10231.3.

 (a) For the purposes of this section, the following definitions apply:

(1) An “alternate plan of care” means a plan of care that includes a specification of long-term care services, providers, or places of care that are not specifically defined as covered services, providers, or places of care under the policy. The alternate plan of care shall be developed by a licensed health care practitioner, describe the insured’s needs, and specify the type, frequency, and providers of all formal and informal long-term care services that are required by the insured and the cost, if any. The services, providers, and places of care specified in an alternate plan of care shall include those that are specifically defined as covered services, providers, and places under the policy, as well as those that are not specifically defined as covered services, providers, and places under the policy.

(2) An “alternate-plan-of-care provision” means a provision in a policy, rider, endorsement, or amendment that allows benefits for services, providers, and places of care that are specified in an alternate plan of care.

(3) “Licensed health care practitioner” means a physician, registered nurse, licensed social worker, or other individual whom the United States Secretary of the Treasury may prescribe by regulation.

(4) “Plan of care” means a written description of the insured’s needs and a specification of the type, frequency, and providers of all formal and informal long-term care services required by the insured and the cost, if any.

(b) An alternate-plan-of-care provision shall provide for all of the following:

(1) An alternate plan of care may be proposed by the insured or the insurer. Adoption, amendment, or replacement of an alternate plan of care shall be agreed to by the insured, the insurer, and a licensed health care practitioner that is independent of the insurer. Consent or agreement to an alternate plan of care shall be free and mutual.

(2) The maximum benefit available under the contract shall not change based on an insured utilizing an alternate plan of care, but that benefit will be reduced by the amount of any benefits paid under an alternate plan of care.

(3) Policy benefits are payable for all services, providers, and places of care that are specified in an alternate plan of care. Coverage for services, providers, and places of care under an alternate plan of care shall be in addition to, not in lieu of, coverage for services, providers, and places of care that are specifically defined as covered services under the policy.

(4) If adopted, an alternate plan of care replaces any existing plan of care, including any previously adopted alternate plan of care. No benefits are payable for services provided pursuant to a plan of care after it is replaced by an alternate plan of care.

(5) An alternate plan of care can be replaced by a new plan of care at any time.

(A) If the new plan of care is not an alternate plan of care, the new plan of care does not need to be adopted in the manner described in paragraph (1) of this subdivision.

(B) If the new plan of care is a new or amended alternate plan of care, the new or amended alternate plan of care shall be adopted in the manner described in paragraph (1) of this subdivision.

(C) No benefits are payable for services provided pursuant to an alternate plan of care after it is replaced by a new plan of care.

(c) Nothing in this section shall be construed to require an insurer to include a provision authorizing an alternate plan of care. However, an insurer and an insured may agree to use an alternate plan of care even if there is no provision in the policy that specifically authorizes one. Nothing in this section is intended to obligate either party to negotiate an alternate plan of care. If an insurer does not accept an extra-contractual request for an alternate plan of care, the rejection is not a denial of a claim.

(d) This section shall apply to policies issued on or after January 1, 2017.

10232.3.

 (a) All applications for long-term care insurance except that which is guaranteed issue, shall contain clear, unambiguous, short, simple questions designed to ascertain the health condition of the applicant. Each health-related question shall contain only one health status inquiry and shall require only a “yes” or “no” answer, except that the application may include a request for the name of any prescribed medication and the name of a prescribing physician. If the application requests the name of any prescribed medication or prescribing physician, then any mistake or omission shall not be used as a basis for the denial of a claim or the rescission of a policy or certificate.

(b) The following warning shall be printed conspicuously and in close conjunction with the applicant’s signature block:

“Caution: If your answers on this application are misstated or untrue, the insurer may have the right to deny benefits or rescind your coverage.”

(c) Every application for long-term care insurance shall include a checklist that enumerates each of the specific documents that this chapter requires be given to the applicant at the time of solicitation. The documents and notices to be listed in the checklist include, but are not limited to, the following:

(1) The outline of coverage pursuant to Section 10233.5.

(2) The HICAP notice pursuant to paragraph (8) of subdivision (a) of Section 10234.93.

(3) The long-term care insurance shoppers guide pursuant to paragraph (9) of subdivision (a) of Section 10234.93.

(4) The “Long-Term Care Insurance Personal Worksheet” pursuant to subdivision (c) of Section 10234.95.

(5) The “Notice to Applicant Regarding Replacement of Accident and Sickness or Long-Term Care Insurance” pursuant to Section 10235.16 if replacement is not made by direct response solicitation or Section 10235.18 if replacement is made by direct response solicitation. Unless the solicitation was made by a direct response method, the agent and applicant shall both sign at the bottom of the checklist to indicate the required documents were delivered and received.

