BILL NUMBER: AB 565 AMENDED
BILL TEXT
AMENDED IN SENATE MARCH 10, 2016
AMENDED IN ASSEMBLY APRIL 28, 2015
AMENDED IN ASSEMBLY MARCH 26, 2015
INTRODUCED BY Assembly Member Cooley
FEBRUARY 24, 2015
An act to amend Section 10270.6 Sections
10203.4, 10270.6, and 10271.1 of the Insurance Code,
relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 565, as amended, Cooley. Group life and disability
insurance: required provisions.
Existing law provides for the regulation of specified insurance
products, including group life and disability insurance,
by the Insurance Commissioner. Existing law requires
provides that insurance under a group life insurance
policy may be extended to insure the dependents of each insured
employee under the group policy, as specified. Existing law defines a
dependent for these purposes as including the employee's spouse and
all children from birth until 26 years of age, or a child 26 years of
age or older who is both incapable of self-sustaining employment by
reason of intellectual disability or physical handicap and
chiefly dependent upon the employee for support and maintenance, as
specified.
This bill would clarify that the group policyholder would be
authorized to elect coverage for dependent children under a group
life insurance policy based on factors, including marital status,
student status, residency, or support requirements, and, for
dependent children over the age of majority, the group policyholder
would be authorized to elect coverage at age variations up to the
limiting age.
Existing law requires a group disability master
insurance policy to include a provision that the insurer will issue
to the policyholder for delivery to an individual insured under the
policy an individual certificate that sets forth a statement as to
the insurance protection to which he or she is entitled and to whom
it is payable.
This bill would provide that instead the insurer may include in
the master insurance policy a provision that the insurer will issue
the certificate directly to the insured individual. This bill would
make other technical, nonsubstantive changes.
Existing law defines a waiver of premium benefit or a waiver of
monthly deduction benefit under a life insurance contract as a
supplemental benefit that operates to safeguard a life insurance
contract against lapse when the insured becomes totally disabled, as
defined by the supplemental benefit, and continues until the end of
the insured's disability or the period specified by the supplemental
benefit, consistent with specified restrictions. Existing law
requires, if the insured's total disability begins before the insured
attains 60 years of age, the insurer to waive all premiums or
monthly deductions due for the period that the insured continues to
be totally disabled. Existing law requires, if the insured's total
disability begins when the insured is 60 years of age or older, the
insurer to waive all premiums or monthly deductions due for the
period that the insured continues to be totally disabled up to 65
years of age.
This bill would require an insurer, for an insured who becomes
totally disabled before attaining 60 years of age and is covered by a
group life insurance policy that includes a supplemental benefit, to
waive all premiums or monthly deductions due for the period of total
disability up to the time the insured attains 65 years of age. The
bill would also permit an insurer, for an insured who becomes totally
disabled on or after 60 years of age and is covered by a group life
insurance policy that includes a supplemental benefit, to collect
premiums as long as the insurer offers the group policyholder the
option of having the insurer waive premiums up to 65 years of age.
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 10203.4 of the
Insurance Code is amended to read:
10203.4. (a) Insurance under a group life insurance policy issued
pursuant to Sections 10202, 10202.8, 10203, 10203.1, and 10203.7 may
be extended to insure the dependents, or any class or classes
thereof, of each insured employee who so elects, in amounts in
accordance with some plan that precludes individual selection and
that shall not be in excess of 100 percent of the insurance on the
life of the insured employee. The group policyholder may elect
coverage for dependent children based on factors, including marital
status, student status, residency, or support requirements, and, for
dependent children over the age of majority, the group policyholder
may elect coverage at age variations up to the limiting age.
(b) "Dependent" includes the member's spouse and all
children from birth until 26 years of age, or a child 26 years of age
or a minor child, as well as a child older than the
age of majority up to a maximum of 26 years of age, or an
older child who is both incapable of self-sustaining
employment by reason of an intellectual disability or physical
handicap and chiefly dependent upon the employee for support and
maintenance if proof of the incapacity and dependency is furnished to
the insurer by the employee within 31 days of the child's attainment
of the limiting age and subsequently as may be required by the
insurer, but not more frequently than annually after the two-year
period following the child's attainment of the limiting age.
(c) The premiums for the insurance on the dependents may be paid
by the employer, the employee, or the employer and the employee
jointly.
SECTION 1. SEC. 2. Section 10270.6
of the Insurance Code is amended to read:
10270.6. Every group disability master policy shall contain the
following provisions:
(a) A provision that the policy, the application of the
policyholder, and the individual applications, if any, of the
individuals insured shall constitute the entire contract between the
parties, and that all statements made by the policyholder, or by the
individuals insured shall, in the absence of fraud, be deemed
representations and not warranties, and that no such statement shall
be used in defense to a claim under the policy, unless it is
contained in a written application.
(b) A provision that the insurer will issue to the policyholder
for delivery to the individuals insured under that policy, or a
provision that the insurer will issue directly to the insured, an
individual certificate setting forth a statement as to the insurance
protection to which he or she is entitled and to whom payable.
(c) A provision that to the group or class thereof originally
insured shall be added from time to time all new employees, members
or pupils of the policyholder eligible to and applying for insurance
in that group or class.
(d) A statement that the policy is not in lieu of and does not
affect any requirement for coverage by workmen's compensation
insurance.
SEC. 3. Section 10271.1 of the
Insurance Code is amended to read:
10271.1. (a) (1) Supplemental benefits that operate to safeguard
life insurance contracts against lapse are defined as a waiver of
premium benefit or a waiver of monthly deduction benefit, as
applicable, in which the insurer waives the premium or monthly
deduction for a life insurance contract when the insured becomes
totally disabled, as defined by the supplemental benefit, and where
the waiver continues until the end of the insured's disability, or
for the period specified by the supplemental benefit, consistent with
paragraph (5).
