BILL NUMBER: AB 1868 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Jones
FEBRUARY 12, 2010
An act to amend Section 10291.5 of, and to add Section 10116.2 to,
the Insurance Code, relating to insurance.
LEGISLATIVE COUNSEL'S DIGEST
AB 1868, as introduced, Jones. Insurance: life: disability:
discretionary clauses.
Existing law generally regulates life and disability insurance
policies, and requires the Insurance Commissioner to disapprove any
disability policy for issuance or delivery in this state in specified
circumstances.
This bill would prohibit a policy, contract, certificate, or
agreement offered or issued in this state providing for life
insurance, disability insurance, or disability income protection
coverage from containing a provision purporting to reserve
discretionary authority to the insurer, or an agent of the insurer,
to interpret the terms of the policy contract, certificate, or
agreement, or providing standards of interpretation or review that
are inconsistent with the laws of this state. The bill would require
the commissioner to disapprove any disability policy that contains a
provision of this type.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10116.2 is added to the Insurance Code, to
read:
10116.2. A policy, contract, certificate, or agreement offered or
issued in this state providing for life insurance, disability
insurance, or disability income protection coverage shall not contain
a provision purporting to reserve discretionary authority to the
insurer, or an agent of the insurer, to interpret the terms of the
policy contract, certificate, or agreement, or to provide standards
of interpretation or review that are inconsistent with the laws of
this state.
SEC. 2. 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 respect to disability insurance, fraud, unfair
trade practices, and insurance economically unsound to the insured.
(2) Assure that the language of all insurance policies can be
readily understood and interpreted.
(b) The commissioner shall not approve any 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 , other than the product
of rate times the periods for which payments are promised)
promised, for loss caused by particular event or
events (as , as distinguished from
character of physical injury or illness of the insured)
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 , 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) 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 ,
as distinguished from character of physical injury or
illness of the insured) 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) If it contains provision or provisions which
that 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
an 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 an 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
that right shall not reduce or end the liability
in 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 specified losses referred to in the preceding paragraph are:
(i) Loss of time which 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 an
accident occurring while the policy is in force.
(iii) Losses which that result from
an 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 the 90 days.
(iv) Losses other than those specified in clause (i), (ii), or
(iii) of this paragraph which that
result from an accident occurring or sickness contracted
while the policy is in force and which the
losses 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 benefit or benefits cover the full amount of any loss
which that might be suffered by reason of the
occurrence of any 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 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 dismemberment under all other
provisions of the policy applicable to the particular event or
events (as , as distinguished from
character of physical injury or illness)
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 , as distinguished from character
of physical injury or illness) illness,
causing the dismemberment.
(C) Of substituting a specified indemnity upon the occurrence of
any dismemberment for any benefit of the policy which
that 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)
, 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 seven days
for policies providing for weekly payment of premium, not less than
10 days for policies providing for monthly payment of premium and not
less than 31 days for all other policies.
(13) If it includes a provision purporting to reserve
discretionary authority to the insurer, or an agent of the insurer,
to interpret the terms of the policy contract, certificate, or
agreement, or to provide standards of interpretation or review that
are inconsistent with the laws of this state.
(13)
(14) If it fails to conform in any respect with any law
of this state.
(c) The commissioner shall not approve any 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 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
adopt 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 adopting that
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
adopted 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
The withdrawal shall be in writing and shall specify
the reasons. An insurer adversely affected by any such
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 a
request, 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 a 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 policy 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.