California Assembly Bill AB1804 Amended / Bill

 BILL NUMBER: AB 1804AMENDED BILL TEXT AMENDED IN SENATE JULY 1, 2014 AMENDED IN ASSEMBLY MAY 28, 2014 AMENDED IN ASSEMBLY MAY 15, 2014 AMENDED IN ASSEMBLY APRIL 29, 2014 AMENDED IN ASSEMBLY APRIL 10, 2014 INTRODUCED BY Assembly Member Perea FEBRUARY 18, 2014 An act to add Section 396 to the Insurance Code, relating to insurance. LEGISLATIVE COUNSEL'S DIGEST AB 1804, as amended, Perea. Insurance: notice of lapse. Existing law requires an insurance policy to specify certain information, including, but not limited to, the parties to the contract, the property or life insured, the risks insured against, premium, and the coverage period. This bill, commencing January 1, 2016, and with regard to private passenger automobile insurance  that provides coverage for 6 months or longer  , specified  owner-occupied homeowners' insurance risks,   residential property insurance,  and policies of individual disability income insurance that are issued and take effect or that are renewed on or after January 1, 2016, would require an insurer to maintain a  verifiable delivery  process  or adopt a procedure  that allows an  insured   applicant or policyholder  to designate one additional person to receive notice of lapse, termination, expiration, nonrenewal, or cancellation of a policy for nonpayment of premium, as specified. The bill would prohibit an insurance policy from lapsing or being terminated for nonpayment of premium unless the insurer, at least 10 days prior to the effective date of the lapse, termination, expiration, nonrenewal, or cancellation, gives notice, as provided, to the individual designated, if any, at the address provided by the  insured   policyholder  for these purposes. The bill would specify that an individual designated by a policyholder does not have any rights, whether as an additional insured or otherwise, to any benefits under the policy, other than the right to receive the notice of lapse, termination, expiration, nonrenewal, or cancellation for nonpayment of premium. 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 396 is added to the Insurance Code, to read: 396. (a) An insurer shall  maintain   do either of the following:   (   1)    Maintain  a  verifiable delivery  process that allows  an insured   a policyholder  to designate in writing  or by electronic transmission pursuant to Section 38.5  one additional person to receive notice of lapse, termination, expiration, nonrenewal, or cancellation of a policy for nonpayment of premium. The insurer shall notify the  insured   policyholder in writing or by electronic transmission pursuant to Section 38.5  of this right at the time of the application  or within 30 days after the inception date of an individual policy described in subdivision (e),  and at least every two years thereafter. The notification described in this subdivision shall instruct the  insured   policyholder  how to request the designation and how to replace or delete a designee.  If a policyholder initiates contact with the insurer after the insurer has provided notice and the insurer complies with the policyholder's request to establish or change the additional person to receive the notice described in this section, the insurer shall not be required to maintain additional verification.   (b) If an insurer does not maintain the process described in subdivision (a), the insurer shall comply with subdivisions (c) to (i), inclusive.   (2) Comply with subdivision (b).   (b) An insurer that adopts the following procedure shall be deemed to have complied with subdivision (a).   (c)   (   1)  Unless an applicant for insurance has been provided notice of the right set forth in this section prior to inception of the policy, the insurer shall provide the  insured,   policyholder,  within 30 days after the inception date of an individual policy described in subdivision  (i),  (e),  with notice of the right to designate one person, in addition to the  insured,   policyholder,  to receive notice of lapse, termination, expiration, nonrenewal, or cancellation of a policy for nonpayment of premium. The insurer shall provide each applicant or  insured   policyholder  with  written  notice  in writing or by electronic transmission pursuant to Section 38.5  of the opportunity to make the designation. That notice shall instruct the applicant or  insured   policyholder  on how he or she is to submit the name, address, and telephone number of one person, in addition to the applicant or  insured,   policyholder,  who is to receive notice of lapse, termination, expiration, nonrenewal, or cancellation of the policy for nonpayment of premium.  (d)   (   2)  If after having been provided notice from the insurer of the right to designate an individual to receive notice of lapse, termination, expiration, nonrenewal, or cancellation for nonpayment of premium, the applicant  or policyholder  fails to take action pursuant to subdivision (a) within 30 days, the  insured   applicant or policyholder  shall be conclusively presumed to have declined the opportunity to exercise his or her right at that time.  (e)   (   3)  Notwithstanding subparagraph (C) of paragraph (2) of subdivision (a) of Section 791.13 or any other law, the insurer shall retain and utilize as necessary the contact information provided in the written designation for the lifetime of the policy, and allow the  insured   policyholder  to update the written designation if the  insured   policyholder  so requests.  (f) An insured   (4)     A policyholder  retains the right to designate the one additional person to receive notice of lapse, termination, expiration, nonrenewal, or cancellation for nonpayment of premium at any time, at the initiative of the  insured,   policyholder,  regardless of whether the  insured   policyholder  previously declined to exercise that right. At least every two years, the insurer shall notify the  insured   policyholder  in writing  or by electronic transmission pursuant to Section 38.5,  of whichever of the following applies:  (1)   (   A)  If  an insured   a policyholder  has previously provided a  written  designation pursuant to  subdivision (c),   this subdivision, in writing or by electronic transmission pursuant to Section 38.5,  the right to change the prior  written  designation by replacing or deleting a person to receive notice of lapse, termination, expiration, nonrenewal, or cancellation for nonpayment of premium.  (2)   (   B)  If the  insured  policyholder  has not previously designated a person to receive the notice of lapse, termination, expiration, nonrenewal, or cancellation for nonpayment of premium pursuant to  this  subdivision  (c)  , the right to designate a person to receive notice of lapse, termination, expiration, nonrenewal, or cancellation for nonpayment of premium.  (3)   (   C)  The notice requirements in  paragraphs (1) and (2)   subparagraphs (A) and (B)  may be provided to  insureds   a policyholder  in a single notice and shall not require two separate notices.  (g)   (   c)  When  an insured   a policyholder  pays the premium for an insurance policy through a payroll or pension deduction plan, the requirements contained in  subdivision (c)   paragraph (1) of subdivision (b)  need not be met until 60 days after the  insured   policyholder  is no longer on that deduction payment plan. The application form for an insurance policy shall clearly indicate the deduction payment plan selected by the applicant.  (h)   (d)  An insurance policy shall not lapse or be terminated for nonpayment of premium unless the insurer, at least 10 days prior to the effective date of the lapse, termination, expiration, nonrenewal, or cancellation, gives notice to the individual designated pursuant to subdivision (a)  or (b)  at the address provided by the  insured   policyholder  for purposes of receiving the notice of lapse, termination, expiration, nonrenewal, or cancellation for nonpayment of premium. Notice shall be given by first-class United States mail, postage prepaid, within 10 days after the premium is due and unpaid. This subdivision does not modify requirements for notice to the  insured   policyholder  of lapse, termination, expiration, nonrenewal, or cancellation set forth in other sections of this code.  (i)   (e)  This section applies only to policies of private passenger automobile insurance  , owner-occupied homeowners' insurance on risks located or resident in this state that are issued and take   that provide coverage for six months or longer, policies of residential property insurance as described in subdivision (a) of Section 10087 that take  effect or that are renewed after the effective date of this section, and policies of individual disability income insurance as described in subdivision (i) of Section 799.01.  (j)   (   f)  This section applies to policies that are issued and take effect or that are renewed on or after January 1, 2016.  (k)   (   g)  An individual designated by a policyholder pursuant to this section to receive notice of lapse, termination, expiration, nonrenewal, or cancellation of the policy for nonpayment of premium does not have any rights, whether as an additional insured or otherwise, to any benefits under the policy, other than the right to receive notice as provided by this section.  (l)   (   h)  This section shall become operative on January 1, 2016.