, to enjoin further proceedings. The court, after citing the
director to show cause why further proceedings should not be
enjoined, and after a hearing and a determination of the facts upon
the merits, may do any of the following:
(1) Dismiss the application after confirming the director's
authority to take possession of all of the plan's books, records,
property, real and personal, and assets, and to conduct, as
conservator, the business or portion of the business as the director
may deem appropriate, and enjoining the owners, officers, and
directors, and their agents and employees, from the transaction of
plan business or disposition of plan property until the further order
of the court.
(2) Enjoin the director from further proceedings and direct the
director to surrender the property and business to the plan.
(3) Make any further order as may be just.
(c) If any facts occur that would entitle the director to take
possession of the property, business, and assets of the plan, the
director may appoint a conservator over the plan and require any bond
of the conservator as the director deems proper. The conservator,
under the direction of the director, shall take possession of the
property, business, and assets of the plan pending further
disposition of its business. The conservator shall retain possession
until the property, business, and assets of the plan are returned to
the plan, or until further order of the director, except that the
conservator shall be able to pay necessary costs of the ongoing
operation without formal order of the director. Whenever the director
has taken possession of any plan pursuant to subdivision (b), the
director shall, within 10 days after the taking, apply to the
superior court in the county in which the principal office of the
plan is located for an order confirming the director's appointment of
the conservator. The order may be given after a hearing upon notice
that the court prescribes.
(d) (1) Subject to the other provisions of this section, a
conservator, while in possession of the property, business, and
assets of a plan, has the same powers and rights, and is subject to
the same duties and obligations, as the director under the same
circumstances, and during this time, the rights of a plan and of all
persons with respect to the plan are the same as if the director had
taken possession of the property, business, and assets of the plan,
for the purpose of carrying out the conservatorship.
(2) Subject to the other provisions of this section, a
conservator, while in possession of the property, business, and
assets of a plan, shall have all of the rights, powers, and
privileges of the plan, and its officers and directors, for the
purpose of carrying out the conservatorship. All expenses of any
conservatorship shall be paid from the assets of the plan, and shall
be a lien on the plan which shall be prior to any other lien.
(3) No action at law or in equity may be maintained by any party
against the director or a conservator by reason of their exercising
or performing the privileges, powers, rights, duties, and obligations
pursuant to the order, or with the approval, of the superior court.
(e) Upon appointing a conservator, the director shall cause to be
made and completed, at the earliest possible date, an examination of
the affairs of the plan as shall be necessary to inform the director
as to the plan's financial condition.
(f) If the director becomes satisfied that it may be done safely
and in the public interest, the director may terminate the
conservatorship and permit the plan for which the conservator was
appointed to resume its business under the direction of its board of
directors, subject to any terms, conditions, restrictions, and
limitations the director prescribes.
1393.5. (a) A person who violates Section 1349, or any person who
directly or indirectly participates in the direction of the
management or policies of the person in violation of Section 1349,
including, but not limited to, any officer, director, partner, or
other person occupying a principal management or supervisory
position, shall be liable for civil penalties as follows:
(1) A sum not more than two thousand five hundred dollars
($2,500), and (2) a sum not exceeding five hundred dollars ($500) for
each subscriber under an individual or group plan contract which was
entered into or renewed while such person was in violation of
Section 1349.
(b) The penalty specified in paragraph (2) of subdivision (a)
shall be imposed only if one or more of the following occurs:
(1) The solicitation of the entry into or renewal of such
contract, or of any subscription or enrollment thereunder, included
the use by the plan or a representative of the plan of any
advertising, evidence of coverage, or disclosure form which was
untrue, misleading, or deceptive.
(2) The contract is not in compliance with this chapter, or the
rules adopted pursuant to this chapter.
(3) The plan does not have a financially sound operation and
adequate provision against the risk of insolvency.
(4) The plan has operated in violation of the provisions of
subdivision (a), (b), (c), (d), or (e) of Section 1367.
(5) The plan has not complied with the provisions of Section 1379.
(c) The civil penalty may be assessed and recovered only in a
civil action. The cause of action may be brought in the name of the
people of the State of California by the Attorney General or the
director, as determined by the director.
