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| Home > Statutes > Usa Arizona |
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USA Statutes : arizona
Title : Insurance
Chapter : PARTICULAR TYPES OF INSURANCE
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20-1201 Scope of article
This article applies to contracts of life insurance and annuities, other than
reinsurance, group life insurance, group annuities and industrial life
insurance. Section 20-1217 (contestability as to excluded or restricted coverage),
section 20-1226 (limitation of liability), section 20-1227 (incontestability after
reinstatement), section 20-1230 (dual pay policies) and sections 20-1231 and 20-1231.01
(standard nonforfeiture law) shall apply to industrial life insurance also.
20-1202 Standard provisions required in life insurance policies
A. No policy of life insurance other than industrial, group and pure endowments
with or without return of premiums or of premiums and interest, shall be delivered or
issued for delivery in this state unless it contains in substance all of the provisions
required by sections 20-1203 to 20-1216, inclusive. This section shall not apply to
annuity contracts nor to any provision of a life insurance policy relating to disability
benefits or to additional benefits in the event of death by accident or accidental means.
B. Any provisions or portions thereof not applicable to single premium or term
policies shall to that extent not be incorporated therein.
20-1203 Grace period
There shall be a provision that a grace period of thirty days, or, at the option of
the insurer, of one month of not less than thirty days, shall be allowed within which the
payment of any premium after the first may be made, during which period of grace the
policy shall continue in full force. If a claim arises under the policy during the period
of grace before the overdue premium is paid, the amount of the premium may be deducted
from the policy proceeds.
20-1204 Incontestability
There shall be a provision that the policy, exclusive of provisions relating to
disability benefits or to additional benefits in the event of death by accident or
accidental means, shall be incontestable, except for nonpayment of premiums, after it has
been in force during the lifetime of the insured for a period of two years from its date
of issue.
20-1205 Application and policy as entire contract; statements in application as representations; information
A. There shall be a provision that the policy, or the policy and the application
therefor if a copy of the application is endorsed upon or attached to the policy when
issued, shall constitute the entire contract between the parties, and that all statements
contained in the application shall, in the absence of fraud, be deemed representations
and not warranties.
B. On written request of an applicant or annuity holder, an insurer shall provide
within a reasonable time reasonable factual information regarding the benefits and
provisions of his annuity contract.
20-1206 Misstatement of age
There shall be a provision that if the age of the insured or of any other person
whose age is considered in determining the premium has been misstated, any amount payable
or benefit accruing under the policy shall be such as the premium would have purchased at
the correct age or ages.
20-1207 Dividends
There shall be a provision in participating policies that, beginning not later than
the end of the third policy year, the insurer shall annually ascertain and apportion the
divisible surplus, if any, that will accrue on the policy anniversary or other dividend
date specified in the policy provided the policy is in force and all premiums to that
date are paid. Except as provided in this section, any dividend so apportioned shall, at
the option of the party entitled to elect such option, be either payable in cash or
applied to any one of such other dividend options as may be provided by the policy. If
any such other dividend options are provided, the policy shall further state which option
shall be automatically effective if the party has not elected some other option. If the
policy specifies a period within which the other dividend option may be elected, such
period shall be not less than thirty days following the date on which the dividend is due
and payable. The annually apportioned dividend shall be deemed to be payable in cash
even though the policy provides that payment of the dividend is to be deferred for a
specified period, but such period shall not exceed six years from the date of
apportionment and interest shall be added to the dividend at a specified rate. If a
participating policy provides that the benefit under any paid-up nonforfeiture provision
is to be participating, it may provide that any divisible surplus apportioned while the
insurance is in force under the nonforfeiture provision shall be applied in the manner
set forth in the policy.
20-1208 Policy loan on old policies
A. In the case of policies issued prior to the operative date of section 20-1231,
there shall be a provision that after three full years premiums have been paid, the
insurer at any time while the policy is in force will advance on proper assignment or
pledge of the policy and on the sole security thereof at a specified rate of interest not
to exceed six per cent per annum, an amount equal to, or at the option of the owner of
the policy less than, the reserve at the end of the current policy year on the policy and
on any dividend addition thereto, computed according to any mortality table, rate of
interest and the method of valuation permitted by the provisions of this title, the
policy specifying the mortality table and rate of interest adopted for computing such
reserve, less an amount not more than two and one-half per cent of the amount insured by
the policy and of any dividend additions thereto, and that the insurer shall deduct from
such loan value any existing indebtedness on the policy and any unpaid balance of the
premium for the current policy year, and may collect interest in advance on the loan to
the end of the current policy year. An insurer may, in lieu of the provisions permitted
by this section for the deduction from a loan on the policy of an amount not more than
two and one-half per cent of the amount insured by the policy and of any dividend
additions thereto, insert in the policy a provision that one fifth of the entire reserve
may be deducted in case of a loan under the policy, or may provide therein that the
deduction may be the two and one-half per cent or the one fifth of the entire reserve at
the option of the insurer. The policy shall reserve to the insurer the right to defer
the granting of a loan, other than for the payment of any premium to the insurer, for six
months after application therefor is made. The policy, at the insurer's option, may
provide for an automatic premium loan, subject to an election of the party entitled to
elect.
B. The provision provided for in subsection A of this section shall not be required
in term insurance, nor shall it apply to temporary insurance or pure endowment insurance,
issued or granted in exchange for lapsed or surrendered policies.
C. In ascertaining the indebtedness due from policy loans, the interest, if not
paid when due, shall be added to the principal of the loans and shall bear interest at
the rate specified in the note or loan agreement.
20-1209.01 Maximum rate of interest on policy loans; definitions
A. Policies issued on or after the effective date of this section shall provide for
policy loan interest rates at either of the following levels:
1. A maximum interest rate of not more than eight per cent a year.
2. An adjustable maximum interest rate established by the life insurer as provided
by this section.
B. The rate of interest charged on a policy loan made by a life insurer under
subsection A, paragraph 2 of this section shall not exceed the higher of the following:
1. The published monthly average for the calendar month ending two months before
the date on which the rate is determined.
2. The rate used to compute the cash surrender values under the policy during the
applicable period plus one per cent a year.
C. If the maximum rate of interest on a policy loan is determined under subsection
A, paragraph 2 of this section, the policy shall contain a provision prescribing the
frequency at which the rate is to be recalculated for that policy.
D. The life insurer shall determine the maximum rate for each policy containing a
provision permitting an adjustable policy loan interest rate at regular intervals at
least once every twelve months but not more frequently than once in any three month
period. At the intervals specified in the policy:
1. The life insurer may increase the policy loan interest rate being charged if the
increase as determined under subsection B of this section would increase that rate by
one-half per cent or more a year.
2. The life insurer shall reduce the policy loan interest rate being charged if the
reduction as determined under subsection B of this section would decrease that rate by
one-half per cent or more a year.
E. The life insurer shall:
1. Notify the policyholder at the time a cash loan is made of the initial rate of
interest on the loan.
2. Notify the policyholder with respect to premium loans of the initial rate of
interest on the loan as soon as it is reasonably practical to do so after making the
initial loan. Notice need not be given to the policyholder if a further premium loan is
added, except as provided in paragraph 3 of this subsection.
3. Send to policyholders with loans reasonable advance notice of any increase in
the rate.
4. Include in the notices required by this subsection the substance of the
provisions of either subsection A, paragraph 1, or subsection A, paragraph 2 and
subsection C of this section, whichever is applicable.
F. The life insurer shall determine the loan value of the policy according to
section 20-1209, but no policy may terminate in a policy year as the sole result of a
change in the interest rate during that policy year, and the life insurer shall maintain
coverage during that policy year until the time at which it would otherwise have
terminated if there had been no change during that policy year.
G. The substance of the provisions of either subsection A, paragraph 1, or
subsection A, paragraph 2 and subsection C of this section shall be set forth in the
policies to which they apply.
H. The rate of interest on policy loans permitted under this section includes the
interest rate charged on reinstatement of policy loans for the period during and after
any lapse of a policy.
I. In this section, unless the context otherwise requires:
1. "Policy" includes certificates issued by a fraternal benefit society and annuity
contracts which provide for policy loans.
2. "Policyholder" includes the owner of the policy or the person designated to pay
premiums as shown on the records of the life insurer.
3. "Policy loan" includes any premium loan made under a policy to pay one or more
premiums that were not paid to the life insurer as they fell due.
4. "Published monthly average" means either:
(a) The Moody's corporate bond yield average, monthly average corporates, as
published by Moody's investors service, incorporated or any successor to the corporation.
(b) If the Moody's corporate bond yield average, monthly average corporates, is no
longer published, a substantially similar average, established by rule of the director.
J. No other provisions of law applies to policy loan interest rates unless made
specifically applicable to such a rate.
20-1209 Policy loan on new policies
A. In case of policies issued on and after January 1, 1979, there shall be a
provision that after the policy has a cash surrender value and while no premium is in
default beyond the grace period for payment, the insurer will advance, on proper
assignment or pledge of the policy and on the sole security of such policy, at a
specified rate of interest not exceeding eight per cent per annum or seven and
four-tenths per cent per annum if payable in advance, an amount equal to or, at the
option of the party entitled thereto, less than the loan value of the policy. If the
policy provides for a rate of interest in excess of six per cent per annum, the insurer
shall certify to the director that the holders of such policies will benefit from
increased earnings of the insurer resulting from such higher interest rates through the
use of higher dividends or lower premiums or both. The loan value of the policy shall be
at least equal to the cash surrender value at the end of the then current policy year,
provided that the insurer may deduct, either from the loan value or from the proceeds of
the loan, any existing indebtedness not already deducted in determining the cash
surrender value including any interest then accrued but not due, any unpaid balance of
the premium for the current policy year and interest on the loan to the end of the
current policy year. The policy may also provide that if interest on any indebtedness is
not paid when due it shall then be added to the existing indebtedness and shall bear
interest at the same rate, and that if and when the total indebtedness on the policy,
including interest due or accrued, equals or exceeds the amount of the loan value the
policy shall terminate and become void. The policy shall reserve to the insurer the
right to defer the granting of a loan, other than for the payment of any premium to the
insurer, for six months after application. The policy, at the insurer's option, may
provide for an automatic premium loan, subject to an election of the party entitled to
elect.
B. This section shall not apply to term policies nor to term insurance benefits
provided by rider or supplemented policy provision.
20-1210 Nonforfeiture options in old policies
A. There shall be a provision specifying the option to which the policyholder is
entitled in the event of default in a premium payment after three full annual premiums
have been paid. This provision shall not be required in term insurance of twenty years
or less, for which uniform premiums are payable during the entire term of the policy, nor
to any term policy of decreasing amount. A provision may also be inserted in the policy
that in the event of default in a premium payment before such options become available
the reserve on any dividend addition then in force may at the option of the insurer be
paid in cash or applied as a net premium to the purchase of paid-up term insurance for
any amount not in excess of the face of the original policy.
B. This section shall not apply to policies issued on or after the operative date
of section 20-1231.
20-1211 Table of values
There shall be a table showing in figures the loan value and the options available
under the policy each year upon default in premium payments, during the first twenty
years or during the term of the policy, whichever is shorter.
20-1212 Table of installments
In case the policy provides that the proceeds may be payable in installments which
are determinable at issue of the policy, there shall be a table showing the amounts of
the guaranteed installments.
20-1213 Reinstatement
There shall be a provision that unless the policy has been surrendered for its cash
surrender value or unless the paid-up term insurance, if any, has expired, the policy
will be reinstated at any time within three years from the date of premium default upon
written application therefor, the production of evidence of insurability satisfactory to
the insurer, the payment of all premiums in arrears, and the payment or reinstatement of
any other indebtedness to the insurer upon the policy, all with interest at a rate not
exceeding six per cent per annum compounded annually.
20-1214 Payment of premiums
There shall be a provision that all premiums after the first shall be payable in
advance.
20-1215 Payment of claims
There shall be a provision that when a policy becomes a claim by the death of the
insured settlement shall be made upon receipt of due proof of death and, at the insurer's
option, surrender of the policy, proof of the interest of the claimant, or both. If an
insurer specifies a particular period prior to the expiration of which settlement shall
be made, the period shall not exceed two months from the receipt of such proofs.
20-1216 Policy title
There shall be a title on the face and on the back of the policy, briefly describing
the policy.
20-1217 Excluded or restricted coverage
A clause in any policy of life insurance providing that the policy shall be
incontestable after a specified period shall preclude only a contest of the validity of
the policy, and shall not preclude the assertion at any time of defenses based upon
provisions in the policy which exclude or restrict coverage, whether or not such
restrictions or exclusions are excepted in the clause.
20-1218 Standard provisions required in annuity and pure endowment contracts
A. No annuity or pure endowment contract, other than reversionary annuities,
survivorship annuities or group annuities, and except as stated in this section, shall be
delivered or issued for delivery in this state unless it contains in substance each of
the provisions specified in sections 20-1219 to 20-1224, inclusive. Any such provisions
not applicable to single premium annuities or single premium pure endowment contracts
shall not, to that extent, be incorporated therein.
B. This section shall not apply to contracts for deferred annuities included in, or
upon the lives of beneficiaries under, life insurance policies.
20-1219 Grace period in annuities
In an annuity or pure endowment contract, other than a reversionary, survivorship or
group annuity, there shall be a provision that there shall be a period of grace of one
month, but not less than thirty days, within which any stipulated payment to the insurer
falling due after the first may be made, subject at the option of the insurer to an
interest charge thereon at a rate to be specified in the contract but not exceeding six
per cent per annum for the number of days of grace elapsing before payment, during which
period of grace the contract shall continue in full force, but in case a claim arises
under the contract on account of death prior to expiration of the period of grace before
the overdue payment to the insurer or the deferred payments of the current contract year,
if any, are made, the amount of the payments, with interest on any overdue payments, may
be deducted from any amount payable under the contract in settlement.
20-1220 Incontestability in annuities
If any statements, other than those relating to age, sex and identity are required
as a condition to issuing an annuity or pure endowment contract, other than a
reversionary, survivorship or group annuity, and subject to section 20-1222, there shall
be a provision that the contract shall be incontestable after it has been in force during
the lifetime of the person or of each of the persons as to whom such statements are
required, for a period of two years from its date of issue, except for nonpayment of
stipulated payments to the insurer. At the option of the insurer the contract may also
except any provisions relative to benefits in the event of disability and any provisions
which grant insurance specifically against death by accident or accidental means.
20-1221 Application and contract as entire contract in annuities
In an annuity or pure endowment contract, other than a reversionary, survivorship or
group annuity, there shall be a provision that the contract shall constitute the entire
contract between the parties or, if a copy of the application is endorsed upon or
attached to the contract when issued, a provision that the contract and the application
therefor shall constitute the entire contract between the parties.
20-1222 Misstatement of age in annuities
In an annuity or pure endowment contract, other than a reversionary, survivorship or
group annuity, there shall be a provision that if the age of the person or persons upon
whose life or lives the contract is made, or of any of them, has been misstated, the
amount payable or benefits accruing under the contract shall be such as the stipulated
payment or payments to the insurer would have purchased according to the correct age, and
that if the insurer makes or has made any overpayment or overpayments on account of such
misstatement, the amount thereof, with interest at the rate to be specified in the
contract but not exceeding six per cent per annum, may be charged against the current or
next succeeding payment or payments to be made by the insurer under the contract.
20-1223 Dividends on annuities
If an annuity or pure endowment contract, other than a reversionary, survivorship or
group annuity, is participating, there shall be a provision that the insurer shall
annually ascertain and apportion any divisible surplus accruing on the contract.
20-1224 Reinstatement of annuities
In an annuity or pure endowment contract, other than a reversionary, survivorship or
group annuity, there shall be a provision that the contract may be reinstated at any time
within one year from the default in making stipulated payments to the insurer, unless the
cash surrender value has been paid, but all overdue stipulated payments and any
indebtedness to the insurer on the contract shall be paid or reinstated with interest
thereon at a rate to be specified in the contract but not exceeding six per cent per
annum payable annually, and in cases where applicable the insurer may also include a
requirement of evidence of insurability satisfactory to the insurer.
20-1225 Standard provisions required in reversionary annuities
A. Except as stated herein, no contract for a reversionary annuity shall be
delivered or issued for delivery in this state unless it contains in substance each of
the following provisions:
1. The reversionary annuity contract shall contain the provisions specified in
sections 20-1219, 20-1220, 20-1221, 20-1222 and 20-1223, except that under section
20-1219 the insurer may at its option provide for an equitable reduction of the amount of
the annuity payments in settlement of an overdue or deferred payment in lieu of providing
for deduction of such payments from an amount payable upon settlement under the contract.
2. In reversionary annuity contracts there shall be a provision that the contract
may be reinstated at any time within three years from the date of default in making
stipulated payments to the insurer, upon production of evidence of insurability
satisfactory to the insurer, and upon condition that all overdue payments and any
indebtedness to the insurer on account of the contract be paid, or, within the limits
permitted by the then cash values of the contract, reinstated, with interest as to both
payments and indebtedness at a rate to be specified in the contract but not exceeding six
per cent per annum compounded annually.
B. This section shall not apply to group annuities or to annuities included in life
insurance policies, and any such provisions not applicable to single premium annuities
shall not to that extent be incorporated therein.
20-1226 Limitation of liability
A. No policy of life insurance shall be delivered or issued for delivery in this
state if it contains a provision which excludes or restricts liability for death caused
in a certain specified manner or occurring while the insured has a specified status,
except that a policy may contain provisions excluding or restricting coverage as
specified therein in the event of death under any one or more of the following
circumstances:
1. Death as a result, directly or indirectly, of war, declared or undeclared, or of
action by military forces, or of any act or hazard of such war or action, or of service
in the military, naval or air forces or in civilian forces auxiliary thereto, or from any
cause while a member of such military, naval or air forces of any country at war,
declared or undeclared, or of any country engaged in such military action.
2. Death as a result of aviation.
3. Death as a result of a specified hazardous occupation or occupations.
4. Death while the insured is outside continental United States and Canada.
5. Death within two years from the date of issue of the policy as a result of
suicide, while sane or insane.
B. A policy which contains any exclusion or restriction pursuant to subsection A of
this section shall also provide that in the event of death under the circumstances to
which the exclusion or restriction is applicable, the insurer will pay an amount not less
than a reserve determined according to the commissioners reserve valuation method upon
the basis of the mortality table and interest rate specified in the policy for the
calculation of nonforfeiture benefits, or if the policy provides for no such benefits,
computed according to a mortality table and interest rate determined by the insurer and
specified in the policy, with adjustment for indebtedness or dividend credit.
C. This section shall not apply to group life insurance, disability insurance,
reinsurance or annuities, or to any provision in a life insurance policy relating to
disability benefits or to additional benefits in the event of death by accident or
accidental means.
20-1227 Incontestability after reinstatement
The reinstatement of any policy of life insurance or annuity contract delivered or
issued for delivery in this state after January 1, 1955 may be contested on account of
fraud or misrepresentation of facts material to the reinstatement only for the same
period following reinstatement and with the same conditions and exceptions as the policy
provides with respect to contestability after original issuance.
20-1228 Policy settlements
Any life insurer may hold under agreement the proceeds of any policy issued by it,
upon such terms and restrictions as to revocation by the policyholder and control by
beneficiaries, and with such exemptions from the claims of creditors of beneficiaries
other than the policyholder as set forth in the policy or as agreed to in writing by the
insurer and the policyholder. Upon maturity of a policy, in the event the policyholder
has made no such agreement, the insurer may hold the proceeds of the policy under an
agreement with the beneficiaries. The insurer shall not be required to segregate the
funds so held but may hold them as part of its general assets.
20-1229 Authorized deductions from insurance proceeds
In determining the amount due under any life insurance policy issued, deduction may
be made of:
1. Any unpaid premiums or installments thereof for the current policy year due
under the terms of the policy.
2. The amount of principal and accrued interest of any policy loan or other
indebtedness against the policy then remaining unpaid.
20-1230 Prohibition of dual or multiple pay policies
No life insurance policy shall be issued or delivered in this state if it provides
that on the death of anyone not specifically named therein, the owner or beneficiary of
the policy shall receive the payment or granting of anything of value.
20-1231.01 Standard nonforfeiture law for life insurance; table for calculating adjusted premiums
Except as provided in paragraph 7 of this section, on a policy issued on or after
the operative date as provided in this section:
1. The adjusted premiums for any policy shall be calculated on an annual basis and
shall be such a uniform percentage of the respective premiums specified in the policy for
each policy year, excluding amounts payable as extra premiums to cover impairments or
special hazards and also excluding any uniform annual contract charge or policy fee
specified in the policy in a statement of the method to be used in calculating the cash
surrender values and paid-up nonforfeiture benefits, that the present value, at the date
of issue of the policy, of all adjusted premiums shall be equal to the sum of:
(a) The then present value of the future guaranteed benefits provided for by the
policy.
(b) One per cent of either the amount of insurance, if the insurance is uniform in
amount, or the average amount of insurance at the beginning of each of the first ten
policy years.
(c) One hundred twenty-five per cent of the nonforfeiture net level premium. In
applying the percentage specified in subdivision (c) of this paragraph no nonforfeiture
net level premium shall be deemed to exceed four per cent of either the amount of
insurance, if the insurance is uniform in amount, or the average amount of insurance at
the beginning of each of the first ten policy years. The date of issue of a policy for
the purpose of this section is the date as of which the rated age of the insured is
determined.
2. The nonforfeiture net level premium is equal to the present value, at the date
of issue of the policy, of the guaranteed benefits provided for by the policy divided by
the present value, at the date of issue of the policy, of an annuity of one per annum
payable on the date of issue of the policy and on each anniversary of the policy on which
a premium falls due.
