September 9, 1994
BULLETIN #660
RE: REVISED SLA CONSTITUTION

As you all know, California's surplus line regulations and business environment have been changing significantly over the past several years. Among other changes, the Association is now designated as the State's official surplus line advisory organization under legislation that went into effect on January I of this year (A.B. 865, now codified as Insurance Code Section 1780.50 et. seq.). Our Constitution has remained fundamentally unchanged since its adoption 50 years ago. In an effort to modernize and in view of recent legislative developments, the Executive Committee appointed a Subcommittee nearly two years ago to update the Association's Constitution.

Attached is the proposed Revised and Restated Constitution, and an executive summary of the principal changes, prepared by the Subcommittee with the Association's counsel. This revised Constitution was approved by the Executive Committee at its August 24, 1994 meeting. The Executive Committee, with the belief that this revised Constitution will better serve the current role and functions of the Association, now submits it to the Membership for approval.

Please review the attached documents carefully, complete, sign and date the ballet, and return it by mail, fax or hand delivery to the Association's office, attention: Ilona Bovee/ Constitution Ballot, by October 14, 1994. The revised Constitution must be approved by two-thirds of the entire SLA Membership to become effective.

The results of the mail/fax vote will be put to the Membership for confirmation and ratification at the 1995 Annual Meeting tentatively scheduled for January 17 in San Francisco and January 18 in Los Angeles.

If you have any questions, please call the Stamping Office.

James S. Pugh
Assistant Manager
Enclosures

BALLOT
Proposed Resolution

Resolved, that The Surplus Line Association of California hereby adopts the proposed Revised and Restated Constitution attached to the Association Bulletin #660 dated September 9, 1994, as the Association's Constitution.

The undersigned member of The Surplus Line Association of California (the 'Association'), personally or by its accredited representative, consents to holding this vote by mail or fax, approves the form of the attached notice, and votes on the foregoing proposed Resolution as indicated below.

(Check one)

_______ I vote in favor of the above proposed Resolution.
_______ I vote against the above proposed Resolution.
_______ I abstain from voting for or against the above proposed Resolution.

__________
Date.
Printed or Typed Name of Member (individual or organization)

Member's License Number'

Printed or Typed Name of Accredited Representative of Member (required for organization members; optional for individual members)

Signature of Member or Accredited Representative.
This ballot must be mailed, faxed or hand-delivered to the SLA by October 14, 1994 to be counted. _______________.
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In the case of an organization member, the organization's license number and not the individual license number of the accredited representative should be inserted.

REVISED AND RESTATED SLA CONSTITUTION

*Executive Summary*

This is an executive summary of the Revised and Restated Constitution of The Surplus Line Association of California approved by the Executive Committee at its August 24, 1994 meeting and submitted to the SLA Membership for approval. The Revised Constitution must be approved by a 2/3 vote of the entire SLA Membership to become effective. This summary highlights the points in which the revised Constitution differs from the existing Constitution. Asterisks indicate those provisions with major changes.

Article I - Definitions

This new article adds key definitions.
Article 11 - Name and Territory
Substantially the same as existing Article 1
. Article III - Non-Profit Status
Moved from existing Article 11.2 to this new proposed article with no substantial changes.

*Article IV - Purposes

Existing Article 11 sets forth the "Objects" of the Association. These are moved to this proposed article, renamed "Purposes," reorganized to better adhere to the SLA's current priorities, and rephrased to conform to AB 865 and the new functions of the Association. The new Purposes are derived from the following sources:

Proposed Article IV(1) = Existing	Article 11.1.(a) and AB 865
Proposed Article IV(2) = Existing	Article 11.1.(d)
Proposed Article IV(3) =  AB 865
Proposed Article IV(4) =  AB 865
Proposed Article IV(5) = Existing	Article 11.1.(b)
Proposed Article IV(6) = Existing	Article 11.1.(e)
Proposed Article IV(7) = new

*Article V - Powers This new provision expressly empowers the Association to perform any acts that facilitate and encourage compliance with the surplus line laws and advance the purposes of the Association, as well as permitting contracting and hiring employees. It is needed because the existing Constitution fails to articulate any express "powers" of the Association, although existing Article V.5. gives the Executive Committee "general powers" to carry out and enforce the provisions of the Constitution and transact business.