1393.6. For violations of Article 3.1 (commencing with Section
1357) and Article 3.15 (commencing with Section 1357.50), the
director may, after appropriate notice and opportunity for hearing,
by order levy administrative penalties as follows:
(a) Any person, solicitor, or solicitor firm, other than a health
care service plan, who willfully violates any provision of this
chapter, or who willfully violates any rule or order adopted or
issued pursuant to this chapter, is liable for administrative
penalties of not less than two hundred fifty dollars ($250) for each
first violation, and of not less than one thousand dollars ($1,000)
and not more than two thousand five hundred dollars ($2,500) for each
subsequent violation.
(b) Any health care service plan that willfully violates any
provision of this chapter, or that willfully violates any rule or
order adopted or issued pursuant to this chapter, is liable for
administrative penalties of not less than two thousand five hundred
dollars ($2,500) for each first violation, and of not less than five
thousand dollars ($5,000) nor more than ten thousand dollars
($10,000) for each second violation, and of not less than fifteen
thousand dollars ($15,000) and not more than one hundred thousand
dollars ($100,000) for each subsequent violation.
(c) The administrative penalties shall be paid to the Managed Care
Administrative Fines and Penalties Fund and shall be used for the
purposes specified in Section 1341.45.
(d) The administrative penalties available to the director
pursuant to this section are not exclusive, and may be sought and
employed in any combination with civil, criminal, and other
administrative remedies deemed advisable by the director to enforce
the provisions of this chapter.
1394. The civil, criminal, and administrative remedies available to
the director pursuant to this article are not exclusive, and may be
sought and employed in any combination deemed advisable by the
director to enforce the provisions of this chapter.
1394.1. Notwithstanding any other provision of law, the director
may file a verified complaint for involuntary dissolution of a health
care service plan on any one or more of the grounds specified in
subdivision (b) of Section 1386. The complaint shall be filed in the
superior court of the county where the principal executive office of
the health care service plan is located or, if the principal
executive office of the health care service plan is not located in
this state, or the health care service plan has no such office, the
County of Sacramento.
1394.2. Notwithstanding any other provision of law, in any
involuntary dissolution of a health care service plan as provided for
in Section 1394.1, or other insolvency proceeding involving a health
care service plan, the following expenses and claims have priority
in the following order:
(a) First, administrative expenses allowed by the superior court
and any fees and charges assessed against the estate of the dissolved
health care service plan in conjunction with the dissolution of the
estate.
(b) Second, taxes due the State of California.
(c) Third, claims having preference by the laws of the United
States and by the laws of this state.
(d) Fourth, claims of health care service plan subscribers and
enrollees for reimbursement for services rendered by noncontracting
providers. Upon proper showing, the superior court may make an order
relieving subscribers and enrollees from liability or stay any
proceeding to secure payment for any services rendered by a
noncontracting provider upon payment, in whole or in part, of the
claim or claims of those noncontracting providers.
(e) Fifth, claims of health care service plan group contract
holders for reimbursement for services rendered by noncontracting
providers to subscribers and enrollees under the group contract.
(f) Sixth, any and all claims, including all officers' and
directors' claims for indemnity, arising against the estate of the
dissolved health care service plan.
1394.3. Except as provided for in Section 1394.1, and 1394.2, the
involuntary dissolution of a health care service plan shall be in
accordance with either of the following:
(a) Chapter 18 (commencing with Section 1800) of Division 1 of
Title 1 of the Corporations Code, if the plan is incorporated under
the General Corporation Law.
(b) Chapter 15 (commencing with Section 8510) of Part 3 of
Division 2 of Title 1 of the Corporations Code if the plan is
incorporated under the Nonprofit Corporation Law.
1390. Any person who willfully violates any provision of this
chapter or of any rule or order thereunder shall upon conviction be
fined not more than ten thousand dollars ($10,000) or imprisoned in
the state prison, or in a county jail for not more than one year, or
be punished by both such fine and imprisonment, but no person may be
imprisoned for the violation of any rule or order if it is proven
that such person had no knowledge of the rule or order.
1391. (a) (1) The director may issue an order directing a plan,
solicitor firm, or any representative thereof, a solicitor, or any
other person to cease and desist from engaging in any act or practice
in violation of the provisions of this chapter, any rule adopted
pursuant to this chapter, or any order issued by the director
pursuant to this chapter.
(2) If the plan, solicitor firm, or any representative thereof, or
solicitor, or any other person fails to file a written request for a
hearing within 30 days from the date of service of the order, the
order shall be deemed a final order of the director and shall not be
subject to review by any court or agency, notwithstanding subdivision
(b) of Section 1397.
