BILL NUMBER: SB 150 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JUNE 16, 2005
AMENDED IN SENATE MAY 4, 2005
AMENDED IN SENATE APRIL 4, 2005
INTRODUCED BY Senator Escutia
FEBRUARY 7, 2005
An act to amend Sections 791.10 , 791.12, and 791.13
and 791.12 of the Insurance Code, relating to
insurance underwriting.
LEGISLATIVE COUNSEL'S DIGEST
SB 150, as amended, Escutia. Insurance: adverse underwriting
decisions.
Existing law requires that, in the event of an adverse
underwriting decision, as defined, the insurance institution or agent
responsible for the decision comply with certain requirements,
including a requirement to either provide the consumer with the
specific reasons for the adverse underwriting decision in writing or
advise the person that upon written request he or she may receive the
specific reasons in writing. Existing law requires the institution
or agent, upon receipt of a written request, to provide the consumer
with the specific items of personal and privileged information that
support those reasons, except as specified.
This bill would require the insurance institution or agent to
provide the reasons for the adverse underwriting decision in all
instances.
Existing law prohibits an insurance institution or agent from
basing an adverse underwriting decision on various types of
information, including personal information received from an
insurance-support organization whose primary source of information is
insurance institutions, except as specified.
This bill would additionally require certain information
related to a claim in the case of auto insurance or property
insurance be obtained by the insurer prior to an adverse underwriting
decision, as specified prohibit an insurer, with
respect to property insurance, from basing an adverse underwriting
decision on information relating to a California claim that occurs on
or after January 1, 2006, and that is received from an
insurance-support organization, unless the information includes
certain elements. It would prohibit property insurance claim
information from being submitted to an insurance-support organization
unless it i s submitted in conjunction with
the above information, except as specified .
The bill would make additional conforming changes.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 791.10 of the Insurance Code is amended to
read:
791.10.
(a) In the event of an adverse underwriting decision the insurance
institution or agent responsible for the decision shall provide the
applicant, policyholder, or individual proposed for coverage, in
writing, at the time that the adverse action is communicated, with
each of the following:
(1) The specific reason or reasons for the adverse underwriting
decision.
(2) A summary of the rights established under Sections 791.08 and
791.09.
(3) The specific items of personal and privileged information that
support the reason or reasons for the adverse underwriting decision;
provided, however:
(A) The insurance institution or agent shall not be required to
furnish specific items of privileged information if it has a
reasonable suspicion, based upon specific information available for
review by the commissioner, that the applicant, policyholder or
individual proposed for coverage has engaged in criminal activity,
fraud, material misrepresentation or material nondisclosure.
(B) Specific items of medical record information supplied by a
medical care institution or medical professional shall be disclosed
either directly to the individual about whom the information relates
or to a medical professional designated by the individual and
licensed to provide medical care with respect to the condition to
which the information relates, whichever the individual prefers.
Mental health record information shall be supplied directly to the
individual, pursuant to this subdivision, only with the approval of
the qualified professional person with treatment responsibility for
the condition to which the information relates.
(4) The names and addresses of the institutional sources that
supplied the specific items of information given pursuant to
paragraph (3); provided, however, that the identity of any medical
professional or medical care institution shall be disclosed either
directly to the individual or to the designated medical professional,
whichever the individual prefers.
(b) The obligations imposed by this section upon an insurance
institution or agent may be satisfied by another insurance
institution or agent authorized to act on its behalf.
(c) When an adverse underwriting decision results solely from an
oral request or inquiry, the explanation of reasons and summary of
rights required by subdivision (a) may be given orally to the extent
that such information is available.
SEC. 2. Section 791.12 of the Insurance Code is amended to read:
791.12.
(a) No insurance institution or agent may
base an adverse underwriting decision in whole or in part on the
following:
(a)
(1) On the fact of a previous adverse underwriting
decision or on the fact that an individual previously obtained
insurance coverage through a residual market mechanism; provided,
however, an insurance institution or agent may base an adverse
underwriting decision on further information obtained from an
insurance institution or agent responsible for a previous adverse
underwriting decision. The further information, when requested, shall
create a conclusive presumption that the information is necessary to
perform the requesting insurer's function in connection with an
insurance transaction involving the individual and, when reasonably
available, shall be furnished the requesting insurer and the
individual, if applicable.
