Amended in Senate August 7, 2014

Amended in Senate July 1, 2014

Amended in Assembly May 28, 2014

Amended in Assembly May 15, 2014

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, premium, and the coverage period.

This bill, commencing January 1, 2016, and with regard to private passenger automobile insurance that provides coverage for 6 months or longer, specified residential property insurance, and policies of individual disability income insurance that are issued and take effect or that are renewed on or after January 1, 2016, would require an insurer to maintain a verifiablebegin delete deliveryend delete process or adopt a procedure that allows an applicant or policyholder to designate one additional person to receive notice of lapse, termination, expiration, nonrenewal, or cancellation of a policy for nonpayment of premium, as specified. The bill would prohibit an insurance policy from lapsing or being terminated for nonpayment of 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 individual designated, if any, at the address provided by the policyholder for these purposes. The 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 for nonpayment of premium.

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 insurer shall do either of the following:

4(1) Maintain a verifiablebegin delete deliveryend delete process that allows a
5policyholder to designate in writing or by electronic transmission
6pursuant to Section 38.5 one additional person to receive notice
7of lapse, termination, expiration, nonrenewal, or cancellation of a
8policy for nonpayment of premium. The insurer shall notify the
9policyholder in writing or by electronic transmission pursuant to
10Section 38.5 of this right at the time of the application or within
1130 days after the inception date of an individual policy described
12in subdivisionbegin delete (e),end deletebegin insert (f),end insert and at least every two years thereafter. The
13notification described in this subdivision shall instruct the
14policyholder how to request the designation and how to replace
15or delete a designee. If a policyholder initiates contact with the
16insurer after the insurer has provided notice and the insurer
17complies with the policyholder’s request to establish or change
18the additional person to receive the notice described in this section,
19the insurer shall not be required to maintain additional verification.

20(2) Comply with subdivision (b).

21(b) An insurer that adopts the following procedure shall be
22deemed to have complied with subdivision (a).

23(1) Unless an applicant for insurance has been provided notice
24of the right set forth in this section prior to inception of the policy,
P3    1the insurer shall provide the policyholder, within 30 days after the
2inception date of an individual policy described in subdivisionbegin delete (e),end delete
3begin insert (f),end insert with notice of the right to designate one person, in addition to
4the policyholder, to receive notice of lapse, termination, expiration,
5nonrenewal, or cancellation of a policy for nonpayment of
6premium. The insurer shall provide each applicant or policyholder
7with notice in writing or by electronic transmission pursuant to
8Section 38.5 of the opportunity to make the designation. That
9notice shall instruct the applicant or policyholder on how he or
10she is to submit thebegin delete name, address, and telephone numberend deletebegin insert name
11and addressend insert
of one person, in addition to the applicant or
12policyholder, who is to receive notice of lapse, termination,
13expiration, nonrenewal, or cancellation of the policy for
14nonpayment of premium.

15(2) If after having been provided notice from the insurer of the
16right to designate an individual to receive notice of lapse,
17termination, expiration, nonrenewal, or cancellation for
18nonpayment of premium, the applicant or policyholder fails tobegin delete take
19action pursuant to subdivision (a)end delete
begin insert designate an individualend insert within
2030 days, the applicant or policyholder shall be conclusively
21presumed to have declined the opportunity to exercise his or her
22right at that time.

23(3) Notwithstanding subparagraph (C) of paragraph (2) of
24subdivision (a) of Section 791.13 or any other law, the insurer
25shall retain and utilize as necessary the contact information
26provided in the written designation for the lifetime of the policy,
27and allow the policyholder to update the written designation if the
28policyholder so requests.

begin delete

29(4)

end delete

30begin insert(c)end insertbegin insert(1)end insertbegin insertend insertA policyholder retains the right to designate the one
31additional person to receive notice of lapse, termination, expiration,
32nonrenewal, or cancellation for nonpayment of premium at any
33time, at the initiative of the policyholder, regardless of whether
34the policyholder previously declined to exercise that right. At least
35every two years, the insurer shall notify the policyholder in writing
36or by electronic transmission pursuant to Section 38.5, of
37whichever of the following applies:

38(A) If a policyholder has previously provided a designation
39pursuant to this subdivision, in writing or by electronic transmission
40pursuant to Section 38.5, the right to change the prior designation
P4    1by replacing or deleting a person to receive notice of lapse,
2termination, expiration, nonrenewal, or cancellation for
3nonpayment of premium.

4(B) If the policyholder has not previously designated a person
5to receive the notice of lapse, termination, expiration, nonrenewal,
6or cancellation for nonpayment of premium pursuant to this
7subdivision, the right to designate a person to receive notice of
8lapse, termination, expiration, nonrenewal, or cancellation for
9nonpayment of premium.

begin delete

10(C)

end delete

11begin insert(2)end insert The notice requirements in subparagraphs (A) and (B)begin insert of
12paragraph (1)end insert
may be provided to a policyholder in a single notice
13and shall not require two separate notices.

begin delete

14(c)

end delete

15begin insert(d)end insert When a policyholder pays the premium for an insurance
16policy through a payroll or pension deduction plan, the
17requirements contained in paragraph (1) of subdivision (b) need
18not be met until 60 days after the policyholder is no longer on that
19deduction payment plan. The application form for an insurance
20policy shall clearly indicate the deduction payment plan selected
21by the applicant.

begin delete

22(d)

end delete

23begin insert(e)end insert An insurance policy shall not lapse or be terminated for
24nonpayment of premium unless the insurer, at least 10 days prior
25to the effective date of the lapse, termination, expiration,
26nonrenewal, or cancellation, gives notice to the individual
27designated pursuant to subdivision (a) or (b) at the address provided
28by the policyholder for purposes of receiving the notice of lapse,
29termination, expiration, nonrenewal, or cancellation for
30nonpayment of premium.begin delete Noticeend deletebegin insert Notwithstanding any other law,
31noticeend insert
shall be given by first-class United States mail, postage
32prepaid, within 10 days after the premium is due and unpaid. This
33subdivision does not modify requirements for notice to the
34policyholder of lapse, termination, expiration, nonrenewal, or
35cancellation set forth in other sections of this code.

begin delete

36(e)

end delete

37begin insert(f)end insert This section applies only to policies of private passenger
38automobile insurance that provide coverage for six months or
39longer, policies of residential property insurance as described in
40subdivision (a) of Section 10087 that take effect or that are renewed
P5    1after the effective date of this section, and policies of individual
2disability income insurance as described in subdivision (i) of
3Section 799.01.

begin delete

4(f)

end delete

5begin insert(g)end insert This section applies to policies that are issued and take effect
6or that are renewed on or after January 1, 2016.

begin delete

7(g)

end delete

8begin insert(h)end insert An individual designated by a policyholder pursuant to this
9section to receive notice of lapse, termination, expiration,
10nonrenewal, or cancellation of the policy for nonpayment of
11premium does not have any rights, whether as an additional insured
12or otherwise, to any benefits under the policy, other than the right
13to receive notice as provided by this section.

begin delete

14(h)

end delete

15begin insert(i)end insert This section shall become operative on January 1, 2016.



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