An insurer organized under the laws of another state and doing business in California is classified as a:
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under California's insurer classifications, a domestic insurer is one incorporated in California, a foreign insurer is one incorporated under the laws of another state, and an alien insurer is one incorporated outside the United States. An insurer organized in another U.S. state and transacting business in California is therefore a foreign insurer in California. Surplus line status is a market-access category describing the channel through which licensed brokers may place coverage with nonadmitted insurers; it is not a classification based on the place of the insurer's incorporation.
Why the other options are wrong
- B) A domestic insurer is one incorporated in California. An insurer organized under the laws of another state is not domestic in California. This choice misstates what the statute actually requires, so it must be eliminated from consideration.
- D) An alien insurer is one incorporated outside the United States. This insurer was organized in another U.S. state, so it is foreign, not alien. This option reflects a different rule and does not match the law that governs the transaction.
- A) Surplus line describes the nonadmitted market channel used by licensed brokers. It is not the classification for an insurer incorporated in another state. Accordingly, this plausible-sounding answer is one that examiners expect candidates to eliminate.
Memory hook
Domestic = home state, foreign = another state, alien = another country. In California, Nevada is foreign.