BILL NUMBER: SB 1449 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY AUGUST 20, 2012
AMENDED IN ASSEMBLY AUGUST 6, 2012
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 10110.5, 10271, and 10292 of, and to add
Section 10271.1 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 instead make those provisions inapplicable to
provisions and supplemental contracts that operate to safeguard
against lapse, or give a special surrender benefit if the owner,
insured, or annuitant, meets certain benefit triggers. The bill would
specify that the provisions or supplemental contracts that operate
to safeguard life insurance contracts against lapse are defined as 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 benefit" 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. The bill would authorize a contract or supplemental
contract issued by an admitted life and disability insurer to contain
a provision for a waiver of a special surrender benefit for a life
insurance or annuity contract in the event of voluntary or
involuntary unemployment of the owner, insured, or annuitant.
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 specify that a
provision or supplemental contract that operates to safeguard a life
insurance contract from lapse or includes a special surrender benefit
shall be considered an integral part of a contract and would require
the insurer to submit, for information purposes, a sample copy of
the life insurance or annuity contract with which the supplemental
contract will be used in order to facilitate the review of the
supplemental contract. The bill would prohibit a provision or
supplemental contract that contains any title, description, or any
other indication that would describe or imply that the policy or
supplemental contract provides long-term care coverage, and would
require a provision or supplemental contract to specify any
applicable exclusions, which the bill would limit, as provided.
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 10110.5 of the Insurance Code is amended to
read:
10110.5. (a) A policy or endorsement issued by an admitted life
and disability insurer may contain a provision for a waiver of
premium payments in the event of involuntary unemployment of the
insured. Insurers issuing policies or endorsements which contain that
provision shall establish any additional reserves and file any
additional financial reports that the commissioner may require.
(b) A contract or supplemental contract issued by an admitted life
and disability insurer may contain a provision for a waiver of
special surrender benefit for a life insurance or annuity contract in
the event of voluntary or involuntary unemployment of the owner,
insured, or annuitant, as applicable. Insurers issuing contracts or
supplemental contracts which contain that provision shall establish
any additional reserves and file any additional financial reports
that the commissioner may require.
SEC. 2. Section 10271 of the Insurance Code is amended to read:
10271. (a) Except as set forth in 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, that provide additional benefits in case of death or
dismemberment or loss of sight by accident, or that operate to
safeguard those contracts against lapse, as described in subdivision
(a) of Section 10271.1, or give a special surrender benefit, as
defined in subdivision (b) of Section 10271.1, or a special benefit,
in the event that the owner, insured, or annuitant, as applicable,
meets the benefit triggers specified in the life insurance or annuity
contract or supplemental 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 owner, insured, or annuitant, as applicable. The
provisions required by paragraph (2) shall be preceded individually
by the appropriate caption as provided in subparagraph (D)
of paragraph (2) , or, at the option of the insurer, by the
appropriate individual or group captions or subcaptions as the
commissioner may approve.
(2) With respect to the benefit standards described in
subdivisions (a) and (b) of Section 10271.1, the following
requirements apply to the supplemental contracts with these benefits:
(A) Either the contract or supplemental contract shall provide
that the contract and the supplemental contract constitute the entire
insurance or annuity contract consistent with paragraph (7) of
subdivision (c) of Section 2534.3 of Title 10 of the California Code
of Regulations, and shall also provide that no agent has the
authority to change the contract or to waive any of its provisions.
This requirement applies without regard to whether the contract is a
variable or nonvariable contract, or a group or individual contract.
This provision shall be preceded individually by a caption
stating "ENTIRE CONTRACT; CHANGES:" or other appropriate caption as
the commissioner may approve.
(B) Either the contract or supplemental contract shall provide for
reinstatement consistent with paragraph (3) of subdivision (c) of
Section 2534.3 of Title 10 of the California Code of Regulations.
This requirement applies without regard to whether the contract is a
variable or nonvariable contract, or a group or individual contract.
This provision shall be preceded individually b y a
caption stating "REINSTATEMENT:" or other appropriate caption as the
commissioner may approve.
(C) Supplemental contracts subject to underwriting shall include
an incontestability statement that provides that the insurer shall
not contest the supplemental contract after it has been in force
during the lifetime of the insured for two years from its date of
issue, and may only be contested based on a statement made in the
application for the supplemental contract, if the statement is
attached to the contract. The statement upon which the contest is
made shall be material to the risk accepted or the hazard assumed by
the insurer. This provision shall be preceded individually by a
caption stating "INCONTESTABLE:" or other appropriate caption as the
commissioner may approve.
(D) A provision or supplemental contract described in subdivision
(a) shall also include:
(i) NOTICE OF CLAIM: The insurer may require written notice of
claim no less than 20 days after an occurrence covered by the
provision or supplemental contract, or commencement of any loss
covered by the provision or supplemental contract. Notice given by or
on behalf of the insured or the beneficiary, as applicable to the
insurer at the insurer's address or telephone number, or to any
authorized agent of the insurer, with information sufficient to
identify the insured, shall be deemed notice to the insurer.