3. In the case of policies which cause on a basis guaranteed in the policy
unscheduled changes in benefits or premiums, or which provide an option for changes in
benefits or premiums other than a change to a new policy, the adjusted premiums and
present values shall initially be calculated on the assumption that future benefits and
premiums do not change from those stipulated at the date of issue of the policy. At the
time of such a change in the benefits or premiums, the future adjusted premiums,
nonforfeiture net level premiums and present values shall be recalculated on the
assumption that future benefits and premiums do not change from those stipulated by the
policy immediately after the change.
4. Except as otherwise provided in paragraph 7 of this section, the recalculated
future adjusted premiums for any such policy are the uniform percentage of the respective
future premiums specified in the policy for each policy year, excluding amounts payable
as extra premiums to cover impairments and special hazards and also excluding any uniform
annual contract charge or policy fee specified in the policy in a statement of the method
to be used in calculating the cash surrender values and paid-up nonforfeiture benefits,
that the present value, at the time of change to the newly defined benefits or premiums,
of all such future adjusted premiums shall be equal to the excess of the sum of the then
present value of the then future guaranteed benefits provided for by the policy and the
additional expense allowance, if any, over the then cash surrender value, if any, or
present value of any paid-up nonforfeiture benefit under the policy.
5. The additional expense allowance, at the time of the change to the newly defined
benefits or premiums, is the sum of:
(a) One per cent of the excess, if positive, of the average amount of insurance at
the beginning of each of the first ten policy years subsequent to the change over the
average amount of insurance prior to the change at the beginning of each of the first ten
policy years subsequent to the time of the most recent previous change or, if there has
been no previous change, the date of issue of the policy.
(b) One hundred twenty-five per cent of the increase, if positive, in the
nonforfeiture net level premium.
6. The recalculated nonforfeiture net level premium is equal to the result obtained
by dividing (a) by (b) where:
(a) (a) Equals the sum of:
(i) The nonforfeiture net level premium applicable prior to the change times the
present value of an annuity of one per annum payable on each anniversary of the policy on
or subsequent to the date of the change on which a premium would have fallen due had the
change not occurred.
(ii) The present value of the increase in future guaranteed benefits provided for
by the policy.
(b) (b) Equals the present value of an annuity of one per annum payable on each
anniversary of the policy on or subsequent to the date of change on which a premium falls
due.
7. Notwithstanding any other provisions of this section, in the case of a policy
issued on a substandard basis which provides reduced graded amounts of insurance so that,
in each policy year, the policy has the same tabular mortality cost as an otherwise
similar policy issued on the standard basis which provides higher uniform amounts of
insurance, adjusted premiums and present values for the substandard policy may be
calculated as if it were issued to provide higher uniform amounts of insurance on the
standard basis.
8. All adjusted premiums and present values referred to in this section shall, for
all policies of ordinary insurance be calculated on the basis of either the commissioners
1980 standard ordinary mortality table, or at the election of the insurer for any one or
more specified plans of life insurance, the commissioners 1980 standard ordinary
mortality table with ten year select mortality factors, for all policies of industrial
insurance be calculated on the basis of the commissioners 1961 standard industrial
mortality table, and for all policies issued in a particular calendar year be calculated
on the basis of a rate of interest not exceeding the nonforfeiture interest rate for
policies issued in that calendar year. However:
(a) At the option of the insurer, calculations for all policies issued in a
particular calendar year may be made on the basis of a rate of interest not exceeding the
nonforfeiture interest rate, as defined in this section, for policies issued in the
immediately preceding calendar year.
(b) Under any paid-up nonforfeiture benefit, including any paid-up dividend
additions, any cash surrender value available, whether or not required by section
20-1231, subsection B, shall be calculated on the basis of the mortality table and rate
of interest used in determining the amount of such paid-up nonforfeiture benefit and
paid-up dividend additions, if any.
(c) An insurer may calculate the amount of any guaranteed paid-up nonforfeiture
benefit including any paid-up additions under the policy on the basis of an interest rate
no lower than that specified in the policy for calculating cash surrender values.
(d) In calculating the present value of any paid-up term insurance with
accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of
mortality assumed may be not more than those shown in the commissioners 1980 extended
term insurance table for policies of ordinary insurance and not more than the
commissioners 1961 industrial extended term insurance table for policies of industrial
insurance.
(e) For insurance issued on a substandard basis, the calculation of any such
adjusted premiums and present values may be based on appropriate modifications of the
tables prescribed in this section and section 20-1231.
(f) Any ordinary mortality tables, adopted after 1980 by the national association
of insurance commissioners, that are approved by the director for use in determining the
minimum nonforfeiture standard may be substituted for the commissioners 1980 standard
ordinary mortality table with or without ten year select mortality factors or for the
commissioners 1980 extended term insurance table.
(g) Any industrial mortality tables, adopted after 1980 by the national association
of insurance commissioners, that are approved by the director for use in determining the
minimum nonforfeiture standard may be substituted for the commissioners 1961 standard
industrial mortality table or the commissioners 1961 industrial extended term insurance
table.
9. The nonforfeiture interest rate per annum for any policy issued in a particular
calendar year shall be equal to one hundred twenty-five per cent of the calendar year
statutory valuation interest rate for such policy as defined in the standard valuation
law, rounded to the nearer one-quarter of one per cent.
10. Notwithstanding any other provision in this title, any refiling of nonforfeiture
values or their methods of computation for any previously approved policy form which
involves only a change in the interest rate or mortality table used to compute
nonforfeiture values shall not require refiling of any other provisions of that policy
form.
11. After July 24, 1982 any insurer may file with the director a written notice of
its election to comply with the provisions of this section after a specified date before
January 1, 1989, which is the operative date of this section for the insurer. If an
insurer makes no such election, the operative date of this section for the insurer is
January 1, 1989.
20-1231 Standard nonforfeiture law for life insurance
A. This section may be cited as the standard nonforfeiture law for life insurance.
B Nonforfeiture provisions--Life. In the case of policies issued on or after the
operative date of this section as defined in subsection J of this section, no policy of
life insurance, except as set forth in subsection I of this section, shall be delivered
or issued for delivery in this state unless it contains in substance the following
provisions, or corresponding provisions which in the opinion of the director are at least
as favorable to the defaulting or surrendering policyholder as are the minimum
requirements specified in this section and are essentially in compliance with subsection
H of this section:
1. That in the event of default in any premium payment, the insurer will grant,
upon proper request not later than sixty days after the due date of the premium in
default, a paid-up nonforfeiture benefit on a plan stipulated in the policy, effective as
of such due date, of such amount as is specified by this section. Instead of the
stipulated paid-up nonforfeiture benefit, the insurer may substitute, upon proper request
not later than sixty days after the due date of the premium in default, an actuarially
equivalent alternative paid-up nonforfeiture benefit which provides a greater amount or
longer period of death benefits or, if applicable, a greater amount or earlier payment of
endowment benefits.
2. That upon surrender of the policy within sixty days after the due date of any
premium payment in default after premiums have been paid for at least three full years in
the case of ordinary insurance, and five full years in the case of industrial insurance,
the insurer will pay, in lieu of any paid-up nonforfeiture benefit, a cash surrender
value of such amount as is specified by this section.
3. That a specified paid-up nonforfeiture benefit shall become effective as
specified in the policy unless the person entitled to make such election elects another
available option not later than sixty days after the due date of the premium in default.
4. That if the policy has become paid up by completion of all premiums payments, or
if it is continued under any paid-up nonforfeiture benefit which became effective on or
after the third policy anniversary in the case of ordinary insurance, or the fifth policy
anniversary in the case of industrial insurance, the insurer will pay, upon surrender of
the policy within thirty days after any policy anniversary, a cash surrender value of
such amount as is specified by this section.
5. In the case of policies which cause on a basis guaranteed in the policy
unscheduled changes in benefits or premiums, or which provide an option for changes in
benefits or premiums other than a change to a new policy, a statement of the mortality
table, interest rate and method used in calculating cash surrender values and the paid-up
nonforfeiture benefits available under the policy. In the case of all other policies, a
statement of the mortality table and interest rate used in calculating the cash surrender
values and the paid-up nonforfeiture benefits available under the policy, together with a
table showing the cash surrender value, if any, and paid-up nonforfeiture benefit, if
any, available under the policy on each policy anniversary, either during the first
twenty policy years or during the term of the policy, whichever is shorter, such values
and benefits to be calculated upon the assumption that there are no dividends or paid-up
additions credited to the policy and that there is no indebtedness to the insurer on the
policy.
6. A statement that the cash surrender values and the paid-up nonforfeiture
benefits available under the policy are not less than the minimum values and benefits
required by or pursuant to the insurance law of this state, an explanation of the manner
in which the cash surrender values and the paid-up nonforfeiture benefits are altered by
the existence of any paid-up additions credited to the policy or any indebtedness to the
insurer on the policy, if a detailed statement of the method of computation of the values
and benefits shown in the policy is not stated therein, a statement that such method of
computation has been filed with the insurance supervisory official of the state in which
the policy is delivered, and a statement of the method to be used in calculating the cash
surrender value and paid-up nonforfeiture benefit available under the policy on any
policy anniversary beyond the last anniversary for which such values and benefits are
consecutively shown in the policy.
C. Any of the provisions or portions of the provisions set forth in subsection B,
paragraphs 1 through 6 of this section which are not applicable by reason of the plan of
insurance may, to the extent inapplicable, be omitted from the policy. The insurer shall
reserve the right to defer the payment of any cash surrender value for a period of six
months after demand therefor with surrender of the policy.
D Cash surrender value--Life.
1. Any cash surrender value available under the policy in the event of default in
the premium payment due on any policy anniversary, whether or not required by subsection
B of this section, shall be an amount not less than the excess, if any, of the present
value on such anniversary of the future guaranteed benefits which would have been
provided for by the policy, including any existing paid-up additions if there had been no
default, over the sum of the then present value of the adjusted premiums as defined in
subsection F of this section and in section 20-1231.01, corresponding to premiums which
would have fallen due on and after such anniversary, and the amount of any indebtedness
to the insurer on account of or secured by the policy.
2. For any policy issued on or after the operative date as provided in section
20-1231.01 which provides supplemental life insurance or annuity benefits at the option
of the insured and for an identifiable additional premium by rider or supplemental policy
provision, the cash surrender value referred to in paragraph 1 of this subsection is in
an amount not less than the sum of the cash surrender value as defined in such paragraph
for an otherwise similar policy issued at the same age without such rider or supplemental
policy provision and the cash surrender value as defined in such paragraph for a policy
which provides only the benefits otherwise provided by such rider or supplemental policy
provision.
3. For any family policy issued on or after the operative date as provided in
section 20-1231.01 which defines a primary insured and provides term insurance on the
life of the spouse of the primary insured expiring before the spouse's age seventy-one,
the cash surrender value referred to in paragraph 1 of this subsection is in an amount
not less than the sum of the cash surrender value as defined in that paragraph for an
otherwise similar policy issued at the same age without term insurance on the life of the
spouse and the cash surrender value as defined in that paragraph for a policy which
provides only the benefits otherwise provided by term insurance on the life of the
spouse.
4. Any cash surrender value available within thirty days after any policy
anniversary under any policy paid up by completion of all premium payments, or any policy
continued under any paid-up nonforfeiture benefits, whether or not required by subsection
B of this section, shall be an amount not less than the present value, on such
anniversary, of the future guaranteed benefits provided for by the policy, including any
existing paid-up additions, decreased by any indebtedness to the insurer on account of or
secured by the policy.
E Paid-up nonforfeiture benefits--Life. Any paid-up nonforfeiture benefit
available under the policy in the event of default in the premium payment due on any
policy anniversary shall be such that its present value as of such anniversary shall be
at least equal to the cash surrender value then provided for by the policy, or, if none
is provided for, that cash surrender value which would have been required by this section
in the absence of the conditions that premiums shall have been paid for at least a
specified period.
F The adjusted premiums--Life.
1. Paragraphs 1 through 4 and paragraph 5, subdivision (a) of this subsection do
not apply to policies issued on or after the operative date as provided in section
20-1231.01. Except as provided in paragraph 3 of this subsection, the adjusted premiums
for any policy shall be calculated on an annual basis and shall be such uniform
percentage of the respective premiums specified in the policy for each policy year,
excluding extra premiums on a substandard policy, that the present value, at the date of
issue of the policy, of all such adjusted premiums shall be equal to the sum of:
(a) The then present value of the future guaranteed benefits provided for by the
policy.
(b) Two per cent of the amount of the insurance if the insurance is uniform in
amount, or of the equivalent uniform amount, as defined by this section, if the amount of
insurance varies with the duration of the policy.
(c) Forty per cent of the adjusted premium for the first policy year.
(d) Twenty-five per cent of either the adjusted premium for the first policy year
or the adjusted premium for a whole life policy of the same uniform or equivalent uniform
amount with uniform premiums for the whole of life issued at the same age for the same
amount of insurance, whichever is less.
2. In applying the percentages specified in subdivisions (c) and (d) of paragraph 1
of this subsection, no adjusted premiums shall be deemed to exceed four per cent of the
amount of insurance or uniform amount equivalent thereto. When the plan or term of a
policy has been changed, either by request of the insured or automatically in accordance
with the provisions of the policy, the date of inception of the changed policy for the
purposes of determining a nonforfeiture benefit or cash surrender value shall be the date
as of which the age of the insured is determined for the purposes of the changed policy.
3. The adjusted premiums for any policy providing term insurance benefits by rider
or supplemental policy provisions shall be equal to the sum of:
(a) The adjusted premiums for an otherwise similar policy issued at the same age
without such term insurance benefits.
(b) The adjusted premiums for such term insurance benefits during the period for
which premiums for such term insurance benefits are payable. Such subdivisions (a) and
(b) shall be calculated separately and as specified in paragraphs 1 and 2 of this
subsection except that, for the purposes of subdivisions (b), (c) and (d) of paragraph 1
of this subsection, the amount of insurance or equivalent uniform amount of insurance
used in the calculation of the adjusted premiums referred to in this subdivision shall be
equal to the excess of the corresponding amount determined for the entire policy over the
amount used in the calculation of the adjusted premiums in subdivision (a) of this
paragraph.
4. In the case of a policy providing an amount of insurance varying with the
duration of the policy, the equivalent uniform amount thereof for the purpose of
paragraphs 1, 2 and 3 of this subsection shall be deemed to be the uniform amount of
insurance provided by an otherwise similar policy, containing the same endowment benefit
or benefits, if any, issued at the same age and for the same term, the amount of which
does not vary with duration and the benefits under which have the same present value at
the date of issue as the benefits under the policy, but in the case of a policy for a
varying amount of insurance issued on the life of a child under age ten, the equivalent
uniform amount may be computed as though the amount of insurance provided by the policy
prior to the attainment of age ten were the amount provided by the policy at age ten.
5. Tables for calculating adjusted premiums shall be as follows:
(a) Except as otherwise provided in subdivisions (b) and (d) of this paragraph, all
adjusted premiums and present values referred to in this section shall for all policies
of ordinary insurance be calculated on the basis of the commissioners 1941 standard
ordinary mortality table provided that, for any category of ordinary insurance issued on
female risks, adjusted premiums and present values may be calculated according to an age
not in excess of three years younger than the actual age of the insured. Such
calculations for all policies of industrial insurance shall be made on the basis of the
1941 standard industrial mortality table. All calculations shall be made on the basis of
the rate of interest, not exceeding three and one-half per cent per annum, specified in
the policy for calculating cash surrender values and paid-up nonforfeiture benefits, but
in calculating the present value of any paid-up term insurance with accompanying pure
endowment, if any, offered as a nonforfeiture benefit, the rates of mortality assumed may
be not more than one hundred thirty per cent of the rates of mortality according to such
applicable table. For insurance issued on a substandard basis, the calculation of any
such adjusted premiums and present values may be based on such other table of mortality
as may be specified by the insurer and approved by the director.
(b) This subdivision does not apply to ordinary policies issued on or after the
operative date as provided in section 20-1231.01. In the case of ordinary policies
issued on or after the operative date defined in subdivision (c) of this paragraph, all
adjusted premiums and present values referred to in this section shall be calculated on
the basis of the commissioners 1958 standard ordinary mortality table and the rate of
interest specified in the policy for calculating cash surrender values and paid-up
nonforfeiture benefits, provided that such rate of interest shall not exceed three and
one-half per cent per annum except that a rate of interest not exceeding four per cent
per annum may be used for policies issued on or after July 1, 1974 and prior to January
1, 1979, and a rate of interest not exceeding five and one-half per cent per annum may be
used for policies issued on or after January 1, 1979, except that for any single premium
whole life or endowment insurance policy a rate of interest not exceeding six and
one-half per cent per annum may be used, and provided that:
(i) For any category of ordinary insurance issued on female risks, adjusted
premiums and present values may be calculated according to an age not in excess of six
years younger than the actual age of the insured.
(ii) In calculating the present value of any paid-up term insurance with
accompanying pure endowment, if any, offered as a nonforfeiture benefit, the rates of
mortality assumed may be not in excess of those shown in the commissioners 1958 extended
term insurance table.
(iii) For insurance issued on a substandard basis, the calculation of any such
adjusted premiums and present values may be based on such other table of mortality as may
be specified by the insurer and approved by the director.
(c) Any insurer may file with the director a written notice of its election to
comply with the provisions of subdivision (b) of this paragraph, either as to designated
ordinary policies or as to all ordinary policies issued by it, after a specified date
before January 1, 1966. After the filing of such notice, then upon such specified date,
which shall be the operative date of such subdivision (b) as to such policies for such
insurer, such subdivision (b) shall become operative with respect to such policies
thereafter issued by such insurer. If an insurer makes no such election, or so elects to
have such subdivision (b) apply as to certain of its ordinary policies only, the
operative date thereof as to all of the ordinary policies issued by such insurer, other
than those policies as to which the insurer has elected an earlier operative date, shall
be January 1, 1966.
(d) This subdivision does not apply to industrial policies issued on or after the
operative date provided in section 20-1231.01. In the case of industrial policies issued
on or after the operative date of this subdivision as defined herein, all adjusted
premiums and present values referred to in this subdivision shall be calculated on the
basis of the commissioners 1961 standard industrial mortality table and the rate of
interest specified in the policy for calculating cash surrender values and paid-up
nonforfeiture benefits provided that such rate of interest shall not exceed three and
one-half per cent per annum except that a rate of interest not exceeding four per cent
per annum may be used for policies issued on or after July 1, 1974 and prior to January
1, 1979, and a rate of interest not exceeding five and one-half per cent per annum may be
used for policies issued on or after January 1, 1979, except that for any single premium
whole life or endowment insurance policy a rate of interest not exceeding six and
one-half per cent per annum may be used. But, in calculating the present value of any
paid-up term insurance with accompanying pure endowment, if any, offered as a
nonforfeiture benefit, the rates of mortality assumed may be not more than those shown in
the commissioners 1961 industrial extended term insurance table and, for insurance issued
on a substandard basis, the calculations of any such adjusted premiums and present values
may be based on such other table of mortality as may be specified by the insurer and
approved by the director. After the effective date of this subdivision, an insurer may
file with the director a written notice of its election to comply with the provisions of
this subdivision, either as to designated industrial policies or as to all industrial
policies issued by it, after a specified date before January 1, 1968. After the filing
of such notice, then upon such specified date, which shall be the operative date of this
subdivision for such insurer, this subdivision shall become operative with respect to the
industrial policies thereafter issued by such insurer. If an insurer makes no such
election, the operative date of this subdivision for such insurer shall be January 1,
1968.
(e) For any plan of life insurance which provides for future premium determination,
the amounts of which are to be determined by the insurer based on then estimates of
future experience, or for any plan of life insurance which is of such a nature that
minimum values cannot be determined by the methods described in subsection B, C, D or E
of this section, paragraph 1 of this subsection, subdivision (b), (c) or (d) of this
paragraph or section 20-1231.01, then:
(i) The director must be satisfied that the benefits provided under the plan are
substantially as favorable to policyholders and insureds as the minimum benefits
otherwise required by subsection B, C, D or E of this section, paragraph 1 of this
subsection, subdivision (b), (c) or (d) of this paragraph or section 20-1231.01.
(ii) The director must be satisfied that the benefits and the pattern of premiums
of the plan are not such as to mislead prospective policyholders or insureds.
(iii) The cash surrender values and paid-up nonforfeiture benefits provided by the
plan must not be less than the minimum values and benefits required for the plan computed
by a method consistent with the principles of this standard nonforfeiture law for life
insurance, as determined by rules adopted by the director.
G Calculation of values--Life.
1. Any cash surrender value and any paid-up nonforfeiture benefit available under
the policy in the event of default in a premium payment due at any time other than on the
policy anniversary shall be calculated with allowance for the lapse of time and the
payment of fractional premiums beyond the last preceding policy anniversary. All values
referred to in subsections D, E and F of this section and section 20-1231.01 may be
calculated upon the assumption that any death benefit is payable at the end of the policy
year of death. The net value of any paid-up additions, other than paid-up term
additions, shall be not less than the amounts used to provide such additions.
2. Notwithstanding such provisions of subsection D of this section, additional
benefits payable and premiums for all such additional benefits shall be disregarded in
ascertaining cash surrender values and nonforfeiture benefits required by this section,
and no such additional benefits shall be required to be included in any paid-up
nonforfeiture benefits:
(a) In the event of death or dismemberment by accident or accidental means.
(b) In the event of total and permanent disability.
(c) As reversionary annuity or deferred reversionary annuity benefits.
