BILL NUMBER: AB 2578 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 7, 2014
INTRODUCED BY Assembly Member Dababneh
FEBRUARY 21, 2014
An act to amend Section 10203.8 Sections
10271 and 10295.6 of the Insurance Code, relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 2578, as amended, Dababneh. Insurance: group life
insurance. disability insurance: life insurance:
accelerated death benefit.
Existing law governs the business of insurance, and defines
various types of insurance for these purposes, including life
insurance and disability insurance. Existing law generally makes the
requirements imposed on disability insurance contracts inapplicable
to life insurance, endowment, and annuity contracts, or supplemental
contracts thereto, that provide supplemental benefits in case of
death or dismemberment or loss of sight by accident, operate to
safeguard contracts against lapse, or give a special surrender
benefit or an accelerated death benefit, as specified. Existing law
requires that supplemental benefits specify any applicable exclusions
and limits those exclusions to, among other things, a condition or
loss caused by engaging in an illegal occupation.
This bill would include a condition or loss caused or
substantially contributed to by engaging in aviation, other than as a
fare-paying passenger, to the list of allowable exclusions to
supplemental benefits.
Existing law defines an accelerated death benefit as a provision,
endorsement, or rider added to a life insurance policy that provides
for the advance payment of any part of the death proceeds, payable
upon the occurrence of a qualifying event, as provided. The insurer
is required to provide the policyholder or certificate holder with a
report, at least monthly, of any accelerated death benefits paid out
during the prior month, an explanation of any changes to the policy
or certificate, death benefits, and cash values on account of the
benefits being paid out, and the amount of the remaining benefits
that can be accelerated at the end of the prior month.
This bill would delete the requirement that the report be provided
on a monthly basis.
Existing law authorizes a life insurer to issue life, disability,
term, and endowment insurance on the group plan with rates less than
the usual rates for those insurance types. Existing law prescribes
the permissible forms of group life insurance. Existing law provides
that one of those forms of group life insurance is a policy covering
the lives of every eligible member of a group of persons who become
or are named depositors under an eligible savings account plan if,
among other conditions, the total amount of insurance under the
policy on any one depositor does not exceed $1,500 on any one life.
This bill would increase the maximum amount of insurance on any
one life under the policy to $3,000.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10271 of the
Insurance Code is amended to read:
10271. (a) Except as set forth in this section, this chapter
shall not apply to, or in any way affect, provisions in life
insurance, endowment, or annuity contracts, or contracts supplemental
thereto, that provide additional benefits in case of death or
dismemberment or loss of sight by accident, or that operate to
safeguard those contracts against lapse, as described in subdivision
(a) of Section 10271.1, or give a special surrender benefit, as
defined in subdivision (b) of Section 10271.1, or an accelerated
death benefit as defined in Article 2.1 (commencing with Section
10295), in the event that the owner, insured, or annuitant, as
applicable, meets the benefit triggers specified in the life
insurance or annuity contract or supplemental contract.
(b) For the purposes of this section, the term "supplemental
benefit" means a rider to or provision in a life insurance policy,
certificate, or annuity contract that provides a benefit as set forth
in subdivision (a).
(c) A supplemental benefit described in subdivision (a) shall
contain all of the following provisions. However, an insurer, at its
option, may substitute for one or more of the provisions a
corresponding provision of different wording approved by the
commissioner that is not less favorable in any respect to the owner,
insured, or annuitant, as applicable. The required provisions shall
be preceded individually by the appropriate caption, or, at the
option of the insurer, by the appropriate individual or group
captions or subcaptions as the commissioner may approve.
(1) A life insurance policy or annuity contract that contains a
supplemental benefit shall provide that the contract, supplemental
contract, and any papers attached thereto by the insurer, including
the application if attached, constitute the entire insurance or
annuity contract and shall also provide that no agent has the
authority to change the contract or to waive any of its provisions.
This provision shall be preceded individually by a caption stating
"ENTIRE CONTRACT; CHANGES:" or other appropriate caption as the
commissioner may approve.
(2) The supplemental benefit shall provide that reinstatement of
the supplemental benefit shall be on the same or more favorable terms
as reinstatement of the underlying life insurance policy or annuity
contract. Following reinstatement, the insured and insurer shall have
the same rights under reinstatement as they had under the
supplemental benefit immediately before the due date of the defaulted
premium, subject to any provisions endorsed in the rider or
endorsement or attached to the rider or endorsement in connection
with the reinstatement. This reinstatement provision shall be
preceded individually by a caption stating "REINSTATEMENT:" or other
appropriate caption as the commissioner may approve.
