BILL NUMBER: AB 2110 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member De La Torre
FEBRUARY 18, 2010
An act to amend Sections 10291.5 and 10350.3 of the Insurance
Code, relating to disability insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 2110, as introduced, De La Torre. Disability insurance: premium
payments: grace periods.
Existing law provides for the regulation of disability insurers by
the Department of Insurance and requires disability insurance
policies to include a provision setting forth a grace period for
making premium payments. Under existing law, the grace period must
equal no less than 7 days for weekly premium policies, no less than
10 days for monthly premium policies, and no less than 31 days for
all other policies. Existing law prohibits the Insurance Commissioner
from approving a policy for issuance or delivery, and authorizes the
commissioner to withdraw approval of the policy, if it fails to meet
these requirements.
This bill would extend the minimum grace period for policies,
other than weekly premium policies, to 50 days.
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 10291.5 of the Insurance Code is amended to
read:
10291.5. (a) The purpose of this section is to achieve both of
the following:
(1) Prevent, in with respect to
disability insurance, fraud, unfair trade practices, and insurance
economically unsound to the insured.
(2) Assure Ensure that the language
of all insurance policies can be readily understood and interpreted.
(b) The commissioner shall not approve any
a disability policy for insurance
issuance or delivery in this state in any of the following
circumstances:
(1) If the commissioner finds that it contains any provision, or
has any label, description of its contents, title, heading, backing,
or other indication of its provisions which
that is unintelligible, uncertain, ambiguous, or abstruse, or
likely to mislead a person to whom the policy is offered, delivered
or issued.
(2) If it contains any provision for payment at a rate, or in an
amount (other than the product of rate times the periods for which
payments are promised) for loss caused by particular event or events
(as distinguished from character of physical injury or illness of the
insured) more than triple the lowest rate, or amount, promised in
the policy for the same loss caused by any other event or events
(loss caused by sickness, loss caused by accident, and different
degrees of disability each being considered, for the purpose of this
paragraph, a different loss); or if it contains any provision for
payment for any confining loss of time at a rate more than six times
the least rate payable for any partial loss of time or more than
twice the least rate payable for any nonconfining total loss of time;
or if it contains any provision for payment for any nonconfining
total loss of time at a rate more than three times the least rate
payable for any partial loss of time.
(3) If it contains any provision for payment for disability caused
by particular event or events (as distinguished from character of
physical injury or illness of the insured) payable for a term more
than twice the least term of payment provided by the policy for the
same degree of disability caused by any other event or events; or if
it contains any benefit for total nonconfining disability payable for
lifetime or for more than 12 months and any benefit for partial
disability, unless the benefit for partial disability is payable for
at least three months; or if it contains any benefit for total
confining disability payable for lifetime or for more than 12 months,
unless it also contains benefit for total nonconfining disability
caused by the same event or events payable for at least three months,
and, if it also contains any benefit for partial disability, unless
the benefit for partial disability is payable for at least three
months. The provisions of this paragraph shall apply separately to
accident benefits and to sickness benefits.
(4) (A) If it contains provision or
provisions which would have the effect, upon any termination of the
policy, of reducing or ending the liability as the insurer would
have, but for the termination, for loss of time resulting from
accident occurring while the policy is in force or for loss of time
commencing while the policy is in force and resulting from sickness
contracted while the policy is in force or for other losses resulting
from accident occurring or sickness contracted while the policy is
in force, and also contains provision or provisions reserving to the
insurer the right to cancel or refuse to renew the policy, unless it
also contains other provision or provisions the effect of which is
that termination of the policy as the result of the exercise by the
insurer of any such right shall not reduce or end the liability
in with respect to the hereinafter
specified losses as the insurer would have had under the policy,
including its other limitations, conditions, reductions, and
restrictions, had the policy not been so terminated.
The
(B) The specified losses referred
to in the preceding paragraph subparagraph
(A) are:
(i) Loss of time which that
commences while the policy is in force and results from sickness
contracted while the policy is in force.
(ii) Loss of time which that
commences within 20 days following and results from accident
occurring while the policy is in force.
(iii) Losses which that result from
accident occurring or sickness contracted while the policy is in
force and arise out of the care or treatment of illness or injury and
which that occur within 90 days from
the termination of the policy or during a period of continuous
compensable loss or losses , which period commences prior
to the end of such those 90 days.
(iv) Losses other than those specified in clause (i), (ii), or
(iii) of this paragraph which that
result from accident occurring or sickness contracted while the
policy is in force and which losses that
occur within 90 days following the accident or the contraction
of the sickness.
(5) If by any caption, label, title, or description of contents
the policy states, implies, or infers without reasonable
qualification that it provides loss of time indemnity for lifetime,
or for any period of more than two years, if the loss of time
indemnity is made payable only when house confined or only under
special contingencies not applicable to other total loss of time
indemnity.
(6) If it contains any benefit for total confining disability
payable only upon condition that the confinement be of an abnormally
restricted nature unless the caption of the part containing
any such that benefit is accurately descriptive
of the nature of the confinement required and unless, if the policy
has a description of contents, label, or title, at least one of them
contain reference to the nature of the confinement required.