(d) As term insurance benefits provided by a rider or supplemental policy provision
to which, if issued as a separate policy, this section would not apply.
(e) As term insurance on the life of a child or on the lives of children provided
in a policy on the life of a parent of the child, if such term insurance expires before
the child's age is twenty-six, is uniform in amount after the child's age is one, and has
not become paid-up by reason of the death of a parent of the child.
(f) As other policy benefits additional to life insurance and endowment benefits.
H. This subsection, in addition to all other applicable subsections of this
section, applies to all policies issued on or after January 1, 1986:
1. Any cash surrender value available under the policy in the event of default in a
premium payment due on any policy anniversary shall be in an amount which does not differ
by more than two-tenths of one per cent of either the amount of insurance, if the
insurance is uniform in amount, or the average amount of insurance at the beginning of
each of the first ten policy years, from the sum of:
(a) The greater of zero and the basic cash value hereinafter specified.
(b) The present value of any existing paid-up additions less the amount of any
indebtedness to the insurer under the policy.
2. The basic cash value shall be equal to the present value, on such anniversary,
of the future guaranteed benefits which would have been provided for by the policy,
excluding any existing paid-up additions and before deduction of any indebtedness to the
insurer, if there had been no default, less the then present value of the nonforfeiture
factors, corresponding to premiums which would have fallen due on and after such
anniversary, except that the effects on the basic cash value of supplemental life
insurance or annuity benefits or of family coverage, as described in subsection D or F of
this section, whichever is applicable, shall be the same as are the effects specified in
subsection D or F of this section, whichever is applicable, on the cash surrender values
defined in that subsection.
3. The nonforfeiture factor for each policy year shall be an amount equal to a
percentage of the adjusted premium for the policy year, as defined in subsection F of
this section or section 20-1231.01, whichever is applicable. Except as is required by the
next succeeding sentence of this paragraph, such percentage:
(a) Must be the same percentage for each policy year between the second policy
anniversary and the latter of:
(i) The fifth policy anniversary.
(ii) The first policy anniversary at which there is available under the policy a
cash surrender value in an amount, before including any paid-up additions and before
deducting any indebtedness, of at least two-tenths of one per cent of either the amount
of insurance, if the insurance is uniform in amount, or the average amount of insurance
at the beginning of each of the first ten policy years.
(b) Must be such that no percentage after the later of the two policy anniversaries
specified in subdivision (a) may apply to fewer than five consecutive policy years.
4. No basic cash value may be less than the value which would be obtained if the
adjusted premiums for the policy, as defined in subsection F of this section or section
20-1231.01, whichever is applicable, were substituted for the nonforfeiture factors in
the calculation of the basic cash value.
5. All adjusted premiums and present values referred to in this subsection shall
for a particular policy be calculated on the same mortality and interest bases as are
used in demonstrating the policy's compliance with the other subsections of this
section. The cash surrender values referred to in this subsection shall include any
endowment benefits provided for by the policy.
6. Any cash surrender value available other than in the event of default in a
premium payment due on a policy anniversary and the amount of any paid-up nonforfeiture
benefit available under the policy in the event of default in a premium payment shall be
determined in manners consistent with the manners specified for determining the analogous
minimum amounts in subsections B, C, D, E and G of this section and section 20-1231.01.
The amounts of any cash surrender values and of any paid-up nonforfeiture benefits
granted in connection with additional benefits such as those listed in subsection G,
paragraph 2 of this section shall conform with the principles of this subsection.
I Exceptions. This section and section 20-1231.01 do not apply to any of the
following:
1. Reinsurance.
2. Group insurance.
3. Pure endowment.
4. Annuity or reversionary annuity contract.
5. A term policy of uniform amount which provides no guaranteed nonforfeiture or
endowment benefits, or renewal thereof, of twenty years or less expiring before age
seventy-one, for which uniform premiums are payable during the entire term of the policy.
6. A term policy of decreasing amount, which provides no guaranteed nonforfeiture
or endowment benefits, on which each adjusted premium, calculated as specified in
subsection F of this section and section 20-1231.01, is less than the adjusted premiums
so calculated on a term policy of uniform amount, or renewal thereof, which provides no
guaranteed nonforfeiture or endowment benefits, issued at the same age and for the same
initial amount of insurance and for a term of twenty years or less expiring before age
seventy-one, for which uniform premiums are payable during the entire term of the policy.
7. Any policy which is delivered outside this state through an insurance producer
or other representative of the insurer issuing the policy.
8. A policy, which provides no guaranteed nonforfeiture or endowment benefits, for
which no cash surrender value, if any, or present value of any paid-up nonforfeiture
benefit, at the beginning of any policy year, calculated as specified in subsections D, E
and F of this section and section 20-1231.01, exceeds two and one-half per cent of the
amount of insurance at the beginning of the same policy year. For the purposes of
determining the applicability of this section, the age at expiry for a joint term life
insurance policy is the age at expiry of the oldest life.
J Operative date. Except as is otherwise provided in subsection F of this
section, after January 1, 1955, any insurer may file with the director a written notice
of its election to comply with the provisions of this section after a specified date
before July 1, 1956. After the filing of such notice, then upon such specified date,
which shall be the operative date for such insurer, this section shall become operative
with respect to the policies thereafter issued by the insurer. If an insurer makes no
such election, the operative date of this section for the insurer shall be July 1, 1956.
20-1232 Standard nonforfeiture law for individual deferred annuities
A. Except as provided in subsection L, no contract of annuity, except as stated in
subsection K, shall be delivered or issued for delivery in this state unless the contract
contains in substance the following provisions or corresponding provisions that in the
opinion of the director are at least as favorable to the contract holder on cessation of
payment of considerations under the contract:
1. That upon cessation of payment of considerations under a contract, or on the
written request of the contract owner, the company shall grant a paid-up annuity benefit
on a plan stipulated in the contract of such value as is specified in subsections D, E,
F, G and I.
2. If a contract provides for a lump sum settlement at maturity, or at any other
time, that upon surrender of the contract at or prior to the commencement of any annuity
payments, the company shall pay in lieu of a paid-up annuity benefit a cash surrender
benefit of such amount as is specified in subsections D, E, G and I. The company may
reserve the right to defer the payment of the cash surrender benefit for a period not to
exceed six months after demand for such cash surrender benefit with surrender of the
contract after making written request and receiving written approval from the director.
The request shall address the necessity and equitability to all policyholders of the
deferral.
3. A statement of the mortality table, if any, and interest rates used in
calculating any minimum paid-up annuity, cash surrender or death benefits that are
guaranteed under the contract, together with sufficient information to determine the
amounts of the benefits.
4. A statement that any paid-up annuity, cash surrender or death benefits that may
be available under the contract are not less than the minimum benefits required by any
statute of the state in which the contract is delivered and an explanation of the manner
in which the benefits are altered by the existence of any additional amounts credited by
the company to the contract, any indebtedness to the company on the contract or any prior
withdrawals from or partial surrenders of the contract.
B. Notwithstanding the requirements of subsection A, a deferred annuity contract
may provide that if no considerations have been received under a contract for a period of
two full years and the portion of the paid-up annuity benefit at maturity on the plan
stipulated in the contract arising from prior considerations paid would be less than
twenty dollars monthly, the company, at its option, may terminate the contract by payment
in cash of the then present value of the portion of the paid-up annuity benefit,
calculated on the basis on the mortality table, if any, and interest rate specified in
the contract for determining the paid-up annuity benefit, and by this payment shall be
relieved of any further obligation under the contract.
C. The minimum values as specified in subsections D, E, F, G and I of any paid-up
annuity, cash surrender or death benefits available under an annuity contract shall be
based upon minimum nonforfeiture amounts prescribed as follows:
1. The minimum nonforfeiture amount at any time at or before the commencement of
any annuity payments is equal to an accumulation up to that time at rates of interest, as
prescribed in paragraph 2 of this subsection, of the net considerations paid before that
time, decreased by the sum of all of the following:
(a) Any prior withdrawals from or partial surrenders of the contract accumulated at
rates of interest as prescribed in paragraph 2 of this subsection.
(b) An annual contract charge of fifty dollars, accumulated at rates of interest as
prescribed in paragraph 2 of this subsection.
(c) Any premium tax paid by the company for the contract, accumulated at rates of
interest as prescribed in paragraph 2 of this subsection.
(d) The amount of any indebtedness to the company on the contract, including
interest due and accrued.
For the purposes of this paragraph, the net considerations for a given contract year used
to define the minimum nonforfeiture amount is an amount equal to eighty-seven and
one-half per cent of the gross considerations credited to the contract during that
contract year.
2. The interest rate used in determining minimum nonforfeiture amounts is an annual
rate of interest determined as the lesser of three per cent per annum and the following,
which shall be specified in the contract if the interest rate will be reset:
(a) The five-year constant maturity treasury rate reported by the federal reserve
as of a date, or average over a period, rounded to the nearest one-twentieth of one per
cent, specified in the contract no longer than fifteen months before the contract issue
date or redetermination date under subdivision (d) of this paragraph.
(b) Reduced by one hundred twenty-five basis points.
(c) Where the resulting interest rate is not less than one per cent.
(d) The interest rate shall apply for an initial period and may be redetermined for
additional periods. The redetermination date, basis and period, if any, shall be stated
in the contract. The basis is the date or average over a specified period that produces
the value of the five-year constant maturity treasury rate to be used at each
redetermination date.
3. During the period or term that a contract provides substantive participation in
an equity indexed benefit, it may increase the reduction described in paragraph 2,
subdivision (b) of this subsection by up to an additional one hundred basis points to
reflect the value of the equity index benefit. The present value at the contract issue
date, and at each redetermination date thereafter, of the additional reduction shall not
exceed the market value of the benefit. The director may require a demonstration that the
present value of the additional reduction does not exceed the market value of the
benefit. Lacking such a demonstration that is acceptable to the director, the director
may disallow or limit the additional reduction.
4. The director may adopt rules to implement paragraph 3 of this subsection and to
provide for further adjustments to the calculation of minimum nonforfeiture amounts for
contracts that provide substantive participation in an equity index benefit and for other
contracts where the director determines that adjustments are justified.
D. Any paid-up annuity benefit available under a contract shall be such that its
present value on the date annuity payments are to commence is at least equal to the
minimum nonforfeiture amount on that date. The present value shall be computed using the
mortality table, if any, and the interest rate specified in the contract for determining
the minimum paid-up annuity benefits guaranteed in the contract.
E. For contracts that provide cash surrender benefits, the cash surrender benefits
available prior to maturity shall not be less than the present value as of the date of
surrender of that portion of the maturity value of the paid-up annuity benefit that would
be provided under the contract at maturity arising from considerations paid prior to the
time of cash surrender reduced by the amount appropriate to reflect any prior withdrawals
from or partial surrenders of the contract, the present value being calculated on the
basis of an interest rate not more than one per cent higher than the interest rate
specified in the contract for accumulating the net considerations to determine maturity
value, decreased by the amount of any indebtedness to the company on the contract,
including interest due and accrued, and increased by any existing additional amounts
credited by the company to the contract. In no event shall any cash surrender benefit be
less than the minimum nonforfeiture amount at that time. The death benefit under such
contracts shall be at least equal to the cash surrender benefit.
F. For contracts that do not provide cash surrender benefits, the present value of
any paid-up annuity benefit available as a nonforfeiture option at any time prior to
maturity shall not be less than the present value of that portion of the maturity value
of the paid-up annuity benefit provided under the contract arising from considerations
paid prior to the time the contract is surrendered in exchange for, or changed to, a
deferred paid-up annuity, the present value being calculated for the period prior to the
maturity date on the basis of the interest rate specified in the contract for
accumulating the net considerations to determine maturity value and increased by any
additional amounts credited by the company to the contract. For contracts that do not
provide any death benefits prior to the commencement of any annuity payments, the present
values shall be calculated on the basis of such interest rate and the mortality table
specified in the contract for determining the maturity value of the paid-up annuity
benefit. However, in no event shall the present value of a paid-up annuity benefit be
less than the minimum nonforfeiture amount at that time.
G. For the purpose of determining the benefits calculated under subsections E and
F, in the case of annuity contracts under which an election may be made to have annuity
payments commence at optional maturity dates, the maturity date shall be deemed to be the
latest date for which election shall be permitted by the contract, but shall not be
deemed to be later than the anniversary of the contract next following the annuitant's
seventieth birthday or the tenth anniversary of the contract, whichever is later.
H. Any contract that does not provide cash surrender benefits or does not provide
death benefits at least equal to the minimum nonforfeiture amount prior to the
commencement of any annuity payments shall include a statement in a prominent place in
the contract that such benefits are not provided.
I. Any paid-up annuity, cash surrender or death benefits available at any time,
other than on the contract anniversary under any contract with fixed scheduled
considerations, shall be calculated with allowance for the lapse of time and the payment
of any scheduled considerations beyond the beginning of the contract year in which
cessation of payment of considerations under the contract occurs.
J. For a contract which provides, within the same contract by rider or supplemental
contract provision, both annuity benefits and life insurance benefits that are in excess
of the greater of cash surrender benefits or a return of the gross considerations with
interest, the minimum nonforfeiture benefits shall be equal to the sum of the minimum
nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if
any, for the life insurance portion computed as if each portion were a separate
contract. Notwithstanding the provisions of subsections D, E, F, G and I, additional
benefits payable in the event of total and permanent disability, as reversionary annuity
or deferred reversionary annuity benefits or as other policy benefits additional to life
insurance, endowment and annuity benefits, and considerations for all such additional
benefits, shall be disregarded in ascertaining the minimum nonforfeiture amounts, paid-up
annuity, cash surrender and death benefits that may be required by this section. The
inclusion of such additional benefits shall not be required in any paid-up benefits,
unless the additional benefits separately would require minimum nonforfeiture amounts,
paid-up annuity, cash surrender and death benefits.
K. This section shall not apply to any reinsurance, group annuity purchased under a
retirement plan or plan of deferred compensation established or maintained by an
employer, including a partnership or sole proprietorship, or by an employee organization,
or by both, other than a plan providing individual retirement accounts or individual
retirement annuities under section 408 of the internal revenue code, as now or hereafter
amended, premium deposit fund, variable annuity, investment annuity, immediate annuity,
any deferred annuity contract after annuity payments have commenced, or reversionary
annuity, nor to any contract which shall be delivered outside this state through an
insurance producer or other representative of the company issuing the contract.
L. The director may adopt rules to implement this section.
20-1233 Free look; annuity contracts
A. Each annuity contract delivered or issued for delivery in this state and each
annuity application shall contain a notice prominently printed on or attached to the
first page stating that, on written request, an insurer is required to provide within a
reasonable time reasonable factual information regarding the benefits and provisions of
the annuity contract to the contract holder and that if for any reason the contract
holder is not satisfied with the annuity contract the contract holder may return the
annuity contract within ten days, or within thirty days if the contract holder is
sixty-five years of age or older on the date of the application for the annuity contract,
after the contract is delivered and receive a refund of all monies paid.
B. Notwithstanding subsection A, for variable annuity contracts, the refund under
subsection A shall equal the sum of the difference between the premiums paid, including
any policy or contract fees or other charges, and the amounts allocated to any separate
accounts under the policy or contract, and the value of the amounts allocated to any
separate accounts under the policy or contract on the date the returned policy is
received by the insurer or its insurance producer.
C. The ten or thirty day return and refund provision provided in subsection A does
not apply to an annuity contract supplemental to a settled annuity contract that provides
for payments in consideration of accumulations from the original annuity contract and
that is issued only to holders of the original contract. 20-1241.01 Scope of article
A. This article applies to the replacement of policies and contracts except for the
following:
1. Credit life insurance.
2. Except as provided in subsection B of this section, group policies and contracts
that do not involve direct solicitation of individuals by an insurance producer.
3. Policies and contracts used to fund prearranged funeral agreements as defined in
section 32-1301.
4. Except as provided in subsection C of this section, a policy or contract that is
used to fund any of the following:
(a) An employee pension and welfare plan as defined by and that is subject to the
employee retirement income security act of 1974 (29 United States Code section 1001
through 1461).
(b) A plan described by sections 401(a), 401(k) or 403(b) of the internal revenue
code, where the plan, for purposes of the employee retirement income security act of
1974, is established or maintained by an employer.
(c) A governmental or church plan as defined in section 414 of the internal revenue
code, a governmental or church welfare benefit plan, or a deferred compensation plan of a
state or local government or a tax exempt organization pursuant to section 457 of the
internal revenue code.
(d) A nonqualified deferred compensation arrangement established or maintained by
an employer or plan sponsor.
5. An application to the existing insurer that issued the existing policy or
contract:
(a) To exercise a contractual change or a conversion privilege.
(b) If the existing insurer is replacing the existing policy or contract pursuant
to a program filed with and approved by the director.
6. Existing life insurance that is a nonrenewable and nonconvertible term life
insurance policy that will expire in five years or less.
7. Proposed life insurance that is to replace life insurance under a binding or
conditional receipt issued by the same insurer.
8. New coverage that is provided under a policy or contract if the insured's
employer or an association of which the insured is a member bears all costs.
9. Immediate annuities that are purchased with proceeds from an existing contract.
Immediate annuities purchased with proceeds from an existing policy are subject to this
article.
10. Structured settlements as defined in section 12-2901.
B. Group policies and contracts involving direct solicitation are subject to this
article.
C. Notwithstanding subsection A of this section, this article applies to a policy
or contract that is used to fund any plan or arrangement that meets all of the following
requirements:
1. The plan or arrangement is funded solely by contributions an employee elects to
make on a pretax or after tax basis.
2. The insurer has been notified that plan participants may choose from among two
or more contract providers or policy providers.
3. The insurance producer directly solicits individual employees for the purchase
of the contract or policy.
D. Registered contracts are exempt from the requirements of this article with
respect to the provision of illustrations or policy summaries. Premium or contract
contribution amounts and identification of the appropriate prospectus or offering
circular are required.
20-1241.02 Policy summary requirements
A. Any policy summary required under this article shall be in writing and shall
satisfy the requirements of this section.
B. A summary of a policy or contract other than a universal life policy shall
contain, to the extent applicable, at least the following information:
1. Current death benefit.
2. Annual contract premium.
3. Current cash surrender value.
4. Current dividend.
5. Application of current dividend.
6. Amount of outstanding loan.
C. A summary of a universal life policy shall contain at least the following
information:
1. The beginning and end date of the current report period.
2. The policy value at the end of the previous report period and at the end of the
current report period.
3. The total amounts that have been credited or debited to the policy value during
the current report period, identifying each by type.
4. The current death benefit at the end of the current report period on each life
covered by the policy.
5. The net cash surrender value of the policy as of the end of the current report
period.
6. The amount of outstanding loans, if any, as of the end of the current report
period. 20-1241.03 Duties of insurance producers
A. An insurance producer who initiates an application shall submit to the insurer,
with or as part of the application, a statement signed by both the applicant and the
insurance producer as to whether the applicant has an existing policy or contract.
B. If the answer is "no" to the question under subsection A of this section
regarding existing coverage, the insurance producer has no further replacement duties.
C. If the answer is "yes" to the question under subsection A of this section
regarding existing coverage, the insurance producer shall present and read to the
applicant, not later than the time of taking the application, a notice regarding
replacements that is in a form that the director has approved or prescribed by rule.
D. The applicant and the insurance producer shall sign the notice required under
subsection C of this section. The insurance producer shall leave the signed notice with
the applicant. If the notice is presented electronically, the insurer shall mail the
applicant a copy of the notice within three business days after the application is
submitted to the insurer. In the notice the insurance producer and the applicant shall
attest that the insurance producer either read the notice aloud or that the applicant did
not wish the notice to be read aloud, in which case the producer need not have read the
notice aloud.
E. The notice prescribed in subsection C of this section shall:
1. Identify each policy and contract proposed to be replaced by:
(a) Name of the insurer.
(b) Name of the insured or annuitant.
(c) Policy or contract number if available.
(d) Application or receipt number if the policy or contract number is not
available.
2. Include a statement as to whether each policy or contract will be replaced or
whether a policy will be used as a source of financing for the new policy or contract.
F. If the application for a new policy or contract is completed in any replacement
transaction, the insurance producer shall give the applicant the original or a copy of
all sales material at the time of the application for the new policy or contract. The
insurance producer or insurer shall provide the applicant with a printed copy of any
electronically presented sales material not later than at the time of policy or contract
delivery.
G. Except as provided in section 20-1241.05, subsection G, in connection with any
replacement transaction, an insurance producer shall submit to the insurer to which an
application for a policy or contract is presented a copy of:
1. Each document required by this section.
2. A statement identifying any preprinted or electronically presented company
approved sales materials used.
3. Any individualized sales materials, including any illustrations related to the
specific policy or contract purchased.
20-1241.04 Duties of insurers that use insurance producers
A. An insurer that uses an insurance producer shall comply with the requirements of
this section.
B. The insurer shall maintain a system for supervision and control of insurance
producers that ensures compliance with the requirements of this article including at
least the following:
1. A method to inform insurance producers of the requirements of this article and
to incorporate those requirements into the insurer's relevant insurance producer training
manuals.
2. A system to provide each insurance producer with a written statement of the
insurer's position on the acceptability of replacements to guide the insurance producer
as to the appropriateness of a replacement transaction.
3. A system to review the appropriateness of each replacement transaction for
compliance with the insurer's replacement policy described in paragraph 2 of this
subsection.
4. A procedure to confirm that the requirements of this article have been met.
5. A procedure to detect replacement transactions that have not been reported as
such by the applicant or insurance producer. An insurer may comply with this requirement
by systematic customer surveys, interviews, confirmation letters or programs of internal
monitoring.