*Article VI - Membership Conforming to AB 865, paragraph 1 of this proposed provision deems all surplus line brokers automatically to be members of the Association.

Purely for convenience, this article includes a new paragraph 2 labeling individual and organization members as two separate "classes" of members. This is helpful because the requirements for proxies and authorized representatives of organizations differs somewhat from individual members. There are no other substantive differences for the two classes.

Proposed paragraph 3 retains the concept in existing Article VII.1. that organization Members must have an "accredited representative" to act on their behalf but the person is renamed "authorized representative."

Like existing Article III of the Constitution, paragraph 4 requires all members to file a signed copy of the Constitution with the Association. The signing requirement has been relocated here from existing Article XII.

*Article VII - Officers The "Chairman" has been renamed "Chair." The office of "Vice-Chair" has been created, which may or may not be filled at the option of the Executive Committee.

The powers and responsibilities of the Chair and Secretary-Treasurer set forth in existing Article IV have been made more explicit. In particular, the office of Secretary-Treasurer has been given far more specific responsibilities than in the past, although he or she will be empowered to delegate those responsibilities. The oversight and ultimate authority of the Executive Committee over the officers has been clarified. 2
Article VIII - Committees All provisions of the existing Constitution establishing committees have been consolidated in this Article for ease of reference. The committees specifically addressed include:

Executive Committee. This committee will continue to exercise overall authority and supervision over the SLA, as at present.

Stamping Office Committee. The name has been shortened from "Stamping Office and Contact Committee"; it will be smaller than in the past, with no more than 5 members. It will continue to perform those functions delegated to it by the Executive Committee.

Nominating Committee. Basically the same as the existing Constitution, except as discussed in Article XI below regarding Elections.

Admitted Market Liaison Committee. This is a new name for the "Arbitration Committee" in existing Article XI.

The Executive Committee will have authority to appoint additional committees or subcommittees. The Chairman will have the power to appoint ad hoc or advisory committees.

Article IX - Meetings The meeting procedures (e.g. calling, notice, quorum) in existing Article VI have been reorganized and clarified but not significantly changed. Procedures for Association meetings and Committee meetings have been placed in separate sections for ease of reference. A request by 10% of the Membership rather than by just 2 members will be required to call a Special Meeting of the Association. Notice of a Special Meeting of the Association must be sent one week instead of just 2 days in advance.

Article X - Voting The proposed voting procedures are substantially the same as existing Article VII. The use of proxies by individual members as distinguished from voting by an authorized representative of an organization Member was clarified. Express approval for mail, telephone or facsimile votes was added.

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*Article XI - Elections This is a new article with substantially new election procedures. (Compare existing Article V.) The nominating committee will nominate a slate of candidates balanced according to size, location and type of operation. Members will receive advance notice of the nominating committee's slate and have the option to nominate alternative slates. In addition, floor nominations will be permitted at the Annual Meeting so long as the candidates are qualified and the slate is balanced. Floor nominations will be submitted for the Commissioner's review as required by AB 865 (Ins. Code § 1780.67).

Article XII - Amendments Substantially the same as existing Article IX. Article XIII - Funds and Disbursements Substantially the same as existing Article XIII, except the proposed language in paragraph 1 regarding assessment of the stamping fee is new, derived almost verbatim from AB 865 (Ins. Code § 1 780.56(b)). Also, the types of investments permitted for SLA funds specified in proposed Paragraph 3 has been expanded to include treasury bills, repurchase agreements and other prudent investments.

Article XIV - Arbitration and Violations Substantially the same as existing Article XI, except the name of the article has been changed from "Administration and Violations" and the provisions for establishing the Arbitration Committee (renamed as "Admitted Market Liaison Committee") have been moved to proposed Article VIII.

The basic 4-step arbitration procedure remains the same: the Arbitrator finds facts and recommends (not prescribes) remedies; the Admitted Market Liaison Committee must review and confirm or reject Arbitrator's decision; the losing party may appeal to the Executive Committee or, ultimately, to the Commissioner. The Association's remedies for violations would be limited to reprimands or recommending to the Commissioner or other law enforcement agencies to fine, or to suspend or revoke a license.

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Article XV - Manager and Asst. Manager This is a new provision generally authorizing these two management positions without specifying any specific duties.