(7) (A) If, irrespective of the premium charged therefor, any
benefit of the policy is, or the benefits of the policy as a whole
are, not sufficient to be of real economic value to the insured.
(B) In determining whether benefits are of real economic value to
the insured, the commissioner shall not differentiate between
insureds of the same or similar economic or occupational classes and
shall give due consideration to all of the following:
(i) The right of insurers to exercise sound underwriting judgment
in the selection and amounts of risks.
(ii) Amount of benefit, length of time of benefit, nature or
extent of benefit, or any combination of those factors.
(iii) The relative value in purchasing power of the benefit or
benefits.
(iv) Differences in insurance issued on an industrial or other
special basis.
(C) To be of real economic value, it shall not be necessary that
any a benefit or benefits cover the
full amount of any a loss
which that might be suffered by reason of the
occurrence of any a hazard or event
insured against.
(8) If it substitutes a specified indemnity upon the occurrence of
accidental death for any benefit of the policy, other than a
specified indemnity for dismemberment, which would accrue prior to
the time of that death , or if it contains any provision
which that has the effect, other than
at the election of the insured exercisable within not less than 20
days in the case of benefits specifically limited to the loss by
removal of one or more fingers or one or more toes or within not less
than 90 days in all other cases, of doing any of the following:
(A) Of substituting, upon the occurrence of the loss of both
hands, both feet, one hand and one foot, the sight of both eyes or
the sight of one eye and the loss of one hand or one foot, some
specified indemnity for any or all benefits under the policy unless
the indemnity so specified is equal to or greater than the total of
the benefit or benefits for which such the
specified indemnity is substituted and which, assuming in all
cases that the insured would continue to live, could possibly accrue
within four years from the date of such the
dismemberment under all other provisions of the policy
applicable to the particular event or events (as distinguished from
character of physical injury or illness) causing the dismemberment.
(B) Of substituting, upon the occurrence of any other
dismemberment some specified indemnity for any or all benefits under
the policy unless the indemnity so specified is equal to or greater
than one-fourth of the total of the benefit or benefits for which the
specified indemnity is substituted and which, assuming in all cases
that the insured would continue to live, could possibly accrue within
four years from the date of the dismemberment under all other
provisions of the policy applicable to the particular event or events
(as distinguished from character of physical injury or illness)
causing the dismemberment.
(C) Of substituting a specified indemnity upon the occurrence of
any dismemberment for any benefit of the policy which would accrue
prior to the time of dismemberment.
As used in this section, loss of a hand shall be severance at or
above the wrist joint, loss of a foot shall be severance at or above
the ankle joint, loss of an eye shall be the irrecoverable loss of
the entire sight thereof, loss of a finger shall mean at least one
entire phalanx thereof and loss of a toe the entire toe.
(9) If it contains provision, other than as provided in Section
10369.3, reducing any original benefit more than 50 percent on
account of age of the insured.
(10) If the insuring clause or clauses contain no reference to the
exceptions, limitations, and reductions (if any) or no specific
reference to, or brief statement of, each abnormally restrictive
exception, limitation, or reduction.
(11) If it contains benefit or benefits for loss or losses from
specified diseases only unless:
(A) All of the diseases so specified in each provision granting
the benefits fall within some general classification based upon the
following:
(i) The part or system of the human body principally subject to
all such those diseases.
(ii) The similarity in nature or cause of such
those diseases.
(iii) In case of diseases of an unusually serious nature and
protracted course of treatment, the common characteristics of
all such those diseases with respect to
severity of affliction and cost of treatment.
(B) The policy is entitled and each provision granting the
benefits is separately captioned in clearly understandable words so
as to accurately describe the classification of diseases covered and
expressly point out, when that is the case, that not all diseases of
the classification are covered.
(12) If it does not contain provision for a grace period
of at least the number of days specified below for the
payment of each premium falling due after the first premium, during
which grace period the policy shall continue in force
provided, that the grace period to be included in the policy shall be
not less than , of at least seven days for
policies providing for weekly payment of premium , not less
than 10 and at least 50 days for
policies providing for monthly payment of premium and not less than
31 days for all other policies.
(13) If it fails to conform in any respect with any law of this
state.
(c) The commissioner shall not approve any
a disability policy covering hospital, medical, or surgical
expenses unless the commissioner finds that the application conforms
to both of the following requirements:
(1) All applications for disability insurance covering hospital,
medical, or surgical expenses, except that which is
those that are guaranteed issue, which include
questions relating to medical conditions, shall contain clear and
unambiguous questions designed to ascertain the health condition or
history of the applicant.
(2) The application questions designed to ascertain the health
condition or history of the applicant shall be based on medical
information that is reasonable and necessary for medical underwriting
purposes. The application shall include a prominently displayed
notice that states:
"California law prohibits an HIV test from being required or used
by health insurance companies as a condition of obtaining health
insurance coverage."