(d) If an insurer does not complete medical underwriting and resolve all reasonable questions arising from information submitted on or with an application before issuing the policy or certificate, then the insurer may only rescind the policy or certificate or deny an otherwise valid claim, upon clear and convincing evidence of fraud or material misrepresentation of the risk by the applicant. The evidence shall:

(1) Pertain to the condition for which benefits are sought.

(2) Involve a chronic condition or involve dates of treatment before the date of application.

(3) Be material to the acceptance for coverage.

(e) No long-term care policy or certificate may be field issued.

(f) The contestability period as defined in Section 10350.2 for long-term care insurance shall be two years.

(g) A copy of the completed application shall be delivered to the insured at the time of delivery of the policy or certificate.

(h) Every insurer shall maintain a record, in accordance with Section 10508, of all policy or certificate rescissions, both state and countrywide, and shall annually furnish this information to the commissioner, which shall include the reason for rescission, the length of time the policy or certificate was in force, and the age and gender of the insured person, in a format prescribed by the commissioner.

(i) The commissioner may, in his or her discretion, make public the aggregate data collected under subdivision (h), upon request.

10232.8.

 (a) In every long-term care policy or certificate that is not intended to be a federally qualified long-term care insurance contract and provides home care benefits, the threshold establishing eligibility for home care benefits shall be at least as permissive as a provision that the insured will qualify if either one of two criteria are met:

(1) Impairment in two out of seven activities of daily living.

(2) Impairment of cognitive ability.

The policy or certificate may provide for lesser but not greater eligibility criteria. The commissioner, at his or her discretion, may approve other criteria or combinations of criteria to be substituted, if the insurer demonstrates that the interest of the insured is better served.

“Activities of daily living” in every policy or certificate that is not intended to be a federally qualified long-term care insurance contract and provides home care benefits shall include eating, bathing, dressing, ambulating, transferring, toileting, and continence; “impairment” means that the insured needs human assistance, or needs continual substantial supervision; and “impairment of cognitive ability” means deterioration or loss of intellectual capacity due to organic mental disease, including Alzheimer’s disease or related illnesses, that requires continual supervision to protect oneself or others.

(b) In every long-term care policy approved or certificate issued after the effective date of the act adding this section, that is intended to be a federally qualified long-term care insurance contract as described in subdivision (a) of Section 10232.1, the threshold establishing eligibility for home care benefits shall provide that a chronically ill insured will qualify if either one of two criteria are met or if a third criterion, as provided by this subdivision, is met:

(1) Impairment in two out of six activities of daily living.

(2) Impairment of cognitive ability.

Other criteria shall be used in establishing eligibility for benefits if federal law or regulations allow other types of disability to be used applicable to eligibility for benefits under a long-term care insurance policy. If federal law or regulations allow other types of disability to be used, the commissioner shall promulgate emergency regulations to add those other criteria as a third threshold to establish eligibility for benefits. Insurers shall submit policies for approval within 60 days of the effective date of the regulations. With respect to policies previously approved, the department is authorized to review only the changes made to the policy. All new policies approved and certificates issued after the effective date of the regulation shall include the third criterion. A policy shall not be sold unless the policy includes the third criterion after one year beyond the effective date of the regulations. An insured meeting this third criterion shall be eligible for benefits regardless of whether the individual meets the impairment requirements in paragraph (1) or (2) regarding activities of daily living and cognitive ability.

(c) A licensed health care practitioner, independent of the insurer, shall certify that the insured meets the definition of “chronically ill individual” as defined under Public Law 104-191. For the purposes of long-term care insurance as defined in Section 10231.2, an insurer shall not impose a certification requirement of longer than 90 days. The policy or certificate shall explain paragraphs (1) through (5) and comply with all of the following:

(1) An insured has the option of submitting a certification to the insurer or submitting a notice of claim and requesting that the insurer conduct the assessment. If the insured requests that the insurer conduct the assessment, the insurer shall provide an independent licensed health care practitioner to conduct the assessment. If a health care practitioner makes a determination, pursuant to this section, that an insured does not meet the definition of “chronically ill individual,” the insurer shall notify the insured that the insured shall be entitled to a second assessment by a licensed health care practitioner, upon request, who shall personally examine the insured. The requirement for a second assessment shall not apply if the initial assessment was performed by a practitioner who otherwise meets the requirements of this section and who personally examined the insured.

(2) The assessments conducted pursuant to this section shall be performed promptly with the certification completed as quickly as possible to ensure that an insured’s benefits are not delayed. The written certification shall be renewed every 12 months.

