California Legislature—2013–14 Regular Session

Assembly Bill No. 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.

LEGISLATIVE COUNSEL’S DIGEST

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:

SECTION 1.  

Section 120 of the Insurance Code is amended
to read:

120.  

Miscellaneous insurance includes insurance against loss
from damage done, directly or indirectly by lightning, windstorm,
tornado, earthquake or insurance under an open policy
indemnifying the producer of any motion picture, television,
theatrical, sport, or similar production, event, or exhibition against
loss by reason of the interruption, postponement, or cancellation
of such production, event, or exhibition due to death, accidental
injury, or sickness preventing performers, directors, or other
principals from commencing or continuing their respective
performance or begin delete duties; end delete begin insert duties, pet insurance, as defined in Section
12880, end insert and any insurance not included in any of the begin delete foregoing
classes, and end delete begin insert types of insurance specified in this section end insert begin insert but end insert which
is a proper subject of insurance.

SEC. 2.  

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

 

PART 9.  Pet Insurance

 

12880.  

For purposes of this part, the following definitions shall
apply:

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

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

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

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

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

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

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

12880.1.  

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, is subject to this part.

12880.2.  

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

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

(A) A preexisting condition.

(B) A hereditary disorder.

(C) A congenital anomaly or disorder.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

12880.3.  

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

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

12880.4.  

Whenever the commissioner shall have reason to
believe that a person has engaged or is engaging in this state in a
violation of this article, and that a proceeding by the commissioner
in respect thereto would be to the interest of the public, he or she
shall issue and serve upon that person an order to show cause
containing a statement of the charges in that respect, a statement
of that person’s potential liability under this part, and a notice of
a hearing thereon to be held at a time and place fixed therein, which
shall not be less than 30 days after the service thereof, for the
purpose of determining whether the commissioner should issue
an order to that person to, pay the penalty imposed by Section
12880.3, and to cease and desist those methods, acts, or practices,
or any of them that violate this article.

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

The hearing shall be conducted in accordance with the
Administrative Procedure Act (Chapter 5 (commencing at Section
11500) of Part 1 of Division 3 of Title 2 of the Government Code),
except that the hearings may be conducted by an administrative
law judge in the administrative law bureau when the proceedings
involve a common question of law or fact with another proceeding
arising under other Insurance Code sections that may be conducted
by administrative law bureau administrative law judges. The
commissioner and the appointed administrative law judge shall
have all the powers granted under the Administrative Procedure
Act.

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

12880.5.  

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