C. The insurer shall have the capacity to monitor each producer's policy and
contract replacements for that insurer and shall be able to produce, on request, and make
available to the department the following records for each insurance producer:
1. Life replacements, including financed purchases, as a percentage of the
producer's total annual sales for life policies covered under section 20-1241.01.
2. Number of lapses of policies by the insurance producer as a percentage of the
insurance producer's total annual sales for life policies covered under section
20-1241.01.
3. Annuity contract and replacements as a percentage of the producer's total annual
annuity contract sales.
4. Number of transactions that are unreported replacements of existing policies or
contracts detected by the insurer's monitoring system as required by subsection B,
paragraph 5 of this section.
5. Replacements, indexed by the replacing insurance producer and the existing
insurer.
D. With or as a part of each application for a policy or contract, the insurer
shall require the signed statement prescribed by section 20-1241.03, subsection A.
E. With each application for a replacement policy or contract, the insurer shall
require the notice prescribed by section 20-1241.03, subsections C and D.
F. If an applicant has an existing policy or contract, the insurer shall require
and shall be able to produce for at least five years after the termination or expiration
of the proposed policy or contract:
1. Copies of any sales materials.
2. The basic illustration and any supplemental illustrations related to the
specific policy or contract that is purchased.
3. The insurance producer's and applicant's signed statements with respect to
financing and replacement.
G. The insurer shall ascertain that the sales material and illustrations used in
the replacement, as provided in section 20-1241.03, subsection G, meet the requirements
of this article and are complete and accurate for the proposed policy or contract.
H. If an application does not meet the requirements of this article, the insurer
shall notify the insurance producer and applicant and fulfill any outstanding
requirements.
I. An insurer may maintain the records required by this section in paper,
photograph, microprocess, magnetic, mechanical or electronic media, or other process that
accurately reproduces that actual document.
20-1241.05 Duties of replacing insurers that use insurance producers
A. A replacing insurer shall comply with the requirements of this section for each
replacement transaction.
B. The insurer shall verify that it has received all required forms and that the
forms comply with this article.
C. The insurer shall notify any existing insurer that may be affected by the
proposed replacement within five business days of the receipt of a completed application
indicating replacement or, if not indicated on the application, when the replacement is
identified, and mail a copy of the available illustration or policy summary for the
proposed policy or available disclosure document for the proposed contract within five
business days of a request from an existing insurer.
D. The insurer shall be able to produce copies of the notification regarding
replacement required in section 20-1241.03, subsections C and D, indexed by the insurance
producer, for at least five years or until the next regular examination by the insurance
regulatory authority of its state of domicile, whichever is later.
E. The insurer shall provide the policy or contract owner notice of the right to
return the policy or contract within thirty days of delivery and receive an unconditional
full refund of all premiums or consideration paid, including any policy fees or charges
or, in the case of a variable or market value adjustment policy or contract, a payment of
the cash surrender value provided under the policy or contract plus all fees and other
charges deducted from the gross premiums or considerations or imposed under the policy or
contract. The notice may be included in the notice required under section 20-1241.03,
subsections C and D.
F. If the replacing insurer and the existing insurer are the same or subsidiaries
or affiliates under common ownership or control, the replacing insurer shall allow credit
for the period of time that has elapsed under the replacement policy's or contract's
incontestability and suicide period up to the face amount of the existing policy or
contract. For financed purchases, the insurer may limit the credit to the amount that the
face amount of the existing policy is reduced by the use of existing policy values to
fund the new policy or contract.
G. If an insurer prohibits the use of sales materials the insurer has not approved,
the insurer, as an alternative to the requirements of section 20-1241.03, subsection G,
may comply as follows:
1. The insurer shall require an insurance producer to submit a signed statement
with each application stating that the insurance producer used only sales material that
the insurer approved and that the insurance producer will provide copies to the applicant
as required by section 20-1241.03, subsection F.
2. Within ten days of the issuance of the policy or contract, the insurer shall:
(a) Notify the applicant by letter or by verbal communication from a person whose
duties are separate from the marketing area of the insurer that the insurance producer
made the representation about leaving sales materials as described in paragraph 1.
(b) Provide the applicant with a toll free number to contact insurer personnel
responsible for regulatory compliance if the insurance producer did not leave sales
materials.
(c) Advise the applicant that it is important to retain copies of the sales
material for future reference.
3. The insurer shall be able to produce a copy of the letter or other verification
required by paragraph 2, subdivision (a) for at least five years after the termination or
expiration of the policy or contract.
20-1241.06 Duties of existing insurer
A. An existing insurer shall comply with the following requirements for any
replacement transaction:
1. The insurer shall retain and be able to provide the director with all
notifications received, indexed by replacing insurer, for at least five years or until
the conclusion of its next examination by the insurance regulatory authority of its state
of domicile, whichever is later.
2. Within five business days of receiving a replacement notice, the insurer shall
send the policy or contract owner a letter advising the owner of the right to receive
information about the existing policy or contract values including, if available, an
in-force illustration or a policy summary if an in-force illustration cannot be produced.
The insurer shall provide the policy or contract owner with this information within five
business days of the receipt of a request from the policy or contract owner.
3. On receipt of a request to borrow, surrender or withdraw any policy values, the
insurer shall send a notice advising the policy owner that a release of policy values may
affect the guaranteed elements, nonguaranteed elements, face amount or surrender value of
the policy from which the values are released.
B. The insurer shall send the notice required by subsection A, paragraph 3 separate
from the check if the check is sent to anyone other than the policy owner. In the case of
consecutive automatic premium loans, the insurer shall send the notice only at the time
of the first loan. 20-1241.07 Duties of insurers with respect to direct response solicitations
A. If a person applies for a policy or contract in response to a direct response
solicitation, the insurer shall require, with or as part of each completed application
for a policy or contract, a statement asking whether the applicant, by applying for the
proposed policy or contract, intends to replace, discontinue or change an existing policy
or contract. If the applicant indicates a replacement or change is not intended or if
the applicant fails to respond to the statement, the insurer shall send the applicant,
with the policy or contract, a notice that the director has approved or prescribed by
rule.
B. If the insurer has proposed the replacement or if the applicant indicates a
replacement is intended and the insurer continues with the replacement, the insurer
shall:
1. Comply with the requirements of section 20-1241.05, subsections C and D if the
applicant furnishes the names of the existing insurer, and the requirements of section
20-1241.05, subsections E and F.
2. With the policy or contract, provide the applicant or prospective applicant with
a notice as required under section 20-1241.05.
20-1241.08 Violations; penalties; intent
A. Any person who does not comply with the applicable requirements of this article
is subject to penalties prescribed under sections 20-220, 20-295 and 20-456. Violations
include:
1. Any deceptive or misleading information set forth in sales material.
2. When completing an application, failing to ask the applicant the pertinent
questions regarding the possibility of financing or replacement.
3. The intentional incorrect recording of an answer.
4. Advising an applicant to respond negatively to any question regarding
replacement in order to prevent notice to the existing insurer.
5. Advising a policy or contract owner to write directly to the company in such a
way as to attempt to obscure the identity of the replacing insurance producer or company.
B. A policy or contract owner may replace existing life insurance or annuities
after indicating in or as part of an application for new coverage that replacement is not
intended. A pattern of such action by a policy or contract owner who buys new coverage
from the same producer is deemed prima facie evidence of the insurance producer's
knowledge that replacement was intended in connection with the transaction and of the
insurance producer's intent to violate this article.
C. If the requirements of this article have not been met, the replacing insurer
shall provide the policy owner an in-force illustration, if available, a policy summary
for the replacement policy or the available disclosure document for the replacement
contract and the appropriate notice regarding replacements prescribed in section
20-1241.03.
D. The director may impose the following penalties for a violation of this article
either separately or in combination:
1. Revocation or suspension of an insurance producer's or company's license.
2. Civil monetary penalties.
3. Forfeiture of any commissions or compensation paid to an insurance producer as a
result of the transaction in connection with which the violations occurred.
4. If the director has determined that the violations were material to the sale,
the insurer may be required to make restitution, restoration of policy or contract values
and interest at the maximum lawful rate on the amount refunded in cash.
20-1241.09 Rules; exemption from rule making procedures
A. The director may adopt rules necessary to implement the requirements of this
article.
B. The department is exempt from title 41, chapter 6, articles 3 and 5 for the
purposes of adopting rules that establish the form and content of any consumer notices,
disclosure forms, buyer's guides and other forms required by this article. The
requirements adopted by rule for any such notices, forms and guides shall substantially
conform to those adopted in model regulations adopted by the national association of
insurance commissioners. 20-1241 Definitions
In this article, unless the context otherwise requires:
1. "Contract" means a contract for the purchase of an annuity.
2. "Direct response solicitation" means a solicitation to purchase a policy or
contract solely through mail, telephone, the internet or other mass communication media.
3. "Direct solicitation" means personal contact to solicit someone to purchase a
policy or contract, but does not include any group meeting held by an insurance producer
solely for the purpose of educating or enrolling individuals or when initiated by an
individual member of a group assisting the individual with selection of investment
options offered by a single insurer in connection with enrolling that individual.
4. "Existing insurer" means the insurer whose policy or contract is or will be
replaced.
5. "Existing policy or contract" means a policy or contract that is in force and
includes a policy under a binding or conditional receipt and a policy or contract that is
within an unconditional refund period.
6. "Financed purchase" means the purchase of a new policy involving the actual or
intended use of monies obtained by the withdrawal or surrender of, or by borrowing from
values of, an existing policy to pay all or part of any premium due on the new policy.
For the purposes of a regulatory review of an individual transaction only, if a
withdrawal, surrender or borrowing involving the policy values of an existing policy is
used to pay premiums on a new policy owned by the same policyholder and issued by the
same insurer within four months before or thirteen months after the effective date of the
new policy, it is deemed prima facie evidence of the policyholder's intent to finance the
purchase of the new policy with existing policy values. This prima facie standard is not
intended to increase or decrease the monitoring obligations of section 20-1241.04,
subsection B, paragraph 5.
7. "Illustration" means a presentation or depiction that includes nonguaranteed
elements of a policy of life insurance over a period of years.
8. "Insurance producer" has the same meaning prescribed in section 20-281.
9. "Policy summary" means a description of a policy or contract that meets the
requirements in section 20-1241.02 and prescribed by the director.
10. "Registered contract" means a variable annuity contract or variable life
insurance policy subject to the prospectus delivery requirements of the securities act of
1933 (P.L. 107-377; 15 United States Code sections 77a through 77aa).
11. "Replaced" or "replacement" means a transaction in which a new policy or
contract is to be purchased and it is known or should be known to the proposing insurance
producer, or to the proposing insurer if there is no insurance producer, that by reason
of the transaction an existing policy or contract has been or is to be:
(a) Lapsed, forfeited, surrendered or partially surrendered, assigned to the
replacing insurer or otherwise terminated.
(b) Converted to reduced paid-up insurance, continued as extended term insurance or
otherwise reduced in value by the use of nonforfeiture benefits or other policy values.
(c) Amended so as to effect either a reduction in benefits or in the term for which
coverage would otherwise remain in force or for which benefits would be paid.
(d) Reissued with any reduction in cash value.
(e) Used in a financed purchase.
12. "Replacing insurer" means the insurer that issues or proposes to issue a new
policy or contract that replaces an existing policy or contract or is a financed
purchase.
13. "Sales material" means a sales illustration and any other written, printed or
electronically presented information that is created, completed or provided by an insurer
or insurance producer, that is used in the presentation to the policy or contract owner
and that is related to the policy or contract purchased.
20-1242.01 Applicability and scope
A. This article applies to all group and individual annuity contracts and
certificates except:
1. Registered or nonregistered variable annuities or other registered products.
2. Immediate and deferred annuities that contain no nonguaranteed elements.
3. Annuities used to fund:
(a) An employee pension plan that is covered by the employee retirement income
security act of 1974 (29 United States Code section 1001 through 1461).
(b) A plan described by sections 401(a), 401(k) or 403(b) of the internal revenue
code, where the plan, for purposes of the employee retirement income security act of
1974, is established or maintained by an employer.
(c) A governmental or church plan as defined in section 414 of the internal revenue
code or a deferred compensation plan of a state or local government or a tax exempt
organization pursuant to section 457 of the internal revenue code.
(d) A nonqualified deferred compensation arrangement established or maintained by
an employer or plan sponsor.
4. Structured settlement annuities.
B. Notwithstanding subsection A of this section, this article applies if:
1. Annuities are used to fund a plan or arrangement that is funded solely by
contributions an employee elects to make on a pretax or after tax basis.
2. The insurer has been notified that plan participants may choose from among two
or more fixed annuity providers.
3. There is a direct solicitation of any individual employee by an insurance
producer for the purchase of an annuity contract. For the purposes of this paragraph,
direct solicitation does not include any meeting held by an insurance producer solely for
the purpose of educating or enrolling employees in the plan or arrangement. 20-1242.02 Standards for the disclosure document and buyer's guide
A. If the application for an annuity contract is taken in a face-to-face meeting,
the applicant, at or before the time of application, shall be given both the disclosure
document and the buyer's guide in the form prescribed by the director.
B. If the application for an annuity contract is taken by means other than in a
face-to-face meeting, the applicant shall be sent both the disclosure document and the
buyer's guide no later than five business days after the completed application is
received by the insurer.
C. With respect to an application received as a result of a direct solicitation
through the mail:
1. Providing a buyer's guide in a mailing that invites prospective applicants to
apply for an annuity contract is deemed to satisfy the requirement that the buyer's guide
be provided no later than five business days after receipt of the application.
2. Providing a disclosure document in a mailing that invites a prospective
applicant to apply for an annuity contract is deemed to satisfy the requirement that the
disclosure document be provided no later than five business days after receipt of the
application.
D. With respect to an application received through the internet:
1. Taking reasonable steps to make the buyer's guide available for viewing and
printing on the insurer's web site is deemed to satisfy the requirement that the buyer's
guide be provided not later than five business days after receipt of the application.
2. Taking reasonable steps to make the disclosure document available for viewing
and printing on the insurer's web site is deemed to satisfy the requirement that the
disclosure document be provided not later than five business days after receipt of the
application.
E. A solicitation for an annuity contract provided in other than a face-to-face
meeting shall include a statement that the proposed applicant may contact the insurer for
a free annuity buyer's guide.
F. If the buyer's guide and disclosure document are not provided at or before the
time of application, a free look period of not less than fifteen days shall be provided
for the applicant to return the annuity contract without penalty. This free look period
shall run concurrently with any other free look period provided under statute.
G. At a minimum, the following information shall be included in the disclosure
document required to be provided under this article:
1. The generic name of the contract, the company product name, if different, the
form number and the fact that it is an annuity.
2. The insurer's name and address.
3. A description of the contract and its benefits, emphasizing its long-term nature
and including examples where appropriate.
4. The guaranteed, nonguaranteed and determinable elements of the contract, their
limitations, if any, and an explanation of how they operate.
5. An explanation of the initial crediting rate, specifying any bonus or
introductory portion, the duration of the rate and the fact that rates may change from
time to time and are not guaranteed.
6. The periodic income options both on a guaranteed and nonguaranteed basis.
7. Any value reductions caused by withdrawals from or surrender of the contract.
8. How values in the contract can be accessed.
9. The death benefit, if available, and how it will be calculated.
10. A summary of the federal tax status of the contract and any penalties applicable
on withdrawal of values from the contract.
11. The impact of any rider, such as a long-term care rider.
12. The specific dollar amount or percentage charges. Fees shall be listed with an
explanation of how they apply.
13. Information about the current guaranteed rate for new contracts that contains a
clear notice that the rate is subject to change. 20-1242.03 Report to contract owners
For annuities in the payout period with changes in nonguaranteed elements and for
the accumulation period of a deferred annuity, the insurer shall provide each contract
owner with a report, at least annually, on the status of the contract that contains at
least the following information:
1. The beginning and end date of the current report period.
2. The accumulation and cash surrender value, if any, at the end of the previous
report period and at the end of the current report period.
3. The total amounts, if any, that have been credited, charged to the contract
value or paid during the current report period.
4. The amount of outstanding loans, if any, as of the end of the current report
period. 20-1242.04 Penalties
An insurer or insurance producer that violates this article is subject to penalties
prescribed under sections 20-220, 20-295 and 20-456. 20-1242.05 Rules; exemption from rule making procedures
A. The director may adopt rules that are necessary to implement the requirements of
this article.
B. The department is exempt from title 41, chapter 6, articles 3 and 5 for the
purposes of adopting rules that establish the form and content of any consumer notices,
disclosure forms, buyer's guides and other forms required by this article. The
requirements adopted by rule for any such notices, forms and guides shall substantially
conform to those adopted in model regulations adopted by the national association of
insurance commissioners. 20-1242 Definitions
In this article, unless the context otherwise requires:
1. "Contract owner" means the owner named in the annuity contract or certificate
holder in the case of a group annuity contract.
2. "Determinable elements" means elements that are derived from processes or
methods that are guaranteed at issue and that are not subject to company discretion, but
where the values or amounts cannot be determined until some point after issue. These
elements include the premiums, credited interest rates, including any bonus, benefits,
values, noninterest based credits, charges or elements of formulas used to determine any
of these. These elements may be described as guaranteed but not determined at issue. An
element is considered determinable if it is calculated from underlying determinable
elements only or from both determinable and guaranteed elements.
3. "Generic name" means a short title descriptive of the annuity contract being
applied for or illustrated such as "single premium deferred annuity".
4. "Guaranteed elements" means the premiums, credited interest rates, including any
bonus, benefits, values, noninterest based credits, charges, or elements of formulas used
to determine any of these, that are guaranteed and determined at issue. An element is
considered guaranteed if all of the underlying elements that go into its calculation are
guaranteed.
5. "Insurance producer" has the same meaning prescribed in section 20-281.
6. "Nonguaranteed elements" means the premiums, credited interest rates, including
any bonus, benefits, values, noninterest based credits, charges, or elements of formulas
used to determine any of these, that are subject to company discretion and that are not
guaranteed at issue. An element is considered nonguaranteed if any of the underlying
nonguaranteed elements are used in its calculation.
7. "Structured settlement annuity" means a qualified funding asset as defined in
section 130(d) of the internal revenue code or an annuity that would be a qualified
funding asset under section 130(d) but for the fact that it is not owned by an assignee
under a qualified assignment. 20-1251.01 Credit union groups
The lives of a group of individuals may be insured under a policy issued to a credit
union organized under the laws of this state or the federal credit union act, which shall
be considered the policyholder, to insure eligible members for amounts of insurance
related to the share balance of each member, based upon some plan which will preclude
individual selection, for the benefit of someone other than the credit union or its
officials and subject to the following requirements:
1. The members eligible for insurance under the policy shall be all the members of
the credit union who meet standard physical requirement conditions of the insurer, or all
of any class or classes of them determined by conditions pertaining to their age or to
membership in the credit union or both.
2. The premiums for the policy shall be paid by the policyholder, either from the
credit union's funds, or from funds contributed by the insured members specifically for
their insurance, or from both. A policy on which part of the premium is to be derived
from funds contributed by the insured members specifically for their insurance may be
placed only if at least seventy-five per cent of the then eligible members, excluding
those whose evidence of individual insurability is not satisfactory to the insurer, elect
to make the required contribution. A policy on which no part of the premium is to be
derived from funds contributed by the insured members specifically for their insurance
must insure all eligible members or all except those whose evidence of individual
insurability is not satisfactory to the insurer.
3. The policy must cover at least twenty-five members at the date of issue. 20-1251 Requirements for group contracts
A. No life insurance policy shall be delivered in this state insuring the lives of
more than one individual unless to one of the groups as provided for in section
20-1251.01 and sections 20-1252 through 20-1256 and unless in compliance with the other
applicable provisions of those sections.
B. Subsection A of this section shall not apply to life insurance policies:
1. Insuring only individuals related by marriage, blood or legal adoption.
2. Insuring only individuals having a common interest through ownership of a
business enterprise, or a substantial legal interest or equity therein, and who are
actively engaged in the management thereof.
3. Insuring only individuals otherwise having an insurable interest in each other's
lives.
C. Nothing in this article validates any charge or practice illegal under any rule
of law or regulation governing usury, consumer lender loans, retail installment sales or
the like, or extends the application of any such rule of law or regulation to any
transaction not otherwise subject thereto. 20-1252 Employee groups
The lives of a group of individuals may be insured under a policy issued to an
employer, or to the trustees of a fund established by an employer, which employer or
trustees shall be deemed the policyholder, to insure employees of the employer for the
benefit of persons other than the employer, subject to the following requirements:
1. The employees eligible for insurance under the policy shall be all of the
employees of the employer, or all of any class or classes thereof determined by
conditions pertaining to their employment. The policy may provide that the term
"employees" shall include the employees of one or more subsidiary corporations, and the
employees, individual proprietors and partners of one or more affiliated corporations,
proprietors or partnerships if the business of the employer and of such affiliated
corporations, proprietors or partnerships is under common control through stock
ownership, contract or otherwise. The policy may provide that the term "employees" shall
include the individual proprietor or partners if the employer is an individual proprietor
or a partnership. The policy may provide that the term "employees" shall include retired
employees. No director of a corporate employer shall be eligible for insurance under the
policy unless such person is otherwise eligible as a bona fide employee of the
corporation by performing services other than the usual duties of a director. No
individual proprietor or partner shall be eligible for insurance under the policy unless
he is actively engaged in and devotes a substantial part of his time to the conduct of
the business of the proprietor or partnership. A policy issued to insure the employees of
a public body may provide that the term "employees" shall include elected or appointed
officials.
