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§ 795. Evidence of Financial Responsibility.

14 CA ADC § 795Barclays Official California Code of Regulations

Barclays California Code of Regulations
Title 14. Natural Resources
Division 1. Fish and Game Commission--Department of Fish and Game (Refs & Annos)
Subdivision 4. Office of Spill Prevention and Response
Chapter 2. Financial Responsibility
14 CCR § 795
§ 795. Evidence of Financial Responsibility.
Currentness
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.

Credits

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.
History
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).
This database is current through 4/26/24 Register 2024, No. 17.
Cal. Admin. Code tit. 14, § 795, 14 CA ADC § 795
End of Document