BILL NUMBER: SB 1212 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY AUGUST 6, 2012
AMENDED IN ASSEMBLY JUNE 28, 2012
AMENDED IN ASSEMBLY JUNE 21, 2012
AMENDED IN SENATE MARCH 26, 2012
INTRODUCED BY Senator Calderon
FEBRUARY 22, 2012
An act to amend Sections 38.5, 663, 678, 678.1, and 10086 of
, and to add Section 10271.2 to, the Insurance
Code, relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
SB 1212, as amended, Calderon. Insurance.
Insurance: electronic transmission.
(1) 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 additional benefits in case of death
or dismemberment or loss of sight by accident, operate to safeguard
contracts against lapse, or give a special surrender value, a special
benefit, or an annuity if the insured or annuitant becomes totally
or permanently disabled.
This bill would specify that the term "special benefit" for
purposes of those provisions includes an accelerated death benefit if
some of all of the death benefit of a life insurance contract is
paid to the insured upon the occurrence of certain qualifying events,
including if the insured requires continuous confinement in an
eligible institution.
(2) Existing law requires supplemental contracts or, if a
supplemental contract is an integral part of a life insurance
contract, life insurance contracts to be submitted for approval by
the Insurance Commissioner before the contracts are delivered or
issued for delivery in this state.
This bill would require a life insurance contract or supplemental
contract that includes an accelerated death benefit that is
submitted for approval by the Insurance Commissioner to be submitted
for approval with specified additional information, including a
statement of the types of policy forms with which the benefit will be
offered.
(3) Existing
Existing law authorizes the electronic transmission of
any written notice required to be given or mailed to any person by an
insurer relating to any insurance on risks or on operations in this
state, as specified.
This bill would provide that if any provision
of the Insurance Code that expressly authorizes electronic
transmission , that provision shall govern over
any other conflicting state law. The bill would also
authorize offers of renewal of automobile, property, or commercial
insurance, as well as certain liability insurance, and any offer of
coverage or renewal and any disclosure of earthquake coverage, to be
provided electronically, as specified.
Vote: majority. Appropriation: no. Fiscal committee: yes
no . State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 38.5 of the Insurance Code is amended to read:
38.5. (a) Any written notice required to be given or mailed to
any person by an insurer relating to any insurance on risks or on
operations in this state not excepted by Section 1851 from the
coverage of Chapter 9 (commencing with Section 1850.4) of Part 2 of
Division 1 of this code may, if not excluded by subdivision (b) or
(c) of Section 1633.3 of the Civil Code, be provided by electronic
transmission pursuant to Title 2.5 (commencing with Section 1633.1)
of Part 2 of Division 3 of the Civil Code, if each party has agreed
to conduct the transaction by electronic means pursuant to Section
1633.5 of the Civil Code. The affidavit of the person who initiated
the electronic transmission, stating the facts of that transmission
into an information processing system outside of the control of the
sender or of any person that sent the electronic record on behalf of
the sender, is prima facie evidence that the notice was transmitted
and shall be sufficient proof of notice. Any notice provided by
electronic transmission shall be treated as if mailed or given for
the purposes of any provision of this code, except as provided by
subdivision (g) of Section 1633.15 of the Civil Code. The insurance
company shall maintain a system for confirming that any notice or
document that is to be provided by electronic means has been sent in
a manner consistent with Section 1633.15 of the Civil Code. A valid
electronic signature shall be sufficient for any provision of law
requiring a written signature. The insurance company shall retain a
copy of the confirmation and electronic signature, when either is
required, with the policy information so that they are retrievable
upon request by the Department of Insurance while the policy is in
force and for five years thereafter.
(b) Notwithstanding any exclusionary provision described in
subdivision (a), if any provision of this
code that expressly authorizes electronic transmission
, that specific provision authorizing electronic
transmission shall govern over any other
conflicting state law.