2. The premium for the policy shall be paid by the policyholder, either from the
employer's funds or funds contributed by him, or from funds contributed by the insured
employees, or from both. A policy on which part of the premium is to be derived from
funds contributed by the insured employees may be placed in force only if at least
seventy-five per cent of the then eligible employees, excluding any as to whom evidence
of individual insurability is not satisfactory to the insurer, elect to make the required
contributions. A policy on which no part of the premium is to be derived from funds
contributed by the insured employees shall insure all eligible employees, or all except
any as to whom evidence of individual insurability is not satisfactory to the insurer.
3. The policy must cover at least two employees at date of issue.
4. The amounts of insurance under the policy must be based upon some plan
precluding individual selection either by the employees or by the employer or trustees. 20-1253 Debtor groups
The lives of a group of individuals may be insured under a policy issued to a
creditor, who shall be deemed the policyholder, to insure debtors of the creditor,
subject to the following requirements:
1. The debtors eligible for insurance under the policy shall be all of the debtors
of the creditor whose indebtedness is repayable in installments, or all of any class or
classes thereof determined by conditions pertaining to the indebtedness or to the
purchase giving rise to the indebtedness. The policy may provide that the term "debtors"
shall include the debtors of one or more subsidiary corporations, and the debtors of one
or more affiliated corporations, proprietors or partnerships if the business of the
policyholder and of such affiliated corporations, proprietors or partnerships is under
common control through stock ownership, contract or otherwise.
2. The premium for the policy shall be paid by the policyholder, either from the
creditor's funds, or from charges collected from the insured debtors, or from both. A
policy on which part or all of the premium is to be derived from the collection from the
insured debtors of identifiable charges not required of uninsured debtors shall not
include, in the class or classes of debtors eligible for insurance, debtors under
obligations outstanding at its date of issue without evidence of individual insurability
unless at least seventy-five per cent of the then eligible debtors elect to pay the
required charges. A policy on which no part of the premium is to be derived from the
collection of such identifiable charges shall insure all eligible debtors, or all except
any as to whom evidence of individual insurability is not satisfactory to the insurer.
3. The policy may be issued only if the group of eligible debtors is then receiving
new entrants at the rate of at least one hundred persons yearly, or may reasonably be
expected to receive at least one hundred new entrants during the first policy year, and
only if the policy reserves to the insurer the right to require evidence of individual
insurability if less than seventy-five per cent of the new entrants become insured.
4. The amount of insurance on the life of any debtor shall at no time exceed the
amount of the unpaid indebtedness.
5. The insurance shall be payable to the policyholder. Such payment shall reduce
or extinguish the unpaid indebtedness of the debtor to the extent of such payment.
20-1254 Labor union groups
The lives of a group of individuals may be insured under a policy issued to a labor
union, which shall be deemed the policyholder, to insure members of the union for the
benefit of persons other than the union or any of its officials, representatives or
agents, subject to the following requirements:
1. The members eligible for insurance under the policy shall be all of the members
of the union, or all of any class or classes thereof determined by conditions pertaining
to their employment, or to membership in the union, or both.
2. The premium for the policy shall be paid by the policyholder, either from the
union's funds, or from funds contributed by the insured members specifically for their
insurance, or from both. A policy on which part of the premium is to be derived from
funds contributed by the insured members specifically for their insurance may be placed
in force only if at least seventy-five per cent of the then eligible members, excluding
any as to whom evidence of individual insurability is not satisfactory to the insurer,
elect to make the required contributions. A policy on which no part of the premium is to
be derived from funds contributed by the insured members specifically for their insurance
shall insure all eligible members, or all except any as to whom evidence of individual
insurability is not satisfactory to the insurer.
3. The policy shall cover at least two members at date of issue.
4. The amounts of insurance under the policy shall be based upon some plan
precluding individual selection either by the members or by the union. 20-1255 Trustee groups
The lives of a group of individuals may be insured under a policy issued to the
trustees of a fund established in this state by two or more employers in the same
industry, if a majority of the employees to be insured of each employer are located
within this state, or to the trustees of a fund established by one or more labor unions,
or by one or more employers in the same industry and one or more labor unions, or by one
or more employers and one or more labor unions whose members are in the same or related
occupations or trades, which trustees shall be deemed the policyholder, to insure
employees of the employers or members of the unions for the benefit of persons other than
the employers or the unions, subject to the following requirements:
1. The persons eligible for insurance shall be all of the employees of the
employers or all of the members of the unions, or all of any class or classes thereof
determined by conditions pertaining to their employment, or to membership in the unions,
or to both. The policy may provide that the term "employees" shall include retired
employees, and the individual proprietor or partners if an employer is an individual
proprietor or a partnership. No director of a corporate employer shall be eligible for
insurance under the policy unless such person is otherwise eligible as a bona fide
employee of the corporation by performing services other than the usual duties of a
director. No individual proprietor or partner shall be eligible for insurance under the
policy unless he is actively engaged in and devotes a substantial part of his time to the
conduct of the business of the proprietor or partnership. The policy may provide that
the term "employees" shall include the trustees or their employees, or both, if their
duties are principally connected with such trusteeship.
2. The premium for the policy shall be paid by the trustees, either from funds
contributed by the employer or employers of the insured persons or by the union or
unions, or from the insured persons specifically for their insurance, or from both, or,
except in the case of a policy issued to the trustees of a fund established wholly by two
or more employers, from such funds, or from funds contributed by the insured persons, or
from both. A policy on which part of the premium is to be derived from funds contributed
by the insured persons specifically for their insurance may be placed in force only if at
least seventy-five per cent of the then eligible persons, excluding any as to whom
evidence of insurability is not satisfactory to the insurer, elect to make the required
contributions. A policy on which no part of the premium is to be derived from funds
contributed by insured persons specifically for their insurance shall insure all eligible
persons, or all except any as to whom evidence of individual insurability is not
satisfactory to the insurer.
3. The policy shall cover at date of issue at least one hundred persons and not
less than an average of five persons, other than individual proprietors or partners, per
employer unit. If the fund is established by the members of an association of employers
the policy may be issued only if either the participating employers constitute at date of
issue at least sixty per cent of those employer members whose employees are not already
covered for group life insurance, or the total number of persons covered at date of issue
exceeds six hundred, and if the policy does not require that, if a participating employer
discontinues membership in the association, the insurance of his employees shall cease
solely by reason of such discontinuance.
4. The amounts of insurance under the policy shall be based upon some plan
precluding individual selection either by the insured persons or by the policyholder,
employers or unions. 20-1256 Association groups
The lives of a group of individuals may be insured under a policy issued to an
association, or to a trust or to the trustee of a fund established, created or maintained
for the benefit of one or more associations. The association, trust or trustee shall be
deemed the policyholder, to insure members of the association or associations, employees
of the association or associations and employees of members of the association or
associations for the benefit of persons other than the association or associations or any
of its officials, representatives or agents, subject to the following requirements:
1. The association or associations must have a constitution and bylaws and must be
organized and maintained in good faith for a purpose other than obtaining insurance.
2. The policy must cover at least two persons at the date of issue.
3. The policy may provide that the term "employees" shall include retired
employees. 20-1257 Coverage of dependents; definition
A. Insurance under any group life insurance policy that is issued pursuant to
section 20-1252, 20-1254 or 20-1255 may, if seventy-five per cent of the eligible persons
then insured under the policy elect, be extended to insure the dependents, or any class
or classes of dependents of each insured person who so elects, in amounts in accordance
with a plan that precludes individual selection by the insured persons or by the
policyholder and that on the life of any one dependent or the spouse of an insured person
shall not be more than one hundred per cent of the insurance on the life of the insured
person.
B. Premiums for any dependent coverage issued pursuant to this section shall be
paid by the policyholder, from the policyholder's monies, from monies contributed by the
policyholder or from monies contributed by the persons insured under the group policy or
from any or all of those sources.
C. A dependent insured pursuant to this section has the same conversion right as to
the insurance on the dependent insured's life as is vested by the terms of the group
policy in the persons insured under the group policy.
D. For the purposes of this section, "dependent" means the spouse of an insured
person, the minor children of an insured person and any other children of an insured
person as provided in the group life insurance policy.
20-1258 Standard provisions required in group life insurance policies
A. Except as set forth in subsection B of this section, no policy of group life
insurance shall be delivered in this state unless it contains in substance the standard
provisions as required by sections 20-1259 to 20-1268, inclusive, or provisions which in
the opinion of the director are more favorable to the persons insured, or at least as
favorable to the persons insured and more favorable to the policyholder.
B. The provisions of sections 20-1264 to 20-1268, inclusive, shall not apply to
policies issued to a creditor to insure debtors of the creditor. The standard provisions
required for individual life insurance policies shall not apply to group life insurance
policies. If the group life insurance policy is on a plan of insurance other than the
term plan, it shall contain a nonforfeiture provision or provisions which in the opinion
of the director is or are equitable to the insured persons and to the policyholder, but
nothing in this section shall be construed to require that group life insurance policies
contain the same nonforfeiture provisions as are required for individual life insurance
policies.
20-1259 Grace period
In group life policies there shall be a provision that the policyholder is entitled
to a grace period of thirty-one days for the payment of any premium due except the first,
during which grace period the death benefit coverage shall continue in force, unless the
policyholder has given the insurer written notice of discontinuance in advance of the
date of discontinuance and in accordance with the terms of the policy. The policy may
provide that the policyholder shall be liable to the insurer for the payment of a pro
rata premium for the time the policy was in force during such grace period.
20-1260 Incontestability
In group life policies there shall be a provision that the validity of the policy
shall not be contested, except for nonpayment of premiums, after it has been in force for
two years from its date of issue, and that no statement made by any person insured under
the policy relating to his insurability shall be used in contesting the validity of the
insurance with respect to which the statement was made after the insurance has been in
force prior to the contest for a period of two years during the person's lifetime nor
unless it is contained in a written instrument signed by him.
20-1261 Attachment of application to policy; statements of persons insured as representations
In group life policies there shall be a provision that a copy of the application, if
any, of the policyholder shall be attached to the policy when issued, that all statements
made by the policyholder or by the persons insured shall be deemed representations and
not warranties, and that no statement made by any person insured shall be used in any
contest unless a copy of the instrument containing the statement is or has been furnished
to such person or to his beneficiary.
20-1262 Right to require evidence of individual insurability
In group life policies there shall be a provision setting forth the conditions, if
any, under which the insurer reserves the right to require a person eligible for
insurance to furnish evidence of individual insurability satisfactory to the insurer as a
condition to part or all of his coverage.
20-1263 Misstatement of age
In group life policies there shall be a provision specifying an equitable adjustment
of premiums or of benefits or of both to be made in the event the age of a person insured
has been misstated, and such provision shall contain a clear statement of the method of
adjustment to be used.
20-1264 Beneficiary
In group life policies there shall be a provision that any sum becoming due by
reason of the death of the person insured shall be payable to the beneficiary designated
by the person insured, subject to the provisions of the policy in the event there is no
designated beneficiary, as to all or any part of such sum, living at the death of the
person insured, and subject to any right reserved by the insurer in the policy and set
forth in the certificate to pay at its option a part of such sum not exceeding two
hundred fifty dollars to any person appearing to the insurer to be equitably entitled
thereto by reason of having incurred funeral or other expenses incident to the last
illness or death of the person insured.
20-1265 Individual certificates
In group life policies there shall be a provision that the insurer will issue to the
policyholder for delivery to each person insured an individual certificate setting forth
a statement as to the insurance protection to which he is entitled, to whom the insurance
benefits are payable, and the rights and conditions set forth in sections 20-1266,
20-1267 and 20-1268.
20-1266 Conversion on termination of eligibility
In group life policies there shall be a provision that if the insurance, or any
portion of it, on a person covered under the policy ceases because of termination of
employment or of membership in the class or classes eligible for coverage under the
policy, such person shall be entitled to have issued to him by the insurer, without
evidence of insurability, an individual policy of life insurance without disability or
other supplementary benefits, provided that application for the individual policy has
been made, and the first premium paid to the insurer, within thirty-one days after the
termination, and provided further that:
1. The individual policy, at the option of such person, is on any one of the forms,
except term insurance, then customarily issued by the insurer at the age and for the
amount applied for.
2. The individual policy is in an amount not in excess of the amount of life
insurance which ceases because of the termination, less, in the case of a person whose
membership in the class or classes eligible for coverage terminates but who continues in
employment in another class, the amount of any life insurance for which the person is or
becomes eligible under any other group policy within thirty-one days after the
termination, provided that any amount of insurance which has matured on or before the
date of the termination as an endowment payable to the person insured, whether in one sum
or in installments or in the form of an annuity, shall not, for the purposes of this
provision, be included in the amount which is considered to cease because of the
termination.
3. The premium on the individual policy is at the insurer's then customary rate
applicable to the form and amount of the individual policy, to the class of risk to which
the person then belongs, and to his age attained on the effective date of the individual
policy.
20-1267 Conversion on termination of policy
In group life policies there shall be a provision that if the group policy
terminates or is amended so as to terminate the insurance of any class of insured
persons, each person insured thereunder at the date of termination whose insurance
terminates and who has been so insured for at least five years prior to the termination
date shall be entitled to have issued to him by the insurer an individual policy of life
insurance, subject to the same conditions and limitations as are provided by section
20-1266, except that the group policy may provide that the amount of the individual
policy shall not exceed the smaller of the amount of the person's life insurance
protection ceasing because of the termination or amendment of the group policy, less the
amount of any life insurance for which he is or becomes eligible under any group policy
issued or reinstated by the same or another insurer within thirty-one days after such
termination, and two thousand dollars.
20-1268 Death pending conversion
In group life policies there shall be a provision that if a person insured under the
group policy dies during the period within which he would have been entitled to have an
individual policy issued to him in accordance with sections 20-1266 or 20-1267 and before
such an individual policy becomes effective, the amount of life insurance which he would
have been entitled to have issued to him under such individual policy shall be payable as
a claim under the group policy, whether or not application for the individual policy or
the payment of the first premium therefor has been made.
20-1269 Notice of conversion right
If any individual insured under a group life insurance policy delivered after
January 1, 1955 in this state becomes entitled under the terms of the policy to have an
individual policy of life insurance issued to him without evidence of insurability,
subject to the making of application and payment of the first premium within a period
specified in the policy, and if the individual is not given notice of the existence of
such right at least fifteen days prior to the expiration date of such period, then
notwithstanding the terms of the policy the individual shall have an additional period
within which to exercise the right. The additional period shall expire fifteen days next
after the individual is given such notice, but in no event shall the additional period
extend beyond sixty days next after the expiration date of the period provided in the
policy. Written notice presented to the individual or mailed by the policyholder to the
last known address of the individual or mailed by the insurer to the last known address
of the individual as furnished by the policyholder shall constitute notice for the
purpose of this section, and nothing contained in this section shall be construed to
continue any insurance beyond the period provided in the policy.
20-1270 Standard provisions required in group annuity contracts
No group annuity contract shall be delivered or issued for delivery in this state
and no certificate shall be used in connection therewith unless it contains in substance
the provisions set forth in sections 20-1271 to 20-1275, inclusive, to the extent that
such provisions are applicable to the contract or to the certificate, as the case may be,
or provisions which in the opinion of the director are more favorable to annuitants, or
not less favorable to annuitants and more favorable to the holders.
20-1271 Grace period in group annuity contracts
In group annuity contracts there shall be a provision that there shall be a period
of grace, either of thirty days or of one month, within which any stipulated payment to
be remitted by the holder to the insurer, falling due after one year from date of issue,
may be made, subject, at the option of the insurer, to an interest charge thereon at a
rate to be specified in the contract, which shall not exceed six per cent per annum for
the number of days of grace elapsing before such payment.
20-1272 Documents constituting entire group annuity contract
In group annuity contracts there shall be a provision specifying the document or
documents which shall constitute the entire contract between the parties. The document
or documents so specified shall be only:
1. The contract.
2. The contract together with the application of the holder of which a copy is
attached thereto.
3. The contract together with the application of the holder of which a copy is
attached thereto and the individual applications of annuitants on file with the insurer
and referred to therein.
20-1273 Misstatements in group annuity contracts
In group annuity contracts there shall be a provision, with an appropriate reference
thereto in the certificate, for the equitable adjustment of the benefits payable under
the contract or of the stipulated payments thereunder, if it is found that the sex, age,
service, salary or any other fact determining the amount of any stipulated payment or the
amount or date or dates of payment of any benefit with respect to any annuitant covered
thereby has been misstated.
20-1274 Nonforfeiture benefits in group annuity contract
A. In group annuity contracts there shall be a provision or provisions, with an
appropriate reference thereto in the certificate, specifying the nature and basis of
ascertainment of the benefits which will be available to an annuitant who contributes to
the cost of the annuity and the conditions of payment thereof in the event of either the
termination of employment of the annuitant, except by death, or the discontinuance of
stipulated payments under the contract. The provision or provisions shall, in either
event, make available to an annuitant who contributes to the cost of the annuity a
paid-up annuity payable commencing at a fixed date in an amount at least equal to that
purchased by the contributions of the annuitant, determinable as of the respective dates
of payment of the several contributions, as shown by a schedule in the contract for that
purpose, based upon the same mortality table, rate of interest and loading formula used
in computing the stipulated payments under the contract. The provision or provisions
may, by way of exception to the foregoing, provide that if the amount of the annuity
determined as aforesaid from the fixed commencement date would be less than one hundred
twenty dollars annually, the insurer may at its option, in lieu of granting the paid-up
annuity, pay a cash surrender value at least equal to that provided by this section.
B. If a cash surrender value, in lieu of the paid-up annuity, is allowed to the
annuitant by the terms of the contract, it may be either in a single sum or in equal
installments over a period of not more than twelve months, and it shall at least equal
either paragraph 1 or 2 following, whichever is less:
1. The amount of reserve attributable to the annuitant's contributions less a
surrender charge not exceeding thirty-five per cent of the average annual contribution
made by the annuitant.
2. The amount which would be payable as a death benefit at the date of surrender.
C. The contract shall also provide that in case of the death of an annuitant before
the commencement date of the annuity, the insurer shall pay a death benefit at least
equal to the aggregate amount of the annuitant's contributions without interest. If any
benefits are available to the holder in either event, the contract shall contain a
provision or provisions specifying the nature and basis of ascertainment of the benefits.
20-1275 Group annuity contract certificates
In group annuity contracts there shall be a provision that the insurer will issue to
the holder of the contract for delivery to each annuitant who contributes thereunder an
individual certificate setting forth a statement in substance of the benefits to which he
is entitled under the contract.
20-1276 "Employee life insurance" defined
A. "Employee life insurance" is that plan of life insurance, other than salary
savings life insurance or pension trust insurance and annuities, under which individual
policies are issued to the employees of any employer and where such policies are issued
on the lives of not less than two nor more than forty-nine employees at date of issue.
B. Premiums for such policies shall be paid by the employer or the trustee of a
fund established by the employer either from the employer's funds or funds contributed by
him, or from funds contributed by the insured employees, or from both. 20-1277 Assignability of group life insurance
Nothing in this title or in any other title shall be construed to prohibit any
person insured under a group life insurance policy from making an assignment of all or
any part of his incidents of ownership under such policy including but not limited to the
privilege to have issued to him an individual policy of life insurance pursuant and
subject to the provisions of sections 20-1266 through 20-1269, inclusive, and the right
to name a beneficiary. Subject to the terms of the policy or agreement between the
insured, the group policyholder and the insurer relating to assignment of incidents of
ownership thereunder, such an assignment by an insured, made either before or after the
effective date of this act, is valid for the purpose of vesting in the assignee, in
accordance with any provisions included therein as to the time at which it is to be
effective, all of such incidents of ownership so assigned, but without prejudice to the
insurer on account of any payment it may make or individual policy it may issue in
accordance with sections 20-1266 through 20-1269, inclusive, prior to receipt of notice
of the assignment.
20-1301 Scope of article
The provisions of this article apply only to industrial life insurance
policies. Section 20-1217 (contestability as to excluded or restricted coverage),
section 20-1226 (limitation of liability), section 20-1227 (incontestability after
reinstatement), section 20-1230 (dual pay policies) and sections 20-1231 and 20-1231.01
(standard nonforfeiture law) shall also apply to industrial life insurance.
20-1302 Required provisions
No policy of industrial life insurance shall be delivered or be issued for delivery
in this state unless it contains in substance the applicable provisions set forth in
sections 20-1303 to 20-1316, inclusive.
20-1303 Grace period
There shall be a provision that the insured is entitled to a grace period of four
weeks within which the payment of any premiums after the first may be made, except that
in policies the premiums for which are payable monthly, the period of grace shall be one
month, but not less than thirty days, and that during the period of grace the policy
shall continue in full force, but if during the grace period the policy becomes a claim,
then any overdue and unpaid premiums may be deducted from any settlement under the
policy.
20-1304 Application and policy as entire contract; statements of applicant as representations
There shall be a provision that the policy shall constitute the entire contract
between the parties, or, if a copy of the application is endorsed upon or attached to the
policy when issued, a provision that the policy and the application therefor shall
constitute the entire contract. If the application is so made a part of the contract, the
policy shall also provide that all statements made by the applicant in such application
shall, in the absence of fraud, be deemed to be representations and not warranties.
20-1305 Incontestability
There shall be a provision that the policy, exclusive of provisions relating to
disability benefits or to additional benefits in the event of death by accident or
accidental means, shall be incontestable, except for nonpayment of premiums, after it has
been in force during the lifetime of the insured for a period of two years from its date
of issue.
