Amended in Assembly April 24, 2014

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.

LEGISLATIVE COUNSEL’S DIGEST

AB 2056, as amended, 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.begin delete Thisend deletebegin insert Theend insert 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 afterbegin delete January 1, 2015,end deletebegin insert July 1, 2015,end insert regardless of the situs of the contract or master group policyholder, or the jurisdiction in which the contract was issued or delivered.begin delete Thisend deletebegin insert Theend insert bill would require an insurerbegin delete ofend deletebegin insert transactingend insert pet insurancebegin insert in this stateend insert to disclose, among other things, whether the policy excludes coverage because of a preexisting condition, a hereditary disorder,begin delete orend delete a congenital anomalybegin delete or disorder. Thisend deletebegin insert, or a chronic condition, and would require that pet insurance policies have a free look cancellation period of not less than 30 days, as provided.end insert

begin insertThisend insert 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.begin insert The bill would authorize the commissioner to adopt reasonable rules and regulations, as necessary, in accordance with the Administrative Procedure Act in order to implement these requirements.end insert

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 1.  

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

3

120.  

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 or duties, pet insurance, as defined in Section 12880,
13and any insurance not included in any of the types of insurance
14specified in this section but which is a proper subject of insurance.

15

SEC. 2.  

Part 9 (commencing with Section 12880) is added to
16Division 2 of the Insurance Code, to read:

 

P3    1PART 9.  Pet Insurance

2

 

begin delete
3

12880.  

For purposes of this part, the following definitions shall
4apply:

5(a) “Pet insurance” means an individual or group insurance
6policy that provides coverage for veterinary expenses.

7(b) “Veterinarian” means an individual who holds a valid license
8to practice veterinary medicine from the Veterinary Medical Board
9pursuant to Chapter 11 (commencing with Section 4800) of
10Division 2 of the Business and Professions Code or other
11appropriate licensing entity in the jurisdiction that he or she
12practices in.

13(c) “Veterinary expenses” means the costs associated with
14medical advice, diagnosis, care, or treatment provided by a
15veterinarian, including, but not limited to, the cost of drugs
16prescribed by a veterinarian.

17(d) “Preexisting condition” means any condition for which the
18pet owner has received medical advice or the pet has received
19treatment for prior to enrollment in a new pet insurance policy.

20(e) “Waiting or affiliation period” means the period of time
21specified in a pet insurance policy that must transpire before some
22or all of the coverage in the policy can begin.

23(f) “Hereditary disorder” means an abnormality that is
24genetically transmitted from parent to offspring and may cause
25illness or disease.

26(g) “Congenital anomaly or disorder” means a condition that is
27present from birth, whether inherited or caused by the environment,
28which may cause or otherwise contribute to illness or disease.

end delete
begin insert
29

begin insert12880.end insert  

For purposes of this part, the following definitions shall
30apply:

31(a) “Chronic condition” means a condition that can be treated
32or managed, but not cured.

33(b) “Congenital anomaly or disorder” means a condition that
34is present from birth, whether inherited or caused by the
35environment, which may cause or otherwise contribute to illness
36or disease.

37(c) “Hereditary disorder” means an abnormality that is
38genetically transmitted from parent to offspring and may cause
39illness or disease.

P4    1(d) “Pet insurance” means an individual or group insurance
2policy that provides coverage for veterinary expenses.

3(e) “Preexisting condition” means any condition for which a
4veterinarian provided medical advice, the pet received treatment
5for, or the pet displayed signs or symptoms consistent with the
6stated condition prior to the effective date of a pet insurance policy.

7(f) “Veterinarian” means an individual who holds a valid license
8to practice veterinary medicine from the Veterinary Medical Board
9pursuant to Chapter 11 (commencing with Section 4800) of
10Division 2 of the Business and Professions Code or other
11appropriate licensing entity in the jurisdiction in which he or she
12practices.

13(g) “Veterinary expenses” means the costs associated with
14medical advice, diagnosis, care, or treatment provided by a
15veterinarian, including, but not limited to, the cost of drugs
16prescribed by a veterinarian.

17(h) “Waiting or affiliation period” means the period of time
18specified in a pet insurance policy that is required to transpire
19before some or all of the coverage in the policy can begin.

end insert
20

12880.1.  

A policy of pet insurance that is marketed, issued,
21amended, renewed, or delivered to a resident of this state, on or
22afterbegin delete January 1, 2015,end deletebegin insert July 1, 2015,end insert regardless of the situs of the
23contract or master group policyholder, or the jurisdiction in which
24the contract was issued or delivered, is subject to this part.