(b)
(2) On personal information received from an
insurance-support organization whose primary source of information is
insurance institutions; provided, however, an insurance institution
or agent may base an adverse underwriting decision on further
personal information obtained as the result of information received
from an insurance-support organization.
(c) For personal automobile coverage as defined by Section 660 and
residential property coverage as defined by Section 675, on
information relating to a claim received from a
(3) For residential property coverage
on a single-family dwelling, condominium unit, or re
sidential renter's unit, on information that relates to a
California claim occurring on or after July 1, 2006, and that is
received from an insurance-support organization whose primary
source of information is insurance institutions, unless the
information includes the following , provided however, that
if the information is not available, an insurance institution or
agent may base an adverse underwriting decision on further claim
history information obtained based upon investigation of the
information received from an insurance-support organization:
:
(1)
(A) The date of loss.
(2)
(B) Whether the claim is open or closed.
(3)
(C) The relevant coverage peril and the description of
the specific cause of the loss.
(4) A description of the property damaged or the liability
incurred.
(5)
(D) For property losses, identification of the area of the
structure or property damaged, in a standard format prescribed by the
insurance-support organization.
(E) The address of the damaged property, if
applicable.
(6) In the case of an auto claim, the determination of fault, if
known.
(7)
(F) The monetary amount of damages paid, or if open,
reserved.
(8) If known, a description of the repairs completed or other
status of damages.
(d)
(G) If known, an indication of whether repairs were or were not
completed.
(4) On the fact that an individual has
previously inquired and received information about the scope or
nature of coverage under a residential fire or property insurance
policy, if the information is received from an insurance-support
organization whose primary source of information is insurance
institutions and the inquiry did not result in the filing of a claim.
(b) (1) Except as provided in paragraph (2), no information with
respect to a claim regarding residential property coverage on a
single-family dwelling condominium unit, or residential renter's unit
shall be submitted by an insurance institution or agent to an
insurance-support organization whose primary source of information is
insurance institutions unless all information required by paragraph
(3) of subdivision (a) is submitted in conjunction with the claim
information.
(2) Paragraph (1) shall not apply if the claim is withdrawn or
denied before all of the applicable data is collected by the insurer,
and the claim information submitted specifically identifies the
claim as withdrawn or denied.
SEC. 3. Section 791.13 of the Insurance Code is amended to read:
791.13.
(a) An insurance institution, agent, or insurance-support
organization shall not disclose any personal or privileged
information about an individual collected or received in connection
with an insurance transaction unless the disclosure is:
(1) With the written authorization of the individual, and meets
either of the conditions specified in subparagraph (A) or (B):
(A) If such authorization is submitted by another insurance
institution, agent, or insurance-support organization, the
authorization meets the requirement of Section 791.06.
(B) If such authorization is submitted by a person other than an
insurance institution, agent, or insurance-support organization, the
authorization is:
(i) Dated.
(ii) Signed by the individual.
(iii) Obtained one year or less prior to the date a disclosure is
sought pursuant to this section.
(2) To a person other than an insurance institution, agent, or
insurance-support organization, provided such disclosure is
reasonably necessary:
(A) To enable such person to perform a business, professional or
insurance function for the disclosing insurance institution, agent,
or insurance-support organization or insured and such person agrees
not to disclose the information further without the individual's
written authorization unless the further disclosure:
(i) Would otherwise be permitted by this section if made by an
insurance institution, agent, or insurance-support organization; or
(ii) Is reasonably necessary for such person to perform its
function for the disclosing insurance institution, agent, or
insurance-support organization.
(B) To enable such person to provide information to the disclosing
insurance institution, agent or insurance-support organization for
the purpose of:
(i) Determining an individual's eligibility for an insurance
benefit or payment; or
(ii) Detecting or preventing criminal activity, fraud, material
misrepresentation or material nondisclosure in connection with an
insurance transaction.
