Amended in Assembly April 29, 2014

Amended in Assembly April 10, 2014

California Legislature—2013–14 Regular Session

Assembly BillNo. 1804


Introduced by Assembly Member Perea

February 18, 2014


An act to add Section 396 to the Insurance Code, relating to insurance.

LEGISLATIVE COUNSEL’S DIGEST

AB 1804, as amended, Perea. Insurance: notice of lapse.

Existing law requires an insurance policy to specify certain information, including, but not limited to, the parties to the contract, the property or life insured, the risks insured against, the premium, and the coverage period.

This bill, commencing July 1, 2015, would prohibit an individual insurance policy covering real property, personal property, as described, liability, or health, issued or renewed on or after July 1, 2015, from being issued until the applicant has been given the right to designatebegin delete at leastend delete one individual, in addition to the applicant, to receive the notice of lapse, termination, expiration, nonrenewal, or cancellation of the policy for nonpayment of the premium, as provided. The bill would prohibit an insurance policy from lapsing or being terminated for nonpayment of the premium unless the insurer, at least 10 days prior to the effective date of the lapse, termination, expiration, nonrenewal, or cancellation gives notice, as provided, to the insured and to the individualbegin delete or individualsend delete designated, if any, at the address provided by the insured for these purposes. begin insertThe bill would specify that an individual designated by a policyholder does not have any rights, whether as an additional insured or otherwise, to any benefits under the policy, other than the right to receive the notice of lapse, termination, expiration, nonrenewal, or cancellation.end insert

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 396 is added to the Insurance Code, to
2read:

3

396.  

(a) An individual policy shall not be issued until the
4applicant has been given the right to designatebegin delete at leastend delete one
5individual, in addition to the applicant, to receive the notice of
6lapse, termination, expiration, nonrenewal, or cancellation of a
7policy for nonpayment of the premium. Upon application for
8issuance of a policy, the insurer shall provide the applicant with
930 days to do one of the following:

10(1) Designate in writing the name, address, and telephone
11number ofbegin delete at leastend delete one individual, in addition to the applicant, who
12is to receive the notice of lapse, termination, expiration,
13nonrenewal, or cancellation for nonpayment of the premium.

14(2) (A) Provide a written waiver signed and dated by the
15applicant electing not to designatebegin delete additional personsend deletebegin insert an individualend insert
16 to receive the notice of lapse, termination, expiration, nonrenewal,
17or cancellation for nonpayment of the premium.

18(B) The required waiver shall read as follows:

19

20“Protection Against Unintended Lapse, Termination, Expiration,
21Nonrenewal, or Cancellation.

22I understand that I have the right to designatebegin delete at leastend delete one person
23other than myself to receive the notice of lapse, termination,
24expiration, nonrenewal, or cancellation of this insurance policy
25for nonpayment of the premium. I understand that notice will be
26given within 10 days after a premium is due and unpaid. I elect
27not to designate any person to receive the notice.

28Dated:____ Signature of Applicant:_____”

29

30(3) If after receiving notice from the insurer of the right to
31designatebegin delete additional personsend deletebegin insert an individualend insert to receive the notice of
32lapse, termination, expiration, nonrenewal, or cancellation for
P3    1nonpayment of the premium, the applicant fails to take action
2pursuant to either paragraph (1) or paragraph (2) within 30 days,
3the insured is deemed to have waived the right to designatebegin delete those
4additional personsend delete
begin insert a personend insert.

5(b) Notwithstanding subparagraph (C) of paragraph (2) of
6subdivision (a) of Section 791.13 or any other law, the insurer
7shall retain and utilize as necessary the contact information
8provided in the written designation for the lifetime of the policy,
9and allow the insured to update the written designation if the
10insured so requests.

11(c) Not less than every two years, the insurer shall notify the
12insured in writing of whichever of the following applies:

13(1) If an insured has previously provided a written designation
14pursuant to paragraph (1) of subdivision (a), the right to change
15the prior written designation by adding or deletingbegin delete additional
16personsend delete
begin insert a personend insert to receive the notice of lapse, termination,
17expiration, nonrenewal, or cancellation for nonpayment of the
18premium.

19(2) If the insured has previously waived the right to designate
20begin delete any personsend deletebegin insert a personend insert pursuant to paragraph (2) of subdivision (a),
21to exercise the right to designatebegin delete additional personsend deletebegin insert a personend insert to
22receive the notice of lapse, termination, expiration, nonrenewal,
23or cancellation for nonpayment of the premium.

24(d) When the insured pays the premium for an insurance policy
25through a payroll or pension deduction plan, the requirements
26contained in subdivision (a) need not be met until 60 days after
27the insured is no longer on that deduction payment plan. The
28application form for an insurance policy shall clearly indicate the
29deduction payment plan selected by the applicant.

30(e) An insurance policy shall not lapse or be terminated for
31nonpayment of the premium unless the insurer, at least 10 days
32prior to the effective date of the lapse, termination, expiration,
33nonrenewal, or cancellation, gives notice to the insured and to the
34individualbegin delete or individualsend delete designated pursuant to subdivision (a) at
35the address provided by the insured for purposes of receiving the
36notice of lapse, termination, expiration, nonrenewal, or cancellation
37for nonpayment of the premium. Notice shall be given by first-class
38United States mail, postage prepaid, within 10 days after the
39premium is due and unpaid.

P4    1(f) This section applies to policies of insurance, other than
2workers’ compensation insurance, on risks located or resident in
3this state that are issued and take effect or that are renewed after
4the effective date of this section and insuring any of the following
5contingencies:

6(1) Loss of or damage to real property that is used predominantly
7for residential purposes and that consists of not more than four
8dwelling units.

9(2) Loss of or damage to personal property in which natural
10persons resident in specifically described real property of the kind
11described in paragraph (1) have an insurable interest, except
12personal property used in the conduct of a commercial or industrial
13enterprise.

14(3) Legal liability of a natural person or persons for loss of,
15damage to, or injury to, persons or property, but not including
16policies primarily insuring risks arising from the conduct of a
17commercial or industrial enterprise.

18(4) Disability and health insurance as defined in Section 106.

19(g) This section applies to policies that are issued and take effect
20or that are renewed on or after July 1, 2015.

begin insert

21(h) An individual designated by a policyholder pursuant to this
22section to receive the notice of lapse, termination, expiration,
23nonrenewal, or cancellation of the policy for nonpayment of the
24premium does not have any rights, whether as an additional
25insured or otherwise, to any benefits under the policy, other than
26the right to receive the notice as provided by this section.

end insert
begin delete

27(h)

end delete

28begin insert(end insertbegin inserti)end insert This section shall become effective on July 1, 2015.



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