Article XVI - Stamping Office Substantially the same as existing Article XIII, except with slight modifications to paragraph 1 to conform to AB 865 (Ins. Code § 1 780.56) and recent changes in the Surplus Line Law regarding document filing and review by the Stamping Office. Paragraph 2 has been revised to specify that the Executive Committee (not the Stamping Office Committee) holds the power to act for the Association in matters concerning the Stamping Office, to issue bulletins, to establish fees and the like, but that the Executive Committee may delegate any such powers subject to its ongoing oversight.

Article XVII - General Substantially the same as existing Article XIV, except obsolete references in paragraph 1 to the majority requirement and all of paragraph 3 have been deleted.

Article XVIII - Immunity and Indemnification Substantially the same as existing Article XV, except paragraphs 1, 3 and 4 have been clarified to express with greater precision the Association's intention with respect to those provisions, and proposed paragraph 2, which references the immunity provisions contained in AB 865 (Ins. Code 1 780.66), has been added.

Omitted Provisions Existing Article VII regarding Fact Findings has been dropped because it is unnecessary. The Executive Committee has the power to conduct fact finding without this specific provision.

Existing Article XII regarding Pledges has been incorporated into paragraph 4 of proposed Article VI regarding Membership.

SF2 73670 00741 SF37399.2 5
REVISED AND RESTATED
CONSTITUTION
OF
THE SURPLUS LINE ASSOCIATION OF CALIFORNIA

APPROVED BY EXECUTIVE/STAMPING OFFICE COMMITTEE AT
AUGUST 24, 1994 MEETING; PENDING APPROVAL BY MEMBERSHIP

ARTICLE I
DEFINITIONS

For purposes of this Constitution, the following terms shall have the specified definitions:

1Commissioner. "Commissioner" means the Insurance Commissioner of the State of California.

2 Member/Membership. "Member" means a licensed surplus line broker that has satisfied the requirements of Article VI, paragraph 1 . "Membership" means the collective body of Members of the Association, or the status of being a Member.

3 Plan of Operation. "Plan of Operation" means the document identifying the duties the Association is authorized to perform pursuant to the Insurance Code and describing how the Association will perform those duties.

4 Surplus Line Laws. "Surplus Line Laws" means any and all statutes, regulations or lawful orders of the Commissioner applicable to the placement of insurance with nonadmitted insurers through surplus line brokers in accordance with Insurance Code § 1 763 and any insurance so placed.

ARTICLE 11
NAME, TERRITORY

1 Name. The name of this organization is The Surplus Line Association of California. · Territory. The territory of the Association is the State of California.

ARTICLE III
NON-PROFIT STATUS

The Association is not organized for profit, and no part of its net earnings shall inure to the benefit of any Member or individual.

ARTICLE IV
PURPOSES

The purposes of the Association are:

1 To monitor, facilitate and encourage compliance by Members and insofar as reasonably possible by non-Members, with the Surplus Line Laws and to discourage and to prevent violations of the Surplus Line Laws by methods hereinafter provided;

2 To promote fair dealing between Members and with the public, to protect the rights of admitted insurers under the Surplus Line Laws, and to encourage legal use of the surplus line market by Members and, insofar as possible by non-Members, by all proper means including conferring with organizations of admitted insurance carriers and making available to Members information concerning the insurance market;

3 To assist the Commissioner in monitoring and regulating the transfer of risk on a sound basis through Members to nonadmitted insurers in accordance with the Surplus Line Laws and to assist with any other matters as the Commissioner may reasonably direct;

4 To establish and implement the Association's Plan of Operation;

· To maintain a Stamping Office for the receipt, review and recording of documents with respect to foreign and alien nonadmitted insurers and any insurance placed with nonadmitted insurers, for performing functions specified in the Association's Plan of Operation or otherwise directed by the Executive Committee, and any other matters the Commissioner reasonably may direct the Association to perform;

6 To confer and cooperate with federal and state officials and other organizations for the purpose of accomplishing the purposes set forth in this Constitution;

7 To provide such other services to its Members as are incidental or related to the purposes of the Association.

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ARTICLE
POWERS

The Association shall have the following powers for carrying out its purposes, which shall be exercised by the Executive Committee in accordance with Article VIII:

1 To perform any acts that will facilitate and encourage compliance by its Members with the Surplus Line Laws;

2 To perform any acts necessary or appropriate for fulfilling or advancing the purposes of the Association;

3 To make contracts and expend funds in the name of the Association;

4 To employ and retain whatever persons and organizations are necessary to perform the duties and carry out the purposes of the Association and to exercise any authority incidental thereto.

