BILL NUMBER: SB 1449 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JUNE 21, 2012
AMENDED IN SENATE APRIL 17, 2012
AMENDED IN SENATE MARCH 29, 2012
INTRODUCED BY Senator Calderon
FEBRUARY 24, 2012
An act to amend Sections 10271 and 10292 of, and to add
Sections 101.5 and 101.6 to Section 10271.5
to, the Insurance Code, relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
SB 1449, as amended, Calderon. Life insurance and annuities.
Existing law governs the business of insurance and defines various
types of insurance for these purposes, including life insurance, and
disability insurance. Existing law generally makes the
requirements imposed on disability insurance contracts inapplicable
to life insurance, endowment, and annuity contracts, or supplemental
contracts thereto, that provide additional benefits in case of death
or dismemberment or loss of sight by accident, operate to safeguard
contracts against lapse, or give a special surrender value, a special
benefit, or an annuity, if the insured or annuitant becomes totally
and permanently disabled.
This bill would provide that a life insurance policy that
includes accelerated payment of part or all of the death benefits, a
waiver of a premium benefit, or a waiver of surrender charges, as
specified, or an annuity that includes a waiver of surrender charges,
shall be deemed to be life insurance or annuity coverage, as
applicable and shall not be subject to provisions governing
disability, health, or long-term care insurance, unless those
provisions also apply to life insurance or annuities, as applicable.
instead make those provisions inapplicable to
provisions and supplemental contracts that operate to safeguard
against lapse, or give a special surrender value, benefit, or
annuity, if the owner, insured, annuitant, or beneficiary meets
certain benefit triggers. The bill would specify that the
provisions or supplemental contracts that operate to safeguard life
insurance contracts against lapse include a waiver of a premium
benefit or monthly deduction benefit when the insured becomes totally
disabled, as specified, and would define the term
"special surrender value" for purposes of those provisions. The bill
would require those provisions and supplemental contracts to contain
certain provisions, including information on giving notice of a
claim.
Existing law requires a supplemental contract described above, or,
if the supplemental contract is an integral part of a contract of
life insurance the entire contract, to be submitted to the Insurance
Commissioner for approval, and prohibits the commissioner from
approving a contract under certain circumstances, including if the
contract contains any provision that is likely to mislead a person to
whom the policy is offered, delivered, or issued.
This bill would require, if a supplemental contract is an integral
part of an annuity contract, the entire contract to be submitted to
the commissioner for approval. The bill would also prohibit the
commissioner from approving a contract or supplemental contract if it
contains any provision that the products constitute long-term care
or disability insurance or provide long-term care coverage or
disability benefits.
The bill would require the Department of Insurance, by January 1,
2014, to submit a report to the Legislature on the number and type of
contracts and supplemental contracts approved or disapproved by the
commissioner pursuant to the bill's provisions.
Vote: majority. Appropriation: no. Fiscal committee: no
yes . State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10271 of the
Insurance Code is amended to read:
10271. (a) Except as provided
set forth in Section 10292
this section , this chapter shall not apply to ,
or in any way affect , provisions in life insurance,
endowment , or annuity contracts , or
contracts supplemental thereto which contain only such
provisions relating to disability insurance as (a) ,
that provide additional benefits in case of death or
dismemberment or loss of sight by accident , or
as (b) that operate to safeguard such
those contracts against lapse, as described
in subdivision (a) of Section 10271.5, or to
give a special surrender value, or
as defined in subdivision (b) of Section 10271.5, a special
benefit, or an annuity, in the event that the owner,
insured or , annuitant shall
become totally and permanently disabled as defined by the contract or
supplemental contract , or beneficiary, as
applicable, meets the benefit triggers specified in the life
insurance or annuity contract or a rider, amendment, or endorsement
attached to the contract .
(b) (1) A provision or supplemental contract described in
subdivision (a) shall contain all of the provisions set forth in
paragraph (2). However, an insurer, at its option, may substitute for
one or more of the provisions a corresponding provision of different
wording approved by the commissioner that is not less favorable in
any respect to the insurer or the beneficiary.
(2) The provisions required to be included in a provision or
supplemental contract pursuant to this subdivision shall be in the
following form:
ENTIRE CONTRACT: CHANGES: This provision or supplemental contract,
including any endorsement and attached papers, constitutes the
entire provision or supplemental contract. No change in the provision
or supplemental contract shall be valid until approved by an
executive officer of the insurer that is endorsed on or attached to
the contract. No agent has authority to change the provision or
supplemental contract or to waive any of its provisions.
REINSTATEMENT: If there is a separate premium charged for the
provision or supplemental contract, and if that premium is not paid
on time, and if the insurer or its agent subsequently accepts the
premium, the insurer shall, without requiring an application for
reinstatement, reinstate the provision or supplemental contract.
