Amended in Senate May 22, 2014

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 tobegin delete amend Section 120 of, and toend delete 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.begin delete 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.end delete

This bill wouldbegin delete add pet insurance as a type of miscellaneous insurance,end deletebegin insert regulate pet insurance policies that are marketed, issued, amended, renewed, or delivered to a resident in this state, on or after 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. The bill wouldend insert define certain termsbegin delete,end delete and specify certain disclosuresbegin delete an insurer of pet insuranceend deletebegin insert a pet insurerend insert is required to make to consumers.begin delete 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 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.end delete The bill wouldbegin insert alsoend insert require an insurer transacting pet insurance in this state to disclose, among other things, whether the policy excludes coverage because of a preexisting condition, a hereditary disorder, a congenital anomaly, 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:

begin delete
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
P3    1performance or duties, pet insurance, as defined in Section 12880,
2and any insurance not included in any of the types of insurance
3specified in this section but which is a proper subject of insurance.

end delete
4

begin deleteSEC. 2.end delete
5begin insertSECTION 1.end insert  

Part 9 (commencing with Section 12880) is added
6to Division 2 of the Insurance Code, to read:

7 

8PART 9.  Pet Insurance

9

 

10

12880.  

For purposes of this part, the following definitions shall
11apply:

12(a) “Chronic condition” means a condition that can be treated
13or managed, but not cured.

14(b) “Congenital anomaly or disorder” means a condition that is
15present from birth, whether inherited or caused by the environment,
16which may cause or otherwise contribute to illness or disease.

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

20(d) “Pet insurance” means an individual or group insurance
21policy that provides coverage for veterinary expenses.

22(e) “Preexisting condition” means any condition for which a
23veterinarian provided medical advice, the pet received treatment
24for, or the pet displayed signs or symptoms consistent with the
25stated condition prior to the effective date of a pet insurance policy
26begin insert or during any waiting periodend insert.

27(f) “Veterinarian” means an individual who holds a valid license
28to practice veterinary medicine from the Veterinary Medical Board
29pursuant to Chapter 11 (commencing with Section 4800) of
30Division 2 of the Business and Professions Code or other
31appropriate licensing entity in the jurisdiction in which he or she
32practices.

33(g) “Veterinary expenses” means the costs associated with
34medical advice, diagnosis, care, or treatment provided by a
35veterinarian, including, but not limited to, the cost of drugs
36prescribed by a veterinarian.

37(h) “Waiting or affiliation period” means the period of time
38specified in a pet insurance policy that is required to transpire
39before some or all of the coverage in the policy can begin.

P4    1

12880.1.  

A policy of pet insurance that is marketed, issued,
2amended, renewed, or delivered to a residentbegin delete ofend deletebegin insert inend insert this state, on or
3after July 1, 2015, regardless of the situs of the contract or master
4group policyholder, or the jurisdiction in which the contract was
5issued or delivered, is subject to this part.

6

12880.2.  

(a) An insurer transacting pet insurance in California
7shall disclose all of the following to consumers:

8(1) If the policy excludes coverage due to any of the following:

9(A) A preexisting condition.

10(B) A hereditary disorder.

11(C) A congenital anomaly or disorder.

12(D) A chronic condition.

13(2) If the policy includes any other exclusion, the following
14statement: “Other exclusions may apply. Please refer to the
15exclusions section of the policy for more information.”

16(3) Any policy provision that limits coverage through a waiting
17or affiliation period, a deductible, coinsurance, or an annual or
18lifetime policy limit.

19(4) Whether the insurer reduces coverage or increases premiums
20based on the insured’s claim history.

21(b) (1) If a pet insurer uses any of the terms in paragraph (1)
22of subdivision (a) in a policy of pet insurance, the insurer shall use
23the definition of those terms as set forth in Section 12880 and
24include the definition of the term in the policy. The pet insurer
25shall also make that definition available through a link on the main
26page of the insurer’s Internet Web site.

27(2) Nothing in this subdivision or Section 12880 in any way
28 prohibits or limits the types of exclusions pet insurers may use in
29their policies.

30(c) A pet insurer shall clearly disclose a summary description
31of the basis or formula on which the insurer determines claim
32payments under a pet insurance policy within the policy and
33through a link on the main page of the insurer’s Internet Web site.

34(d) A pet insurer that uses a benefit schedule to determine claim
35payment under a pet insurance policy shall do both of the
36following:

37(1) Clearly disclose the applicable benefit schedule in the policy.

38(2) Disclose all benefit schedules used by the insurer under its
39pet insurance policies through a link on the main page of the
40insurer’s Internet Web site.

P5    1(e) A pet insurer that determines claim payments under a pet
2insurance policy based on usual and customary fees, or any other
3reimbursement limitation based on prevailing veterinary service
4provider charges, shall do both of the following:

5(1) Include a usual and customary fee limitation provision in
6the policy that clearly describes the insurer’s basis for determining
7usual and customary fees and how that basis is applied in
8 calculating claim payments.

