California Legislature—2015–16 Regular Session

Assembly Bill No. 1512

Introduced by Committee on Insurance

March 5, 2015

An act to amend Section 396 of the Insurance Code, relating to insurance.

LEGISLATIVE COUNSEL’S DIGEST

AB 1512, as introduced, Committee on Insurance. Insurance: notice of lapse.

Existing law requires an insurance policy to specify certain information, including, but not limited to, the parties to the contract, the property or life insured, the risks insured against, premium, and the coverage period. Existing law, commencing January 1, 2016, and with regard to private passenger automobile insurance that provides coverage for 6 months or longer, specified residential property insurance, and policies of individual disability income insurance that are issued and take effect or that are renewed on or after January 1, 2016, requires an insurer to maintain a verifiable process or adopt a procedure that allows an applicant or policyholder to designate one additional person to receive notice of lapse, termination, expiration, nonrenewal, or cancellation of a policy for nonpayment of premium, as specified. Existing law provides that if an insurer opts to adopt the verifiable process then, the insurer shall provide the policyholder, within 30 days after the inception of an individual policy, with notice of the right to designate one person. Existing law provides that if a policy holder pays the premium for an insurance policy through a payroll or pension deduction plan, then the notice of the right to designate one person need only be sent within 60 days after the policyholder is no longer on that deduction payment plan. Existing law further requires the application form for an insurance policy to clearly indicate the deduction payment plan selected by the applicant.

This bill would remove the requirement that the application form clearly indicate the deduction payment plan selected by the applicant.

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 396 of the Insurance Code is amended
to read:

396.  

(a) An insurer shall do either of the following:

(1) Maintain a verifiable process that allows a policyholder to
designate in writing or by electronic transmission pursuant to
Section 38.5 one additional person to receive notice of lapse,
termination, expiration, nonrenewal, or cancellation of a policy
for nonpayment of premium. The insurer shall notify the
policyholder in writing or by electronic transmission pursuant to
Section 38.5 of this right at the time of the application or within
30 days after the inception date of an individual policy described
in subdivision (f), and at least every two years thereafter. The
notification described in this subdivision shall instruct the
policyholder how to request the designation and how to replace
or delete a designee. If a policyholder initiates contact with the
insurer after the insurer has provided notice and the insurer
complies with the policyholder’s request to establish or change
the additional person to receive the notice described in this section,
the insurer shall not be required to maintain additional verification.

(2) Comply with subdivision (b).

(b) An insurer that adopts the following procedure shall be
deemed to have complied with subdivision (a).

(1) Unless an applicant for insurance has been provided notice
of the right set forth in this section prior to inception of the policy,
the insurer shall provide the policyholder, within 30 days after the
inception date of an individual policy described in subdivision (f),
with notice of the right to designate one person, in addition to the
policyholder, to receive notice of lapse, termination, expiration,
nonrenewal, or cancellation of a policy for nonpayment of
premium. The insurer shall provide each applicant or policyholder
with notice in writing or by electronic transmission pursuant to
Section 38.5 of the opportunity to make the designation. That
notice shall instruct the applicant or policyholder on how he or
she is to submit the name and address of one person, in addition
to the applicant or policyholder, who is to receive notice of lapse,
termination, expiration, nonrenewal, or cancellation of the policy
for nonpayment of premium.

(2) If after having been provided notice from the insurer of the
right to designate an individual to receive notice of lapse,
termination, expiration, nonrenewal, or cancellation for
nonpayment of premium, the applicant or policyholder fails to
designate an individual within 30 days, the applicant or
policyholder shall be conclusively presumed to have declined the
opportunity to exercise his or her right at that time.

(3) Notwithstanding subparagraph (C) of paragraph (2) of
subdivision (a) of Section 791.13 or any other law, the insurer
shall retain and utilize as necessary the contact information
provided in the written designation for the lifetime of the policy,
and allow the policyholder to update the written designation if the
policyholder so requests.

(c) (1) A policyholder retains the right to designate the one
additional person to receive notice of lapse, termination, expiration,
nonrenewal, or cancellation for nonpayment of premium at any
time, at the initiative of the policyholder, regardless of whether
the policyholder previously declined to exercise that right. At least
every two years, the insurer shall notify the policyholder in writing
or by electronic transmission pursuant to Section 38.5, of
whichever of the following applies:

(A) If a policyholder has previously provided a designation
pursuant to this subdivision, in writing or by electronic transmission
pursuant to Section 38.5, the right to change the prior designation
by replacing or deleting a person to receive notice of lapse,
termination, expiration, nonrenewal, or cancellation for
nonpayment of premium.

(B) If the policyholder has not previously designated a person
to receive the notice of lapse, termination, expiration, nonrenewal,
or cancellation for nonpayment of premium pursuant to this
subdivision, the right to designate a person to receive notice of
lapse, termination, expiration, nonrenewal, or cancellation for
nonpayment of premium.

(2) The notice requirements in subparagraphs (A) and (B) of
paragraph (1) may be provided to a policyholder in a single notice
and shall not require two separate notices.

(d) When a policyholder pays the premium for an insurance
policy through a payroll or pension deduction plan, the
requirements contained in paragraph (1) of subdivision (b) need
not be met until 60 days after the policyholder is no longer on that
deduction payment plan. begin delete The application form for an insurance
policy shall clearly indicate the deduction payment plan selected
by the applicant. end delete

(e) An insurance policy shall not lapse or be terminated for
nonpayment of premium unless the insurer, at least 10 days prior
to the effective date of the lapse, termination, expiration,
nonrenewal, or cancellation, gives notice to the individual
designated pursuant to subdivision (a) or (b) at the address provided
by the policyholder for purposes of receiving the notice of lapse,
termination, expiration, nonrenewal, or cancellation for
nonpayment of premium. Notwithstanding any other law, notice
shall be given by first-class United States mail, postage prepaid,
within 10 days after the premium is due and unpaid. This
subdivision does not modify requirements for notice to the
policyholder of lapse, termination, expiration, nonrenewal, or
cancellation set forth in other sections of this code.

(f) This section applies only to policies of private passenger
automobile insurance that provide coverage for six months or
longer, policies of residential property insurance as described in
subdivision (a) of Section 10087 that take effect or that are renewed
after the effective date of this section, and policies of individual
disability income insurance as described in subdivision (i) of
Section 799.01.

(g) This section applies to policies that are issued and take effect
or that are renewed on or after January 1, 2016.

(h) An individual designated by a policyholder pursuant to this
section to receive notice of lapse, termination, expiration,
nonrenewal, or cancellation of the policy for nonpayment of
premium does not have any rights, whether as an additional insured
or otherwise, to any benefits under the policy, other than the right
to receive notice as provided by this section.

(i) This section shall become operative on January 1, 2016.