(b) If a timely request for a hearing is made by a licensed plan,
the request shall automatically stay the effect of the order only to
the extent that the order requires the cessation of operation of the
plan or prohibits acceptance of new members by the plan or both.
However, no automatic stay shall be issued if any examination or
inspection of the plan performed by the director discloses, or
reports or documents submitted to the director by the plan on their
face show, that the plan is in violation of any fiscal requirement of
this chapter or in violation of any requirement of Section 1384 or
1385. In the event of an automatic stay, only that portion of the
order requiring cessation of operation or prohibiting enrollment
shall be stayed and all other portions of the order shall remain
effective. If a hearing is held, and a finding is made that the
health or safety of the members and potential members of the plan
might be adversely affected by its continued operation, the stay
shall be terminated. This finding shall be made, if at all, not later
than 30 days after the date of the hearing.
(c) If a timely request for a hearing is made by an unlicensed
plan, the director may stay the effect of the order to the extent
that the order requires the cessation of operation of the plan or
prohibits acceptance of new members by the plan, for that period and
subject to those conditions that the director may require, upon a
determination by the director that the action would be in the public
interest.
1391.5. (a) If, after examination or investigation, the director
has reasonable grounds to believe that irreparable loss and injury to
the plan's enrollee or enrollees occurred or may occur as a result
of any act or practice unless the director acts immediately, the
director may, by written order, addressed to that person, order the
discontinuance of the unsafe or injurious act or practice. The order
shall become effective immediately, but shall not become final except
in accordance with this section.
(b) No order issued pursuant to this section shall become final
except after notice to the affected person of the director's
intention to make the order final and of the reasons for the finding.
The director shall also notify that person that upon receiving a
request for hearing by the plan, the matter shall be set for hearing
to commence with 15 business days after receipt of the request,
unless that person consents to have the hearing commence at a later
date.
(c) If no hearing is requested within 15 days after the mailing or
service of the required notice, and none is ordered by the director,
the order shall become final on the 15th day without a hearing and
shall not be subject to review by any court or agency notwithstanding
subdivision (b) of Section 1397.
(d) If a hearing is requested or ordered, it shall be held in
accordance with the provisions of the Administrative Procedure Act
(Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of
Title 2 of the Government Code), and the director shall have all of
the powers granted under that act.
(e) If, upon conclusion of the hearing, it appears to the director
that the affected person has conducted business in an unsafe or
injurious manner, the director shall make the order of discontinuance
final.
(f) For purposes of this section, "person" includes any plan,
solicitor firm, or any representative thereof, a solicitor, or any
other person defined in subdivision (j) of Section 1345.
1392. (a) (1) Whenever it appears to the director that any person
has engaged, or is about to engage, in any act or practice
constituting a violation of any provision of this chapter, any rule
adopted pursuant to this chapter, or any order issued pursuant to
this chapter, the director may bring an action in superior court, or
the director may request the Attorney General to bring an action to
enjoin these acts or practices or to enforce compliance with this
chapter, any rule or regulation adopted by the director pursuant to
this chapter, or any order issued by the director pursuant to this
chapter, or to obtain any other equitable relief.
(2) If the director determines that it is in the public interest,
the director may include in any action authorized by paragraph (1) a
claim for any ancillary or equitable relief and the court shall have
jurisdiction to award this additional relief.
(3) Upon a proper showing, a permanent or preliminary injunction,
restraining order, writ of mandate, or other relief shall be granted,
and a receiver, monitor, conservator, or other designated fiduciary
or officer of the court may be appointed for the defendant or the
defendant's assets.
(b) A receiver, monitor, conservator, or other designated
fiduciary, or officer of the court appointed by the superior court
pursuant to this section may, with the approval of the court,
exercise any or all of the powers of the defendant's officers,
directors, partners, or trustees, or any other person who exercises
similar powers and performs similar duties, including the filing of a
petition for bankruptcy. No action at law or in equity may be
maintained by any party against the director, or a receiver, monitor,
conservator, or other designated fiduciary or officer of the court
by reason of their exercising these powers or performing these duties
pursuant to the order of, or with the approval of, the superior
court.
1393. (a) The superior court of the county in which is located the
principal office of the plan in this state shall, upon the filing by
the director of a verified application showing any of the conditions
enumerated in Section 1386 to exist, issue its order vesting title to
all of the assets of the plan, wherever situated, in the director or
the director's successor in office, in his or her official capacity
as such, and direct the director to take possession of all of its
books, records, property, real and personal, and assets, and to
conduct, as conservator, the business or portion of the business of
the person as may seem appropriate to the director, and enjoining the
person and its officers, directors, agents, servants, and employees
from the transaction of its business or disposition of its property
until the further order of the court.