(3) A licensed health care practitioner shall develop a written plan of care after personally examining the insured.

(4) The costs to have a licensed health care practitioner certify that an insured meets, or continues to meet, the definition of “chronically ill individual,” or to prepare written plans of care shall not count against the lifetime maximum of the policy or certificate.

(5) In order to be considered “independent of the insurer,” a licensed health care practitioner shall not be an employee of the insurer and shall not be compensated in any manner that is linked to the outcome of the certification.

(6) It is the intent of this subdivision that the practitioner’s assessments be unhindered by financial considerations.

(7) This subdivision shall apply only to a policy or certificate intended to be a federally qualified long-term care insurance contract.

(d) “Activities of daily living” in every policy or certificate intended to be a federally qualified long-term care insurance contract as provided by Public Law 104-191 shall include eating, bathing, dressing, transferring, toileting, and continence; “impairment in activities of daily living” means the insured needs “substantial assistance” either in the form of “hands-on assistance” or “standby assistance,” due to a loss of functional capacity to perform the activity; “impairment of cognitive ability” means the insured needs substantial supervision due to severe cognitive impairment; “licensed health care practitioner” means a physician, registered nurse, licensed social worker, or other individual whom the United States Secretary of the Treasury may prescribe by regulation; and “plan of care” means a written description of the insured’s needs and a specification of the type, frequency, and providers of all formal and informal long-term care services required by the insured, and the cost, if any.

(e) Until the time that these definitions may be superseded by federal law or regulation, the terms “substantial assistance,” “hands-on assistance,” “standby assistance,” “severe cognitive impairment,” and “substantial supervision” shall be defined according to the safe-harbor definitions contained in Internal Revenue Service Notice 97-31, issued May 6, 1997.

(f) The definitions of “activities of daily living” to be used in policies and certificates that are intended to be federally qualified long-term care insurance shall be the following until the time that these definitions may be superseded by federal law or regulations:

(1) Eating, which shall mean feeding oneself by getting food in the body from a receptacle (such as a plate, cup, or table) or by a feeding tube or intravenously.

(2) Bathing, which shall mean washing oneself by sponge bath or in either a tub or shower, including the act of getting into or out of a tub or shower.

(3) Continence, which shall mean the ability to maintain control of bowel and bladder function; or when unable to maintain control of bowel or bladder function, the ability to perform associated personal hygiene (including caring for a catheter or colostomy bag).

(4) Dressing, which shall mean putting on and taking off all items of clothing and any necessary braces, fasteners, or artificial limbs.

(5) Toileting, which shall mean getting to and from the toilet, getting on or off the toilet, and performing associated personal hygiene.

(6) Transferring, which shall mean the ability to move into or out of bed, a chair, or wheelchair.

The commissioner may approve the use of definitions of “activities of daily living” that differ from the verbatim definitions of this subdivision if these definitions would result in more policy or certificate holders qualifying for long-term care benefits than would occur by the use of the verbatim definitions of this subdivision. In addition, the following definitions may be used without the approval of the commissioner: (1) the verbatim definitions of eating, bathing, dressing, toileting, transferring, and continence in subdivision (g); or (2) the verbatim definitions of eating, bathing, dressing, toileting, and continence in this subdivision and a substitute, verbatim definition of “transferring” as follows: “transferring,” which shall mean the ability to move into and out of a bed, a chair, or wheelchair, or ability to walk or move around inside or outside the home, regardless of the use of a cane, crutches, or braces.

The definitions to be used in policies and certificates for impairment in activities of daily living, “impairment in cognitive ability,” and any third eligibility criterion adopted by regulation pursuant to subdivision (b) shall be the verbatim definitions of these benefit eligibility triggers allowed by federal regulations. In addition to the verbatim definitions, the commissioner may approve additional descriptive language to be added to the definitions, if the additional language is (1) warranted based on federal or state laws, federal or state regulations, or other relevant federal decision, and (2) strictly limited to that language that is necessary to ensure that the definitions required by this section are not misleading to the insured.

(g) The definitions of “activities of daily living” to be used verbatim in policies and certificates that are not intended to qualify for favorable tax treatment under Public Law 104-191 shall be the following:

(1) Eating, which shall mean reaching for, picking up, and grasping a utensil and cup; getting food on a utensil, and bringing food, utensil, and cup to mouth; manipulating food on plate; and cleaning face and hands as necessary following meals.

(2) Bathing, which shall mean cleaning the body using a tub, shower, or sponge bath, including getting a basin of water, managing faucets, getting in and out of tub or shower, and reaching head and body parts for soaping, rinsing, and drying.

