BILL NUMBER: AB 2411 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 15, 2010
INTRODUCED BY Assembly Member Jones
( Coauthors: Assembly Members
Charles Calderon, Carter, Feuer,
Salas, Solorio, and Torres )
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 amended, 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 , in connection with
the sale of a new, amended, or renewed pet insurance policy on or
after July 1, 2011, require pet insurers to reasonably disclose to
the consumer (1) if the policy excludes coverage on the basis of a
preexisting condition or other disorder, as specified, (2) any policy
provision that limits coverage in a specified manner, and (3)
whether the insurer reduces coverage or increases premiums based on
claims experience in any preceding policy period. The bill would
also, with respect to pet insurance policies marketed, issued,
amended, renewed, or delivered on or after July 1, 2011, require pet
insurers that determine claim payments on any basis to clearly
disclose that basis in the policy and through a link on the
insurer's Internet Web site, 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
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 July 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.
12880.4. (a) In connection with the sale of a new, amended, or
renewed policy of pet insurance on or after July 1, 2011, a pet
insurer shall reasonably disclose all of the following to the
consumer:
(1) If the policy excludes coverage due to any of the following:
(A) A preexisting condition.
(B) A hereditary disorder.
(C) A congenital anomaly or disorder.
(2) Any policy provision that limits coverage through a waiting or
affiliation period, a deductible, coinsurance, or an annual or
lifetime policy limit.
(3) Whether the insurer reduces coverage or increases premiums
based on claims experience in any preceding policy period.
(b) If a pet insurer uses any of the terms set forth in
subparagraph (A) to (C), inclusive, of paragraph (1) of subdivision
(a) in a policy of pet insurance, the insurer shall include a
definition of the term in the policy and shall make that definition
available via a link on the main page of the insurer's Internet Web
site.
(c) A pet insurer that determines claim payments under a pet
insurance policy on any basis shall clearly disclose that basis in
the policy and through a link on the main page of the insurer's
Internet Web site.
(d) A pet insurer that uses a benefit schedule to determine claim
payments under a pet insurance policy shall do both of the following:
(1) Include the applicable benefit schedule in the policy.
(2) Disclose all benefit schedules used by the insurer under its
pet insurance policies through a link on the main page of the insurer'
s Internet Web site.
(e) A pet insurer that determines claim payments under a pet
insurance policy based on usual and customary fees, or any other
reimbursement limitation based on prevailing veterinary service
provider charges, shall do both of the following:
(1) Include a usual and customary fee limitation provision in the
policy that clearly describes the insurer's basis for determining
usual and customary fees and how that basis is applied in calculating
claim payments.
(2) Disclose the insurer's basis for determining usual and
customary charges under the policy via a link on the main page of the
insurer's Internet Web site.
(f) The disclosures required by this section shall be in addition
to any other disclosures required by other applicable law.