25

12880.2.  

(a) begin deleteIn connection with the sale of a new, amended,
26or renewed policy of pet insurance, a pet insurer end delete
begin insertAn insurer
27transacting pet insurance in California end insert
shall disclose all of the
28following tobegin delete the consumer:end deletebegin insert consumers: end insert

29(1) If the policy excludes coverage due to any of thebegin delete following
30exclusions:end delete
begin insert following: end insert

31(A) A preexisting condition.

32(B) A hereditary disorder.

33(C) A congenital anomaly or disorder.

begin insert

34(D) A chronic condition.

end insert
begin insert

35(2) If the policy includes any other exclusion, the following
36statement: “Other exclusions may apply. Please refer to the
37exclusions section of the policy for more information.”

end insert
begin delete

38(2)

end delete

P5    1begin insert(3)end insert Any policy provision that limits coverage through a waiting
2or affiliation period, a deductible, coinsurance, or an annual or
3lifetime policy limit.

begin delete

4(3)

end delete

5begin insert(4)end insert Whether the insurer reduces coverage or increases premiums
6based on the insured’s claim history.

7(b) begin insert(1)end insertbegin insertend insertIf a pet insurer uses any of the terms in paragraph (1)
8of subdivision (a) in a policy of pet insurance, the insurer shall
9begin delete include aend deletebegin insert use the definition of those terms as set forth in Section
1012880 and include theend insert
definition of the term in thebegin delete policy and shallend delete
11begin insert policy. The pet insurer shall alsoend insert make that definition available
12through a link on the main page of the insurer’s Internet Web site.

begin insert

13(2) Nothing in this subdivision or Section 12880 in any way
14 prohibits or limits the types of exclusions pet insurers may use in
15their policies.

end insert

16(c) A pet insurer shall clearly disclosebegin insert a summary description
17ofend insert
the basis or formula on which the insurer determines claim
18payments under a pet insurance policy within the policy and
19through a link on the main page of the insurer’s Internet Web site.

20(d) A pet insurer that uses a benefit schedule to determine claim
21payment under a pet insurance policy shall do both of the
22following:

23(1) Clearly disclose the applicable benefit schedule in the policy.

24(2) Disclose all benefit schedules used by the insurer under its
25pet insurancebegin delete policesend deletebegin insert policiesend insert through a link on the main page of
26the insurer’s Internet Web site.

27(e) A pet insurer that determines claim payments under a pet
28insurance policy based on usual and customary fees, or any other
29reimbursement limitation based on prevailing veterinary service
30provider charges, shall do both of the following:

31(1) Include a usual and customary fee limitation provision in
32the policy that clearly describes the insurer’s basis for determining
33usual and customary fees and how that basis is applied in
34begin delete calculationend deletebegin insert calculatingend insert claim payments.

35(2) Disclose the insurer’s basis for determining usual and
36customary fees through a link on the main page of the insurer’s
37Internet Web site.

38(f) The insurer shall create a summary of all policy provisions
39required in subdivisions (a) through (e), inclusive, into a separate
P6    1document titled “Insurer Disclosure of Important Policy
2Provisions.”

3(g) The insurer shall post the “Insurer Disclosure of Important
4Policy Provisions” document required in subdivision (f) through
5a link on the main page of the insurer’s Internet Web site.

begin delete

6(h) Prior to the sale of a pet insurance policy, the insurer shall
7provide the consumer with a printed copy, in at least 12-point type,
8of the “Insurer Disclosure of Important Policy Provisions”
9document. The insurer shall obtain the consumer’s signature
10indicating that the consumer has read and understands the
11disclosure document.

end delete
begin insert

12(h) (1) In connection with the issuance of a new pet insurance
13policy, the insurer shall provide the consumer with a copy of the
14“Insurer Disclosure of Important Policy Provisions” document
15required pursuant to subdivision (f) in at least 12-point type when
16it delivers the policy.

end insert
begin insert

17(2) In addition, the pet insurance policy shall have clearly
18printed thereon or attached thereto a notice stating that, after
19receipt of the policy by the owner, the policy may be returned by
20the insured for cancellation by delivering it or mailing it to the
21insurer or to the agent through whom it was purchased.