(3) Dressing, which shall mean putting on, taking off, fastening, and unfastening garments and undergarments and special devices such as back or leg braces, corsets, elastic stockings or garments, and artificial limbs or splints.

(4) Toileting, which shall mean getting on and off a toilet or commode and emptying a commode, managing clothing and wiping and cleaning the body after toileting, and using and emptying a bedpan and urinal.

(5) Transferring, which shall mean moving from one sitting or lying position to another sitting or lying position; for example, from bed to or from a wheelchair or sofa, coming to a standing position, or repositioning to promote circulation and prevent skin breakdown.

(6) Continence, which shall mean the ability to control bowel and bladder as well as use ostomy or catheter receptacles, and apply diapers and disposable barrier pads.

(7) Ambulating, which shall mean walking or moving around inside or outside the home regardless of the use of a cane, crutches, or braces.

10271.

 (a) Except as set forth in this section, this chapter shall not apply to, or in any way affect, provisions in life insurance, endowment, or annuity contracts, or contracts supplemental thereto, that provide additional benefits in case of death or dismemberment or loss of sight by accident, or that operate to safeguard those contracts against lapse, as described in subdivision (a) of Section 10271.1, or give a special surrender benefit, as defined in subdivision (b) of Section 10271.1, or an accelerated death benefit as defined in Article 2.1 (commencing with Section 10295), in the event that the owner, insured, or annuitant, as applicable, meets the benefit triggers specified in the life insurance or annuity contract or supplemental contract.

(b) For the purposes of this section, 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).

(c) A supplemental benefit described in subdivision (a) shall contain all of the following provisions. However, an insurer, at its option, may substitute for one or more of the provisions a corresponding provision of different wording approved by the commissioner that is not less favorable in any respect to the owner, insured, or annuitant, as applicable. The required provisions shall be preceded individually by the appropriate caption, or, at the option of the insurer, by the appropriate individual or group captions or subcaptions as the commissioner may approve.

(1) A life insurance policy or annuity contract that contains a supplemental benefit shall provide that the contract, supplemental contract, and any papers attached thereto by the insurer, including the application if attached, constitute the entire insurance or annuity contract and shall also provide that no agent has the authority to change the contract or to waive any of its provisions. This provision shall be preceded individually by a caption stating “ENTIRE CONTRACT; CHANGES:” or other appropriate caption as the commissioner may approve.

(2) The supplemental benefit shall provide that reinstatement of the supplemental benefit shall be on the same or more favorable terms as reinstatement of the underlying life insurance policy or annuity contract. Following reinstatement, the insured and insurer shall have the same rights under reinstatement as they had under the supplemental benefit immediately before the due date of the defaulted premium, subject to any provisions endorsed in the rider or endorsement or attached to the rider or endorsement in connection with the reinstatement. This reinstatement provision shall be preceded individually by a caption stating “REINSTATEMENT:” or other appropriate caption as the commissioner may approve.

(3) A supplemental benefit subject to underwriting shall include an incontestability statement that provides that the insurer shall not contest the supplemental benefit after it has been in force during the lifetime of the insured for two years from its date of issue, and that the supplemental benefit may only be contested based on a statement made in the application for the supplemental benefit, if the statement is attached to the contract and if the statement was material to the risk accepted or the hazard assumed by the insurer. This provision shall be preceded individually by a caption stating “INCONTESTABILITY:” or other appropriate caption as the commissioner may approve.

(4) A supplemental benefit shall contain the provision in subparagraph (A), except that an accelerated death benefit as defined in Article 2.1 (commencing with Section 10295) shall contain the provision in subparagraph (B).

(A) The supplemental benefit shall provide either that the insurer may accept written notice of claim at any time or that the insurer may require that written notice of claim be submitted by a due date that is no less than 20 days after an occurrence covered by the supplemental benefit, or commencement of any loss covered by the supplemental benefit, or as soon after the due date as is reasonably possible. Notice given by or on behalf of the insured or the beneficiary, as applicable, to the insurer at the insurer’s address or telephone number, or to any authorized agent of the insurer, with information sufficient to identify the insured, shall be deemed notice to the insurer. This provision shall be preceded individually by a caption stating “NOTICE OF CLAIM:” or other appropriate caption as the commissioner may approve.

(B) The accelerated death benefit shall provide either that the insured may give notice of claim at any time or that the insured shall give notice of claim by a due date that is at least 20 days after the insured receives documentation that establishes the occurrence of a qualifying event, or as soon after the due date as is reasonably possible. Notice given by or on behalf of the insured or the beneficiary, as applicable, to the insurer at the insurer’s address or telephone number, or to any authorized agent of the insurer, with information sufficient to identify the insured, shall be deemed notice to the insurer. This provision shall be preceded individually by a caption stating “NOTICE OF CLAIM:” or other appropriate caption as the commissioner may approve.