(b) Whenever it appears to the director that irreparable loss and
injury to the property and business of the plan or to the plan's
enrollees has occurred or may occur unless the director acts
immediately, the director, without notice and before applying to the
court for any order, may take possession of the property, business,
books, records, and accounts of the plan, and of the offices and
premises occupied by it for the transaction of its business, and
retain possession until returned to the plan or until further order
of the director or subject to an order of the court. Any person
having possession of and refusing to deliver any of the books,
records, or assets of a plan against which a seizure order has been
issued by the director, shall be guilty of a misdemeanor and
punishable by a fine not exceeding ten thousand dollars ($10,000) or
imprisonment not exceeding one year, or both the fine and
imprisonment. Whenever the director has taken possession of any plan
pursuant to this subdivision, the owners, officers, and directors of
the plan may apply to the superior court in the county in which the
principal office of the plan is located, within 10 days after the
taking, to enjoin further proceedings. The court, after citing the
director to show cause why further proceedings should not be
enjoined, and after a hearing and a determination of the facts upon
the merits, may do any of the following:
(1) Dismiss the application after confirming the director's
authority to take possession of all of the plan's books, records,
property, real and personal, and assets, and to conduct, as
conservator, the business or portion of the business as the director
may deem appropriate, and enjoining the owners, officers, and
directors, and their agents and employees, from the transaction of
plan business or disposition of plan property until the further order
of the court.
(2) Enjoin the director from further proceedings and direct the
director to surrender the property and business to the plan.
(3) Make any further order as may be just.
(c) If any facts occur that would entitle the director to take
possession of the property, business, and assets of the plan, the
director may appoint a conservator over the plan and require any bond
of the conservator as the director deems proper. The conservator,
under the direction of the director, shall take possession of the
property, business, and assets of the plan pending further
disposition of its business. The conservator shall retain possession
until the property, business, and assets of the plan are returned to
the plan, or until further order of the director, except that the
conservator shall be able to pay necessary costs of the ongoing
operation without formal order of the director. Whenever the director
has taken possession of any plan pursuant to subdivision (b), the
director shall, within 10 days after the taking, apply to the
superior court in the county in which the principal office of the
plan is located for an order confirming the director's appointment of
the conservator. The order may be given after a hearing upon notice
that the court prescribes.
(d) (1) Subject to the other provisions of this section, a
conservator, while in possession of the property, business, and
assets of a plan, has the same powers and rights, and is subject to
the same duties and obligations, as the director under the same
circumstances, and during this time, the rights of a plan and of all
persons with respect to the plan are the same as if the director had
taken possession of the property, business, and assets of the plan,
for the purpose of carrying out the conservatorship.
(2) Subject to the other provisions of this section, a
conservator, while in possession of the property, business, and
assets of a plan, shall have all of the rights, powers, and
privileges of the plan, and its officers and directors, for the
purpose of carrying out the conservatorship. All expenses of any
conservatorship shall be paid from the assets of the plan, and shall
be a lien on the plan which shall be prior to any other lien.
(3) No action at law or in equity may be maintained by any party
against the director or a conservator by reason of their exercising
or performing the privileges, powers, rights, duties, and obligations
pursuant to the order, or with the approval, of the superior court.
(e) Upon appointing a conservator, the director shall cause to be
made and completed, at the earliest possible date, an examination of
the affairs of the plan as shall be necessary to inform the director
as to the plan's financial condition.
(f) If the director becomes satisfied that it may be done safely
and in the public interest, the director may terminate the
conservatorship and permit the plan for which the conservator was
appointed to resume its business under the direction of its board of
directors, subject to any terms, conditions, restrictions, and
limitations the director prescribes.
1393.5. (a) A person who violates Section 1349, or any person who
directly or indirectly participates in the direction of the
management or policies of the person in violation of Section 1349,
including, but not limited to, any officer, director, partner, or
other person occupying a principal management or supervisory
position, shall be liable for civil penalties as follows:
(1) A sum not more than two thousand five hundred dollars
($2,500), and (2) a sum not exceeding five hundred dollars ($500) for
each subscriber under an individual or group plan contract which was
entered into or renewed while such person was in violation of
Section 1349.