ARTICLE VI
MEMBERSHIP

1 Term of Membership. Any individual or organization licensed as a surplus line broker under the laws of the State of California shall be deemed a Member of the Association. Membership in the Association shall automatically terminate upon a Member's ceasing to be a licensed surplus line broker.

· Classes of Members. There shall be two classes of Members, individual Members and organization Members, depending on the type of surplus line broker's license held. Both classes shall have the same rights and duties under this Constitution.

3 Authorized Representative. An individual Member may, and an organization Member shall, designate an "authorized representative." A Member's authorized representative shall have all the authority of a Member, including but not limited to, authority to be counted towards a quorum and to vote on the Member's behalf; provided that to count toward a quorum and vote, a representative of an individual Member

3 must be authorized to vote by proxy in accordance with paragraph 1 of Article X.

4 Signing the Constitution. Each Member, or in the case of an organization Member the Member's authorized representative, shall sign and file with the Association a copy of the Constitution. Such act shall constitute acceptance of and subscription to the Constitution and shall commit the Member and all of his, her or its employees and representatives to strict observance thereof. Failure to sign or file a copy of the Constitution will not relieve any Member of his or her or its obligation to comply with the Constitution. The Association will notify the Commissioner of such failure.

ARTICLE VII
OFFICERS

1 Officers. The officers of the Association shall be a Chair and a Secretary-Treasurer, to be elected at the annual meeting and to hold office until the next annual meeting or until their successors are elected. In addition, the Executive Committee may, in its discretion, appoint one Executive Committee member to serve as Vice-Chair.

Chair. The Chair, subject to the oversight and ultimate authority of the Executive Committee, shall supervise the affairs of the Association. He or she shall perform all duties incidental to his or her office and such other duties as may be required by law, by this Constitution, or which may be assigned to the Chair from time to time by the Executive Committee or the voting members. The Chair shall have the power to form and appoint ad hoc advisory committees as he or she deems necessary or appropriate. If the Executive Committee appoints a Vice-Chair pursuant to paragraph 1 of the Article, the Chair may, in his or her discretion, authorize the Vice-Chair to assist in the performance of one or more of the Chair's duties. The Chair shall be an ex-officio Member of all committees with voting power and shall preside at all meetings of the Association and of the Executive Committee. The Chair's vote shall only be counted to break a tie vote of the other Members present and voting. In the absence of the Chair and the Vice-Chair, if any, the Executive Committee may designate a Chair pro tem.

3 Vice-Chair. If the Executive Committee appoints a Vice-Chair pursuant to paragraph 1 of this Article, he or she shall assist the Chair as the Chair deems necessary or desirable, and in the Chair's absence or inability to serve, shall be Acting Chair and shall perform all the duties and exercise all of the powers of the Chair.

4 Secretary-Treasurer. The Secretary-Treasurer shall be a member of the Executive Committee with voting power. The Secretary-Treasurer shall be responsible to do or to cause to be done the following:

(a) certify and keep at the principal office the original or a copy of the Association's Constitution, as amended or otherwise altered to date;

(b) keep a book of minutes of meetings of the Association, the Executive Committee and the Stamping Office Committee, and vote counts, recording therein the time and place of holding thereof, whether regular or special, and if special, how authorized, what notice was given thereof, the names of those present at such meetings and the proceedings thereof, and shall provide copies of the minutes to the Executive Committee;

(c) see that all notices are duly given in accordance with the provisions of this Constitution or as may be required by law;

(d) be custodian of records of the Association or designate one or more employees of the Association to serve as custodian of records subject to his or her supervision;

(e) keep the Membership list;

(f)exhibit and provide at all reasonable times to any officer, Executive Committee member or Association member on request therefor, the Constitution, the Membership list and the minutes of meetings;