(3) To an insurance institution, agent, insurance-support
organization or self-insurer, provided the information disclosed is
limited to that which is reasonably necessary under either
subparagraph (A) or (B):
(A) To detect or prevent criminal activity, fraud, material
misrepresentation or material nondisclosure in connection with
insurance transactions; or
(B) For either the disclosing or receiving insurance institution,
agent or insurance-support organization to perform its function in
connection with an insurance transaction involving the individual.
(4) To a medical-care institution or medical professional for the
purpose of any of the following:
(A) Verifying insurance coverage or benefits.
(B) Informing an individual of a medical problem of which the
individual may not be aware.
(C) Conducting operations or services audit, provided only such
information is disclosed as is reasonably necessary to accomplish the
foregoing purposes.
(5) To an insurance regulatory authority; or
(6) To a law enforcement or other governmental authority pursuant
to law.
(7) Otherwise permitted or required by law.
(8) In response to a facially valid administrative or judicial
order, including a search warrant or subpoena.
(9) Made for the purpose of conducting actuarial or research
studies, provided:
(A) No individual may be identified in any actuarial or research
report.
(B) Materials allowing the individual to be identified are
returned or destroyed as soon as they are no longer needed.
(C) The actuarial or research organization agrees not to disclose
the information unless the disclosure would otherwise be permitted by
this section if made by an insurance institution, agent or
insurance-support organization.
(10) To a party or a representative of a party to a proposed or
consummated sale, transfer, merger or consolidation of all or part of
the business of the insurance institution, agent or
insurance-support organization, provided:
(A) Prior to the consummation of the sale, transfer, merger, or
consolidation only such information is disclosed as is reasonably
necessary to enable the recipient to make business decisions about
the purchase, transfer, merger, or consolidation.
(B) The recipient agrees not to disclose the information unless
the disclosure would otherwise be permitted by this section if made
by an insurance institution, agent or insurance-support organization.
(11) To a person whose only use of such information will be in
connection with the marketing of a product or service, provided:
(A) No medical-record information, privileged information, or
personal information relating to an individual's character, personal
habits, mode of living, or general reputation is disclosed, and no
classification derived from such information is disclosed; or
(B) The individual has been given an opportunity to indicate that
he or she does not want personal information disclosed for marketing
purposes and has given no indication that he or she does not want the
information disclosed; and
(C) The person receiving such information agrees not to use it
except in connection with the marketing of a product or service.
(12) To an affiliate whose only use of the information will be in
connection with an audit of the insurance institution or agent or the
marketing of an insurance product or service, provided the affiliate
agrees not to disclose the information for any other purpose or to
unaffiliated persons.
(13) By a consumer reporting agency, provided the disclosure is to
a person other than an insurance institution or agent.
(14) To a group policyholder for the purpose of reporting claims
experience or conducting an audit of the insurance institution's or
agent's operations or services, provided the information disclosed is
reasonably necessary for the group policyholder to conduct the
review or audit.
(15) To a professional peer review organization for the purpose of
reviewing the service or conduct of a medical-care institution or
medical professional.
(16) To a governmental authority for the purpose of determining
the individual's eligibility for health benefits for which the
governmental authority may be liable.
(17) To a certificate holder or policyholder for the purpose of
providing information regarding the status of an insurance
transaction.
(18) To a lienholder, mortgagee, assignee, lessor, or other person
shown on the records of an insurance institution or agent as having
a legal or beneficial interest in a policy of insurance. The
information disclosed shall be limited to that which is reasonably
necessary to permit the person to protect his or her interest in the
policy and shall be consistent with Article 5.5 (commencing with
Section 770).
(b) No information shall be submitted by an insurance institution
or agent to an insurance-support organization with respect to claims
information for personal automobile coverage as defined by Section
660 or residential coverage as defined by Section 675 unless all
related information required by subdivision (c) of Section 791.12 is
submitted in conjunction with the claim information.