California Legislature—2013–14 Regular Session

Assembly BillNo. 2056

Introduced by Assembly Member Dababneh

February 20, 2014

An act to amend Section 120 of, and to add Part 9 (commencing with Section 12880) to Division 2 of, the Insurance Code, relating to insurance.


AB 2056, as introduced, Dababneh. Insurance: pet insurance.

Existing law governs the business of insurance and authorizes the Insurance Commissioner to provide oversight over the insurance industry including, life and disability insurance, health insurance, workers’ compensation, and liability insurance. The commissioner is authorized to, among other things, conduct investigations and bring enforcement actions against insurers for violations of the laws governing the business of insurance. Insurance in the state is divided into classes including, among other things, miscellaneous insurance, which includes insurance against loss from damage done by lightning and any insurance not included in the foregoing classes but which is a proper subject of insurance.

This bill would add pet insurance as a type of miscellaneous insurance, define certain terms, and specify certain disclosures an insurer of pet insurance is required to make to consumers. This bill would apply to a policy of pet insurance that is marketed, issued, amended, renewed, or delivered to a resident of this state, on or after January 1, 2015, regardless of the situs of the contract or master group policyholder, or the jurisdiction in which the contract was issued or delivered. This bill would require an insurer of pet insurance to disclose, among other things, whether the policy excludes coverage because of a preexisting condition, a hereditary disorder, or a congenital anomaly or disorder. This bill would authorize the commissioner to hold a hearing to determine if an insurer is in violation of the provisions governing pet insurance and to assess a civil penalty, which is to be determined by the commissioner but not to exceed $5,000 for each violation, or $10,000 for a willful violation. The hearing would be required to be conducted pursuant to the Administrative Procedure Act, except as specified, and a person found to be in violation may have the proceedings reviewed by means of any remedy pursuant to a specified statute or the Administrative Procedure Act.

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

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

P2    1


Section 120 of the Insurance Code is amended
2to read:



Miscellaneous insurance includes insurance against loss
4from damage done, directly or indirectly by lightning, windstorm,
5tornado, earthquake or insurance under an open policy
6indemnifying the producer of any motion picture, television,
7theatrical, sport, or similar production, event, or exhibition against
8loss by reason of the interruption, postponement, or cancellation
9of such production, event, or exhibition due to death, accidental
10injury, or sickness preventing performers, directors, or other
11principals from commencing or continuing their respective
12performance orbegin delete duties;end deletebegin insert duties, pet insurance, as defined in Section
1312880,end insert
and any insurance not included in any of thebegin delete foregoing
14classes, andend delete
begin insert types of insurance specified in this sectionend insertbegin insert butend insert which
15is a proper subject of insurance.


SEC. 2.  

Part 9 (commencing with Section 12880) is added to
17Division 2 of the Insurance Code, to read:


19PART 9.  Pet Insurance





For purposes of this part, the following definitions shall

23(a) “Pet insurance” means an individual or group insurance
24policy that provides coverage for veterinary expenses.

P3    1(b) “Veterinarian” means an individual who holds a valid license
2to practice veterinary medicine from the Veterinary Medical Board
3pursuant to Chapter 11 (commencing with Section 4800) of
4Division 2 of the Business and Professions Code or other
5appropriate licensing entity in the jurisdiction that he or she
6practices in.

7(c) “Veterinary expenses” means the costs associated with
8medical advice, diagnosis, care, or treatment provided by a
9veterinarian, including, but not limited to, the cost of drugs
10prescribed by a veterinarian.

11(d) “Preexisting condition” means any condition for which the
12pet owner has received medical advice or the pet has received
13treatment for prior to enrollment in a new pet insurance policy.

14(e) “Waiting or affiliation period” means the period of time
15specified in a pet insurance policy that must transpire before some
16or all of the coverage in the policy can begin.

17(f) “Hereditary disorder” means an abnormality that is
18genetically transmitted from parent to offspring and may cause
19illness or disease.

20(g) “Congenital anomaly or disorder” means a condition that is
21present from birth, whether inherited or caused by the environment,
22which may cause or otherwise contribute to illness or disease.



A policy of pet insurance that is marketed, issued,
24amended, renewed, or delivered to a resident of this state, on or
25after January 1, 2015, regardless of the situs of the contract or
26master group policyholder, or the jurisdiction in which the contract
27was issued or delivered, is subject to this part.



(a) In connection with the sale of a new, amended,
29or renewed policy of pet insurance, a pet insurer shall disclose all
30of the following to the consumer:

31(1) If the policy excludes coverage due to any of the following

33(A) A preexisting condition.

34(B) A hereditary disorder.

35(C) A congenital anomaly or disorder.

36(2) Any policy provision that limits coverage through a waiting
37or affiliation period, a deductible, coinsurance, or an annual or
38lifetime policy limit.