NOTICE OF CLAIM: Written notice of claim must be given to the
insurer within 20 days after an occurrence covered by the provision
or supplemental contract, or commencement of any loss covered by the
provision or supplemental contract, or as soon thereafter as is
reasonably possible. Notice given by or on behalf of the insured or
the beneficiary to the insurer at address/telephone number], or to
any authorized agent of the insurer, with information sufficient to
identify the insured, shall be deemed notice to the insurer.
CLAIM FORMS: The insurer, upon receipt of a notice of claim, will
furnish to the claimant such forms as are usually furnished by it for
filing a proof of occurrence or a proof of loss. If the forms are
not furnished within 15 days after giving notice, the claimant shall
be deemed to have complied with the requirements of this policy as to
proof of occurrence or proof of loss upon submitting, within the
time fixed in the policy for filing proof of occurrence or proof of
loss, written proof covering the character and the extent of the
occurrence or loss.
PROOF OF LOSS: Written proof of occurrence or proof of loss must
be furnished to the insurer at its office in case of claim for
occurrence or loss for which this provision or supplemental contract
provides a benefit within 90 days after the termination of the period
for which the insurer is liable, and, in the case of claim for any
other occurrence or loss, within 90 days after the date of the
occurrence or loss. Failure to furnish proof within the time required
shall not invalidate or reduce the claim if it was not reasonably
possible to give proof within the time, provided proof is furnished
as soon as reasonably possible and, except in the absence of legal
capacity, no later than one year from the time proof is otherwise
required.
PHYSICAL EXAMINATIONS: The insurer, at its own expense, shall have
the right and opportunity to examine the person of the insured when
and as often as the insurer may reasonably require during the
pendency of a claim.
(c) The commissioner shall review contracts and supplemental
contracts to ensure that the language can be readily understood and
interpreted, and shall not approve any contract or supplemental
contract for insurance or delivery in this state if the commissioner
finds that the contract or supplemental contract does any of the
following:
(1) Contains any provision, label, description of its contents,
title, heading, backing, or other indication of its provisions that
is unintelligible, uncertain, ambiguous, or abstruse, or likely to
mislead a person to whom the contract or supplemental contract is
offered, delivered, or issued.
(2) Constitutes fraud, unfair trade practices, and insurance
economically unsound to the owner, insured, annuitant, or
beneficiary, as applicable.
(3) Contains any provision, label, description of its contents,
title, heading, backing, or other indication of its provisions that
the products constitute long-term care or disability insurance or
provide long-term care coverage or disability benefits.
(d) If the commissioner notifies the insurer, in writing, that the
filed form does not comply with the requirements of law and
specifies the reasons for his or her opinion, it is unlawful for an
insurer to issue any policy in that form.
SEC. 2. Section 10271.5 is added to the
Insurance Code , to read:
10271.5. (a) (1) Provisions or supplemental contracts that
operate to safeguard life insurance contracts against lapse include,
but are not limited to, a waiver of premium benefit or a waiver of
monthly deduction benefit, as applicable, in which the insurer waives
the premium or monthly deduction for a life insurance contract when
the insured becomes totally disabled, as defined in the contract or
supplemental contract, and where the waiver continues until the end
of the insured's disability, or until the attainment of an age
established by the insurer.
(2) For purposes of this subdivision, total disability shall not
be less favorable to the insured than the following:
(A) During the first 24 months of total disability, the insured is
unable to perform with reasonable continuity the substantial and
material duties of his or her job due to sickness or bodily injury.
(B) After the first 24 months of total disability, the insured,
due to sickness or bodily injury, is unable to engage with reasonable
continuity in any other job in which he or she could reasonably be
expected to perform satisfactorily in light of his or her age,
education, training, experience, station in life, or physical and
mental capacity.
(3) The definition of total disability may also include
presumptive total disability, such as the insured's total and
permanent loss of sight of both eyes, hearing of both ears, speech,
the use of both hands, both feet, or one hand and one foot.
(4) The total disability shall be required to continue for a
consecutive period of time specified in the contract or supplemental
contract.
(5) The insurer may provide exclusions based on injuries or
illness that were intentionally self-inflicted or the product of
reckless or illegal conduct.
(6) The waiver of premium or monthly deduction benefit shall
continue for the period specified in the contract or supplemental
contract, but shall not be less favorable to the insured than the
following:
(A) If the insured's total disability begins before the insured
attains 60 years of age, the company shall waive all premiums or
monthly deductions due for the period of the total disability, and if
the total disability extends to the insured's attainment of 65 years
of age, the company shall waive all further premiums or monthly
deductions due.
(B) If the insured's total disability begins after the age
specified in subparagraph (A), the company shall waive all premiums
or monthly deductions due for the period that the insured continues
to be totally disabled up to 65 years of age.