20-1306 Misstatement of age
There shall be a provision that if it is found that the age of the individual
insured, or the age of any other individual considered in determining the premium, has
been misstated, any amount payable or benefit accruing under the policy shall be such as
the premium would have purchased at the correct age or ages.
20-1307 Dividends
If a participating policy, there shall be a provision that the insurer shall
annually ascertain and apportion any divisible surplus accruing on the policy, except
that at the option of the insurer such participation may be deferred to the end of the
fifth policy year. This provision shall not prohibit the payment of additional dividends
on default of payment of premiums or termination of the policy.
20-1308 Nonforfeiture benefits
There shall be provisions for nonforfeiture benefits and cash surrender values as
required by sections 20-1231 and 20-1231.01.
20-1309 Reinstatement
There shall be a provision that unless the policy has been surrendered for its cash
surrender value or unless the paid-up term insurance, if any, has expired, the policy
will be reinstated at any time within two years from the date of premium default upon
written application therefor, the production of evidence of insurability satisfactory to
the insurer, the payment of all premiums in arrears, and the payment or reinstatement of
any other indebtedness to the insurer upon the policy, all with interest at a rate not
exceeding six per cent per annum compounded annually.
20-1310 Settlement
There shall be a provision that when the policy becomes a claim by the death of the
insured, settlement shall be made upon surrender of the policy and receipt of due proof
of death.
20-1311 Authority to alter contract
There shall be a provision that no insurance producer shall have the power or
authority to waive, change or alter any of the terms or conditions of any policy, except
that at the option of the insurer the terms or conditions may be changed by an
endorsement signed by a duly authorized officer of the insurer.
20-1312 Beneficiary; change of beneficiary; payment
A. Each policy shall have a space on the front or back page of the policy for the
name of the beneficiary designated with a reservation of the right to designate or change
the beneficiary after the issuance of the policy.
B. The policy may also provide that no designation or change of beneficiary shall
be binding on the insurer unless endorsed on the policy by the insurer, and that the
insurer may refuse to endorse the name of any proposed beneficiary who does not appear to
the insurer to have an insurable interest in the life of the insured. Such a policy may
also provide that if the beneficiary designated in the policy does not surrender the
policy with due proof of death within the period stated in the policy, which shall be not
less than thirty days after the death of the insured, or if the beneficiary is the estate
of the insured or is a minor, or dies before the insured, or is not legally competent to
give a valid release, then the insurer may make payment thereunder to the executor or
administrator of the insured, or to any of the insured's relatives by blood or legal
adoption or connection by marriage, or to any person appearing to the insurer to be
equitably entitled thereto by reason of having been named beneficiary, or by reason of
having incurred expense for the maintenance, medical attention or burial of the
insured. The policy may also include a similar provision applicable to any other payment
due under the policy.
20-1313 Direct payment of premiums
In the case of weekly premium policies, there may be a provision that upon proper
notice to the insurer, while premiums on the policy are not in default beyond the grace
period, of the intention to pay future premiums directly to the insurer at its home
office or any office designated by the insurer for the purpose, the insurer will, at the
end of each period of a year from the due date of the first premium so paid, for which
period such premiums are so paid continuously without default beyond the grace period,
refund a stated percentage of the premiums in an amount which fairly represents the
savings in collection expense.
20-1314 Conversion of weekly premium policies
There shall be a provision in the case of weekly premium policies granting to the
insured, upon proper written request and upon presentation of evidence of insurability
satisfactory to the insurer, the privilege of converting a weekly premium industrial
insurance policy to any form of life insurance with less frequent premium payments
regularly issued by the insurer, in accordance with terms and conditions agreed upon with
the insurer. The privilege of making the conversion need be granted only if the
insurer's weekly premium industrial policies on the life insured, in force as premium
paying insurance and on which conversion is requested, grant benefits in event of death,
exclusive of additional accidental death benefits and exclusive of any dividend
additions, in an amount not less than the minimum amount of such insurance with less
frequent premium payments issued by the insurer at the age of the insured on the plan of
industrial or ordinary insurance desired.
20-1315 Conversion of monthly premium policies
There shall be a provision, in the case of monthly premium industrial policies,
granting, upon proper written request and upon presentation of evidence of insurability
satisfactory to the insurer, the privilege of converting a monthly premium industrial
insurance policy to any form of ordinary life insurance regularly issued by the insurer,
in accordance with terms and conditions agreed upon with the insurer. The privilege of
making the conversion need be granted only if the insurer's monthly premium industrial
policies on the life insured, in force as premium paying insurance and on which
conversion is requested, grant benefits in event of death, exclusive of additional
accidental death benefits and exclusive of any dividend additions, in an amount not less
than the minimum amount of ordinary insurance issued by the insurer at the age of the
insured on the plan of ordinary insurance desired.
20-1316 Title of policy
There shall be a title on the face of each such policy briefly describing its form.
20-1317 Provisions inapplicable to single premium or term policies
Any of the provisions required by sections 20-1303 to 20-1316, inclusive, or any
portion thereof which are not applicable to single premium or term policies or to
policies issued or granted pursuant to nonforfeiture provisions shall to that extent not
be incorporated therein.
20-1318 Prohibited provisions
No policy of industrial insurance shall contain any of the following provisions:
1. A provision by which the insurer may deny liability under the policy for the
reason that the insured has previously obtained other insurance from the same insurer.
2. A provision giving the insurer the right to declare the policy void because the
insured has had any disease or ailment, whether specified or not, or because the insured
has received institutional, hospital, medical or surgical treatment or attention, except
a provision which gives the insurer the right to declare the policy void if the insured
has, within two years prior to the issuance of the policy, received institutional,
hospital, medical or surgical treatment or attention and if the insured or claimant under
the policy fails to show that the condition occasioning such treatment or attention was
not of a serious nature or was not material to the risk.
3. A provision giving the insurer the right to declare the policy void because the
insured has been rejected for insurance, unless such right is conditioned upon a showing
by the insurer that knowledge of the rejection would have led to a refusal by the insured
to make the contract.
20-1341 Scope of article
Nothing in this article shall apply to or affect:
1. Any policy of liability or workers' compensation insurance with or without
supplementary expense coverage therein.
2. Any group or blanket policy.
3. Life insurance, endowment or annuity contracts, or contracts supplemental
thereto which contain only such provisions relating to disability insurance as provide
additional benefits in case of death or dismemberment or loss of sight by accident, or as
operate to safeguard such contracts against lapse or to give a special surrender value or
special benefit or an annuity in the event that the insured or annuitant becomes totally
and permanently disabled, as defined by the contract or supplemental contract.
4. Reinsurance.
20-1342.01 Handicapped children
An individual hospital or medical expense insurance policy, delivered or issued for
delivery in this state more than one hundred twenty days after the effective date of this
section, which provides that coverage of a dependent child shall terminate upon
attainment of the limiting age for dependent children specified in the policy, shall also
provide in substance that attainment of such limiting age shall not operate to terminate
the coverage of such child while the child is and continues to be both incapable of
self-sustaining employment by reason of mental retardation or physical handicap and
chiefly dependent upon the policyholder for support and maintenance. Proof of such
incapacity and dependency shall be furnished to the insurer by the policyholder within
thirty-one days of the child's attainment of the limiting age and subsequently as may be
required by the insurer but not more frequently than annually after the two-year period
following the child's attainment of the limiting age.
20-1342.02 Disapproval of disability policy form
The director may disapprove any disability policy form if the benefits provided in
the policy form are unreasonable in relation to the premium charged.
20-1342.03 Disability insurance; clinical trials; cancer; definitions
A. A disability insurer is not obligated to pay any costs, other than covered
patient costs, that are directly associated with a cancer clinical trial that is offered
in this state and in which the insured participates voluntarily. A cancer clinical trial
is a course of treatment in which all of the following apply:
1. The treatment is part of a scientific study of a new therapy or intervention
that is being conducted at an institution in this state, that is for the treatment,
palliation or prevention of cancer in humans and in which the scientific study includes
all of the following:
(a) Specific goals.
(b) A rationale and background for the study.
(c) Criteria for patient selection.
(d) Specific directions for administering the therapy and monitoring patients.
(e) A definition of quantitative measures for determining treatment response.
(f) Methods for documenting and treating adverse reactions.
2. The treatment is being provided as part of a study being conducted in a phase I,
phase II, phase III or phase IV cancer clinical trial.
3. The treatment is being provided as part of a study being conducted in accordance
with a clinical trial approved by at least one of the following:
(a) One of the national institutes of health.
(b) A national institutes of health cooperative group or center.
(c) The United States food and drug administration in the form of an
investigational new drug application.
(d) The United States department of defense.
(e) The United States department of veterans affairs.
(f) A qualified research entity that meets the criteria established by the national
institutes of health for grant eligibility.
(g) A panel of qualified recognized experts in clinical research within academic
health institutions in this state.
4. The proposed treatment or study has been reviewed and approved by an
institutional review board of an institution in this state.
5. The personnel providing the treatment or conducting the study:
(a) Are providing the treatment or conducting the study within their scope of
practice, experience and training and are capable of providing the treatment because of
their experience, training and volume of patients treated to maintain expertise.
(b) Agree to accept reimbursement as payment in full from the insurer at the rates
that are established by the insurer and that are not more than the level of reimbursement
applicable to other similar services provided by health care providers with the insurer's
provider network.
6. There is no clearly superior, noninvestigational treatment alternative.
7. The available clinical or preclinical data provide a reasonable expectation that
the treatment will be at least as efficacious as any noninvestigational alternative.
B. Pursuant to the patient informed consent document, no party is liable for
damages associated with the treatment provided during any phase of a cancer clinical
trial.
C. Each contract delivered or issued for delivery in this state shall provide
benefits under the contract, and those benefits shall not supplant any portion of the
clinical trial that is customarily paid for by government, biotechnical, pharmaceutical
or medical device industry sources.
D. This section does not create any private right or cause of action for or on
behalf of any patient against the insurer. This section provides solely an administrative
remedy to the director for any violation of this section or any related rule.
E. Nothing in this section prohibits the insurer from imposing deductibles,
coinsurance or other cost sharing measures in relation to benefits provided pursuant to
this section.
F. For the purposes of this section:
1. "Cooperative group" means a formal network of facilities that collaborates on
research projects and that has an established national institutes of health approved peer
review program operating within the group, including the national cancer institute
clinical cooperative group and the national cancer institute community clinical oncology
program.
2. "Institutional review board" means any board, committee or other group that is
both:
(a) Formally designated by an institution to approve the initiation of and to
conduct periodic review of biomedical research involving human subjects and in which the
primary purpose of such review is to assure the protection of the rights and welfare of
the human subjects and not to review a clinical trial for scientific merit.
(b) Approved by the national institutes of health office for protection from
research risks.
3. "Multiple project assurance contract" means a contract between an institution
and the United States department of health and human services that defines the
relationship of the institution to the United States department of health and human
services and that sets out the responsibilities of the institution and the procedures
that will be used by the institution to protect human subjects.
4. "Patient" means the insured or the insured's covered dependent.
5. "Patient cost" means any fee or expense that is covered under the contract and
that is for a service or treatment that would be required if the patient were receiving
usual and customary care. Patient cost does not include the cost:
(a) Of any drug or device provided in a phase I cancer clinical trial.
(b) Of any investigational drug or device.
(c) Of nonhealth services that might be required for a person to receive treatment
or intervention.
(d) Of managing the research of the clinical trial.
(e) That would not be covered under the patient's contract.
(f) Of treatment or services provided outside this state.
20-1342.04 Disability insurance policies; varying copayments and deductibles allowed
A. Except as provided in sections 20-1379 and 20-2304, a disability insurer may
offer one or more disability insurance policies that contain a choice of deductibles,
coinsurance, copayments, out-of-pocket and any other cost sharing levels. Plans offered
under this section shall clearly disclose in marketing materials, certificates of
coverage and contracts the insured's financial responsibilities. A disability insurer
that offers such a disability insurance policy shall continue to provide any mandated
health coverage that is required by this state or by federal law.
B. This section does not prohibit a health benefits plan that is intended to
qualify as a high deductible health plan as defined by 26 United States Code section
223(c)(2) from requiring the application of deductibles, copayments or coinsurance to
benefits provided under the health benefits plan. 20-1342 Scope and format of policy; definitions
A. A policy of disability insurance shall not be delivered or issued for delivery
to any person in this state unless it otherwise complies with this title and complies
with the following:
1. The entire money and other considerations shall be expressed in the policy.
2. The time when the insurance takes effect and terminates shall be expressed in
the policy.
3. It shall purport to insure only one person, except that a policy may insure,
originally or by subsequent amendment, on the application of the policyholder or the
policyholder's spouse, any two or more eligible members of that family, including
husband, wife, dependent children or any children under a specified age that does not
exceed nineteen years and any other person dependent upon the policyholder. Any policy,
except accidental death and dismemberment, applied for that provides family coverage
shall, as to such coverage of family members, also provide that the benefits applicable
for children shall be payable with respect to a newly born child of the insured from the
instant of such child's birth, to a child adopted by the insured, regardless of the age
at which the child was adopted, and to a child who has been placed for adoption with the
insured and for whom the application and approval procedures for adoption pursuant to
section 8-105 or 8-108 have been completed to the same extent that such coverage applies
to other members of the family. The coverage for newly born or adopted children or
children placed for adoption shall include coverage of injury or sickness including
necessary care and treatment of medically diagnosed congenital defects and birth
abnormalities. If payment of a specific premium is required to provide coverage for a
child, the policy may require that notification of birth, adoption or adoption placement
of the child and payment of the required premium must be furnished to the insurer within
thirty-one days after the date of birth, adoption or adoption placement in order to have
the coverage continue beyond the thirty-one day period.
4. The style, arrangement and overall appearance of the policy shall give no undue
prominence to any portion of the text, and every printed portion of the text of the
policy and of any endorsements or attached papers shall be plainly printed in light-faced
type of a style in general use, the size of which shall be uniform and not less than ten
point with a lower case unspaced alphabet length of not less than one hundred and twenty
point. "Text" shall include all printed matter except the name and address of the
insurer, name or title of the policy, the brief description, if any, and captions and
subcaptions.
5. The exceptions and reductions of indemnity shall be set forth in the policy and,
other than those contained in sections 20-1345 through 20-1368, shall be printed and, at
the insurer's option, either included with the benefit provision to which they apply or
under an appropriate caption such as "exceptions", or "exceptions and reductions", except
that if an exception or reduction specifically applies only to a particular benefit of
the policy, a statement of such exception or reduction shall be included with the benefit
provision to which it applies.
6. Each such form, including riders and endorsements, shall be identified by a form
number in the lower left-hand corner of the first page.
7. The policy shall contain no provision purporting to make any portion of the
charter, rules, constitution or bylaws of the insurer a part of the policy unless such
portion is set forth in full in the policy, except in the case of the incorporation of,
or reference to, a statement of rates or classification of risks, or short-rate table
filed with the director.
8. Each contract shall be so written that the corporation shall pay benefits:
(a) For performance of any surgical service that is covered by the terms of such
contract, regardless of the place of service.
(b) For any home health services that are performed by a licensed home health
agency and that a physician has prescribed in lieu of hospital services, as defined by
the director, providing the hospital services would have been covered.
(c) For any diagnostic service that a physician has performed outside a hospital in
lieu of inpatient service, providing the inpatient service would have been covered.
(d) For any service performed in a hospital's outpatient department or in a
freestanding surgical facility, providing such service would have been covered if
performed as an inpatient service.
9. A disability insurance policy that provides coverage for the surgical expense of
a mastectomy shall also provide coverage incidental to the patient's covered mastectomy
for the expense of reconstructive surgery of the breast on which the mastectomy was
performed, surgery and reconstruction of the other breast to produce a symmetrical
appearance, prostheses, treatment of physical complications for all stages of the
mastectomy, including lymphedemas, and at least two external postoperative prostheses
subject to all of the terms and conditions of the policy.
10. A contract, except a supplemental contract covering a specified disease or other
limited benefits, that provides coverage for surgical services for a mastectomy shall
also provide coverage for mammography screening performed on dedicated equipment for
diagnostic purposes on referral by a patient's physician, subject to all of the terms and
conditions of the policy and according to the following guidelines:
(a) A baseline mammogram for a woman from age thirty-five to thirty-nine.
(b) A mammogram for a woman from age forty to forty-nine every two years or more
frequently based on the recommendation of the woman's physician.
(c) A mammogram every year for a woman fifty years of age and over.
11. Any contract that is issued to the insured and that provides coverage for
maternity benefits shall also provide that the maternity benefits apply to the costs of
the birth of any child legally adopted by the insured if all the following are true:
(a) The child is adopted within one year of birth.
(b) The insured is legally obligated to pay the costs of birth.
(c) All preexisting conditions and other limitations have been met by the insured.
(d) The insured has notified the insurer of the insured's acceptability to adopt
children pursuant to section 8-105, within sixty days after such approval or within sixty
days after a change in insurance policies, plans or companies.
12. The coverage prescribed by paragraph 11 of this subsection is excess to any
other coverage the natural mother may have for maternity benefits except coverage made
available to persons pursuant to title 36, chapter 29, but not including coverage made
available to persons defined as eligible under section 36-2901, paragraph 6, subdivisions
(b), (c), (d) and (e). If such other coverage exists the agency, attorney or individual
arranging the adoption shall make arrangements for the insurance to pay those costs that
may be covered under that policy and shall advise the adopting parent in writing of the
existence and extent of the coverage without disclosing any confidential information such
as the identity of the natural parent. The insured adopting parents shall notify their
insurer of the existence and extent of the other coverage.
B. Any contract that provides maternity benefits shall not restrict benefits for
any hospital length of stay in connection with childbirth for the mother or the newborn
child to less than forty-eight hours following a normal vaginal delivery or ninety-six
hours following a cesarean section. The contract shall not require the provider to
obtain authorization from the insurer for prescribing the minimum length of stay required
by this subsection. The contract may provide that an attending provider in consultation
with the mother may discharge the mother or the newborn child before the expiration of
the minimum length of stay required by this subsection. The insurer shall not:
1. Deny the mother or the newborn child eligibility or continued eligibility to
enroll or to renew coverage under the terms of the contract solely for the purpose of
avoiding the requirements of this subsection.
2. Provide monetary payments or rebates to mothers to encourage those mothers to
accept less than the minimum protections available pursuant to this subsection.
3. Penalize or otherwise reduce or limit the reimbursement of an attending provider
because that provider provided care to any insured under the contract in accordance with
this subsection.
4. Provide monetary or other incentives to an attending provider to induce that
provider to provide care to an insured under the contract in a manner that is
inconsistent with this subsection.
5. Except as described in subsection C of this section, restrict benefits for any
portion of a period within the minimum length of stay in a manner that is less favorable
than the benefits provided for any preceding portion of that stay.
C. Nothing in subsection B of this section:
1. Requires a mother to give birth in a hospital or to stay in the hospital for a
fixed period of time following the birth of the child.
2. Prevents an insurer from imposing deductibles, coinsurance or other cost sharing
in relation to benefits for hospital lengths of stay in connection with childbirth for a
mother or a newborn child under the contract, except that any coinsurance or other cost
sharing for any portion of a period within a hospital length of stay required pursuant to
subsection B of this section shall not be greater than the coinsurance or cost sharing
for any preceding portion of that stay.
3. Prevents an insurer from negotiating the level and type of reimbursement with a
provider for care provided in accordance with subsection B of this section.
D. Any contract that provides coverage for diabetes shall also provide coverage for
equipment and supplies that are medically necessary and that are prescribed by a health
care provider including:
1. Blood glucose monitors.
2. Blood glucose monitors for the legally blind.
3. Test strips for glucose monitors and visual reading and urine testing strips.
4. Insulin preparations and glucagon.
5. Insulin cartridges.
6. Drawing up devices and monitors for the visually impaired.
7. Injection aids.
8. Insulin cartridges for the legally blind.
9. Syringes and lancets including automatic lancing devices.
10. Prescribed oral agents for controlling blood sugar that are included on the plan
formulary.
11. To the extent coverage is required under medicare, podiatric appliances for
prevention of complications associated with diabetes.
12. Any other device, medication, equipment or supply for which coverage is required
under medicare from and after January 1, 1999. The coverage required in this paragraph
is effective six months after the coverage is required under medicare.
E. Nothing in subsection D of this section:
1. Prohibits a disability insurer from imposing deductibles, coinsurance or other
cost sharing in relation to benefits for equipment or supplies for the treatment of
diabetes.
2. Requires a policy to provide an insured with outpatient benefits if the policy
does not cover outpatient benefits.
F. Any contract that provides coverage for prescription drugs shall not limit or
exclude coverage for any prescription drug prescribed for the treatment of cancer on the
basis that the prescription drug has not been approved by the United States food and drug
administration for the treatment of the specific type of cancer for which the
prescription drug has been prescribed, if the prescription drug has been recognized as
safe and effective for treatment of that specific type of cancer in one or more of the
standard medical reference compendia prescribed in subsection G of this section or
medical literature that meets the criteria prescribed in subsection G of this section.
The coverage required under this subsection includes covered medically necessary services
associated with the administration of the prescription drug. This subsection does not:
1. Require coverage of any prescription drug used in the treatment of a type of
cancer if the United States food and drug administration has determined that the
prescription drug is contraindicated for that type of cancer.
2. Require coverage for any experimental prescription drug that is not approved for
any indication by the United States food and drug administration.
3. Alter any law with regard to provisions that limit the coverage of prescription
drugs that have not been approved by the United States food and drug administration.
4. Require reimbursement or coverage for any prescription drug that is not included
in the drug formulary or list of covered prescription drugs specified in the contract.
