Amended in Senate August 6, 2014

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


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.

This bill would regulate pet insurance policies that are marketed, issued, amended, renewed, or deliveredbegin insert, whether or not in California,end insert to abegin delete resident in this state,end deletebegin insert California resident,end insert 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 would define certain terms and specify certain disclosures a pet insurer is required to make to consumers. The bill would also 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:

P2    1


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


4PART 9.  Pet Insurance





For purposes of this part, the following definitions shall

8(a) “Chronic condition” means a condition that can be treated
9or managed, but not cured.

10(b) “Congenital anomaly or disorder” means a condition that is
11present from birth, whether inherited or caused by the environment,
12which may cause or otherwise contribute to illness or disease.

13(c) “Hereditary disorder” means an abnormality that is
14genetically transmitted from parent to offspring and may cause
15illness or disease.

16(d) “Pet insurance” means an individual or group insurance
17policy that provides coverage for veterinary expenses.

18(e) “Preexisting condition” means any condition for which a
19veterinarian provided medical advice, the pet received treatment
20for, or the pet displayed signs or symptoms consistent with the
P3    1stated condition prior to the effective date of a pet insurance policy
2or during any waiting period.

3(f) “Veterinarian” means an individual who holds a valid license
4to practice veterinary medicine from the Veterinary Medical Board
5pursuant to Chapter 11 (commencing with Section 4800) of
6Division 2 of the Business and Professions Code or other
7appropriate licensing entity in the jurisdiction in which he or she

9(g) “Veterinary expenses” means the costs associated with
10medical advice, diagnosis, care, or treatment provided by a
11veterinarian, including, but not limited to, the cost of drugs
12prescribed by a veterinarian.

13(h) “Waiting or affiliation period” means the period of time
14specified in a pet insurance policy that is required to transpire
15before some or all of the coverage in the policy can begin.



A policy of pet insurance that is marketed, issued,
17amended, renewed, or deliveredbegin insert, whether or not in California,end insert to
18abegin delete resident in this state,end deletebegin insert California resident,end insert on or after July 1, 2015,
19regardless of the situs of the contract or master group policyholder,
20or the jurisdiction in which the contract was issued or delivered,
21is subject to this part.



(a) An insurer transacting pet insurance in California
23shall disclose all of the following to consumers:

24(1) If the policy excludes coverage due to any of the following:

25(A) A preexisting condition.

26(B) A hereditary disorder.

27(C) A congenital anomaly or disorder.

28(D) A chronic condition.

29(2) If the policy includes any other exclusion, the following
30statement: “Other exclusions may apply. Please refer to the
31exclusions section of the policy for more information.”

32(3) Any policy provision that limits coverage through a waiting
33or affiliation period, a deductible, coinsurance, or an annual or
34lifetime policy limit.

35(4) Whether the insurer reduces coverage or increases premiums
36based on the insured’s claim history.

37(b) (1) If a pet insurer uses any of the terms in paragraph (1)
38of subdivision (a) in a policy of pet insurance, the insurer shall use
39the definition of those terms as set forth in Section 12880 and
40include the definition of the term in the policy. The pet insurer
P4    1shall also make that definition available through a link on the main
2page of the insurer’s Internet Web site.

3(2) Nothing in this subdivision or Section 12880 in any way
4 prohibits or limits the types of exclusions pet insurers may use in
5theirbegin delete policies.end deletebegin insert policies, nor does it require pet insurers to have any
6of the limitations or exclusions defined in Section 12880.end insert

7(c) A pet insurer shall clearly disclose a summary description
8of the basis or formula on which the insurer determines claim
9payments under a pet insurance policy within the policy and
10through a link on the main page of the insurer’s Internet Web site.

11(d) A pet insurer that uses a benefit schedule to determine claim
12payment under a pet insurance policy shall do both of the

14(1) Clearly disclose the applicable benefit schedule in the policy.

15(2) Disclose all benefit schedules used by the insurer under its
16pet insurance policies through a link on the main page of the
17insurer’s Internet Web site.

18(e) A pet insurer that determines claim payments under a pet
19insurance policy based on usual and customary fees, or any other
20reimbursement limitation based on prevailing veterinary service
21provider charges, shall do both of the following:

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

26(2) Disclose the insurer’s basis for determining usual and
27customary fees through a link on the main page of the insurer’s
28Internet Web site.