end insert
begin insert

22(A) The period of time set forth by the insurer for return of the
23policy shall be clearly stated on the notice, and this free look period
24shall be not less than 30 days. The insured may return the policy
25to the insurer or the agent through whom the policy was purchased
26at any time during the free look period specified in the notice.

end insert
begin insert

27(B) The delivery or mailing of the policy by the insured pursuant
28to this paragraph shall void the policy from the beginning, and
29the parties shall be in the same position as if a policy or contract
30had not been issued.

end insert
begin insert

31(C) All premiums paid and any policy fee paid for the policy
32shall be refunded to the insured within 30 days from the date that
33the insurer is notified of the cancellation. However, if the insurer
34has paid any claim, or has advised the insured in writing that a
35claim will be paid, the 30-day free look right pursuant to this
36paragraph is inapplicable and instead the policy provisions
37relating to cancellation apply to any refund.

end insert

38(i) The disclosures required in this section shall be in addition
39to any other disclosure requirements required by law or regulation.

P7    1

12880.3.  

(a) A person who violates a provision of this part is
2liable to the state for a civil penalty to be determined by the
3commissioner, not to exceed five thousand dollars ($5,000) for
4each violation, or, if the violation was willful, a civil penalty not
5to exceed ten thousand dollars ($10,000) for each violation. The
6commissioner may establish the acts that constitute a distinct
7violation for purposes of this section. However, when the issuance,
8amendment, or servicing of a policy or endorsement is inadvertent,
9all of those acts constitute a single violation for purposes of this
10section.

11(b) The penalty imposed by this section shall be imposed by
12and determined by the commissioner pursuant to Section 12880.4.
13The penalty imposed by this section is appealable by means of any
14remedy provided by Section 12940 or by Chapter 5 (commencing
15with Section 11500) of Part 1 of Division 3 of Title 2 of the
16Government Code.

17

12880.4.  

begin insert(a)end insertbegin insertend insertWhenever the commissioner shall have reason
18to believe that a person has engaged or is engaging in this state in
19a violation of this article, and that a proceeding by the
20commissioner in respect thereto would be to the interest of the
21public, he or she shall issue and serve upon that person an order
22to show cause containing a statement of the charges in that respect,
23a statement of that person’s potential liability under this part, and
24a notice of a hearing thereon to be held at a time and place fixed
25therein, which shall not be less than 30 days after the service
26thereof, for the purpose of determining whether the commissioner
27 should issue an order to that personbegin delete to,end deletebegin insert toend insert pay the penalty imposed
28by Sectionbegin delete 12880.3,end deletebegin insert 12880.3end insert and to cease and desist those methods,
29acts, or practices, or any ofbegin delete themend deletebegin insert them,end insert that violate this article.

begin delete

30If

end delete

31begin insert (b)end insertbegin insertend insertbegin insertIfend insert the charges or any of them are found to be justified, the
32commissioner shall issue and cause to be served upon that person
33an order requiring that person to pay the penalty imposed by
34Section 12880.3 and to cease and desist from engaging in those
35methods, acts, or practices found to be in violation of this part.

begin delete

36The

end delete

37begin insert(c)end insertbegin insertend insertbegin insertTheend insert hearing shall be conducted in accordance with the
38Administrative Procedure Act (Chapter 5 (commencingbegin delete atend deletebegin insert withend insert
39 Section 11500) of Part 1 of Division 3 of Title 2 of the Government
40Code), except that the hearings may be conducted by an
P8    1administrative law judge in the administrative law bureau when
2the proceedings involve a common question of law or fact with
3another proceeding arising under other Insurance Code sections
4that may be conducted by administrative law bureau administrative
5law judges. The commissioner and the appointed administrative
6law judge shall have all the powers granted under the
7Administrative Procedure Act.

begin delete

8The

end delete

9begin insert(d)end insertbegin insertend insertbegin insertTheend insert person shall be entitled to have the proceedings and the
10order reviewed by means of any remedy provided by Section 12940
11or by the Administrative Procedure Act.

12

12880.5.  

The commissioner maybegin delete, as conditions warrant, after
13notice and hearing,end delete
adopt reasonable rules andbegin delete regulations, and
14amendments and additions to thoseend delete
regulations, as are necessary
15to administer thisbegin delete part.end deletebegin insert part, in accordance with the rulemaking
16provisions of the Administrative Procedure Act (Chapter 3.5
17(commencing with Section 11340) of Part 1 of Division 3 of Title
182 of the Government Code).end insert



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