(b) "Special surrender value" includes a "waiver of surrender
charge benefit" wherein the insurer waives the surrender charge
usually charged for a withdrawal of funds from the cash value of a
life insurance contract or the account value of an annuity contract
if the owner, insured, annuitant, or beneficiary, as applicable,
meets any of the following criteria:
(1) Develops any medical condition where the annuitant or policy
owner's life expectancy is expected to be less than or equal to a
limited period of time that shall not be restricted to a period of
less than six months.
(2) Is receiving, as prescribed by a physician and surgeon,
registered nurse, or licensed social worker, home care or
community-based services, as defined in subdivision (a) of Section
10232.9, or is confined in a skilled nursing facility, convalescent
nursing home, or extended care facility, which shall not be defined
more restrictively than as in the Medicare Program, or is confined in
a residential care facility or residential care facility for the
elderly, as defined in Section 1569.2 of the Health and Safety Code.
Out-of-state providers of services shall be defined as comparable in
licensure and staffing requirements to California providers.
(3) Has a medical condition that may reduce his or her life
expectancy.
(4) Becomes confined in an eligible institution, as defined in the
contract or supplemental contract, because he or she needs
extraordinary medical intervention.
(5) Is totally disabled and unable to perform any work for pay or
profit for a period of time specified in the contract or supplemental
contract.
(6) Is disabled and is prevented from engaging in the substantial
and material duties of an occupation for which she or he becomes
qualified by reason of education or training or for a period
specified in the contract, not to exceed 12 months.
(7) Has a chronic illness, defined as a permanent inability to
perform a specified number of activities of daily living, or has a
permanent severe cognitive impairment or a similar form of dementia.
(8) Has become involuntarily or voluntarily unemployed.
(d) The department shall report to the Legislature by January 1,
2014, the number and type of contracts and supplemental contracts
approved or disapproved under this section. The report shall include,
by category of policy and the feature involved, a statement of the
reasons for disapproval. The report shall not include the identity of
any insurer, specific contract language, or any proprietary
language.
(e) (1) The requirement for submitting a report imposed under
subdivision (d) is inoperative on January 1, 2018, pursuant to
Section 10231.5 of the Government Code.
(2) The report submitted pursuant to subdivision (d) shall comply
with Section 9795 of the Government Code.
SEC. 3. Section 10292 of the Insurance
Code is amended to read:
10292. (a) A supplemental contract
of the kind mentioned in described in Section
10271 shall not be delivered or issued for delivery to any person in
this State state until a copy of the
form thereof is submitted to , and approved by ,
the commissioner. If such the
supplemental contract is an integral part of a contract of life
insurance or annuity , the entire contract shall be
submitted to the commissioner , but his power of approval
or disapproval is limited to the supplemental portion
described in such section and such
any other portions as that relate
to such the supplemental portion.
The
(b) The commissioner may
make adopt reasonable rules and regulations
concerning the provisions in such contracts and their
submission to and approval by him as are necessary
, advisable or convenient to enforce the standards set forth in this
chapter found by him to be applicable to any such supplemental
contract; provided, however, that none of the standards set forth in
Section 10291.5 except those in subsections (a) and (b)(1) thereof,
shall be deemed applicable to such supplemental contract
to administer and carry out the purposes of Sections 10271 and
10271.5, and this section .
SECTION 1. Section 101.5 is added to the
Insurance Code, to read:
101.5. If a policy of life insurance includes any of the
following provisions, the policy shall be deemed to be life insurance
and shall not be subject to provisions governing disability, health,
or long-term care insurance unless those provisions also apply to
life insurance:
(a) Accelerated payment of part or all of the death benefits if an
insured becomes confined in an eligible institution; needs
extraordinary medical intervention; has a medical condition that, in
the absence of extensive or extraordinary medical treatment, would
result in a drastically reduced life span; is unable to perform a
specified number of activities of daily living; or is cognitively
impaired.
(b) Waiver of premium benefit until the end of disability of the
insured or the attainment of an age as established by the insurer.
(c) Waiver of surrender charges if the insured has been diagnosed
with a limited life expectancy, is receiving care from a health care
facility, has a medical condition that may reduce his or her life
expectancy, is disabled and unable to perform tasks of daily living
or be employed, or is cognitively impaired.
SEC. 2. Section 101.6 is added to the Insurance
Code, to read:
101.6. If an annuity includes a waiver of surrender charges for
an annuitant or beneficiary who is diagnosed with a limited life
expectancy, is receiving care from a health care facility, has a
medical condition that may reduce his or her life expectancy, is
disabled and unable to perform tasks of daily living or be employed,
or is cognitively impaired, the annuity shall be deemed to be annuity
coverage and shall not be subject to provisions governing
disability, long-term care, and health insurance, unless those
provisions also apply to annuities.