SEC. 2. Section 663 of the Insurance Code is amended to read:
663. (a) Before policy expiration, an insurer shall deliver to or
mail to the named insured, at the address shown on the policy, one
of the following:
(1) At least 20 days before expiration, a written or verbal offer
of renewal of the policy, contingent upon payment of premium as
stated in the offer.
(2) At least 30 days before expiration, a written notice of
nonrenewal of the policy, including the statement required by Section
666.
(b) (1) An insurer that delivers a verbal offer to renew that is
declined by an insured shall, at least 20 days before expiration of
the policy, deliver to or mail to the named insured, at the address
shown on the policy, a written confirmation of the offer and
rejection.
(2) An insurer that attempts to satisfy subdivision (a) with a
verbal offer to renew, but is unable to contact the named insured
directly at least 20 days before policy expiration, shall, at least
20 days before policy expiration, deliver to or mail to the named
insured, at the address shown on the policy, a written offer to renew
the policy, contingent upon payment of premium as stated in the
offer.
(c) In the event that an insurer fails to give the named insured
either an offer of renewal or notice of nonrenewal as required by
this section, the existing policy, with no change in its terms and
conditions, shall remain in effect for 30 days from the date that
either the offer to renew or the notice of nonrenewal is delivered or
mailed to the named insured. A notice to this effect shall be
provided by the insurer to the named insured with the policy or the
notice of renewal or nonrenewal. Notwithstanding the failure of an
insurer to comply with this section, the policy shall terminate on
the effective date of any other replacement or succeeding automobile
insurance policy procured by the insured, or his agent or broker,
with respect to any automobile designated in both policies.
(d) The insurer shall not be required to notify the named insured,
or any other insured, of nonrenewal of the policy if the insurer has
mailed or delivered a notice of expiration or cancellation, on or
prior to the 30th day preceding expiration of the policy period.
(e) Notwithstanding any provision to the contrary, the offer of
renewal pursuant to this section may be provided electronically.
SEC. 3. Section 678 of the Insurance Code is amended to read:
678. (a) At least 45 days prior to policy expiration, an insurer
shall deliver to the named insured or mail to the named insured at
the address shown in the policy, either of the following:
(1) An offer of renewal of the policy contingent upon payment of
premium as stated in the offer, stating each of the following:
(A) Any reduction of limits or elimination of coverage.
(B) The telephone number of the insurer's representatives who
handle consumer inquiries or complaints. The telephone number shall
be displayed prominently in a font size consistent with the other
text of the renewal offer.
(2) A notice of nonrenewal of the policy. That notice shall
contain each of the following:
(A) The reason or reasons for the nonrenewal.
(B) The telephone number of the insurer's representatives who
handle consumer inquiries or complaints. The telephone number shall
be displayed prominently in a font size consistent with the other
text of the notice of nonrenewal.
(C) A brief statement indicating that if the consumer has
contacted the insurer to discuss the nonrenewal and remains
unsatisfied, he or she may have the matter reviewed by the
department. The statement shall include the telephone number of the
unit within the department that responds to consumer inquiries and
complaints.
(b) In the event an insurer fails to give the named insured either
an offer of renewal or notice of nonrenewal as required by this
section, the existing policy, with no change in its terms and
conditions, shall remain in effect for 45 days from the date that
either the offer to renew or the notice of nonrenewal is delivered or
mailed to the named insured. A notice to this effect shall be
provided by the insurer to the named insured with the policy or the
notice of renewal or nonrenewal.
(c) Any policy written for a term of less than one year shall be
considered as if written for a term of one year. Any policy written
for a term longer than one year, or any policy with no fixed
expiration date, shall be considered as if written for successive
policy periods or terms of one year.
(d) This section applies only to policies of insurance specified
in Section 675.
(e) Notwithstanding any other law to the contrary, the offer of
renewal pursuant to this section may be provided electronically.