9(2) Disclose the insurer’s basis for determining usual and
10customary fees through a link on the main page of the insurer’s
11Internet Web site.

12(f) The insurer shall create a summary of all policy provisions
13required in subdivisions (a) through (e), inclusive, into a separate
14document titled “Insurer Disclosure of Important Policy
15Provisions.”

16(g) The insurer shall post the “Insurer Disclosure of Important
17Policy Provisions” document required in subdivision (f) through
18a link on the main page of the insurer’s Internet Web site.

19(h) (1) In connection with the issuance of a new pet insurance
20policy, the insurer shall provide the consumer with a copy of the
21“Insurer Disclosure of Important Policy Provisions” document
22required pursuant to subdivision (f) in at least 12-point type when
23it delivers the policy.

24(2) In addition, the pet insurance policy shall have clearly printed
25thereon or attached thereto a notice stating that, after receipt of the
26policy by the owner, the policy may be returned by the insured for
27cancellation by delivering it or mailing it to the insurer or to the
28agent through whom it was purchased.

29(A) The period of time set forth by the insurer for return of the
30policy shall be clearly stated on the notice, and this free look period
31shall be not less than 30 days. The insured may return the policy
32to the insurer or the agent through whom the policy was purchased
33at any time during the free look period specified in the notice.

34(B) The delivery or mailing of the policy by the insured pursuant
35to this paragraph shall void the policy from the beginning, and the
36parties shall be in the same position as if a policy or contract had
37not been issued.

38(C) All premiums paid and any policy fee paid for the policy
39shall be refunded to the insured within 30 days from the date that
40the insurer is notified of the cancellation. However, if the insurer
P6    1has paid any claim, or has advised the insured in writing that a
2claim will be paid, the 30-day free look right pursuant to this
3paragraph is inapplicable and instead the policy provisions relating
4to cancellation apply to any refund.

5(i) The disclosures required in this section shall be in addition
6to any other disclosure requirements required by law or regulation.

7

12880.3.  

(a) A person who violates a provision of this part is
8liable to the state for a civil penalty to be determined by the
9commissioner, not to exceed five thousand dollars ($5,000) for
10each violation, or, if the violation was willful, a civil penalty not
11to exceed ten thousand dollars ($10,000) for each violation. The
12commissioner may establish the acts that constitute a distinct
13violation for purposes of this section. However, when the issuance,
14amendment, or servicing of a policy or endorsement is inadvertent,
15all of those acts constitute a single violation for purposes of this
16section.

17(b) The penalty imposed by this section shall be imposed by
18and determined by the commissioner pursuant to Section 12880.4.
19The penalty imposed by this section is appealable by means of any
20remedy provided by Section 12940 or by Chapter 5 (commencing
21with Section 11500) of Part 1 of Division 3 of Title 2 of the
22Government Code.

23

12880.4.  

(a) Whenever the commissioner shall have reason
24to believe that a person has engaged or is engaging in this state in
25a violation of this article, and that a proceeding by the
26commissioner in respect thereto would be to the interest of the
27public, he or she shall issue and serve upon that person an order
28to show cause containing a statement of the charges in that respect,
29a statement of that person’s potential liability under this part, and
30a notice of a hearing thereon to be held at a time and place fixed
31therein, which shall not be less than 30 days after the service
32thereof, for the purpose of determining whether the commissioner
33 should issue an order to that person to pay the penalty imposed by
34Section 12880.3 and to cease and desist those methods, acts, or
35practices, or any of them, that violate this article.

36 (b) If the charges or any of them are found to be justified, the
37commissioner shall issue and cause to be served upon that person
38an order requiring that person to pay the penalty imposed by
39Section 12880.3 and to cease and desist from engaging in those
40methods, acts, or practices found to be in violation of this part.

P7    1(c) The hearing shall be conducted in accordance with the
2Administrative Procedure Act (Chapter 5 (commencing with
3 Section 11500) of Part 1 of Division 3 of Title 2 of the Government
4Code), except that the hearings may be conducted by an
5administrative law judge in the administrative law bureau when
6the proceedings involve a common question of law or fact with
7another proceeding arising under other Insurance Code sections
8that may be conducted by administrative law bureau administrative
9law judges. The commissioner and the appointed administrative
10law judge shall have all the powers granted under the
11Administrative Procedure Act.

12(d) The person shall be entitled to have the proceedings and the
13order reviewed by means of any remedy provided by Section 12940
14or by the Administrative Procedure Act.

15

12880.5.  

The commissioner may adopt reasonable rules and
16regulations, as are necessary to administer this part, in accordance
17with the rulemaking provisions of the Administrative Procedure
18Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of
19Division 3 of Title 2 of the Government Code).



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