(5) A supplemental benefit shall contain the provision in subparagraph (A), except that an accelerated death benefit as defined in Article 2.1 (commencing with Section 10295) shall contain the provision in subparagraph (B).

(A) The supplemental benefit shall provide that the insurer, upon receipt of a notice of claim, shall furnish to the claimant those forms as are usually furnished by it for filing a proof of occurrence or a proof of loss. If the forms are not furnished within 15 days after giving notice, the claimant shall be deemed to have complied with the requirements of the supplemental benefit as to proof of occurrence or proof of loss upon submitting, within the time fixed by the supplemental benefit for filing proof of occurrence or proof of loss, written proof covering the character and the extent of the occurrence or loss. This provision shall be preceded individually by a caption stating “CLAIM FORMS:” or other appropriate caption as the commissioner may approve.

(B) The accelerated death benefit shall provide that the insurer, upon receipt of a notice of claim, shall furnish to the claimant any forms required for filing proof of loss. If the forms are not furnished within 15 days after notice of claim is given to the insurer, the claimant shall be deemed to have provided proof of loss upon sending, within the time fixed by the supplemental benefit for filing proof of loss, documentation that establishes the occurrence of a qualifying event. This provision shall be preceded individually by a caption stating “CLAIM FORMS:” or other appropriate caption as the commissioner may approve.

(6) A supplemental benefit shall contain the provision in subparagraph (A), except that an accelerated death benefit as defined in Article 2.1 (commencing with Section 10295) shall contain the provision in subparagraph (B).

(A) The supplemental benefit shall provide that the insurer may require, in the case of a claim for which the supplemental benefit provides any periodic payment contingent upon continuing occurrence or loss, that the insured provide written proof of occurrence or proof of loss no less than 90 days after the termination of the period for which the insurer is liable, and, in the case of claim for any other occurrence or loss, that the insured provide written proof of occurrence or proof of loss within 90 days after the date of the occurrence or loss. Failure to furnish proof within the time required shall not invalidate or reduce the claim if it was not reasonably possible to give proof within the time, provided proof is furnished as soon as reasonably possible and, except in the absence of legal capacity, no later than one year from the time proof is otherwise required. This provision shall be preceded individually by a caption stating “PROOF OF LOSS:” or other appropriate caption as the commissioner may approve.

(B) The accelerated death benefit shall provide that the insured shall send completed claim forms and documentation that establishes the occurrence of a qualifying event within 90 days of receiving that documentation. Failure to send proof within the time required shall not invalidate or reduce the claim as long as proof is sent as soon as reasonably possible and, except in the absence of legal capacity, no later than one year from the time proof is otherwise required. This provision shall be preceded individually by a caption stating “PROOF OF LOSS:” or other appropriate caption as the commissioner may approve.

(7) The supplemental benefit shall provide that the insurer, at its own expense, shall have the right and opportunity to examine the person of the insured when and as often as the insurer may reasonably require during the pendency of a claim and to make an autopsy in case of death where it is not forbidden by law. This provision shall be preceded individually by a caption stating “PHYSICAL EXAMINATIONS:” or other appropriate caption as the commissioner may approve.

(d) The commissioner shall not approve any contract or supplemental contract for insurance or delivery in this state if the commissioner finds that the contract or supplemental contract does any of the following:

(1) Contains any provision, label, description of its contents, title, heading, backing, or other indication of its provisions that is unintelligible, uncertain, ambiguous, or abstruse, or likely to mislead a person to whom the supplemental benefit is offered, delivered, or issued.

(2) Constitutes fraud, unfair trade practices, or insurance economically unsound to the owner, insured, or annuitant, as applicable.

(3) Contains any actuarial information that is materially incomplete, incorrect, or inadequate.

(e) A supplemental benefit described in subdivision (a) shall not contain any title, description, or any other indication that would describe or imply that the supplemental benefit provides long-term care coverage.

(f) Commencing two years from the date of the issuance of the supplemental benefit, no claim for loss incurred or disability, as defined by the supplemental benefit, may be reduced or denied on the grounds that a disease or physical condition not excluded from coverage by name or specific description effective on the date of loss had existed prior to the effective date on the coverage of the supplemental benefit.

(g) With regard to supplemental benefits set forth in subdivision (a), the supplemental benefit shall specify any applicable exclusions, which shall be limited to the following:

(1) Condition or loss caused or substantially contributed to by any attempt at suicide or intentionally self-inflicted injury, while sane or insane.

(2) Condition or loss caused or substantially contributed to by war or an act of war, as defined in the exclusion provisions of the contract.