(ii) CLAIM FORMS: The insurer, upon receipt of a notice of claim,
shall 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 the
provision or supplemental contract as to proof of occurrence or proof
of loss upon submitting, within the time fixed in the provision or
supplemental contract for filing proof of occurrence or proof of
loss, written proof covering the character and the extent of the
occurrence or loss.
(iii) PROOF OF LOSS: The insurer may require that the insured
provide written proof of occurrence or proof of loss no less than 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.
(iv) 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, or annuitant, as
applicable.
(d) A provision or supplemental contract described in subdivision
(a) shall not contain any title, description, or any other indication
that would describe or imply that the policy or supplemental
contract provides long-term care coverage.
(e) Commencing two years from the date of the issuance of the
provision or supplemental contract, no claim for loss incurred or
disability, as defined in the provision or supplemental contract, may
be reduced or denied on the grounds that a disease or physical
condition not excluded from coverage by name or specific description
effective on the date of loss had existed prior to the effective date
on the coverage of the provision or supplemental contract.
(f) With regard to benefits set forth in Section 10271.1, the
provisions and supplemental contracts shall specify any applicable
exclusions, which shall be limited to the following:
(1) Total disability caused or substantially contributed to by any
attempt at suicide or intentionally self-inflicted injury, while
sane or insane.
(2) Total disability caused or substantially contributed to by war
or an act of war, as defined in the exclusion provisions of the
contract.
(3) Total disability caused or substantially contributed to by
active participation in a riot, insurrection, or terrorist activity.
(4) Total disability caused or substantially contributed to by
committing or attempting to commit a felony.
(5) Total disability caused or substantially contributed to by
voluntary intake of either:
(A) Any drug, unless prescribed or administered by a physician and
taken in accordance with the physician's instructions.
(B) Poison, gas, or fumes, unless they are the direct result of an
occupational accident.
(6) Total disability occurring after the policy anniversary or
supplemental contract anniversary, as applicable and as defined in
the policy or supplemental contract, on which the insured attains a
specified age of no less than 65.
(7) Total disability in consequence of the insured being
intoxicated, as defined by the jurisdiction where the total
disability occurred.
(8) Total disability caused or materially contributed to by
engaging in an illegal occupation.
(g) 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. 3. Section 10271.1 is added to the Insurance Code, to read:
10271.1. (a) (1) Provisions or supplemental contracts that
operate to safeguard life insurance contracts against lapse are
defined as 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 insurer may require total disability to continue for an
uninterrupted period of time specified in the contract or
supplemental contract, or the insurer may allow separate periods of
disability to be combined.
(5) 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 insurer 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 insurer 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 insurer 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 benefit" is defined as 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, or annuitant, as applicable, meets
any of the following criteria:
(1) Develops any medical condition where the owner's, insured's,
or annuitant'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 12 months or greater than 24 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 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 any medical condition that would, in the absence of
treatment, result in death within a limited period of time, as
defined in the provision or supplemental contract, but that shall not
be restricted to a period of less than six months.
(4) Is totally disabled, as follows:
(A) During the first 24 months of total disability, the owner,
insured, or annuitant, as applicable, 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 owner,
insured, or annuitant, as applicable, 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.
(C) 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.
(D) The insurer may require the total disability to continue for
an uninterrupted period of time specified in the contract or
supplemental contract, or the insurer may allow separate periods of
disability to be combined.
(5) Has a chronic illness as defined pursuant to either
subparagraph (A) or (B):
(A) Either of the following:
(i) Impairment in performing two out of seven activities of daily
living, as set forth in subdivisions (a) and (g) of Section 10232.8,
meaning the insured needs human assistance, or needs continual
substantial supervision.
(ii) The insured has an impairment of cognitive ability, meaning a
deterioration or loss of intellectual capacity due to mental illness
or disease, including Alzheimer's disease or related illnesses, that
requires continual supervision to protect oneself or others.
(B) Either of the following:
(i) Impairment in performing two out of six activities of daily
living as described in subdivisions (b), (d), (e), and (f) of Section
10232.8 due to a loss of functional capacity to perform the
activity.
(ii) Impairment of cognitive ability, meaning the insured needs
substantial supervision due to severe cognitive impairment, as
described in subdivision subdivisions
(b) and (e) of Section 10232.8.
(6) Has become involuntarily or voluntarily unemployed.
SEC. 4. Section 10292 of the Insurance Code is amended to read:
10292. (a) A supplemental contract described in Section 10271
shall not be delivered or issued for delivery to any person in this
state until a copy of the form thereof is submitted to, and approved
by, the commissioner. If 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 or her power of
approval or disapproval is limited to the supplemental portion and
any other portions that relate to the supplemental portion.
(b) A supplemental contract described in Section 10271.1 shall be
considered an integral part of a contract for purposes of this
section. To facilitate the review of a supplemental contract, the
insurer shall submit, for informational purposes, a sample copy of
the life insurance or annuity contract with which the supplemental
contract will be used. To facilitate the location of the required
provisions as stated in paragraph (2) of subdivision (b) of Section
10271, the insurer shall provide the sample copy page reference for
the provisions that appear in the contract.
(c) The commissioner may adopt reasonable rules and regulations as
are necessary to administer and carry out the purposes of Sections
10271 and 10271.5, and this section.