BILL NUMBER: AB 730	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member De La Torre

                        FEBRUARY 26, 2009

   An act to amend Section 10400 of the Insurance Code, relating to
health insurance.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 730, as introduced, De La Torre. Health insurance: unlawful
rescission of policy: penalties.
   Existing law provides for the licensing and regulation of health
insurers by the Insurance Commissioner. Existing law prohibits a
health insurer from engaging in the practice of postclaims
underwriting, which is defined to mean the rescinding, canceling, or
limiting of a health insurance policy or certificate due to the
insurer's failure to complete medical underwriting and resolve all
reasonable questions arising from written information submitted on or
with an insurance application. Existing law provides that any person
willfully violating various provisions governing disability
insurance policies, including health insurance policies, or orders of
the commissioner in that regard, shall forfeit to the state a sum
not to exceed $118 for each violation.
   This bill would provide that a health insurer that unlawfully
rescinds a health insurance policy shall be liable to the state for a
civil penalty to be fixed by the commissioner in an amount not to
exceed $5,000, except that if the insurer knew, or had reason to
know, that the act of rescission was unlawful, the civil penalty
shall be fixed by the commissioner in an amount not to exceed $10,000
for each act or violation. The bill would make other related
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 10400 of the Insurance Code is amended to read:

   10400.   (a)    Any person willfully violating
any provision of this chapter or order of the commissioner made in
accordance therewith shall  forfeit to the people of this
  be liable to the  state  for  a 
sum   civil penalty to be fixed by the commissioner in
an amount  not to exceed one hundred eighteen dollars ($118) for
each  such  violation  , which sum may be
recovered by civil action  . The commissioner may also
suspend or revoke the license of an insurer or agent for any 
such  willful violation  in that regard  . 
   (b) Notwithstanding subdivision (a), a health insurer that
unlawfully rescinds a health insurance policy shall be liable to the
state for a civil penalty to be fixed by the commissioner, in an
amount not to exceed five thousand dollars ($5,000) for each unlawful
rescission of a policy, except that if the insurer knew, or had
reason to know, that the act of rescission was unlawful, the civil
penalty shall be fixed by the commissioner in an amount not to exceed
ten thousand dollars ($10,000) for each act or violation.