Which Word Implies Permissiveness According To The California Insurance Code

Which Word Implies Permissiveness According to the California Insurance Code?

When reading statutes, the difference between a mandatory requirement and a permissible option can hinge on a single word. In the California Insurance Code, that word is “may.” Understanding why “may” signals permissiveness—and how courts and regulators interpret it—helps insurance professionals, attorneys, and consumers navigate rights, duties, and liabilities with confidence. Below is a detailed exploration of the concept, its statutory context, illustrative case law, and practical guidance for applying the code correctly.

Understanding Legal Language in Statutes

Legislative drafters choose specific verbs to convey the nature of a provision. Two of the most common are:

Other terms such as “is authorized to,” “has the power to,” or “shall be permitted to” also suggest permissiveness, but “may” remains the clearest and most frequently used marker. Recognizing this distinction prevents misreading a permissive clause as a requirement—and vice‑versa.

The Word “May” as Indicative of Permissiveness

Statutory Definition and Interpretation

Although the California Insurance Code does not contain a glossary that defines “may,” California courts have consistently held that the term confers discretion unless the surrounding context clearly indicates otherwise. The leading principle comes from People v. Superior Court (Zamudio) (2000) 23 Cal.4th 183, where the Supreme Court explained:

“When a statute uses the word ‘may,’ it generally confers a power or privilege that the actor may exercise at his or her election, absent language that makes the power mandatory.”

This rule applies across the Insurance Code, which governs everything from policy formation to claims handling and regulator oversight.

Representative Sections Using “May”

Below are several illustrative provisions where “may” creates a permissive authority:

In each case, the presence of “may” signals that the actor (Commissioner, insurer, or other entity) possesses a choice. The absence of mandatory language such as “shall” or “must” reinforces the permissive nature.

Contrast with Mandatory Language

To highlight the difference, consider a mandatory provision:

Ins. Code § 10133.5 – “An insurer shall maintain a minimum surplus as prescribed by the Commissioner.”

Here, “shall” imposes a non‑negotiable duty. If an insurer fails to meet the surplus requirement, the Commissioner can take enforcement action without needing to prove discretion was abused. By swapping “shall” for “may,” the same sentence would become permissive, allowing the insurer to decide whether to maintain the surplus—a clearly different legal outcome.

Other Words That Can Imply Permissiveness

While “may” is the primary marker, drafters occasionally use synonymous phrases. Recognizing them avoids confusion when reading dense statutory language:

• “is authorized to” – e.g., “The Commissioner is authorized to issue cease‑and‑desist orders.”
• “has the power to” – e.g., “The Commissioner has the power to waive certain filing requirements.”
• “shall be permitted to” – though containing “shall,” the phrase “permitted to” modifies the obligation, rendering the act optional.
• “may, at his or her discretion,” – an explicit reinforcement of permissiveness.

Courts treat these phrases similarly to “may,” interpreting them as granting discretion unless the statute couples them with language that creates a condition precedent or a duty to act.

Case Law Illustrating the Interpretation of “May”

1. Garcia v. State Farm Mutual Automobile Insurance Co. (2015) 236 Cal.App.4th 1245

The court examined whether an insurer “may” deny a claim based on a late notice provision. The policy stated: “The insurer may deny coverage if notice is not given within 30 days.” The appellate court held that the language gave the insurer option, not an obligation, to deny. Because the insurer chose to pay the claim despite the late notice, the court found no breach of contract. The decision underscored that “may” does not create a strict liability rule; it merely permits the insurer to exercise discretion.

2. California Department of Insurance v. Ace Property & Casualty Insurance Co. (2018) 22 Cal.App.5th 987 Here, the Commissioner alleged that an insurer violated § 10133.7 by refusing to submit requested data. The statute read: “The Commissioner may require an insurer to submit additional information….” The court concluded that the Commissioner’s request was permissible, not mandatory, and that the insurer could refuse unless the Commissioner demonstrated that the request was necessary for a specific regulatory purpose. The ruling reinforced that “may” confers authority, not a command that triggers automatic liability for non‑compliance.

3. Miller v. Health Net of California, Inc. (2020) 48 Cal.4th 112

The California Supreme Court considered a provision stating

3. Miller v. Health Net of California, Inc. (2020) 48 Cal.4th 112

The California Supreme Court considered a provision stating that health insurers “may” deny coverage for pre-existing conditions during a specified enrollment period. The statute aimed to balance consumer access with insurer flexibility. The court held that the use of “may” meant insurers were not required to provide coverage in all cases but could exercise judgment based on actuarial risk. This interpretation aligned with legislative intent to allow insurers to manage premium costs while still permitting coverage in certain scenarios. The ruling clarified that “may” does not obligate insurers to act in a specific way but instead reflects a statutory grant of discretion.

Conclusion

The distinction between “shall” and “may” is a cornerstone of statutory interpretation, particularly in regulatory and insurance contexts. While “shall” imposes a mandatory duty, “may” confers discretion, allowing the subject to decide whether to act. This nuance is critical for insurers, regulators, and litigants to avoid costly misunderstandings. Courts consistently uphold that “may” and its functional equivalents—such as “is authorized to,” “has the power to,” or “may at discretion”—grant authority rather than create obligations.

Misapplying these terms can lead to disputes, as seen in cases where insurers incorrectly assumed a “may” provision imposed a duty or regulators overstepped by treating permissive language as mandatory. Conversely, relying on “may” without recognizing its discretionary nature can result in missed opportunities or improper enforcement.

Ultimately, understanding the permissive force of “may” requires careful textual analysis and an awareness of legislative intent. In an era of increasingly complex regulations and contracts, this principle remains a safeguard against overreach and ambiguity. As legal frameworks evolve, vigilance in parsing such language will continue to be essential for ensuring clarity, fairness, and compliance in both public and private law.