(2) For purposes of this subdivision, total disability shall not
be less favorable to the insured than the following:
(A) During the first 24 months of total disability, the insured is
unable to perform with reasonable continuity the substantial and
material duties of his or her job due to sickness or bodily injury.
(B) After the first 24 months of total disability, the insured,
due to sickness or bodily injury, is unable to engage with reasonable
continuity in any other job in which he or she could reasonably be
expected to perform satisfactorily in light of his or her age,
education, training, experience, station in life, or physical and
mental capacity.
(3) The definition of total disability may also include
presumptive total disability, such as the insured's total and
permanent loss of sight of both eyes, hearing of both ears, speech,
the use of both hands, both feet, or one hand and one foot.
(4) The insurer may require total disability to continue for an
uninterrupted period of time specified by the supplemental benefit,
or the insurer may allow separate periods of disability to be
combined.
(5) The waiver of premium or monthly deduction benefit shall
continue for the period specified by the supplemental benefit, but
shall not be less favorable to the insured than the following:
(A) If the insured's total disability begins before the insured
attains 60 years of age, the insurer shall waive all premiums or
monthly deductions due for the period that the insured continues to
be totally disabled. disabled, except in the
case of coverage under group life insurance policies where, if the
insured's total disability begins before the insured attains 60 years
of age, the insurer shall waive all premiums or monthly
deductions due for the period of total disability up to 65 years of
age. Nothing in this subdivision shall preclude the insurer from
extending a supplemental benefit for longer periods.
(B) If the insured's total disability begins after the age
specified in subparagraph (A), the insurer shall waive all premiums
or monthly deductions due for the period that the insured continues
to be totally disabled up to 65 years of age.
age, except in the case of coverage under group life insurance
policies where, subject to the insurer offering the group
policyholder the option to have the insurer waive premiums up to 65
years of age, premiums are not required to be waived for a disability
that begins on or after the date the insured attains 60
years of age. Nothing in this subdivision shall preclude the insurer
from extending a supplemental benefit for longer periods.
(6) In addition to the permissible exclusions listed in
subdivision (g) of Section 10271, the insurer may exclude a total
disability occurring after the policy anniversary or supplemental
contract anniversary, as applicable and as defined by the
supplemental benefit, on which the insured attains a specified age of
no less than 65 years.
(b) "Special surrender benefit" is defined as a "waiver of
surrender charge benefit" wherein the insurer waives the surrender
charge usually charged for a withdrawal of funds from the cash value
of a life insurance contract or the account value of an annuity
contract if the owner, insured, or annuitant, as applicable, meets
any of the following criteria:
(1) Develops any medical condition where the owner's, insured's,
or annuitant's life expectancy is expected to be less than or equal
to a limited period of time that shall not be restricted to a period
of less than 12 months or greater than 24 months.
(2) Is receiving, as prescribed by a physician, registered nurse,
or licensed social worker, home care or community-based services, as
defined in subdivision (a) of Section 10232.9, or is confined in a
skilled nursing facility, convalescent nursing home, or extended care
facility, which shall not be defined more restrictively than as in
the Medicare program, or is confined in a residential care facility
or residential care facility for the elderly, as defined in the
Health and Safety Code. Out-of-state providers of services shall be
defined as comparable in licensure and staffing requirements to
California providers.
(3) Has any medical condition that would, in the absence of
treatment, result in death within a limited period of time, as
defined by the supplemental benefit, but that shall not be restricted
to a period of less than six months.
(4) Is totally disabled, as follows:
(A) During the first 24 months of total disability, the owner,
insured, or annuitant, as applicable, is unable to perform with
reasonable continuity the substantial and material duties of his or
her job due to sickness or bodily injury.
(B) After the first 24 months of total disability, the owner,
insured, or annuitant, as applicable, due to sickness or bodily
injury, is unable to engage with reasonable continuity in any other
job in which he or she could reasonably be expected to perform
satisfactorily in light of his or her age, education, training,
experience, station in life, or physical and mental capacity.
(C) The definition of total disability may also include
presumptive total disability, such as the insured's total and
permanent loss of sight of both eyes, hearing of both ears, speech,
the use of both hands, both feet, or one hand and one foot.
(D) The insurer may require the total disability to continue for
an uninterrupted period of time specified by the supplemental
benefit, or the insurer may allow separate periods of disability to
be combined.
(5) Has a chronic illness as defined pursuant to either
subparagraph (A) or (B):
(A) Either of the following:
(i) Impairment in performing two out of seven activities of daily
living, as set forth in subdivisions (a) and (g) of Section 10232.8,
meaning the insured needs human assistance, or needs continual
substantial supervision.
(ii) The insured has an impairment of cognitive ability, meaning a
deterioration or loss of intellectual capacity due to mental illness
or disease, including Alzheimer's disease or related illnesses, that
requires continual supervision to protect oneself or others.
(B) Either of the following:
(i) Impairment in performing two out of six activities of daily
living as described in subdivisions (b), (d), (e), and (f) of Section
10232.8 due to a loss of functional capacity to perform the
activity.
(ii) Impairment of cognitive ability, meaning the insured needs
substantial supervision due to severe cognitive impairment, as
described in subdivisions (b), (d), and (e) of Section 10232.8.
(6) Has become involuntarily or voluntarily unemployed.
(c) 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) of Section 10271.