BILL NUMBER: AB 2411	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Jones

                        FEBRUARY 19, 2010

   An act to amend Sections 100, 700.01, 739, and 1063 of, to add
Section 119.7 to, and to add Part 9 (commencing with Section 12880)
to Division 2 of, the Insurance Code, relating to insurance.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2411, as introduced, Jones. Pet insurance.
   Existing law provides for the regulation of various types of
insurance by the Department of Insurance.
   This bill would provide for the regulation of pet insurance, as
defined. The bill would prohibit a pet insurer from excluding
coverage on the basis of a preexisting condition provision for a
period beyond 6 months following the insured's effective date of
coverage and would specify that a preexisting condition provision may
only relate to conditions for which medical advice, diagnosis, care,
or treatment, including, but not limited to, use of prescription
drugs, was recommended or received from a veterinarian during the 6
months immediately preceding the effective date of coverage. The bill
would authorize a pet insurer that does not utilize a preexisting
condition provision to impose a waiting or affiliation period of no
more than 30 days. The bill would require a pet insurer to provide
specified reimbursement for covered veterinary expenses incurred by
an insured and would also require a pet insurer to make a reasonable
disclosure, as part of its solicitation and sales materials, of
certain terms and conditions contained in its pet insurance policies,
as specified. The bill would enact other related conforming
provisions.
   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 100 of the Insurance Code is amended to read:
   100.  Insurance in this state is divided into the following
classes:
   (1) Life
   (2) Fire
   (3) Marine
   (4) Title
   (5) Surety
   (6) Disability
   (7) Plate glass
   (8) Liability
   (9) Workmen's compensation
   (10) Common carrier liability
   (11) Boiler and machinery
   (12) Burglary
   (13) Credit
   (14) Sprinkler
   (15) Team and vehicle
   (16) Automobile
   (17) Mortgage
   (18) Aircraft
   (19) Mortgage guaranty
   (19.5) Insolvency
   (19.6) Legal insurance 
   (19.7) Pet insurance 
   (20) Miscellaneous
  SEC. 2.  Section 119.7 is added to the Insurance Code, to read:
   119.7.  "Pet insurance" has the same meaning as that term is
defined in Section 12880.
  SEC. 3.  Section 700.01 of the Insurance Code is amended to read:
   700.01.  In addition to any or all of the classes of insurance
 which   that  it is permitted to transact
by all other applicable provisions of this code, any incorporated
insurer admitted or hereafter admitted for one or more of the classes
of insurance stated in Section 100, except life, title, mortgage, or
mortgage guaranty  ,  shall (subject to any limitations
contained in its articles of incorporation or charter) be admitted
after January 1, 1990, for any or all of the following classes, upon
making application therefor and complying with all applicable
requirements of law, if its paid-in capital is not less than two
million six hundred thousand dollars ($2,600,000) or the aggregate of
the amounts hereinafter set forth opposite the classes transacted by
it in the United States if an alien insurer, or in any jurisdiction
if other than an alien insurer, whichever is lower; provided, that
the paid-in capital of incorporated insurers not transacting either
fire, marine or surety insurance making application under this
section shall be at least three hundred thousand dollars ($300,000)
in excess of that aggregate amount. In no event shall any
incorporated insurer, as a condition for its admission, be permitted
to have a paid-in capital of less than one million dollars
($1,000,000) or be required to have a paid-in capital in excess of
two million six hundred thousand dollars ($2,600,000) for any or all
of the classes of insurance hereinafter set forth.
Number and name of                          Amount
class                                           of
                                            capital
  2. Fire ...............................  $350,000
  3. Marine .............................   350,000
  5. Surety .............................   350,000
  6. Disability .........................   250,000
  7. Plate glass ........................   100,000
  8.                    )
Liability              )
9. Workers'            )................
                        )                 300,000
compensation           )                 for any
10. Common                               or all
carrier                                  of these
liability
11. Boiler and machinery ...............   100,000
12. Burglary ...........................   100,000
13. Credit .............................   100,000
14. Sprinkler ..........................   100,000
15. Team and vehicle ...................   100,000
16. Automobile .........................   200,000
18. Aircraft ...........................   100,000
 19. Pet ................................   100,000 
20. Miscellaneous ......................   100,000


   This section shall not be applicable to life, title, mortgage, or
mortgage guaranty insurance, and an insurer now or hereafter admitted
to transact life, title, mortgage, or mortgage guaranty insurance
shall not be admitted under the provisions of this section, but its
admission is governed by other applicable provisions of this code.