5. Prohibit a contract from limiting or excluding coverage of a prescription drug,
if the decision to limit or exclude coverage of the prescription drug is not based
primarily on the coverage of prescription drugs required by this section.
6. Prohibit the use of deductibles, coinsurance, copayments or other cost sharing
in relation to drug benefits and related medical benefits offered.
G. For the purposes of subsection F of this section:
1. The acceptable standard medical reference compendia are the following:
(a) The American medical association drug evaluations, a publication of the
American medical association.
(b) The American hospital formulary service drug information, a publication of the
American society of health system pharmacists.
(c) Drug information for the health care provider, a publication of the United
States pharmacopoeia convention.
2. Medical literature may be accepted if all of the following apply:
(a) At least two articles from major peer reviewed professional medical journals
have recognized, based on scientific or medical criteria, the drug's safety and
effectiveness for treatment of the indication for which the drug has been prescribed.
(b) No article from a major peer reviewed professional medical journal has
concluded, based on scientific or medical criteria, that the drug is unsafe or
ineffective or that the drug's safety and effectiveness cannot be determined for the
treatment of the indication for which the drug has been prescribed.
(c) The literature meets the uniform requirements for manuscripts submitted to
biomedical journals established by the international committee of medical journal editors
or is published in a journal specified by the United States department of health and
human services as acceptable peer reviewed medical literature pursuant to section
186(t)(2)(B) of the social security act (42 United States Code section 1395x(t)(2)(B)).
H. Any contract that is offered by a disability insurer and that contains a routine
outpatient prescription drug benefit shall provide coverage of medical foods to treat
inherited metabolic disorders as provided by this section.
I. The metabolic disorders triggering medical foods coverage under this section
shall:
1. Be part of the newborn screening program prescribed in section 36-694.
2. Involve amino acid, carbohydrate or fat metabolism.
3. Have medically standard methods of diagnosis, treatment and monitoring including
quantification of metabolites in blood, urine or spinal fluid or enzyme or DNA
confirmation in tissues.
4. Require specially processed or treated medical foods that are generally
available only under the supervision and direction of a physician who is licensed
pursuant to title 32, chapter 13 or 17, that must be consumed throughout life and without
which the person may suffer serious mental or physical impairment.
J. Medical foods eligible for coverage under this section shall be prescribed or
ordered under the supervision of a physician licensed pursuant to title 32, chapter 13 or
17 as medically necessary for the therapeutic treatment of an inherited metabolic
disease.
K. An insurer shall cover at least fifty per cent of the cost of medical foods
prescribed to treat inherited metabolic disorders and covered pursuant to this section.
An insurer may limit the maximum annual benefit for medical foods under this section to
five thousand dollars, which applies to the cost of all prescribed modified low protein
foods and metabolic formula.
L. For the purposes of:
1. This section:
(a) "Inherited metabolic disorder" means a disease caused by an inherited
abnormality of body chemistry and includes a disease tested under the newborn screening
program prescribed in section 36-694.
(b) "Medical foods" means modified low protein foods and metabolic formula.
(c) "Metabolic formula" means foods that are all of the following:
(i) Formulated to be consumed or administered enterally under the supervision of a
physician who is licensed pursuant to title 32, chapter 13 or 17.
(ii) Processed or formulated to be deficient in one or more of the nutrients
present in typical foodstuffs.
(iii) Administered for the medical and nutritional management of a person who has
limited capacity to metabolize foodstuffs or certain nutrients contained in the
foodstuffs or who has other specific nutrient requirements as established by medical
evaluation.
(iv) Essential to a person's optimal growth, health and metabolic homeostasis.
(d) "Modified low protein foods" means foods that are all of the following:
(i) Formulated to be consumed or administered enterally under the supervision of a
physician who is licensed pursuant to title 32, chapter 13 or 17.
(ii) Processed or formulated to contain less than one gram of protein per unit of
serving, but does not include a natural food that is naturally low in protein.
(iii) Administered for the medical and nutritional management of a person who has
limited capacity to metabolize foodstuffs or certain nutrients contained in the
foodstuffs or who has other specific nutrient requirements as established by medical
evaluation.
(iv) Essential to a person's optimal growth, health and metabolic homeostasis.
2. Subsection A of this section, the term "child", for purposes of initial coverage
of an adopted child or a child placed for adoption but not for purposes of termination of
coverage of such child, means a person under the age of eighteen years. 20-1343 Policies issued for delivery in another state
If any policy is issued by a domestic insurer for delivery to a person residing in
another state, and if the official having responsibility for the administration of the
insurance laws of such other state has advised the director that any such policy is not
subject to approval or disapproval by such official, the director may by ruling require
that such policy meet applicable standards set forth in this article and in article 1 of
chapter 5 of this title.
20-1344 Policy provisions required; omissions; substitutions
A. Except as provided in subsection B of this section, each such policy delivered
or issued for delivery to any person in this state shall contain the provisions specified
in sections 20-1345 to 20-1356, inclusive, in the words in which such provisions appear,
except that the insurer may, at its option, substitute for one or more of such provisions
corresponding provisions of different wording approved by the director which are in each
instance not less favorable in any respect to the insured or the beneficiary. Each such
provision shall be preceded individually by the applicable caption shown, or, at the
option of the insurer, by such appropriate individual or group captions or subcaptions as
the director approves.
B. If any such provision is in whole or in part inapplicable to or inconsistent
with the coverage provided by a particular form of policy, the insurer, with the approval
of the director, shall omit from the policy any inapplicable provision or part of a
provision, and shall modify any inconsistent provision or part of a provision in such
manner as to make the provision as contained in the policy consistent with the coverage
provided by the policy.
20-1345 Policy and attachments as entire contract; changes in policy
There shall be a provision as follows: "Entire contract; changes: This policy,
including the endorsements and the attached papers, if any, constitutes the entire
contract of insurance. No change in this policy shall be valid until approved by an
executive officer of the insurer and unless such approval be endorsed hereon or attached
hereto. No agent has authority to change this policy or to waive any of its provisions."
20-1346 Time limit on defenses
A. There shall be a provision as follows: "Time limit on certain
defenses: (a) After two years from the date of issue of this policy no misstatements,
except fraudulent misstatements, made by the applicant in the application for such policy
shall be used to void the policy or to deny a claim for loss incurred or disability (as
defined in the policy) commencing after the expiration of such two year period."
"(b) No claim for loss incurred or disability (as defined in the policy) commencing
after two years from the date of issue of this policy shall be reduced or denied on the
ground 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 of coverage of this policy."
B. The policy provision set forth in (a) of subsection A of this section shall not
be so construed as to affect any legal requirement for avoidance of a policy or denial of
a claim during such initial two year period, nor to limit the application of sections
20-1358, 20-1359, 20-1360, 20-1361 and 20-1362 in the event of misstatement with respect
to age or occupation or other insurance.
C. A policy which the insured has the right to continue in force subject to its
terms by the timely payment of premium until at least age fifty or, in the case of a
policy issued after age forty-four, for at least five years from its date of issue, may
contain in lieu of (a) of subsection A of this section the following provision, from
which the clause in parentheses may be omitted at the insurer's option, under the caption
"Incontestable:" "After this policy has been in force for a period of two years during
the lifetime of the insured (excluding any period during which the insured is disabled),
it shall become incontestable as to the statements contained in the application."
20-1347 Grace period
A. There shall be a provision as follows: "Grace period: A grace period of
______________ (insert a number not less than 'seven' for weekly premium policies, 'ten'
for monthly premium policies and 'thirty-one' for all other policies) days will be
granted for the payment of each premium falling due after the first premium, during which
grace period the policy shall continue in force."
B. A policy which contains a cancellation provision may add, at the end of the
provision set forth in subsection A of this section: "subject to the right of the
insurer to cancel in accordance with the cancellation provision hereof."
C. A policy in which the insurer reserves the right to refuse any renewal shall
have, at the beginning of the provision set forth in subsection A of this
section: "Unless not less than five days prior to the premium due date the insurer has
delivered to the insured or has mailed to his last address as shown by the records of the
insurer written notice of its intention not to renew this policy beyond the period for
which the premium has been accepted,".
20-1348 Reinstatement
A. There shall be a provision as follows: "Reinstatement: If any renewal premium
is not paid within the time granted the insured for payment, a subsequent acceptance of
premium by the insurer or by any agent duly authorized by the insurer to accept such
premium, without requiring in connection therewith an application for reinstatement,
shall reinstate the policy, provided, however, that if the insurer or such agent requires
an application for reinstatement and issues a conditional receipt for the premium
tendered, the policy will be reinstated upon approval of such application by the insurer
or, lacking such approval, upon the forty-fifth day following the date of such
conditional receipt unless the insurer has previously notified the insured in writing of
its disapproval of such application. The reinstated policy shall cover only loss
resulting from such accidental injury as may be sustained after the date of reinstatement
and loss due to such sickness as may begin more than ten days after such date. In all
other respects the insured and insurer shall have the same rights thereunder as they had
under the policy immediately before the due date of the defaulted premium, subject to any
provisions endorsed hereon or attached hereto in connection with the reinstatement. Any
premium accepted in connection with a reinstatement shall be applied to a period for
which premium has not been previously paid, but not to any period more than sixty days
prior to the date of reinstatement."
B. The last sentence of the provision set forth in subsection A of this section may
be omitted from any policy which the insured has the right to continue in force subject
to its terms by the timely payment of premiums until at least age fifty or, in the case
of a policy issued after age forty-four for at least five years from its date of issue.
20-1349 Notice of claim
A. There shall be a provision as follows: "Notice of claim: Written notice of
claim must be given to the insurer within twenty days after the occurrence or
commencement of any loss covered by the policy, or as soon thereafter as is reasonably
possible. Notice given by or on behalf of the insured or the beneficiary to the insurer
at ____________ (insert the location of such office as the insurer may designate for the
purpose), or to any authorized agent of the insurer, with information sufficient to
identify the insured, shall be deemed notice to the insurer."
B. In a policy providing a loss-of-time benefit which may be payable for at least
two years, an insurer may at its option insert the following between the first and second
sentences of the provision set forth in subsection A of this section: "Subject to the
qualifications set forth below, if the insured suffers loss of time on account of
disability for which indemnity may be payable for at least two years, he shall, at least
once in every six months after having given notice of claim, give to the insurer notice
of continuance of said disability, except in the event of legal incapacity. The period
of six months following any filing of proof by the insured or any payment by the insurer
on account of such claim or any denial of liability in whole or in part by the insurer
shall be excluded in applying this provision. Delay in the giving of such notice shall
not impair the insured's right to any indemnity which would otherwise have accrued during
the period of six months preceding the date on which such notice is actually given."
20-1350 Claim forms
There shall be a provision as follows: "Claim forms: The insurer, upon receipt of a
notice of claim, will furnish to the claimant such forms as are usually furnished by it
for filing proofs of loss. If such forms are not furnished within fifteen days after the
giving of such notice the claimant shall be deemed to have complied with the requirements
of this policy as to proof of loss upon submitting, within the time fixed in the policy
for filing proofs of loss, written proof covering the occurrence, the character and the
extent of the loss for which claim is made."
20-1351 Proofs of loss
There shall be a provision as follows: "Proofs of loss: Written proof of loss must
be furnished to the insurer at its said office in case of claim for loss for which this
policy provides any periodic payment contingent upon continuing loss within ninety days
after the termination of the period for which the insurer is liable and in case of claim
for any other loss within ninety days after the date of such loss. Failure to furnish
such proof within the time required shall not invalidate nor reduce any claim if it was
not reasonably possible to give proof within such time, provided such proof is furnished
as soon as reasonably possible and in no event, except in the absence of legal capacity,
later than one year from the time proof is otherwise required."
20-1352 Time for payment of claims
There shall be a provision as follows:
"Time of payment of claims: Indemnities payable under this policy for any loss
other than loss for which this policy provides any periodic payment, will be paid
immediately upon receipt of due written proof of such loss. Subject to due written proof
of loss, all accrued indemnities for loss for which this policy provides periodic payment
will be paid ___________ (insert period for payment which must not be less frequently
than monthly) and any balance remaining unpaid upon the termination of liability will be
paid immediately upon receipt of due written proof."
20-1353 Payment of claims
A. There shall be a provision as follows:
"Payment of claims: Indemnity for loss of life will be payable in accordance with
the beneficiary designation and the provisions respecting such payment which may be
prescribed herein and effective at the time of payment. If no such designation or
provision is then effective, such indemnity shall be payable to the estate of the
insured. Any other accrued indemnities unpaid at the insured's death may, at the option
of the insurer, be paid either to such beneficiary or to such estate. All other
indemnities will be payable to the insured."
B. The following provisions, or either of them, may be included with the provision
set forth in subsection A of this section at the option of the insurer: "If any
indemnity of this policy shall be payable to the estate of the insured, or to an insured
or beneficiary who is a minor or otherwise not competent to give a valid release, the
insurer may pay such indemnity, up to an amount not exceeding $ ____________________
(insert an amount which shall not exceed one thousand dollars), to any relative by blood
or connection by marriage of the insured or beneficiary who is deemed by the insurer to
be equitably entitled thereto. Any payment made by the insurer in good faith pursuant to
this provision shall fully discharge the insurer to the extent of such payment."
"Subject to any written direction of the insured in the application or otherwise all
or a portion of any indemnities provided by this policy on account of hospital, nursing,
medical, or surgical services may, at the insurer's option and unless the insured
requests otherwise in writing not later than the time of filing proof of such loss, be
paid directly to the hospital or person rendering such services, but it is not required
that the service be rendered by a particular hospital or person."
20-1354 Physical examination; autopsy
There shall be a provision as follows: "Physical examinations and autopsy: The
insurer at its own expense shall have the right and opportunity to examine the person of
the insured when and as often as it may reasonably require during the pendency of a claim
hereunder and to make an autopsy in case of death where it is not forbidden by law."
20-1355 Legal actions
There shall be a provision as follows: "Legal actions: No action at law or in
equity shall be brought to recover on this policy prior to the expiration of sixty days
after written proof of loss has been furnished in accordance with the requirements of
this policy. No such action shall be brought after the expiration of two years after the
time written proof of loss is required to be furnished."
20-1356 Change of beneficiary
A. There shall be a provision as follows: "Change of beneficiary: Unless the
insured makes an irrevocable designation of beneficiary, the right to change a
beneficiary is reserved to the insured and the consent of the beneficiary or
beneficiaries shall not be requisite to surrender or assignment of this policy or to any
change of beneficiary or beneficiaries, or to any other changes in this policy."
B. The first clause of the provision set forth in subsection A of this section
relating to the irrevocable designation of beneficiary may be omitted at the insurer's
option.
20-1357 Optional policy provisions
Except as provided in subsection B of section 20-1344, no such policy delivered or
issued for delivery to any person in this state shall contain provisions respecting the
matters set forth in sections 20-1358 to 20-1368, inclusive, unless the provisions are in
the words in which such provisions appear in the applicable section, except that the
insurer may, at its option, use in lieu of any such provision a corresponding provision
of different wording approved by the director which is not less favorable in any respect
to the insured or the beneficiary. Any such provision contained in the policy shall be
preceded individually by the appropriate caption or, at the option of the insurer, by
such appropriate individual or group captions or subcaptions as the director may approve.
20-1358 Change of occupation
There may be a provision as follows: "Change of occupation: If the insured be
injured or contract sickness after having changed his occupation to one classified by the
insurer as more hazardous than that stated in this policy or while doing for compensation
anything pertaining to an occupation so classified, the insurer will pay only such
portion of the indemnities provided in this policy as the premium paid would have
purchased at the rates and within the limits fixed by the insurer for such more hazardous
occupation. If the insured changes his occupation to one classified by the insurer as
less hazardous than that stated in this policy, the insurer, upon receipt of proof of
such change of occupation, will reduce the premium rate accordingly, and will return the
excess pro rata unearned premium from the date of change of occupation or from the policy
anniversary date immediately preceding receipt of such proof, whichever is the more
recent. In applying this provision, the classification of occupational risk and the
premium rates shall be such as have been last filed by the insurer prior to the
occurrence of the loss for which the insurer is liable or prior to date of proof of
change in occupation with the state official having supervision of insurance in the state
where the insured resided at the time this policy was issued; but if such filing was not
required, then the classification of occupational risk and the premium rates shall be
those last made effective by the insurer in such state prior to the occurrence of the
loss or prior to the date of proof of change in occupation."
20-1359 Misstatement of age
There may be a provision as follows: "Misstatement of age: If the age of the
insured has been misstated, all amounts payable under this policy shall be such as the
premium paid would have purchased at the correct age."
20-1360 Other insurance in this insurer
A. There may be a provision as follows:
"Other insurance in this insurer: If an accident or sickness or accident and
sickness policy or policies previously issued by the insurer to the insured be in force
concurrently herewith, making the aggregate indemnity for _____________________ (insert
type of coverage or coverages) in excess of $ _______________________ (insert maximum
limit of indemnity or indemnities) the excess insurance shall be void and all premiums
paid for such excess shall be returned to the insured or to his estate."
B. The following provision may be inserted in lieu of the provision set forth in
subsection A of this section: "Insurance effective at any one time on the insured under
a like policy or policies in this insurer is limited to the one such policy elected by
the insured, his beneficiary or his estate, as the case may be, and the insurer will
return all premiums paid for all other such policies."
20-1361 Insurance with other insurers; provision of service or expense incurred basis
A. There may be a provision as follows:
"Insurance with other insurers: If there be other valid coverage, not with this
insurer, providing benefits for the same loss on a provision of service basis or on an
expense incurred basis and of which this insurer has not been given written notice prior
to the occurrence or commencement of loss, the only liability under any expense incurred
coverage of this policy shall be for such proportion of the loss as the amount which
would otherwise have been payable hereunder plus the total of the like amounts under all
such other valid coverages for the same loss of which this insurer had notice bears to
the total like amounts under all valid coverages for such loss, and for the return of
such portion of the premiums paid as shall exceed the pro rata portion for the amount so
determined. For the purpose of applying this provision when other coverage is on a
provision of service basis, the 'like amount' of such other coverage shall be taken as
the amount which the services rendered would have cost in the absence of such coverage."
B. If the policy provision set forth in subsection A of this section is included in
a policy which also contains the policy provision set out in section 20-1362 there shall
be added to the caption of the provision the phrase "--expense incurred benefits." The
insurer may, at its option, include in this provision a definition of "other valid
coverage," approved as to form by the director which definition shall be limited in
subject matter to coverage provided by organizations subject to regulation by insurance
law or by insurance authorities of this or any other state of the United States or any
province of Canada, and by hospital or medical service organizations, and to any other
coverage the inclusion of which may be approved by the director. In the absence of such
definition the term shall not include group insurance, automobile medical payments
insurance, or coverage provided by hospital or medical service organizations or by union
welfare plans or employer or employee benefit organizations. For the purpose of applying
the policy provision with respect to any insured, any amount of benefit provided for the
insured pursuant to any compulsory benefit statute, including any workers' compensation
or employer's liability statute, whether provided by a governmental agency or otherwise
shall in all cases be deemed to be "other valid coverage" of which the insurer has had
notice. In applying the policy provision no third party liability coverage shall be
included as "other valid coverage."
20-1362 Insurance with other insurers
A. There may be a provision as follows:
"Insurance with other insurers: If there be other valid coverage, not with this
insurer, providing benefits for the same loss on other than an expense incurred basis and
of which this insurer has not been given written notice prior to the occurrence or
commencement of loss, the only liability for such benefits under this policy shall be for
such proportion of the indemnities otherwise provided hereunder for such loss as the like
indemnities of which the insurer had notice (including the indemnities under this policy)
bear to the total amount of all like indemnities for such loss, and for the return of
such portion of the premium paid as shall exceed the pro rata portion for the indemnities
thus determined."
B. If the provision is included in a policy which also contains the policy
provision set out in section 20-1361 there shall be added to the caption of the provision
set forth in subsection A of this section the phrase "--other benefits." The insurer
may, at its option, include in this provision a definition of "other valid coverage,"
approved as to form by the director, which definition shall be limited in subject matter
to coverage provided by organizations subject to regulation by insurance law or by
insurance authorities of this or any other state of the United States or any province of
Canada, and to any other coverage the inclusion of which may be approved by the
director. In the absence of such definition the term shall not include group insurance,
or benefits provided by union welfare plans or by employer or employee benefit
organizations. For the purpose of applying the policy provision with respect to any
insured, any amount of benefit provided for the insured pursuant to any compulsory
benefit statute, including any workers' compensation or employer's liability statute,
whether provided by a governmental agency or otherwise shall in all cases be deemed to be
"other valid coverage" of which the insurer has had notice. In applying the policy
provision no third party liability coverage shall be included as "other valid coverage."
20-1363 Relation of earnings to insurance
A. There may be a provision as follows: "Relation of earnings to insurance: If the
total monthly amount of loss of time benefits promised for the same loss under all valid
loss of time coverage upon the insured, whether payable on a weekly or monthly basis,
shall exceed the monthly earnings of the insured at the time disability commenced or his
average monthly earnings for the period of two years immediately preceding a disability
for which claim is made, whichever is the greater, the insurer will be liable only for
such proportionate amount of such benefits under this policy as the amount of such
monthly earnings or such average monthly earnings of the insured bears to the total
amount of monthly benefits for the same loss under all such coverage upon the insured at
the time such disability commences and for the return of such part of the premiums paid
during such two years as shall exceed the pro rata amount of the premiums for the
benefits actually paid hereunder; but this shall not operate to reduce the total monthly
amount of benefits payable under all such coverage upon the insured below the sum of two
hundred dollars or the sum of the monthly benefits specified in such coverages, whichever
is the lesser, nor shall it operate to reduce benefits other than those payable for loss
of time."