SEC. 4. Section 678.1 of the Insurance Code is amended to read:
678.1. (a) This section applies only to policies of insurance of
commercial insurance that are subject to Sections 675.5 and 676.6.
(b) A notice of nonrenewal shall be in writing and shall be
delivered or mailed to the producer of record and to the named
insured at the mailing address shown on the policy. Subdivision (a)
of Section 1013 of the Code of Civil Procedure shall be applicable if
the notice is mailed.
(c) An insurer, at least 60 days, but not more than 120 days, in
advance of the end of the policy period, shall give notice of
nonrenewal, and the reasons for the nonrenewal, if the insurer
intends not to renew the policy, or to condition renewal upon
reduction of limits, elimination of coverages, increase in
deductibles, or increase of more than 25 percent in the rate upon
which the premium is based.
(d) If an insurer fails to give timely notice required by
subdivision (c), the policy of insurance shall be continued, with no
change in its terms or conditions, for a period of 60 days after the
insurer gives the notice.
(e) With respect to policies defined in subdivision (b) of Section
676.6, in addition to the bases for conditional renewal set forth in
subdivision (c), an insurer may also condition renewal upon
requirements relating to the underlying policy or policies. If the
requirements are not satisfied as of (1) the expiration date of the
policy, or (2) 30 days after mailing or delivery of such notice,
whichever is later, the conditional renewal notice shall be treated
as an effective notice of nonrenewal, provided the insurer has sent
written confirmation to the first named insured and the producer of
record that the conditions were not met and that coverage ceased at
the expiration date shown in the expiring policy.
(f) A notice of nonrenewal shall not be required in any of the
following situations.
(1) The transfer of, or renewal of, a policy without a change in
its terms or conditions or the rate on which the premium is based
between insurers that are members of the same insurance group.
(2) The policy has been extended for 90 days or less, if the
notice required in subdivision (c) has been given prior to the
extension.
(3) The named insured has obtained replacement coverage or has
agreed, in writing, within 60 days of the termination of the policy,
to obtain that coverage.
(4) The policy is for a period of no more than 60 days and the
insured is notified at the time of issuance that it may not be
renewed.
(5) The named insured requests a change in the terms or conditions
or risks covered by the policy within 60 days prior to the end of
the policy period.
(6) The insurer has made a written offer to the insured, within
the time period specified in subdivision (c), to renew the policy
under changed terms or conditions or at a changed premium rate. As
used herein, "terms or conditions" includes, but is not limited to, a
reduction in limits, elimination of coverages, or an increase in
deductibles.
(g) Notwithstanding any other law to the contrary, the offer of
renewal or conditional renewal pursuant to this section may be
provided electronically.
SEC. 5. Section 10086 of the Insurance Code is amended to read:
10086. (a) If an offer of earthquake coverage is accepted, the
coverage shall be continued at the applicable rates and conditions
for the policy term, provided the policy of residential property
insurance is not terminated by the named insured or insurer.
(1) At any renewal, an insurer may modify the terms and conditions
of an existing policy, rider, or endorsement providing coverage
against loss or damage caused by the peril of earthquake if the
modified terms and conditions provide the minimum coverages required
by Section 10089.
(2) An insurer that modifies the terms and conditions of an
existing policy, rider, or endorsement shall provide the insured with
the renewal notice in a stand-alone disclosure document stating the
changes in the terms and conditions of the insured's existing policy,
rider, or endorsement. Proof of mailing of the disclosure document
by first-class mail to a named insured at the mailing address shown
on the policy or application creates a conclusive presumption that
the disclosure document was provided. The disclosure shall include
the following statement in 14-point boldface type:
THE COVERAGE IN THE POLICY WE ARE OFFERING YOU WITH THIS RENEWAL
HAS BEEN REDUCED, AND SUBSTANTIALLY DIFFERS FROM THE COVERAGES
PROVIDED BY YOUR HOMEOWNERS' POLICY. INSURANCE COMPANIES ARE ALLOWED
TO RENEW EARTHQUAKE INSURANCE POLICIES WITH COVERAGE THAT IS REDUCED
FROM THE COVERAGE YOU PREVIOUSLY PURCHASED. YOU MAY REQUEST A SAMPLE
COPY OF THIS NEW POLICY TO REVIEW PRIOR TO MAKING A DECISION TO
ACCEPT THIS RENEWAL, AND WE WILL MAIL OR DELIVER IT TO YOU WITHIN 14
DAYS OF YOUR REQUEST. A REQUEST FOR THE SAMPLE COPY SHALL NOT CHANGE
OR EXTEND THE POLICY EXPIRATION DATE SPECIFIED IN THE RENEWAL NOTICE.
