California Assembly Bill AB1747 Amended / Bill

 BILL NUMBER: AB 1747AMENDED BILL TEXT AMENDED IN ASSEMBLY APRIL 26, 2012 INTRODUCED BY Assembly Member Feuer FEBRUARY 17, 2012 An act to amend Section 10173.2 of, and  to  add Sections 10113.71 and 10113.72 to, the Insurance Code, relating to life insurance. LEGISLATIVE COUNSEL'S DIGEST AB 1747, as amended, Feuer. Life insurance: nonpayment premium lapse: notice. Existing law requires that life insurance policies contain certain provisions, including, but not limited to, an individual life insurance policy notice of the right to cancel a policy. Existing law requires life insurers to provide certain notices to individual life insurance policyholders, including, but not limited to, a notice of premium increases. This bill would require that every life insurance policy issued or delivered in this state contain a provision for a grace period of not less than 60 days from the premium due date that provides that where the premium owed is paid fully within the grace period the policy remains in force and a provision that gives the applicant the right to designate at least one  individual   person  , in addition to the applicant, to receive notice of lapse or termination of a policy for nonpayment of premium.  The bill would require that every life insurance policy issued or delivered in this state, except group life insurance, contain a provision for the reinstatement of the policy at any time within 2 years from the date of default upon the written application of the insured and evidence of insurability, including good health, satisfactory to the insurer, and payment of amounts owed since the date of the default.  The bill would prohibit a notice of  cancellation   pending lapse and termination  from being effective unless mailed by the insurer to the named insured, a named designee,  and  a known assignee  ,  or  additional   other person having an interest  in the policy  at least 30 days prior to the effective date of  cancellation where cancellation   termination if termination  is for nonpayment of premium. The bill would also make conforming changes. 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 10113.71 is added to the Insurance Code, to read: 10113.71. (a)  (1)    Every life insurance policy issued or delivered in this state shall contain a provision for a grace period of not less than 60 days from the premium due date  that provides that where   . The provision   shall provide that if  the premium owed is fully paid within the grace period the policy shall remain in force.  (2) Every life insurance policy issued or delivered in this state, except group life insurance, shall contain a provision that the policy shall be reinstated at any time within two years from the date of default upon the written application of the insured and evidence of insurability, including good health, satisfactory to the insurer, and payment of amounts owed since the date of the default.  (b) (1) A notice of  cancellation   pending lapse and termination  of a life insurance policy shall not be effective unless mailed by the insurer to the named insured, a designee named pursuant to Section 10113.72,  and  a known assignee, or  additional   other person having an  interest  in the policy   ,  at least 30 days prior to the effective date of  cancellation where cancellation   termination if termination  is for nonpayment of premium. (2) This subdivision shall not apply to nonrenewal. (3) Notice shall be given  to the insured and to the designee  by first-class United States mail, postage prepaid, not less than 30 days after a premium is due and unpaid. However, notices made to assignees pursuant to this section may be done electronically with consent of the assignee. (c) For purposes of this section, a life insurance policy includes, but is not limited to, an individual life insurance policy  , an individual variable life insurance policy,  and a group life insurance policy, except where otherwise provided. SEC. 2. Section 10113.72 is added to the Insurance Code, to read: 10113.72. (a) An individual life insurance policy shall not be issued or delivered in this state until the applicant has been given the right to designate at least one  individual   person  , in addition to the applicant, to receive notice of lapse or termination of a policy for nonpayment of premium. The insurer shall receive from each applicant  one of the following:(1)     A   a  written designation listing the name, address, and telephone number of at least one  individual   person  , in addition to the applicant, who is to receive notice of lapse or termination of the policy for nonpayment of premium.  (2) A waiver signed and dated by the applicant electing not to designate additional persons to receive notice. The required waiver shall read as follows:   "Protection Against Unintended Lapse.   I understand that I have the right to designate at least one person other than myself to receive notice of lapse or termination of this life insurance policy for nonpayment of premium. I understand that notice will not be given until 30 days after a premium is due and unpaid. I elect not to designate a person to receive the notice.   Signature of Applicant   Date  (b) The insurer shall notify the insured of the right to change the written designation  , no less often than once every two years   or designate one or more persons, if the insured did not designate a person at the time the policy took effect, when the insured's premium is due. The insured may change the designation more often if he or she chooses to do so  . (c) No individual life insurance policy shall lapse or be terminated for nonpayment of premium unless the insurer, at least 30 days prior to the effective date of the lapse or termination, gives notice to the insured and to the  individual   person  or  individuals   persons  designated pursuant to subdivision (a), at the address provided by the insured for purposes of receiving notice of lapse or termination. Notice shall be given by first-class United States mail, postage prepaid, not less than 30 days after a premium is due and unpaid. (d) Each individual life insurance policy shall include a provision that, in the event of lapse, provides for reinstatement of coverage, if the insurer is provided with proof of the insured's cognitive impairment or the loss of functional capacity. This option shall be available to the insured if requested within five months after termination and shall allow for the collection of a past due premium, where appropriate. The standard of proof of cognitive impairment or loss of functional capacity shall not be more stringent than the benefit eligibility criteria on cognitive impairment or the loss of functional capacity contained in the policy. SEC. 3. Section 10173.2 of the Insurance Code is amended to read: 10173.2. When a policy of life insurance is, after the effective date of this section, assigned in writing as security for an indebtedness, the insurer shall, in any case in which it has received written notice of the name and address of the assignee, mail to the assignee a written notice, postage prepaid and addressed to the assignee's address filed with the insurer, not less than 30 days prior to the final lapse of the policy, each time the insured has failed or refused to transmit a premium payment to the insurer before the commencement of the policy's grace period or before the notice is mailed. The insurer shall give that notice to the assignee in the proper case while the assignment remains in effect, unless the assignee has notified the insurer in writing that the notice is waived. The insurer shall be permitted to charge the insured directly or against the policy the reasonable cost of complying with this section, but in no event to exceed two dollars and fifty cents ($2.50) for each notice. As used in this section, "final lapse of the policy" means the date after which the policy will not be reinstated by the insurer without requiring evidence of insurability or written application.