(3) Condition or loss caused or substantially contributed to by active participation in a riot, insurrection, or terrorist activity.

(4) Condition or loss caused or substantially contributed to by committing or attempting to commit a felony.

(5) Condition or loss caused or substantially contributed to by voluntary intake of either:

(A) Any drug, unless prescribed or administered by a physician and taken in accordance with the physician’s instructions.

(B) Poison, gas, or fumes, unless they are the direct result of an occupational accident.

(6) Condition or loss in consequence of the insured being intoxicated, as defined by the jurisdiction where the condition or loss occurred.

(7) Condition or loss caused or substantially contributed to by engaging in an illegal occupation.

(8) Condition or loss caused or substantially contributed to by engaging in aviation, other than as a fare-paying passenger.

(h) If the commissioner notifies the insurer, in writing, that the filed form or actuarial information does not comply with the requirements of law and specifies the reasons for his or her opinion, it is unlawful for an insurer to issue any policy in that form.

10295.

 (a) An accelerated death benefit, as described in this section, shall not be offered, sold, issued, or marketed as health, accident, or long-term care insurance. An accelerated death benefit shall not reimburse or provide specific coverage for any health, accident, or long-term care insurance benefits.

(b) (1) For the purposes of this article, an “accelerated death benefit” means a provision, endorsement, or rider added to a life insurance policy that provides for the advance payment of any part of the death proceeds, payable upon the occurrence of a qualifying event in accordance with Section 10295.1.

(2) For the purposes of this article, “qualifying event” means that subparagraph (A) or (B) applies.

(A) The insured has a 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.

(B) (i) The insured has a chronic illness as defined in subparagraph (B) of paragraph (5) of subdivision (b) of Section 10271.1.

(ii) For policies intended to be federally tax qualified, the insurer shall require that a licensed health care practitioner, independent of the insurer, certifies that the insured meets the definition of “chronically ill individual” as defined under the federal Health Insurance Portability and Accountability Act (Public Law 104-191). The accelerated death benefit shall explain subclauses (I) through (IV) and comply with all of the following:

(I) An insured has the option of submitting a certification to the insurer or submitting a notice of claim and requesting that the insurer conduct the assessment. If the insured requests that the insurer conduct the assessment, the insurer shall provide an independent licensed health care practitioner to conduct the assessment. If a health care practitioner makes a determination, pursuant to this clause, that an insured does not meet the definition of “chronically ill individual,” the insurer shall notify the insured that the insured shall be entitled to a second assessment by a licensed health care practitioner, upon request, who shall personally examine the insured. The requirement for a second assessment shall not apply if the initial assessment was performed by a practitioner who otherwise meets the requirements of this clause and who personally examined the insured.

(II) The assessments conducted pursuant to this clause shall be performed promptly with the certification completed as quickly as possible to ensure that an insured’s benefits are not delayed. The written certification shall be renewed every 12 months.

(III) The costs to have a licensed health care practitioner certify that an insured meets, or continues to meet, the definition of “chronically ill individual,” shall not count against the lifetime maximum of the policy or certificate.

(IV) In order to be considered “independent of the insurer,” a licensed health care practitioner shall not be an employee of the insurer and shall not be compensated in any manner that is linked to the outcome of the certification.

(V) It is the intent of the Legislature in enacting this clause that the practitioner’s assessments be unhindered by financial considerations.

(VI) This clause shall apply only to a policy or certificate intended to be federally tax qualified.

(3) For the purposes of this article, “applicant” means any of the following:

(A) In the case of an individual life insurance policy with an accelerated death benefit, the person who seeks to contract for benefits.

(B) (i) In the case of a group life insurance policy with an accelerated death benefit, the proposed certificate holder.

(ii) “Certificate” means any certificate issued under a group life insurance policy that includes an accelerated death benefit.

(4) For the purposes of this article, 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.

(c) A life insurance policy that accelerates death benefits if the insured is chronically ill and requires that the insured receives long-term care services described in Section 10231.2, shall not be considered an accelerated death benefit for the purposes of this article.

(d) Nothing in this subdivision shall be construed as prohibiting an insurer from including other riders to a life insurance policy, such as a terminal illness rider, that are not subject to this article.

10295.1.

 (a) An accelerated death benefit as defined in paragraph (1) of subdivision (b) of Section 10295 shall comply with, and shall explain all of, the following:

(1) That the accelerated death benefit is fixed at the time the insurer approves the request for the accelerated death benefit.

(2) That the payment of the accelerated death benefit is not conditioned on the receipt of long-term care or medical services.