(3) A supplemental benefit subject to underwriting shall include
an incontestability statement that provides that the insurer shall
not contest the supplemental benefit after it has been in force
during the lifetime of the insured for two years from its date of
issue, and that the supplemental benefit may only be contested based
on a statement made in the application for the supplemental benefit,
if the statement is attached to the contract and if the statement was
material to the risk accepted or the hazard assumed by the insurer.
This provision shall be preceded individually by a caption stating
"INCONTESTABILITY:" or other appropriate caption as the commissioner
may approve.
(4) The supplemental benefit shall provide either that the insurer
may accept written notice of claim at any time or that the insurer
may require that written notice of claim be submitted by a due date
that is no less than 20 days after an occurrence covered by the
supplemental benefit, or commencement of any loss covered by the
supplemental benefit, or as soon after the due date as is reasonably
possible. Notice given by or on behalf of the insured or the
beneficiary, as applicable, to the insurer at the insurer's address
or telephone number, or to any authorized agent of the insurer, with
information sufficient to identify the insured, shall be deemed
notice to the insurer. This provision shall be preceded individually
by a caption stating "NOTICE OF CLAIM:" or other appropriate caption
as the commissioner may approve.
(5) The supplemental benefit shall provide that the insurer, upon
receipt of a notice of claim, shall furnish to the claimant those
forms as are usually furnished by it for filing a proof of occurrence
or a proof of loss. If the forms are not furnished within 15 days
after giving notice, the claimant shall be deemed to have complied
with the requirements of the supplemental benefit as to proof of
occurrence or proof of loss upon submitting, within the time fixed by
the supplemental benefit for filing proof of occurrence or proof of
loss, written proof covering the character and the extent of the
occurrence or loss. This provision shall be preceded individually by
a caption stating "CLAIM FORMS:" or other appropriate caption as the
commissioner may approve.
(6) The supplemental benefit shall provide that the insurer may
require that the insured provide written proof of occurrence or proof
of loss no less than 90 days after the termination of the period for
which the insurer is liable, and, in the case of claim for any other
occurrence or loss, within 90 days after the date of the occurrence
or loss. Failure to furnish proof within the time required shall not
invalidate or reduce the claim if it was not reasonably possible to
give proof within the time, provided proof is furnished as soon as
reasonably possible and, except in the absence of legal capacity, no
later than one year from the time proof is otherwise required. This
provision shall be preceded individually by a caption stating "PROOF
OF LOSS:" or other appropriate caption as the commissioner may
approve.
(7) The supplemental benefit shall provide that the insurer, at
its own expense, shall have the right and opportunity to examine the
person of the insured when and as often as the insurer may reasonably
require during the pendency of a claim and to make an autopsy in
case of death where it is not forbidden by law. This provision shall
be preceded individually by a caption stating "PHYSICAL EXAMINATIONS:"
or other appropriate caption as the commissioner may approve.
(d) The commissioner shall not approve any contract or
supplemental contract for insurance or delivery in this state if the
commissioner finds that the contract or supplemental contract does
any of the following:
(1) Contains any provision, label, description of its contents,
title, heading, backing, or other indication of its provisions that
is unintelligible, uncertain, ambiguous, or abstruse, or likely to
mislead a person to whom the supplemental benefit is offered,
delivered, or issued.
(2) Constitutes fraud, unfair trade practices, or insurance
economically unsound to the owner, insured, or annuitant, as
applicable.
(3) Contains any actuarial information that is materially
incomplete, incorrect, or inadequate.
(e) A supplemental benefit described in subdivision (a) shall not
contain any title, description, or any other indication that would
describe or imply that the supplemental benefit provides long-term
care coverage.
(f) Commencing two years from the date of the issuance of the
supplemental benefit, no claim for loss incurred or disability, as
defined by the supplemental benefit, may be reduced or denied on the
grounds that a disease or physical condition not excluded from
coverage by name or specific description effective on the date of
loss had existed prior to the effective date on the coverage of the
supplemental benefit.
(g) With regard to supplemental benefits set forth in subdivision
(a), the supplemental benefit shall specify any applicable
exclusions, which shall be limited to the following:
(1) Condition or loss caused or substantially contributed to by
any attempt at suicide or intentionally self-inflicted injury, while
sane or insane.
(2) Condition or loss caused or substantially contributed to by
war or an act of war, as defined in the exclusion provisions of the
contract.
(3) Condition or loss caused or substantially contributed to by
active participation in a riot, insurrection, or terrorist activity.
(4) Condition or loss caused or substantially contributed to by
committing or attempting to commit a felony.