A SUMMARY OF THE CHANGES IS INCLUDED WITH THIS NOTICE.
The commissioner shall approve the form of the summary at the time
he or she approves the policy. The summary shall include the
information contained in subdivision (a) of Section 10083, and may be
included with the renewal notice in standard type.
The commissioner may approve substantially similar disclosure
forms if necessary to accurately disclose relevant information to the
policyholder. The commissioner may also approve disclosure forms
substantially similar to the disclosure statement required by Section
10083 if necessary to accurately disclose relevant information to
the policyholder.
(3) If the earthquake coverage is provided by a policy issued by
the California Earthquake Authority, the following disclosure shall
be provided in 14-point boldface type:
CALIFORNIA EARTHQUAKE AUTHORITY POLICY DISCLOSURE
THIS POLICY IS BEING PURCHASED FROM THE CALIFORNIA EARTHQUAKE
AUTHORITY ("CEA"). THE COVERAGE IN THIS CEA POLICY SUBSTANTIALLY
DIFFERS FROM THE COVERAGES PROVIDED IN YOUR HOMEOWNER'S POLICY. THE
CEA IS NOT PART OF OR ASSOCIATED WITH YOUR HOMEOWNER'S INSURANCE
COMPANY. IF LOSSES AS A RESULT OF AN EARTHQUAKE OR A SERIES OF
EARTHQUAKES EXCEED THE AVAILABLE RESOURCES OF THE CEA, THIS POLICY IS
NOT COVERED BY THE CALIFORNIA INSURANCE GUARANTY ASSOCIATION.
THEREFORE, THE CALIFORNIA INSURANCE GUARANTY ASSOCIATION WILL NOT PAY
YOUR CLAIMS OR PROTECT YOUR ASSETS IF THE CEA BECOMES INSOLVENT AND
IS UNABLE TO MAKE PAYMENTS AS PROMISED. IN ADDITION, YOUR CEA POLICY
MAY BE SUBJECT TO FUTURE SURCHARGES OF THE POLICY PREMIUM IN CERTAIN
CASES WHERE AN EARTHQUAKE OR SERIES OF EARTHQUAKES HAS EXCEEDED
AVAILABLE RESOURCES TO PAY CLAIMS. IN THAT CASE, THIS MEANS THAT IN
ADDITION TO THE ANNUAL PREMIUM, YOU MAY BE CHARGED UP TO AN
ADDITIONAL 20% OF THE PREMIUM.
(b) If the offer is not accepted, the insurer or any affiliated
insurer shall be required on an every other year basis to offer
earthquake coverage in connection with any continuation, renewal, or
reinstatement of the policy following any lapse thereof, or with
respect to any other policy that extends, changes, supersedes, or
replaces the policy of residential property insurance.
(c) Nothing in this section shall preclude the named insured from
terminating the earthquake coverage at any time.
(d) Notwithstanding any other law to the contrary, any offer of
coverage or renewal or any disclosure pursuant to this section may be
provided electronically.