(3) That the insured shall have the option to take the accelerated death benefit in a lump sum on the occurrence of a qualifying event, as well as an option to receive the benefit in periodic payments for a certain period only. The insured shall have the choice of requesting a lump sum that is equal to the maximum amount of the accelerated death benefit, or requesting a lump sum that is less than the maximum amount. For purposes of this paragraph, “lump sum” shall mean that a claim is paid in a single payment.

(4) That the accelerated death benefit may not restrict the insured’s use of the proceeds.

(5) That the payment of the accelerated death benefit is due immediately upon receipt of the due written proof of eligibility.

(6) That, prior to the payment of the accelerated death benefit, the insurer is required to obtain from an assignee or irrevocable beneficiary, if any, a signed acknowledgment of concurrence for payout. If the insurer making the accelerated death benefit is itself the assignee under the policy, the acknowledgment is not required.

(7) That if any death benefit remains after payment of an accelerated death benefit, the accidental death benefit provision, if any, in the policy shall not be affected by the payment of the accelerated death benefit.

(b) The accelerated death benefit shall also provide for all of the following:

(1) A maximum amount that may be accelerated.

(2) An explanation that the insured may accelerate more than once on a qualifying event up to the maximum amount.

(3) An explanation that the insured may accelerate on more than one of the qualifying events specified in the supplemental provision up to the maximum amount.

(4) A statement that the policy, rider, endorsement, or certificate pays proceeds that are or are not intended for favorable tax treatment under Section 101(g) of the Internal Revenue Code (26 U.S.C. Sec. 101(g)), if applicable.

(c) The insurer shall advise the policyholder or certificate holder that there may be tax consequences of accepting an amount above the amount that would be tax qualified under the Internal Revenue Code.

(d) The accelerated death benefit shall not contain any preexisting condition limitation and shall not contain any requirement that acceleration be conditioned on a prior hospitalization or institutionalization.

(e) The accelerated death benefit shall contain an explanation of how the insured will pay for the accelerated death benefit, whether by paying a portion of the premium for the life insurance policy, by paying a fee at the time of the acceleration, by paying the cost of insurance charge, or by paying the administrative expense charge, together with an illustration. If there is a premium or cost of insurance charge, or a charge imposed upon the acceleration, a generic illustration numerically demonstrating any effect of the payment of a benefit on the policy’s cash value, accumulation account, death benefit, premium, policy loans, and policy liens shall suffice for this purpose.

(f) (1) Every accelerated death benefit that pays proceeds intended for favorable tax treatment under Section 101(g) of the Internal Revenue Code (26 U.S.C. Sec. 101(g)) shall be identified as such by prominently displaying and printing that intention on page one of the accelerated benefit policy provision, rider, endorsement, or certificate.

(2) Every accelerated death benefit that pays proceeds that are not intended for favorable tax treatment under Section 101(g) of the Internal Revenue Code (26 U.S.C. Sec. 101(g)) shall be identified as such by prominently displaying and printing that intention on page one of the accelerated death benefit policy provision, rider, endorsement, or certificate.

10295.3.

 (a) A written disclosure, as set forth below, shall be included with the filing for the commissioner’s approval, and shall be given to each applicant. The same written disclosure shall be attached to the policy or certificate delivered to the insured.

(b) The required written disclosure shall be in the following form:

“IMPORTANT NOTICE TO APPLICANT/BUYER REGARDING ACCELERATED DEATH BENEFITS”

“The benefits provided by this accelerated death benefit are not intended to provide, and will never provide, long-term care insurance, nursing home insurance, or home care insurance. If you are interested in long-term care or nursing home or home care insurance, you should consult with an insurance agent licensed to sell that insurance, inquire with the insurance company offering the accelerated death benefits, or visit the California Department of Insurance Internet Web site (www.insurance.ca.gov) section regarding long-term care insurance.

If you choose to accelerate a portion of your death benefit, doing so will reduce the amount that your beneficiary will receive upon your death.

Receipt of accelerated death benefits may be taxable. Prior to electing to buy the accelerated death benefit, you should seek assistance from a qualified tax adviser.

Receipt of accelerated death benefits may affect eligibility for public assistance programs, such as Medi-Cal or Medicaid. Prior to electing to buy the accelerated death benefit, you should consult with the appropriate social services agency concerning how receipt of accelerated death benefits may affect that eligibility.”

(c) In the case of agent-solicited life insurance, the agent shall provide the disclosure form to the applicant prior to, or concurrently with, the application. Acknowledgment of the applicant’s receipt of the disclosure shall be signed by the applicant and the writing agent.

(d) In the case of a solicitation by direct response methods, the insurer shall provide the disclosure form to the applicant together with the application. The form shall include a statement that a full premium refund shall be provided to the insured if the policy is returned to the company within the free look period, pursuant to Section 10295.8.

