BILL NUMBER: AB 2056	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  APRIL 24, 2014

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. 
This   The  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,
  July 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  
The  bill would require an insurer  of  
transacting  pet insurance  in this state  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   , 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. 
    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.  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. 
   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 duties, pet insurance,
as defined in Section 12880, and any insurance not included in any
of the types of insurance specified in this section but 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.  For purposes of this part, the following definitions shall
apply:
   (a) "Chronic condition" means a condition that can be treated or
managed, but not cured.
   (b) "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.
   (c) "Hereditary disorder" means an abnormality that is genetically
transmitted from parent to offspring and may cause illness or
disease.
   (d) "Pet insurance" means an individual or group insurance policy
that provides coverage for veterinary expenses.
   (e) "Preexisting condition" means any condition for which a
veterinarian provided medical advice, the pet received treatment for,
or the pet displayed signs or symptoms consistent with the stated
condition prior to the effective date of a pet insurance policy.
   (f) "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 in which he or she practices.
   (g) "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.
   (h) "Waiting or affiliation period" means the period of time
specified in a pet insurance policy that is required to transpire
before some or all of the coverage in the policy can begin. 
   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,   July 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 
 An insurer transacting pet insurance in California  shall
disclose all of the following to  the consumer: 
 consumers: 
   (1) If the policy excludes coverage due to any of the 
following exclusions:   following: 
   (A) A preexisting condition.
   (B) A hereditary disorder.
   (C) A congenital anomaly or disorder. 
   (D) A chronic condition.  
   (2) If the policy includes any other exclusion, the following
statement: "Other exclusions may apply. Please refer to the
exclusions section of the policy for more information." 

   (2) 
    (3)  Any policy provision that limits coverage through a
waiting or affiliation period, a deductible, coinsurance, or an
annual or lifetime policy limit. 
   (3) 
    (4)  Whether the insurer reduces coverage or increases
premiums based on the insured's claim history.
   (b)  (1)    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   use
the definition of those terms as set forth in Section 12880 and
include the  definition of the term in the  policy and
shall   policy. The pet insurer shall also  make
that definition available through a link on the main page of the
insurer's Internet Web site. 
   (2) Nothing in this subdivision or Section 12880 in any way
prohibits or limits the types of exclusions pet insurers may use in
their policies. 
   (c) A pet insurer shall clearly disclose  a summary
description of  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   policies  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   calculating  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.
 
   (h) (1) In connection with the issuance of a new pet insurance
policy, the insurer shall provide the consumer with a copy of the
"Insurer Disclosure of Important Policy Provisions" document required
pursuant to subdivision (f) in at least 12-point type when it
delivers the policy.  
   (2) In addition, the pet insurance policy shall have clearly
printed thereon or attached thereto a notice stating that, after
receipt of the policy by the owner, the policy may be returned by the
insured for cancellation by delivering it or mailing it to the
insurer or to the agent through whom it was purchased.  
   (A) The period of time set forth by the insurer for return of the
policy shall be clearly stated on the notice, and this free look
period shall be not less than 30 days. The insured may return the
policy to the insurer or the agent through whom the policy was
purchased at any time during the free look period specified in the
notice.  
   (B) The delivery or mailing of the policy by the insured pursuant
to this paragraph shall void the policy from the beginning, and the
parties shall be in the same position as if a policy or contract had
not been issued.  
   (C) All premiums paid and any policy fee paid for the policy shall
be refunded to the insured within 30 days from the date that the
insurer is notified of the cancellation. However, if the insurer has
paid any claim, or has advised the insured in writing that a claim
will be paid, the 30-day free look right pursuant to this paragraph
is inapplicable and instead the policy provisions relating to
cancellation apply to any refund. 
   (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.   (a)    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,  to
 pay the penalty imposed by Section  12880.3, 
 12880.3  and to cease and desist those methods, acts, or
practices, or any of  them   them,  that
violate this article. 
   If 
    (b)     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 
    (c)     The  hearing shall be
conducted in accordance with the Administrative Procedure Act
(Chapter 5 (commencing  at   with  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 
    (d)     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.
  part, in accordance with the rulemaking provisions of
the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code).