SEC. 6. Section 10271.2 is added to the
Insurance Code, to read:
10271.2. (a) The term "special benefit," as used in this chapter,
includes an accelerated death benefit if some or all of the death
benefit of a life insurance contract is paid to the insured upon the
occurrence of any of the following qualifying events:
(1) The insured develops a medical condition that is reasonably
expected to result in a drastically limited life span, as defined in
the contract or supplemental contract, but not defined in a way to
require a life span of less than six months but not providing
benefits for a life span of more than 24 months.
(2) The insured requires continuous confinement in an eligible
institution, as defined in the contract or supplemental contract, and
is expected to remain there for the rest of his or her life.
(3) The insured requires extraordinary medical intervention, such
as a major organ transplant or continuous artificial life support,
without which he or she would die.
(4) The insured has a medical condition that, in the absence of
extensive or extraordinary medical treatment, would result in a
drastically reduced life span.
(5) The insured has a chronic illness, defined in the contract or
supplemental contract as a permanent inability to perform, without
substantial assistance from another individual, more than three out
of six activities of daily living, or permanent severe cognitive
impairment or similar forms of dementia.
(b) A life insurance contract or supplemental contract submitted
for approval of the commissioner pursuant to Section 10292 shall be
submitted with the following additional information if the contract
includes an accelerated death benefit:
(1) A statement of the types of policy forms with which this
benefit will be offered, any underwriting restrictions involving face
amount or age, and whether the benefit is intended for use with new
issues or in force business.
(2) A specimen issue of the statement regarding the effect of
accelerated death benefit payment on other benefit provisions, to be
provided to the owner prior to, or concurrent with, the election of
the accelerated death benefit option, and an explanation of how and
when the statement will be provided. The statement shall demonstrate
the effect of the acceleration of the death benefit on the policy
cash value, death benefit, premium, cost of insurance charges, and
loans and liens, as applicable. The statement shall be based only on
guaranteed values. The statement shall also include a disclosure that
receipt of an accelerated death benefit may affect eligibility for
Medicaid or other governmental benefits or entitlements and may have
tax consequences.
(3) An actuarial memorandum prepared, dated, and signed by the
member of the American Academy of Actuaries that includes the
following information:
(A) A description of the accelerated death benefit, including the
effects of payment of the accelerated death benefit on all policy
benefits, premium payments, cost of insurance rates, and values,
including any outstanding loan, if applicable, for all types of forms
with which the accelerated death benefit will be used.
(B) A description of, and justification for, expense charges
associated with the accelerated death benefit and the maximum expense
charges.
(C) A description of the interest rate or interest rate
methodology used in any present value calculation or in accruing
interest on the amount of the accelerated death benefit, which shall
not exceed the greater of: (i) The current yield on 90-day treasury
bills, or (ii) A variable rate determined in accordance with the
National Association of Insurance Commissioners (NAIC) Model Policy
Loan Interest Rate Bill No. 590.
(D) A description of the mortality basis and methodology,
including the period of time applicable to any mortality discount,
used in any present value calculation of the accelerated death
benefit.
(E) A description of the mortality and morbidity basis and
methodology used in the determination of any separate premium or
costs of insurance for the accelerated death benefit.
(F) The formula used to determine the accelerated death benefit,
including any limitations on the amount of the benefit, and the
formula used to determine the postacceleration premium.
(G) A sample calculation of the accelerated death benefit. If the
policy contains a loan provision, the example shall assume that there
is an outstanding loan at date of acceleration. All policy benefits,
premium payments, cost of insurance charges and values, including
the outstanding loan, if applicable, immediately before and
immediately after acceleration shall be shown in the example.
(H) If an accelerated death benefit may be paid in installments,
the basis used in the calculation of the minimum periodic payment for
the payment period and a sample calculation of a minimum periodic
payment, and the basis used and a sample calculation of the lump sum
payable if the insured dies before all periodic payments for the
payment period are made.
(I) For any accelerated death benefit of the type other than a
terminal illness, a certification that the value and premium of the
accelerated death benefit is incidental to the life coverage.