(e) In the case of group insurance policies, the disclosure form shall be delivered together with the application for the certificate, or with the certificate of coverage or any related document furnished by the insurer for the certificate holder.

10295.5.

 (a) Applications, if any, or forms supporting an application, if any, for accelerated death benefits shall contain clear, unambiguous, short, and simple questions designed to ascertain the health condition of the applicant. Each health-related question shall contain only one health status inquiry and shall require only a “yes” or “no” answer, except that the application may include a request for the name of any prescribed medication and the name of the prescribing physician. If the application requests the name of any prescribed medication or the prescribing physician, then any mistake or omission shall not be used as a basis for the denial of a claim or the rescission of the accelerated death benefit or life insurance policy or certificate.

(b) The following warning shall be printed conspicuously and in close conjunction with the applicant’s signature block:

 

“Caution: If your answers on this application are misstated or untrue, the insurer may have the right to deny benefits or rescind your accelerated death benefit coverage.”

 

(c) If an insurer does not complete medical underwriting for the accelerated death benefit separate from underwriting for the life insurance policy and resolve all reasonable questions arising from information submitted on or with an application before issuing the accelerated death benefit, then the insurer may only rescind the accelerated death benefit or life insurance policy or certificate or deny an otherwise valid claim upon clear and convincing evidence of fraud or material misrepresentation of the risk by the applicant. The evidence shall do all of the following:

(1) Pertain to the condition for which benefits are sought.

(2) Involve a chronic condition or involve dates of treatment before the date of application.

(3) Be material to the acceptance for coverage.

(d) An accelerated death benefit may not be field issued.

(e) The contestability period for a life insurance policy or certificate that contains an accelerated death benefit shall comply with paragraph (3) of subdivision (c) of Section 10271.

(f) A copy of the completed application shall be delivered to the insured at the time of delivery of the life insurance policy or certificate that contains an accelerated death benefit.

10295.6.

 (a) When a policyholder or certificate holder requests an acceleration of death benefits, the insurer shall send a statement to the policyholder or certificate holder and irrevocable beneficiary showing any effect that the payment of the accelerated death benefit would have on the policy’s cash value, accumulation account, death benefit, premium, policy loans, and policy liens. The statement shall disclose that receipt of accelerated death benefit payments may adversely affect the recipient’s eligibility for Medicaid or other government benefits or entitlements. In addition, receipt of an accelerated death benefit payment may be taxable and assistance should be sought from a personal tax adviser. When a previous disclosure statement becomes invalid as a result of an acceleration of the death benefit, the insurer shall send a revised disclosure statement to the policyholder or certificate holder and irrevocable beneficiary.

(b) The accelerated death benefit shall be effective not more than 30 days following the effective date of the policy provision, rider, endorsement, or certificate.

(c)  If the insurer charges a separate premium for the accelerated death benefit, then the insurer may also offer a waiver of premium benefit as defined in subdivision (a) of Section 10271.1. At the time the waiver of the accelerated death benefit premium benefit is claimed, the insurer shall explain any continuing premium requirement to keep the underlying policy in force.

(d) An insurer shall not unfairly discriminate among insureds with different qualifying events covered under the policy or among insureds with similar qualifying events covered under the policy. An insurer shall not apply further conditions on the payment of the accelerated death benefits other than those conditions specified in the accelerated death benefit.

(e) No later than one month after payment of an accelerated death benefit, the insurer shall provide the policyholder or certificate holder with a report of any accelerated death benefits paid out during the prior month, an explanation of any changes to the policy or certificate, death benefits, and cash values on account of the benefits being paid out, and the amount of the remaining benefits that can be accelerated at the end of the prior month. The insurer may use a calendar month or policy or certificate month.

(f) The conversion benefit available to group certificate holders on termination of employment pursuant to paragraph (2) of subdivision (a) of Section 10209 shall include a benefit comparable to the accelerated death benefit. This requirement may be satisfied by an individual policy or certificate. This requirement, subject to the approval of the commissioner, may be satisfied by arrangement with another insurer to provide the required coverage.

(g) When payment of an accelerated death benefit results in a pro rata reduction in cash value, the payment may be applied toward repaying a portion of the loan equal to a pro rata portion of any outstanding policy loans if disclosure of the effect of acceleration upon any remaining death benefit, cash value or accumulation account, policy loan, and premium payments, including a statement of the possibility of termination of any remaining death benefit, is provided to the policyholder or certificate holder. The policyholder or certificate holder shall provide written consent authorizing any other arrangement for the repayment of outstanding policy loans.