   Insurers admitted for one or more classes of insurance on December
31, 1989, shall be governed by the provisions of this section in
effect as of December 31, 1989, until December 31, 1999. After
December 31, 1999, all insurers governed by this section shall meet
the capital requirements of this section as become effective January
1, 1990. Insurers admitted for one or more classes of insurance on
December 31, 1989, that thereafter amend their certificate of
authority to add a class or classes of insurance shall become subject
to the capital requirements of this section.
  SEC. 4.  Section 739 of the Insurance Code is amended to read:
   739.  As used in this article, these terms shall have the
following meanings:
   (a) "Adjusted RBC Report" means a Risk-Based Capital (RBC) report
that has been adjusted by the commissioner in accordance with
subdivision (c) of Section 739.2.
   (b) "Corrective Order" means an order issued by the commissioner
specifying corrective actions that the commissioner has determined
are required.
   (c) "Domestic insurer" means any life or health insurer or
property and casualty insurer organized in this state.
   (d) "Foreign insurer" means any life or health insurer or property
and casualty insurer that is licensed to do business in this state
but is not domiciled in this state.
   (e) "Life or health insurer" means any admitted insurer issuing
insurance subject to Part 2 (commencing with Section 10110) of
Division 2, or a licensed property and casualty insurer writing only
disability insurance.
   (f) "NAIC" means the National Association of Insurance
Commissioners.
   (g) "Negative trend" means, with respect to a life or health
insurer, a negative trend over a period of time, as determined in
accordance with the "Trend Test Calculation" included in the RBC
Instructions defined in subdivision (i).
   (h) "Property and casualty insurer" means any admitted insurer
writing insurance as described in Section 102, 103, 105, 107, 108,
109, 110, 111, 112, 113, 114, 115, 116, 118, 119.5, 119.6, 
119.7,  or 120, but does not include monoline mortgage guaranty
insurers, financial guaranty insurers, or title insurers.
   (i) "RBC Instructions" means the RBC Report, including risk-based
capital instructions adopted by the NAIC, and as the RBC Instructions
may be amended by the NAIC from time to time in accordance with the
procedures adopted by the NAIC.
   (j) "RBC Level" means an insurer's Company Action Level RBC,
Regulatory Action Level RBC, Authorized Control Level RBC, or
Mandatory Control Level RBC where:
   (1) "Company Action Level RBC" means, with respect to any insurer,
the product of 2.0 and its Authorized Control Level RBC.
   (2) "Regulatory Action Level RBC" means the product of 1.5 and its
Authorized Control Level RBC.
   (3) "Authorized Control Level RBC" means the number determined
under the risk-based capital formula in accordance with the RBC
Instructions.
   (4) "Mandatory Control Level RBC" means the product of .70 and the
Authorized Control Level RBC.
   (k) "RBC Plan" means a comprehensive financial plan containing the
elements specified in subdivision (b) of Section 739.3. If the
commissioner rejects the RBC Plan, and it is revised by the insurer,
with or without the commissioner's recommendation, the plan shall be
called the "Revised RBC Plan."
   (l) "RBC Report" means the report required in Section 739.2.
   (m) "Total Adjusted Capital" means the sum of:
   (1) An insurer's statutory capital and surplus.
   (2) Other items, if any, that the RBC Instructions may provide.
  SEC. 5.  Section 1063 of the Insurance Code is amended to read:
   1063.  (a) Within 60 days after the original effective date of
this article, all insurers, including reciprocal insurers, admitted
to transact insurance in this state of any or all of the following
classes only in accordance with the provisions of Chapter 1
(commencing with Section 100) of Part 1 of this division: fire (see
Section 102), marine (see Section 103), plate glass (see Section
107), liability (see Section 108), workers' compensation (see Section
109), common carrier liability (see Section 110), boiler and
machinery (see Section 111), burglary (see Section 112), sprinkler
(see Section 114), team and vehicle (see Section 115), automobile
(see Section 116), aircraft (see Section 118),  pet (see Section
  119.7),  and miscellaneous (see Section 120), shall
establish the California Insurance Guarantee Association (the
association); provided, however, this article shall not apply to the
following classes or kinds of insurance: life and annuity (see
Section 101), title (see Section 104), fidelity or surety including
fidelity or surety bonds, or any other bonding obligations (see
Section 105), disability or health (see Section 106), credit (see
Section 113), mortgage (see Section 117), mortgage guaranty,
insolvency or legal (see Section 119), financial guaranty or other
forms of insurance offering protection against investment risks (see
Section 124), the ocean marine portion of any marine insurance or
ocean marine coverage under any insurance policy including the
following: the Jones Act (46 U.S.C. Sec. 688), the Longshore and
Harbor Workers' Compensation Act (33 U.S.C. Sec. 901 et seq.), or any
other similar federal statutory enactment, or any endorsement or
policy affording protection and indemnity coverage, or reinsurance as
defined in Section 620, or fraternal fire insurance written by
associations organized and operating under Sections 9080 to 9103,
inclusive. Any insurer admitted to transact only those classes or
kinds of insurance excluded from this article shall not be a member
insurer of the association. Each insurer admitted to transact a class
of insurance included in this article, including the State
Compensation Insurance Fund, as a condition of its authority to
transact insurance in this state, shall participate in the
association whether established voluntarily or by order of the
commissioner after the elapse of 60 days following the original
effective date of this article in accordance with rules to be
established as provided in this article. It shall be the purpose of
the association to provide for each member insurer insolvency
insurance as defined in Section 119.5.