(d) Nothing in this section authorizes the commissioner to
establish or require a single or standard application form for
application questions.
(e) The commissioner may, from time to time as conditions warrant,
after notice and hearing, promulgate such reasonable rules and
regulations, and amendments and additions thereto, as are necessary
or convenient, to establish, in advance of the submission of
policies, the standard or standards conforming to subdivision (b), by
which he or she shall disapprove or withdraw approval of any
disability policy.
In promulgating any such rule or regulation , the
commissioner shall give consideration to the criteria herein
established and to the desirability of approving for use in policies
in this state uniform provisions, nationwide or otherwise, and is
hereby granted the authority to consult with insurance authorities of
any other state and their representatives individually or by way of
convention or committee, to seek agreement upon those provisions.
Any such rule or regulation shall be promulgated in accordance
with the procedure provided in Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code.
(f) The commissioner may withdraw approval of filing of any policy
or other document or matter required to be approved by the
commissioner, or filed with him or her, by this chapter when the
commissioner would be authorized to disapprove or refuse filing of
the same if originally submitted at the time of the action of
withdrawal.
Any such That withdrawal shall be in
writing and shall specify reasons. An insurer adversely affected by
any such the withdrawal may, within a
period of 30 days following mailing or delivery of the writing
containing the withdrawal, by written request , secure a
hearing to determine whether the withdrawal should be annulled,
modified, or confirmed. Unless, at any time, it is mutually agreed to
the contrary, a hearing shall be granted and commenced within 30
days following filing of the request and shall proceed with
reasonable dispatch to determination. Unless the commissioner in
writing in the withdrawal, or subsequent thereto, grants an
extension, any such the withdrawal
shall, in the absence of any such request a
request fo r a hearing , be effective, prospectively
and not retroactively, on the 91st day following the mailing or
delivery of the withdrawal, and, if request for the hearing is filed,
on the 91st day following mailing or delivery of written notice of
the commissioner's determination.
(g) No proceeding under this section is subject to Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of
the Government Code.
(h) Except as provided in subdivision (k), any action taken by the
commissioner under this section is subject to review by the courts
of this state and proceedings on review shall be in accordance with
the Code of Civil Procedure.
Notwithstanding any other provision of law to the contrary,
petition for any such that review may
be filed at any time before the effective date of the action taken by
the commissioner. No action of the commissioner shall become
effective before the expiration of 20 days after written notice and a
copy thereof are mailed or delivered to the person adversely
affected, and any action so submitted for review shall not become
effective for a further period of 15 days after the filing of the
petition in court. The court may stay the effectiveness thereof for a
longer period.
(i) This section shall be liberally construed to effectuate the
purpose and intentions herein stated; but shall not be construed to
grant the commissioner power to fix or regulate rates for disability
insurance or prescribe a standard form of disability policy, except
that the commissioner shall prescribe a standard supplementary
disclosure form for presentation with all disability insurance
policies, pursuant to Section 10603.
(j) This section shall be effective on and after July 1, 1950, as
to all policies thereafter submitted and on and after January 1,
1951, the commissioner may withdraw approval pursuant to subdivision
(d) of any policy thereafter issued or delivered in this state
irrespective of when its form may have been submitted or approved,
and prior to those dates the provisions of law in effect on January
1, 1949, shall apply to those policies.
(k) Any such A policy
subject to this section that is issued by an insurer to an
insured on a form approved by the commissioner, and in accordance
with the conditions, if any, contained in the approval, at a time
when that approval is outstanding shall, as between the insurer and
the insured, or any person claiming under the policy, be conclusively
presumed to comply with, and conform to, this section.
SEC. 2. Section 10350.3 of the Insurance Code is amended to read:
10350.3. A disability policy shall contain a provision
which that shall be in one of the two forms set
forth herein in this section . Form A
shall be used in a policy in which the insurer does not reserve the
right to refuse any renewal. Form B shall be used in a policy in
which an insurer reserves the right to refuse any renewal. The clause
in parentheses may only be added if the policy contains a
cancellation provision. In the blank in each such
form shall be inserted a number; number:
not less than "7" for weekly premium policies , "10"
for monthly premium policies, and "31" and not less
than "50" for all other policies.
Form A.
Grace Period: A grace period of __ days will be granted for the
payment of each premium falling due after the first premium, during
which grace period the policy shall continue in force (subject to the
right of the insurer to cancel in accordance with the cancellation
provision hereof).
Form B.
Grace Period: Unless not less than five days prior to the premium
due date the insurer has delivered to the insured or has mailed to
his last address as shown by the records of the insurer written
notice of its intention not to renew this policy beyond the period
for which the premium has been accepted, a grace period of __ days
will be granted for the payment of each premium falling due after the
first premium, during which grace period the policy shall continue
in force (subject to the right of the insurer to cancel in accordance
with the cancellation provision hereof).
SEC. 3. The changes made by Sections 1 and 2 of this act shall
only apply to disability insurance policies issued, amended, or
renewed on or after January 1, 2011.