Insurance Code section 816

No insurer shall pay any person given discretion as to settlement of claims under any policy of insurance, or surety bond, whether in direct negotiation with the claimant or in supervision of the person negotiating, a compensation which in any way is contingent upon the amount of settlement of such claims, except as in this section otherwise expressly provided.
This section shall apply equally to a single claim, a number of specified claims, an aggregate of claims during a specified period of time or an aggregate of claims under any contract, agreement or arrangement.
This section shall not affect the interpretation or provisions of Section 815.
The word “person” as used in this section includes, but is not limited to: employees, agents, brokers, representatives, general agents, managing general agents, surplus line brokers, insureds, coinsureds, adjusters and independent contractors but does not include attorneys in fact or other exclusive managers of an insurer.
This section does not apply to:

(a)

Compensation of a producer, managing general agent, surplus line broker or general agent under any arrangement, agreement or contract whereby the producer or general agent is not granted discretion in the actual adjustment or settlement of any or all individual claims settled for an amount exceeding five hundred dollars ($500).

(b)

A producer, managing general agent, surplus line broker or general agent who is compensated by a contingent commission arrangement based wholly or partly on underwriting results, unless the arrangement guarantees an agreed return to the insurer which may exceed the underwriting profit actually earned by the insurer on business written through the producer, managing general agent, surplus line broker or general agent.

(c)

Contracts of reinsurance between insurers.

(d)

An arrangement, schedule of charges, agreement or contract, express or implied, for the adjustment of claims under which the compensation for the services of the person making the adjustment (exclusive of reimbursement for actual expenses) consistently increases, in reasonable brackets, as the amount paid in settlement of a claim increases.
An insurer which in any other jurisdiction is making payments which would be in violation of this section if made in respect to insurance business done in this state shall not be admitted to this state until it presents evidence satisfactory to the commissioner that it will not make such payments in this state and that it will within one year after admission to this state cease to make any such payments in any other jurisdiction and, within the same period, terminate any contract or arrangement under which such payments are to be paid. Failure to so cease such payments and to so terminate such contracts and arrangements within such period of one year shall constitute grounds for revocation of the insurer’s certificate of authority.

Source: Section 816, https://leginfo.­legislature.­ca.­gov/faces/codes_displaySection.­xhtml?lawCode=INS§ionNum=816.­ (updated Jan. 1, 1972; accessed Jun. 30, 2025).

Green check means up to date. Up to date

Verified:
Jun. 30, 2025

§ 816's source at ca​.gov