   (b) The association shall be managed by a board of governors,
composed of nine member insurers, each of which shall be appointed by
the commissioner to serve initially for terms of one, two, or three
years and thereafter for three-year terms so that three terms shall
expire each year on December 31, and shall continue in office until
his or her successor shall be appointed and qualified. At least five
members of the board shall be domestic insurers. At least three of
the members shall be stock insurers, and at least three shall be
nonstock insurers. The nine members shall be representative, as
nearly as possible, of the classes of insurance and of the kinds of
insurers covered by this article. In case of a vacancy for any reason
on the board, the commissioner shall appoint a member insurer to
fill the unexpired term. In addition to the nine member insurers, the
membership of the board shall also include one public member
appointed by the President pro Tempore of the Senate, one public
member appointed by the Speaker of the Assembly, one business member
appointed by the commissioner, and one labor member appointed by the
commissioner.
   (c) The association shall adopt a plan of operations, and any
amendments thereto, not inconsistent with the provisions of this
article, necessary to assure the fair, reasonable, and equitable
manner of administering the association, and to provide for other
matters as are necessary or advisable to implement the provisions of
this article. The plan of operations and any amendments thereto shall
be subject to prior written approval by the commissioner. All
members of the association shall adhere to the plan of operation.
   (d) If for any reason the association fails to adopt a suitable
plan of operation within 90 days following the original effective
date of this article, or if at any time thereafter the association
fails to adopt suitable amendments to the plan of operation, the
commissioner shall after hearing adopt and promulgate reasonable
rules as are necessary or advisable to effectuate the provisions of
this chapter. These rules shall continue in force until modified by
the commissioner after hearing or superseded by a plan of operation,
adopted by the association and approved by the commissioner.
   (e) In accordance with its plan of operation, the association may
designate one or more of its members as a servicing facility, but a
member may decline this designation. Each servicing facility shall be
reimbursed by the association for all reasonable expenses it incurs
and for all payments it makes on behalf of the association. Each
servicing facility shall have authority to perform any functions of
the association that the board of governors lawfully may delegate to
it and to do so on behalf of and in the name of the association. The
designation of servicing facilities shall be subject to the approval
of the commissioner.
   (f) The association shall have authority to borrow funds when
necessary to effectuate the provisions of this article, and may
provide in its plan of operations for any of the following:
   (1) The issuance of notes, bonds, or debentures, or the
establishment of a special purpose trust or other entity, solely for
the purpose of facilitating a financing.
   (2) The securing of that borrowing or those notes, bonds, or
debentures by pledging or granting liens or mortgages, or by
otherwise encumbering its real or personal property, including, but
not limited to, premiums levied under Section 1063.5.
   (g) The association, either in its own name or through servicing
facilities, may be sued and may use the courts to assert or defend
any rights the association may have by virtue of this article as
reasonably necessary to fully effectuate the provisions thereof.
   (h) The association shall have the right to intervene as a party
in any proceeding instituted pursuant to Section 1016 wherein
liquidation of a member insurer as defined in Section 1063.1 is
sought.
   (i) (1) The association shall have an annual audit of its
financial condition conducted by an independent certified public
accountant. The audit shall be conducted, to the extent possible, in
accordance with generally accepted auditing standards (GAAS) and the
report of the audit shall be submitted to the commissioner.