29(f) The insurer shall create a summary of all policy provisions
30required in subdivisions (a) through (e), inclusive, into a separate
31document titled “Insurer Disclosure of Important Policy

33(g) The insurer shall post the “Insurer Disclosure of Important
34Policy Provisions” document required in subdivision (f) through
35a link on the main page of the insurer’s Internet Web site.

36(h) (1) In connection with the issuance of a new pet insurance
37policy, the insurer shall provide the consumer with a copy of the
38“Insurer Disclosure of Important Policy Provisions” document
39required pursuant to subdivision (f) in at least 12-point type when
40it delivers the policy.

P5    1(2) In addition, the pet insurance policy shall have clearly printed
2thereon or attached thereto a notice stating that, after receipt of the
3policy by the owner, the policy may be returned by the insured for
4cancellation by delivering it or mailing it to the insurer or to the
5agent through whom it was purchased.

6(A) The period of time set forth by the insurer for return of the
7policy shall be clearly stated on the notice, and this free look period
8shall be not less than 30 days. The insured may return the policy
9to the insurer or the agent through whom the policy was purchased
10at any time during the free look period specified in the notice.

11(B) The delivery or mailing of the policy by the insured pursuant
12to this paragraph shall void the policy from the beginning, and the
13parties shall be in the same position as if a policy or contract had
14not been issued.

15(C) All premiums paid and any policy fee paid for the policy
16shall be refunded to the insured within 30 days from the date that
17the insurer is notified of the cancellation. However, if the insurer
18has paid any claim, or has advised the insured in writing that a
19claim will be paid, the 30-day free look right pursuant to this
20paragraph is inapplicable and instead the policy provisions relating
21to cancellation apply to any refund.

22(i) The disclosures required in this section shall be in addition
23to any other disclosure requirements required by law or regulation.



(a) A person who violates a provision of this part is
25liable to the state for a civil penalty to be determined by the
26commissioner, not to exceed five thousand dollars ($5,000) for
27each violation, or, if the violation was willful, a civil penalty not
28to exceed ten thousand dollars ($10,000) for each violation. The
29commissioner may establish the acts that constitute a distinct
30violation for purposes of this section. However, when the issuance,
31amendment, or servicing of a policy or endorsement is inadvertent,
32all of those acts constitute a single violation for purposes of this

34(b) The penalty imposed by this section shall be imposed by
35and determined by the commissioner pursuant to Section 12880.4.
36The penalty imposed by this section is appealable by means of any
37remedy provided by Section 12940 or by Chapter 5 (commencing
38with Section 11500) of Part 1 of Division 3 of Title 2 of the
39Government Code.

P6    1


(a) Whenever the commissioner shall have reason
2to believe that a person has engaged or is engaging in this state in
3a violation of this article, and that a proceeding by the
4commissioner in respect thereto would be to the interest of the
5public, he or she shall issue and serve upon that person an order
6to show cause containing a statement of the charges in that respect,
7a statement of that person’s potential liability under this part, and
8a notice of a hearing thereon to be held at a time and place fixed
9therein, which shall not be less than 30 days after the service
10thereof, for the purpose of determining whether the commissioner
11 should issue an order to that person to pay the penalty imposed by
12Section 12880.3 and to cease and desist those methods, acts, or
13practices, or any of them, that violate this article.

14(b) If the charges or any of them are found to be justified, the
15commissioner shall issue and cause to be served upon that person
16an order requiring that person to pay the penalty imposed by
17Section 12880.3 and to cease and desist from engaging in those
18methods, acts, or practices found to be in violation of this part.

19(c) The hearing shall be conducted in accordance with the
20Administrative Procedure Act (Chapter 5 (commencing with
21 Section 11500) of Part 1 of Division 3 of Title 2 of the Government
22Code), except that the hearings may be conducted by an
23administrative law judge in the administrative law bureau when
24the proceedings involve a common question of law or fact with
25another proceeding arising under other Insurance Code sections
26that may be conducted by administrative law bureau administrative
27law judges. The commissioner and the appointed administrative
28law judge shall have all the powers granted under the
29Administrative Procedure Act.

30(d) The person shall be entitled to have the proceedings and the
31order reviewed by means of any remedy provided by Section 12940
32or by the Administrative Procedure Act.



The commissioner may adopt reasonable rules and
34regulations, as are necessary to administer this part, in accordance
35with the rulemaking provisions of the Administrative Procedure
36Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of
37Division 3 of Title 2 of the Government Code).