(b) The penalty specified in paragraph (2) of subdivision (a)
shall be imposed only if one or more of the following occurs:
(1) The solicitation of the entry into or renewal of such
contract, or of any subscription or enrollment thereunder, included
the use by the plan or a representative of the plan of any
advertising, evidence of coverage, or disclosure form which was
untrue, misleading, or deceptive.
(2) The contract is not in compliance with this chapter, or the
rules adopted pursuant to this chapter.
(3) The plan does not have a financially sound operation and
adequate provision against the risk of insolvency.
(4) The plan has operated in violation of the provisions of
subdivision (a), (b), (c), (d), or (e) of Section 1367.
(5) The plan has not complied with the provisions of Section 1379.
(c) The civil penalty may be assessed and recovered only in a
civil action. The cause of action may be brought in the name of the
people of the State of California by the Attorney General or the
director, as determined by the director.
1393.6. For violations of Article 3.1 (commencing with Section
1357) and Article 3.15 (commencing with Section 1357.50), the
director may, after appropriate notice and opportunity for hearing,
by order levy administrative penalties as follows:
(a) Any person, solicitor, or solicitor firm, other than a health
care service plan, who willfully violates any provision of this
chapter, or who willfully violates any rule or order adopted or
issued pursuant to this chapter, is liable for administrative
penalties of not less than two hundred fifty dollars ($250) for each
first violation, and of not less than one thousand dollars ($1,000)
and not more than two thousand five hundred dollars ($2,500) for each
subsequent violation.
(b) Any health care service plan that willfully violates any
provision of this chapter, or that willfully violates any rule or
order adopted or issued pursuant to this chapter, is liable for
administrative penalties of not less than two thousand five hundred
dollars ($2,500) for each first violation, and of not less than five
thousand dollars ($5,000) nor more than ten thousand dollars
($10,000) for each second violation, and of not less than fifteen
thousand dollars ($15,000) and not more than one hundred thousand
dollars ($100,000) for each subsequent violation.
(c) The administrative penalties shall be paid to the Managed Care
Administrative Fines and Penalties Fund and shall be used for the
purposes specified in Section 1341.45.
(d) The administrative penalties available to the director
pursuant to this section are not exclusive, and may be sought and
employed in any combination with civil, criminal, and other
administrative remedies deemed advisable by the director to enforce
the provisions of this chapter.
1394. The civil, criminal, and administrative remedies available to
the director pursuant to this article are not exclusive, and may be
sought and employed in any combination deemed advisable by the
director to enforce the provisions of this chapter.
1394.1. Notwithstanding any other provision of law, the director
may file a verified complaint for involuntary dissolution of a health
care service plan on any one or more of the grounds specified in
subdivision (b) of Section 1386. The complaint shall be filed in the
superior court of the county where the principal executive office of
the health care service plan is located or, if the principal
executive office of the health care service plan is not located in
this state, or the health care service plan has no such office, the
County of Sacramento.
1394.2. Notwithstanding any other provision of law, in any
involuntary dissolution of a health care service plan as provided for
in Section 1394.1, or other insolvency proceeding involving a health
care service plan, the following expenses and claims have priority
in the following order:
(a) First, administrative expenses allowed by the superior court
and any fees and charges assessed against the estate of the dissolved
health care service plan in conjunction with the dissolution of the
estate.
(b) Second, taxes due the State of California.
(c) Third, claims having preference by the laws of the United
States and by the laws of this state.
(d) Fourth, claims of health care service plan subscribers and
enrollees for reimbursement for services rendered by noncontracting
providers. Upon proper showing, the superior court may make an order
relieving subscribers and enrollees from liability or stay any
proceeding to secure payment for any services rendered by a
noncontracting provider upon payment, in whole or in part, of the
claim or claims of those noncontracting providers.
(e) Fifth, claims of health care service plan group contract
holders for reimbursement for services rendered by noncontracting
providers to subscribers and enrollees under the group contract.
(f) Sixth, any and all claims, including all officers' and
directors' claims for indemnity, arising against the estate of the
dissolved health care service plan.
1394.3. Except as provided for in Section 1394.1, and 1394.2, the
involuntary dissolution of a health care service plan shall be in
accordance with either of the following:
(a) Chapter 18 (commencing with Section 1800) of Division 1 of
Title 1 of the Corporations Code, if the plan is incorporated under
the General Corporation Law.
(b) Chapter 15 (commencing with Section 8510) of Part 3 of
Division 2 of Title 1 of the Corporations Code if the plan is
incorporated under the Nonprofit Corporation Law.