   (2) The association shall annually audit at least one-third of the
service companies retained by the association to adjust claims of
insolvent insurers. The audits shall (A) assure that all covered
claims are being investigated, adjusted, and paid in accordance with
customary industry standards and practices and all applicable
statutes, rules and regulations, and (B) examine the management and
supervisory systems overseeing the claims functions. The audits shall
be conducted by the association or an independent auditor, provided
that the three largest service companies, as measured by the number
of claims processed for the association during the previous three
fiscal years, shall be audited by an independent auditor at least
once every three years. The association shall implement systems to
retain independent auditing firms for the purpose of this paragraph,
provided that no one firm is designated or utilized as an exclusive
provider. Audits conducted pursuant to this paragraph shall be
submitted annually to the commissioner for review.
   (j) The commissioner shall examine the association to the same
extent as, and in accordance with, the requirements of Article 4
(commencing with Section 730) of Chapter 1 of Part 2 of Division 2,
which sets forth the examination requirements applicable to admitted
insurers. A copy of the examination report shall be filed with the
Chairpersons of the Senate and Assembly Committees on Insurance no
later than December 31 of the year the report is completed.
  SEC. 6.  Part 9 (commencing with Section 12880) is added to
Division 2 of the Insurance Code, to read:

      PART 9.  PET INSURANCE


   12880.  For purposes of this part, the following definitions shall
apply:
   (a) "Pet insurance" means an individual or group insurance policy
that provides coverage for veterinary expenses.
   (b) "Veterinarian" means an individual who holds a valid license
to practice veterinary medicine from the Veterinary Medical Board
pursuant to Chapter 11 (commencing with Section 4800) of Division 2
of the Business and Professions Code or other appropriate licensing
entity in the jurisdiction in which he or she practices.
   (c) "Veterinary expenses" means the costs associated with any
medical advice, diagnosis, care, or treatment provided by a
veterinarian, including, but not limited to, the cost of drugs
prescribed by a veterinarian.
   (d) "Hereditary disorder" means an abnormality that is genetically
transmitted from parent to offspring and may cause illness or
disease.
   (e) "Reasonable and customary charges" means the average amounts
charged by veterinarians for veterinary expenses as identified in any
respected source of the veterinary industry, including, but not
limited to, the sixth edition, or any subsequent edition, of the
American Animal Hospital Association's Veterinary Fee Reference.
   12880.1.  A policy of pet insurance that is marketed, issued,
amended, renewed, or delivered to a resident of this state on or
after January 1, 2011, regardless of the situs of the contract or
master group policyholder, shall be subject to this part.
   12880.2.  (a) A pet insurer shall not exclude coverage on the
basis of a preexisting condition provision for a period beyond six
months following the insured's effective date of coverage. A
preexisting condition provision contained in a pet insurance policy
may only relate to conditions for which medical advice, diagnosis,
care, or treatment, including, but not limited to, use of
prescription drugs, was recommended or received from a veterinarian
during the six months immediately preceding the effective date of
coverage.
   (b) A pet insurer that does not utilize a preexisting condition
provision may impose a waiting or affiliation period not to exceed 30
days before the coverage subject to this part shall become
effective. During the waiting or affiliation period, the insurer is
not required to provide coverage for veterinary expenses and no
premium shall be charged to the policyholder or insured.
   12880.3.  A pet insurer shall do one of the following:
   (a) Provide reimbursement for the covered veterinary expenses
incurred by the insured without limitation, except for any applicable
coinsurance.
   (b) Provide reimbursement for the covered veterinary expenses
incurred by the insured, limited by any applicable coinsurance and
one of the following:
   (1) The reasonable and customary charges for the veterinary
expenses incurred by the insured, as established in the geographic
area or metropolitan status where the expenses were incurred. The
insurer shall clearly disclose the source of those reasonable and
customary charges.
   (2) The insurer's benefit schedule which, if used, must include a
side-by-side comparison between that schedule and the reasonable and
customary charges for the veterinary expenses incurred by the
insured, as established in the geographic area or metropolitan status
where the expenses were incurred. The insurer shall also clearly
disclose the source of the reasonable and customary charges.
   12880.4.  In connection with the offering for sale of a pet
insurance policy, an insurer shall make a reasonable disclosure, as
part of its solicitation and sales materials, of the terms and
conditions relating to any preexisting condition provision,
hereditary disorder provision, waiting or affiliation period
provision, deductible provision, coinsurance provision, coverage
limit provision, and benefit schedule provision contained in the
policy. The disclosures required by this section shall be in addition
to any other disclosures required by law.