(g) have charge and custody of, and be responsible for, all funds and securities of the Association, and, as appropriate, maintain all such funds in the name of the Association in any of the following as shall be selected by the Executive Committee or its designee:(1) banks, trust companies, or other depositories; (2) in United States government bonds, treasury certificates or other obligations for which the full faith and credit of the United States are pledged for payment of principal and interest; (3) in certificates of deposit of any federally or state chartered bank, (4) in repurchase agreements collateralized by securities issued by the United State government; or (5) any other prudent investment that the Executive Committee deems appropriate;

whatever;

(i) disburse the funds of the Association as may be directed by the Executive Committee, taking proper vouchers of such disbursements;

(j) keep and maintain adequate and correct accounts of the Association's properties and business transactions, including accounts of its assets, liabilities, receipts, disbursements, gains and losses;

(k) exhibit at all reasonable times the books of account and financial records to any Executive Committee member on request therefor;

(l) render to the Executive Committee, whenever requested, an account of any and all of his or her transactions as Secretary Treasurer and of the financial condition of the Association;

(m) cause to be prepared, and certify or have certified, the financial statements, a summary of which shall be available to any Member on request and included in the annual report to the Members, and the tax and other statements necessary to maintain the Association's tax exempt status; and

(n) in general, perform all duties incidental to the office of Secretary Treasurer and such other duties as may be required by law, this Constitution, the Association's Plan of Operation, or which may be assigned to him or her from time to time by the Executive Committee.

6 Vacancies. Any vacancy occurring in any of the offices of the Association may be filled by the Executive Committee for the unexpired term.

ARTICLE VIII
COMMITTEES

1 Executive Committee

(a) Composition. The Association shall elect an Executive Committee which shall be the governing body of the Association. The Executive Committee shall consist of thirteen Members. The retiring Chair, the current Chair and the Secretary-Treasurer shall be voting Members for the ensuing year and the remaining ten Members shall be elected as hereinafter provided. All Members shall hold office until the next annual meeting or until their successors are elected.

(b) Vacancies. Subject to confirmation by the Executive Committee, the Chair shall have the power to fill, for the unexpired term, vacancies on the Executive Committee caused by death or otherwise.

(c) General Powers. In addition to the powers expressly given to it by the provisions of the Constitution, the Executive Committee is hereby invested with the general powers to carry out and enforce the provisions of this Constitution and the Association's Plan of Operation and to transact all other business of the Association not otherwise delegated by this Constitution.

(d) Financial Powers. The Executive Committee shall authorize such expenditures and actions as in its judgment shall be necessary to accomplish said purposes. ·

Stamping Office Committee. Within 21 days after election of the Executive Committee, the Executive Committee shall appoint a Stamping Office Committee of no more than five from the Membership of the Association. Subject to supervision by the Executive Committee, the Stamping Office Committee shall supervise the operation of the Stamping Office and shall exercise any powers expressly delegated to it by this Constitution or by the Executive Committee.

3 Nominating Committee. Not less than sixty days prior to each annual meeting, the Chair shall appoint a Nominating Committee of five from the Membership of the Association, which shall perform the duties specified in Article XI and shall do or cause to be done any acts incidental to the performance of those duties.

4 Admitted Market Liaison Committee. The Executive Committee may appoint an Admitted Market Liaison Committee of six Members, and if appointed, it shall liaise with the admitted market on matters of common interest and shall also exercise the powers specified in Article XIV.

· Other Committees.

(a) Subcommittees. The Executive Committee may appoint such additional committees or subcommittees as it may deem necessary or desirable, and may delegate to them, subject to supervision by the Executive Committee, any of the Executive Committee's powers.

(b) Ad Hoc or Advisory Committees. The Chair may appoint ad hoc or advisory committees to study issues or perform special projects as he or she deems necessary or appropriate.

ARTICLE IX MEETINGS

Association Meetings.

(a) Annual Meeting. The annual meeting of the Association shall be held in January, or as soon thereafter as the Executive Committee deems necessary or appropriate, on a date or dates to be fixed by the Executive Committee. A combined statewide meeting, or separate meetings in Northern and Southern California, may be held, as determined by the Executive Committee. Whenever the annual meeting is held in such separate locations and sessions, it shall be known as a single annual meeting and the first session shall be adjourned to the next session of the annual meeting.

(b) Special Meetings. Special meetings of the Association may be called at any time by the Chair and shall be called at the written request of ten percent of the Members of the Association.