39(3) Whether the insurer reduces coverage or increases premiums
40based on the insured’s claim history.

P4    1(b) If a pet insurer uses any of the terms in paragraph (1) of
2subdivision (a) in a policy of pet insurance, the insurer shall include
3a definition of the term in the policy and shall make that definition
4available through a link on the main page of the insurer’s Internet
5Web site.

6(c) A pet insurer shall clearly disclose the basis or formula on
7which the insurer determines claim payments under a pet insurance
8policy within the policy and through a link on the main page of
9the insurer’s Internet Web site.

10(d) A pet insurer that uses a benefit schedule to determine claim
11payment under a pet insurance policy shall do both of the

13(1) Clearly disclose the applicable benefit schedule in the policy.

14(2) Disclose all benefit schedules used by the insurer under its
15pet insurance polices through a link on the main page of the
16insurer’s Internet Web site.

17(e) A pet insurer that determines claim payments under a pet
18insurance policy based on usual and customary fees, or any other
19reimbursement limitation based on prevailing veterinary service
20provider charges, shall do both of the following:

21(1) Include a usual and customary fee limitation provision in
22the policy that clearly describes the insurer’s basis for determining
23usual and customary fees and how that basis is applied in
24calculation claim payments.

25(2) Disclose the insurer’s basis for determining usual and
26customary fees through a link on the main page of the insurer’s
27Internet Web site.

28(f) The insurer shall create a summary of all policy provisions
29required in subdivisions (a) through (e), inclusive, into a separate
30document titled “Insurer Disclosure of Important Policy

32(g) The insurer shall post the “Insurer Disclosure of Important
33Policy Provisions” document required in subdivision (f) through
34a link on the main page of the insurer’s Internet Web site.

35(h) Prior to the sale of a pet insurance policy, the insurer shall
36provide the consumer with a printed copy, in at least 12-point type,
37of the “Insurer Disclosure of Important Policy Provisions”
38document. The insurer shall obtain the consumer’s signature
39indicating that the consumer has read and understands the
40disclosure document.

P5    1(i) The disclosures required in this section shall be in addition
2to any other disclosure requirements required by law or regulation.



(a) A person who violates a provision of this part is
4liable to the state for a civil penalty to be determined by the
5commissioner, not to exceed five thousand dollars ($5,000) for
6each violation, or, if the violation was willful, a civil penalty not
7to exceed ten thousand dollars ($10,000) for each violation. The
8commissioner may establish the acts that constitute a distinct
9violation for purposes of this section. However, when the issuance,
10amendment, or servicing of a policy or endorsement is inadvertent,
11all of those acts constitute a single violation for purposes of this

13(b) The penalty imposed by this section shall be imposed by
14and determined by the commissioner pursuant to Section 12880.4.
15The penalty imposed by this section is appealable by means of any
16remedy provided by Section 12940 or by Chapter 5 (commencing
17with Section 11500) of Part 1 of Division 3 of Title 2 of the
18Government Code.



Whenever the commissioner shall have reason to
20believe that a person has engaged or is engaging in this state in a
21violation of this article, and that a proceeding by the commissioner
22in respect thereto would be to the interest of the public, he or she
23shall issue and serve upon that person an order to show cause
24containing a statement of the charges in that respect, a statement
25of that person’s potential liability under this part, and a notice of
26a hearing thereon to be held at a time and place fixed therein, which
27shall not be less than 30 days after the service thereof, for the
28purpose of determining whether the commissioner should issue
29an order to that person to, pay the penalty imposed by Section
3012880.3, and to cease and desist those methods, acts, or practices,
31or any of them that violate this article.

32If the charges or any of them are found to be justified, the
33commissioner shall issue and cause to be served upon that person
34an order requiring that person to pay the penalty imposed by
35Section 12880.3 and to cease and desist from engaging in those
36methods, acts, or practices found to be in violation of this part.

37The hearing shall be conducted in accordance with the
38Administrative Procedure Act (Chapter 5 (commencing at Section
3911500) of Part 1 of Division 3 of Title 2 of the Government Code),
40except that the hearings may be conducted by an administrative
P6    1law judge in the administrative law bureau when the proceedings
2involve a common question of law or fact with another proceeding
3arising under other Insurance Code sections that may be conducted
4by administrative law bureau administrative law judges. The
5commissioner and the appointed administrative law judge shall
6have all the powers granted under the Administrative Procedure

8The person shall be entitled to have the proceedings and the
9order reviewed by means of any remedy provided by Section 12940
10or by the Administrative Procedure Act.



The commissioner may, as conditions warrant, after
12notice and hearing, adopt reasonable rules and regulations, and
13amendments and additions to those regulations, as are necessary
14to administer this part.