(5) Condition or loss caused or substantially contributed to by
voluntary intake of either:
(A) Any drug, unless prescribed or administered by a physician and
taken in accordance with the physician's instructions.
(B) Poison, gas, or fumes, unless they are the direct result of an
occupational accident.
(6) Condition or loss in consequence of the insured being
intoxicated, as defined by the jurisdiction where the condition or
loss occurred.
(7) Condition or loss caused or substantially contributed to by
engaging in an illegal occupation.
(8) Condition or loss caused or substantially contributed to by
engaging in aviation, other than as a fare-paying passenger.
(h) If the commissioner notifies the insurer, in writing, that the
filed form or actuarial information does not comply with the
requirements of law and specifies the reasons for his or her opinion,
it is unlawful for an insurer to issue any policy in that form.
SEC. 2. Section 10295.6 of the
Insurance Code is amended to read:
10295.6. (a) When a policyholder or certificate holder requests
an acceleration of death benefits, the insurer shall send a statement
to the policyholder or certificate holder and irrevocable
beneficiary showing any effect that the payment of the accelerated
death benefit would have on the policy's cash value, accumulation
account, death benefit, premium, policy loans, and policy liens. The
statement shall disclose that receipt of accelerated death benefit
payments may adversely affect the recipient's eligibility for
Medicaid or other government benefits or entitlements. In addition,
receipt of an accelerated death benefit payment may be taxable and
assistance should be sought from a personal tax adviser. When a
previous disclosure statement becomes invalid as a result of an
acceleration of the death benefit, the insurer shall send a revised
disclosure statement to the policyholder or certificate holder and
irrevocable beneficiary.
(b) The accelerated death benefit shall be effective not more than
30 days following the effective date of the policy provision, rider,
endorsement, or certificate.
(c) If the insurer charges a separate premium for the accelerated
death benefit, then the insurer may also offer a waiver of premium
benefit as defined in subdivision (a) of Section 10271.1. At the time
the waiver of the accelerated death benefit premium benefit is
claimed, the insurer shall explain any continuing premium requirement
to keep the underlying policy in force.
(d) An insurer shall not unfairly discriminate among insureds with
different qualifying events covered under the policy or among
insureds with similar qualifying events covered under the policy. An
insurer shall not apply further conditions on the payment of the
accelerated death benefits other than those conditions specified in
the accelerated death benefit.
(e) The insurer shall provide the policyholder or certificate
holder with a report , at least monthly, of any
accelerated death benefits paid out during the prior month, an
explanation of any changes to the policy or certificate, death
benefits, and cash values on account of the benefits being paid out,
and the amount of the remaining benefits that can be accelerated at
the end of the prior month. The insurer may use a calendar month or
policy or certificate month.
(f) The conversion benefit available to group certificate holders
on termination of employment pursuant to paragraph (2) of subdivision
(a) of Section 10209 shall include a benefit comparable to the
accelerated death benefit. This requirement may be satisfied by an
individual policy or certificate. This requirement, subject to the
approval of the commissioner, may be satisfied by arrangement with
another insurer to provide the required coverage.
(g) When payment of an accelerated death benefit results in a pro
rata reduction in cash value, the payment may be applied toward
repaying a portion of the loan equal to a pro rata portion of any
outstanding policy loans if disclosure of the effect of acceleration
upon any remaining death benefit, cash value or accumulation account,
policy loan, and premium payments, including a statement of the
possibility of termination of any remaining death benefit, is
provided to the policyholder or certificate holder. The policyholder
or certificate holder shall provide written consent authorizing any
other arrangement for the repayment of outstanding policy loans.
SECTION 1. Section 10203.8 of the Insurance
Code is amended to read:
10203.8. Life insurance conforming to all of the following
conditions is another form of group life insurance:
(a) Covering the lives of every eligible member of a group of
persons who become or are named depositors under a savings account
plan, established by a financial institution including subsidiary or
affiliated persons, which plan provides for periodic deposits of like
amounts.
(b) The period during which the deposits may be made under the
plan does not exceed 60 consecutive months, and the total amount of
insurance under the policy on any one depositor does not exceed the
difference between the amounts deposited and the maximum amount that
may be deposited under the plan and does not exceed three thousand
dollars ($3,000) on any one life.
(c) The group numbers 100 new entrants yearly.
(d) The policy is issued upon application of and made payable to
the financial institution as beneficiary, and the premiums are paid
by or through the financial institution.
(e) The policy of insurance conforming to this section is not
subject to Section 10209 of this code or Section 704.100 of the Code
of Civil Procedure.