(c) Notice. Notice of annual meetings of the Association, with an agenda of matters to be considered, shall be sent to the Members at least one week in advance of the meeting. Notice of special meetings must be sent to the Members at least one week in advance, with an agenda of matters to be considered. Any matters not included in the agenda shall not be considered at annual or special meetings, unless a quorum is present and two-thirds of the Members present approve.

(d) Quorum. At annual and special meetings of the Association, one-third of the Members shall constitute a quorum. If separate sessions are held, in the manner set forth in paragraph 1 (a) of this Article, one-third of the Members having principal offices in Southern California shall constitute a quorum for the Southern session, and one-third of the Members having principal offices in Northern California shall constitute a quorum for the Northern session.

Committee Meetings.

(a) Attendance. Any Member or a Member's authorized representative shall be permitted to attend meetings of the committees of the Association to discuss before such committee matters in which that Member is interested.

(b) Notice. Notice of regular committee meetings, with an agenda of matters to be considered, shall be sent to the members of that committee, and the Association's Chair, at least one week in advance of the meeting. Notice of special committee meetings shall be given at least 48 hours in advance of the meeting unless extenuating circumstances warrant shorter notice. If less than

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48 hours notice is given, the committee may act only if (1) a quorum is in attendance, (2) the members present unanimously agree to waive notice, or (3) the absent members subsequently agree to waive notice and consent to the holding of the meeting. Any matters not included in the agenda shall not be considered at regular or special meetings, unless a quorum is present and two-thirds of the committee members approve.

(c) Quorum. A majority of a committee's members shall constitute a quorum of that committee for the transaction of business.

(d) Unanimous Written Consent. Every action required or permitted to be taken by a committee may be taken without a meeting if all committee members consent thereto or ratify the act in writing.

(e) Telephone Conference Meetings. Committee meetings may be held through use of conference telephone or similar communications equipment, so long as all members participating in such meeting can hear one another. Participation in a meeting pursuant to this paragraph constitutes presence in person at such meeting.

ARTICLE X
VOTING

Proxy. To vote by proxy, an individual Member shall file in writing with the Association the name of a person authorized to vote on that Member's behalf in the proceedings of the Association. Authorized representatives of organization Members are not required to obtain a proxy to vote on behalf of the Member.

Required Vote. Except as otherwise provided, all resolutions and motions offered shall be deemed adopted when assented to by a majority of the Members present and voting. If separate sessions are held in the manner set forth in paragraph 1 (a) of Article IX, the resolutions and motions must receive such majority assent at both sessions or in a subsequent mail vote. When otherwise provided, as when a two-thirds vote of the entire Membership of the Association is required, the number of votes at the meeting shall be counted. If this constitutes a majority of those present but not two-thirds of the entire Association Membership, the approval of a sufficient number by mail or facsimile vote, within thirty days of the last session of the meeting, to constitute the required two-thirds of the Membership may be obtained.

3 Mail, Telephone and Facsimile Votes. Any vote of the Membership of the Association, including a vote to amend this Constitution pursuant to Article XII, may be taken at a meeting or by mail or facsimile, in the discretion of the Chair. Any vote of a committee of the Association may, in the discretion of the chairman of that committee, be taken by mail, telephone or facsimile, except on matters before the Executive Committee on appeal from findings of the Arbitrator in a complaint.

ARTICLE XI
ELECTIONS

1 Annual Election. Elections for the officers of the Association and members of the Executive Committee shall be held annually at the Annual Meeting or as soon thereafter as practicable. Voting in this election shall be conducted in accordance with Article X.

Nominating Committee Slate. The Nominating Committee shall nominate a slate of candidates for the offices of Chair, Secretary Treasurer and the Executive Committee. It shall be the policy of the Association to seek to maintain a balance among its representative officers and committee members based on the size, location and type of operations.

3 Alternative Slates. Not less than 1 4 days prior to the election, the Nominating Committee shall mail its slate of candidates to the Membership and shall solicit nominations from the Membership for alternative slates of qualified candidates which seek to maintain the prescribed balance among representative officers and committee members based on the size, location and type of operations. The Member submitting an alternative slate shall demonstrate that all such proposed candidates are qualified and have consented to the nomination.

4 Floor Nominations