B. The policy provision set forth in subsection A of this section may be inserted
only in a policy which the insured has the right to continue in force subject to its
terms by the timely payment of premiums until at least age fifty or, in the case of a
policy issued after age forty-four for at least five years from its date of issue. The
insurer may, at its option, include in this provision a definition of "valid loss of time
coverage," approved as to form by the director, which definition shall be limited in
subject matter to coverage provided by governmental agencies or by organizations subject
to regulation by insurance law or by insurance authorities of this or any other state of
the United States or any province of Canada, or to any other coverage the inclusion of
which may be approved by the director or any combination of such coverages. In the
absence of such definition the term shall not include any coverage provided for the
insured pursuant to any compulsory benefit statute, including any workers' compensation
or employer's liability statute, or benefits provided by union welfare plans or by
employer or employee benefit organizations.
20-1364 Unpaid premium
There may be a provision as follows: "Unpaid premium: Upon the payment of a claim
under this policy, any premium then due and unpaid or covered by any note or written
order may be deducted therefrom."
20-1365 Cancellation
There may be a provision as follows: "Cancellation: The insurer may cancel this
policy at any time by written notice delivered to the insured, or mailed to his last
address as shown by the records of the insurer, stating when, not less than thirty days
thereafter, such cancellation shall be effective; and after the policy has been continued
beyond its original term the insured may cancel this policy at any time by written notice
delivered or mailed to the insurer, effective upon receipt or on such later date as may
be specified in such notice. In the event of cancellation, the insurer will return
promptly the unearned portion of any premium paid. If the insured cancels, the earned
premium shall be computed by the use of the short-rate table last filed with the state
official having supervision of insurance in the state where the insured resided when the
policy was issued. If the insurer cancels, the earned premium shall be computed pro
rata. Cancellation shall be without prejudice to any claim originating prior to the
effective date of cancellation."
20-1366 Conformity with statutes
There may be a provision as follows: "Conformity with statutes: Any provision of
this policy which, on its effective date, is in conflict with the statutes of the state,
District of Columbia or territory in which the insured resides on such date is hereby
amended to conform to the minimum requirements of such statutes."
20-1367 Illegal occupation
There may be a provision as follows: "Illegal occupation: The insurer shall not be
liable for any loss to which a contributing cause was the insured's commission of or
attempt to commit a felony or to which a contributing cause was the insured's being
engaged in an illegal occupation."
20-1368 Intoxicants and narcotics
There may be a provision as follows: "Intoxicants and narcotics: The insurer shall
not be liable for any loss sustained or contracted in consequence of the insured's being
intoxicated or under the influence of any narcotic unless administered on the advice of a
physician."
20-1369 Arrangement of provisions in policy
The provisions which are the subject of sections 20-1345 to 20-1368, inclusive, or
any corresponding provisions which are used in lieu thereof in accordance with such
sections, shall be printed in the consecutive order of the provisions in such sections
or, at the option of the insurer, any such provision may appear as a unit in any part of
the policy, with other provisions to which it may be logically related, provided that the
resulting policy shall not be in whole or in part unintelligible, uncertain, ambiguous,
abstruse or likely to mislead a person to whom the policy is offered, delivered or
issued.
20-1370 Third party ownership
The word "insured," as used in this article shall not be construed as preventing a
person other than the insured with a proper insurable interest from making application
for and owning a policy covering the insured or from being entitled under such a policy
to any indemnities, benefits and rights provided therein.
20-1371 Policy provision requirements of other jurisdictions
Any policy of a foreign or alien insurer, when delivered or issued for delivery to
any person in this state, may contain any provision which is not less favorable to the
insured or the beneficiary than the provisions of this article and which is prescribed or
required by the law of the state or country under which the insurer is organized. Any
policy of a domestic insurer may, when issued for delivery in any other state or country,
contain any provision permitted or required by the laws of such other state or country.
20-1372 Effect of policy containing nonconforming provisions
No policy provision which is not subject to this article shall cause a policy, or
any portion thereof to be less favorable in any respect to the insured or the beneficiary
than the provisions thereof which are subject to this article. A policy delivered or
issued for delivery to any person in this state in violation of this article shall be
held valid but shall be construed as provided in this article. When any provision in a
policy subject to this article is in conflict with any provision of this article, the
rights, duties and obligations of the insurer, the insured and the beneficiary shall be
governed by the provisions of this article.
20-1373 Age limit
If any policy contains a provision establishing, as an age limit or otherwise, a
date after which the coverage provided by the policy will not be effective, and if such
date falls within a period for which premium is accepted by the insurer or if the insurer
accepts a premium after such date, the coverage provided by the policy will continue in
force subject to any right of cancellation until the end of the period for which premium
has been accepted. In the event the age of the insured has been misstated and if,
according to the correct age of the insured, the coverage provided by the policy would
not have become effective, or would have ceased prior to the acceptance of such premium
or premiums, then the liability of the insurer shall be limited to the refund, upon
request, of all premiums paid for the period not covered by the policy.
20-1374 Effective date of provisions; moratorium
A policy, rider or endorsement which could have been lawfully used or delivered or
issued for delivery to any person in this state immediately prior to January 1, 1955, may
be used or delivered or issued for delivery to any such person until January 1, 1957,
without being subject to the provisions of sections 20-1341 to 20-1372, inclusive.
20-1375 Franchise disability insurance law
Disability insurance on a franchise plan is declared to be that form of disability
insurance issued to five or more employees of any corporation, copartnership or
individual employer or any governmental corporation, agency or department thereof, or to
ten or more members, employees or employees of members of any trade or professional
association or of a labor union or of any other association having had an active
existence for at least two years where such association or union has a constitution or
bylaws and is formed in good faith for purposes other than that of obtaining insurance,
where such persons, with or without their dependents, are issued the same form of an
individual policy varying only as to amounts and kinds of coverage applied for by such
persons under an arrangement whereby the premiums on the policies may be paid to the
insurer periodically by the employer, with or without payroll deductions, or by the
association for its members, or by some designated person acting on behalf of the
employer or association. The term "employees" as used herein may be deemed to include
the officers, managers and employees of the employer and the individual proprietor or
partners if the employer is an individual proprietor or partnership.
20-1376.01 Prohibiting denial of chiropractic contract benefits; direct reimbursement
If a disability insurance contract provides for or offers reimbursement for any
service which is within the lawful scope of the practice of a chiropractor holding a
certificate or license issued by the state in which the services are rendered, a
subscriber covered under such contract may select either a physician or chiropractor to
provide the examination, care or treatment for which the subscriber is eligible and which
falls within the scope of practice of the chiropractor or physician. Reimbursement for
the cost of the service may be made directly to the person licensed or certified pursuant
to title 32, chapter 8 or 13 or to the subscriber if the cost of the service has not been
reimbursed to another provider or health care institution.
20-1376.02 Prohibiting denial of psychologist contract benefits
If a disability insurance contract provides for or offers reimbursement for any
service which is within the lawful scope of the practice of a psychologist holding a
certificate or license issued by the state in which the services are rendered, a
subscriber covered under such contract may select either a physician or psychologist to
provide the examination, care or treatment for which the subscriber is eligible and which
falls within the scope of practice of the psychologist or physician.
20-1376.03 Prohibiting denial of contract benefits; nurses; reimbursement
If a disability insurance contract provides or offers reimbursement for any service
which is within the scope of the practice of a registered nurse practitioner or a
certified registered nurse qualified under the rules adopted by the state board of
nursing regarding extended nursing practice and licensed pursuant to title 32, chapter
15, the contract benefits shall not be denied to a subscriber who receives the services
of the certified registered nurse or registered nurse practitioner. The cost of the
service may be reimbursed directly to the certified registered nurse or registered nurse
practitioner or to the subscriber if another provider or health care institution was not
reimbursed for the cost of the service.
20-1376.04 Prohibiting denial of occupational or physical therapist contract benefits If a disability insurance contract provides coverage for occupational or physical therapy services, and provides both an in-network and out-of-network benefit, an insurer shall not deny a claim for covered occupational or physical therapy services obtained out-of-network solely on the basis that a physician did not refer the insured to the occupational or physical therapist or prescribe specific occupational or physical therapy services. An insurer may impose coinsurance, copayments, deductibles, dollar caps, limitations on the number of visits, provider network restrictions or other cost containment measures as a condition of coverage of occupational and physical therapy services for both in-network and out-of-network benefits. 20-1376 Prohibiting denial of certain contract benefits
A. Notwithstanding any provision of any disability insurance contract, benefits
shall not be denied under the contract for any medical or surgical service performed by a
holder of a license issued pursuant to title 32, chapter 7 or 11, if the service
performed is within the lawful scope of such person's license, and if the service is
surgical, such person is a member of the staff of an accredited hospital, and if such
contract would have provided benefits if such service had been performed by a holder of a
license issued pursuant to title 32, chapter 13.
B. If any disability insurance contract provides for or offers eye care services,
the subscriber shall have freedom of choice to select either an optometrist or a
physician and surgeon skilled in diseases of the eye to provide the examination, care, or
treatment for which the subscriber is eligible and which falls within the scope of
practice of the optometrist or physician and surgeon. Unless such disability insurance
contract otherwise provides, there shall be no reimbursement for ophthalmic materials,
lenses, spectacles, eyeglasses, or appurtenances thereto.
C. If any individual disability insurance contract is written to provide coverage
for psychiatric, drug abuse or alcoholism services, reimbursement for such services shall
be made in accordance with the terms of the contract without regard to whether the
covered services are rendered in a psychiatric special hospital or general
hospital. Reimbursement for the cost of the service may be made directly to the person
licensed or certified pursuant to title 32, chapter 13 or 19.1 or to the subscriber if
the cost of the service has not been reimbursed to another provider or health care
institution.
20-1377 Continuation of coverage under individual policies; requirements; exceptions; renewability
A. A policy of disability insurance delivered or issued for delivery in this state
shall provide for the right of covered family members to continue coverage on the death
of the named insured, the entry of a decree of dissolution of marriage of the named
insured and any other conditions, other than failure of the insured to pay the required
premium, specifically stated in the policy under which coverage would otherwise terminate
as to the covered spouse or covered dependent children of the named insured.
B. At the option of the insurer, coverage shall either continue under the existing
policy or by the issuance of a converted policy with the person exercising the right to
convert designated as the named insured. Coverage provided by a conversion policy must
provide benefits most similar to the coverage contained in the policy that was
terminated. A person entitled to continuation or conversion rights under this section
may elect a lesser form of coverage.
C. Continuation or conversion of coverage may, at the option of the spouse
exercising the right, include covered dependent children for whom the spouse has
responsibility for care or support.
D. The person exercising the continuation or conversion rights shall notify the
insurer and make payment of the appropriate premium within thirty-one days following the
termination of the existing policy. A monthly premium rate shall be offered to the
person exercising continuation or conversion rights, and payment of one monthly premium
shall be deemed sufficient consideration to enact the continuation or conversion policy.
E. Coverage provided through continuation or conversion shall be without additional
evidence of insurability and shall not impose any preexisting condition limitations,
exclusions or other contractual time limitations other than those remaining unexpired
under the policy or contract from which continuation or conversion is exercised.
F. Conversion is not available to a person who is eligible for medicare or eligible
for or covered by other similar disability benefits which together with the conversion
coverage would constitute overinsurance.
G. This section does not apply to disability income policies, to accidental death
or dismemberment policies or to single term nonrenewable policies.
H. Each policy of disability insurance shall include notice of the continuation and
conversion privilege.
I. Except as provided in subsection J of this section, any policy, including a
conversion or continuation policy, that is issued under this section shall not be
cancelled or nonrenewed except for the following reasons:
1. The individual has failed to pay premiums or contributions in accordance with
the terms of the coverage or the insurer has not received premium payments in a timely
manner.
2. The individual has performed an act or practice that constitutes fraud or the
individual made an intentional misrepresentation of material fact under the terms of the
coverage.
3. The insurer has ceased to offer coverage to individuals that is consistent with
the requirements of sections 20-1379 and 20-1380.
4. If the insurer offers health care coverage in this state through a network plan,
the individual no longer resides, lives or works in the service area served by the
network plan or in an area for which the insurer is authorized to transact business but
only if the coverage is terminated uniformly without regard to any health status-related
factor of any covered individual.
5. If the insurer offers health care coverage in this state in the individual
market only through one or more bona fide associations, the membership of the individual
in the association has ceased but only if that coverage is terminated uniformly without
regard to any health status-related factor of any covered individual.
J. An insurer who offers only one form of an individual medical expense policy may
modify the conversion policy if the modification complies with the notice and disclosure
requirements set forth in the policy and applies uniformly to the policy offered to the
general public and to the conversion policy.
K. At the time of filing a petition for dissolution of marriage, the clerk of the
court shall provide to the petitioner for a dissolution of marriage two copies of the
notice of the right of a dependent spouse to convert health insurance coverage under this
section. The petitioner shall cause one copy of the notice to be served on the
respondent together with a copy of the petition, summons and preliminary injunction. The
director shall prepare the notice which must include a summary of this section. The
clerk of the court or the director is not liable for damages arising from information
contained in or omitted from the notices prepared or provided under this section.
L. Any person who is a United States armed forces reservist, who is ordered to
active military duty on or after August 22, 1990 and who had coverage under an individual
disability insurance policy at such time shall have the right to reinstate such coverage
upon release from active military duty subject to the following conditions:
1. The reservist shall make written application to the insurer within ninety days
of discharge from active military duty or within one year of hospitalization continuing
after discharge. Coverage shall be effective upon receipt of application by the insurer.
2. The insurer may exclude from such coverage any health or physical condition
arising during and occurring as a direct result of active military duty.
M. Each dependent of a person eligible for reinstatement under this section shall
be afforded the same rights and be subject to the same conditions as the insured, if the
dependent was insured under the individual disability insurance policy at the time the
eligible person entered active duty. Any dependent of such person born during the period
of active military duty shall have the same rights as other dependents noted in this
section.
N. The director shall adopt emergency rules applicable to persons who are leaving
active service in the armed forces of the United States and returning to civilian status
consistent with the provisions of subsection L of this section, including:
1. Conditions of eligibility.
2. Coverage of dependents.
3. Preexisting conditions.
4. Termination of insurance.
5. Probationary periods.
6. Limitations.
7. Exceptions.
8. Reductions.
9. Elimination periods.
10. Requirements for replacement.
11. Any other conditions of coverage.
20-1378 Eligibility; prohibiting cancellation because of eligibility for certain benefits
A. Except as specifically provided in sections 20-1379 and 20-1380, with respect to
the determination of whether a person is an eligible individual, an insurer issuing
disability insurance contracts shall not consider the availability of or a person's
eligibility for medical assistance pursuant to title XIX of the social security act (P.L.
89-97; 79 Stat. 344; 42 United States Code section 1396a (1980)) when considering
eligibility for coverage or calculating payments under its plans for eligible
policyholders.
B. To the extent that payment for covered expenses has been made under the state
program pursuant to title XIX of the social security act for health care items or
services furnished to an individual, the state is considered to have acquired the rights
of the individual to payment by any other party for those health care items or services.
On presentation of proof that the state program pursuant to title XIX of the social
security act has paid for covered items or services, the insurer shall make payments to
the state program pursuant to title XIX of the social security act according to the
coverage provided in the disability insurance policy.
C. An insurer issuing disability insurance contracts may not impose on a state
agency that has been assigned the rights of an individual who is eligible for medical
assistance and who is covered for health benefits from the insurer any requirements that
are different from the requirements applicable to an agent or assignee of any other
covered individual.
D. An insurer issuing disability insurance contracts shall not cancel or fail to
renew the contract of any person based on that person's eligibility for or enrollment in
a program funded under title XIX of the social security act or title 36, chapter 29 or
34. Nothing in this section prohibits cancellation or failure to renew for nonpayment of
monies due under the contract.
20-1379 Guaranteed availability of individual health insurance coverage; prior group coverage; definitions
A. Every health care insurer that offers individual health insurance coverage in
the individual market in this state shall provide guaranteed availability of coverage to
an eligible individual who desires to enroll in individual health insurance coverage and
shall not:
1. Decline to offer that coverage to, or deny enrollment of, that individual.
2. Impose any preexisting condition exclusion for that coverage.
B. Every health care insurer that offers individual health insurance coverage in
the individual market in this state shall offer all policy forms of health insurance
coverage that are designed for, are made generally available and actively marketed to and
enroll both eligible or other individuals. A health care insurer that offers only one
policy form in the individual market complies with this section by offering that form to
eligible individuals. A health care insurer also may comply with the requirements of this
section by electing to offer at least two different policy forms to eligible individuals
as provided by subsection C of this section.
C. A health care insurer shall meet the requirements prescribed in subsection B of
this section if:
1. The health care insurer offers at least two different policy forms, both of
which are designed for, made generally available and actively marketed to and enroll both
eligible and other individuals.
2. The offer includes at least either:
(a) The policy forms with the largest and next to the largest earned premium volume
of all policy forms offered by the health care insurer in this state in the individual
market during a period not to exceed the preceding two calendar years.
(b) A choice of two policy forms with representative coverage, consisting of a
lower level of coverage policy form and a higher level of coverage policy form, each of
which includes benefits that are substantially similar to other individual health
insurance coverage offered by the health care insurer in this state and each of which is
covered by a method that provides for risk adjustment, risk spreading or a risk spreading
mechanism among the health care insurer's policies.
D. The health care insurer's election pursuant to subsection C of this section is
effective for policies offered during a period of at least two years.
E. If a health care insurer offers individual health insurance coverage in the
individual market through a network plan, the health care insurer may do both of the
following:
1. Limit the individuals who may be enrolled under health insurance coverage to
those who live, reside or work within the service area for a network plan.
2. Within the service area of a network plan, deny health insurance coverage to
individuals if the health care insurer has demonstrated, if required, to the director
that both:
(a) The health care insurer will not have the capacity to deliver services
adequately to additional individual enrollees because of the health care insurer's
obligations to existing group contract holders and enrollees and individual enrollees.
(b) The health care insurer is applying this paragraph uniformly to individuals
without regard to any health status-related factor of the individuals and without regard
to whether the individuals are eligible individuals.
F. A health care insurer may deny individual health insurance coverage in the
individual market to an eligible individual if the health care insurer demonstrates to
the director that the health care insurer:
1. Does not have the financial reserves necessary to underwrite additional
coverage.
2. Is denying coverage uniformly to all individuals in the individual market in
this state pursuant to state law and without regard to any health status-related factor
of the individuals and without regard to whether the individuals are eligible
individuals.
G. If a health care insurer denies health insurance coverage in this state pursuant
to subsection F of this section, the health care insurer shall not offer that coverage in
the individual market in this state for one hundred eighty days after the date the
coverage is denied or until the health care insurer demonstrates to the director that the
health care insurer has sufficient financial reserves to underwrite additional coverage,
whichever is later.
H. An accountable health plan as defined in section 20-2301 that offers conversion
policies on an individual or group basis in connection with a health benefits plan
pursuant to this title is not a health care insurer that offers individual health
insurance coverage solely because of the offer of a conversion policy.
I. Nothing in this section:
1. Creates additional restrictions on the amount of the premium rates that a health
care insurer may charge an individual for health insurance coverage provided in the
individual market.
2. Prevents a health care insurer that offers health insurance coverage in the
individual market from establishing premium rates or modifying otherwise applicable
copayments or deductibles in return for adherence to programs of health promotion and
disease prevention.
3. Requires a health care insurer that offers only short-term limited duration
insurance limited benefit coverage or to individuals and no other coverage to individuals
in the individual market to offer individual health insurance coverage in the individual
market.
4. Requires a health care insurer offering health care coverage only on a group
basis or through one or more bona fide associations, or both, to offer health insurance
coverage in the individual market.
J. A health care insurer shall provide, without charge, a written certificate of
creditable coverage as described in this section for creditable coverage occurring after
June 30, 1996 if the individual:
1. Ceases to be covered under a policy offered by a health care insurer. An
individual who is covered by a policy that is issued on a group basis by a health care
insurer, that is terminated or not renewed at the choice of the sponsor of the group and
where the replacement of the coverage is without a break in coverage is not entitled to
receive the certification prescribed in this paragraph but is instead entitled to receive
the certification prescribed in paragraph 2 of this subsection.
2. Requests certification from the health care insurer within twenty-four months
after the coverage under a health insurance coverage policy offered by a health care
insurer ceases.
K. The certificate of creditable coverage provided by a health care insurer is a
written certification of the period of creditable coverage of the individual under the
health insurance coverage offered by the health care insurer. The department may enforce
and monitor the issuance and delivery of the notices and certificates by health care
insurers as required by this section, section 20-1380, the health insurance portability
and accountability act of 1996 (P.L. 104-191; 110 Stat. 1936) and any federal regulations
adopted to implement the health insurance portability and accountability act of 1996.
L. Any health care insurer, accountable health plan or other entity that issues
health care coverage in this state, as applicable, shall issue and accept a certificate
of creditable coverage of the individual that contains at least the following
information:
1. The date that the certificate is issued.
2. The name of the individual or dependent for whom the certificate applies and any
other information that is necessary to allow the issuer providing the coverage specified
in the certificate to identify the individual, including the individual's identification
number under the policy and the name of the policyholder if the certificate is for or
includes a dependent.
3. The name, address and telephone number of the issuer providing the certificate.
4. The telephone number to call for further information regarding the certificate.
5. One of the following:
(a) A statement that the individual has at least eighteen months of creditable
coverage. For purposes of this subdivision, eighteen months means five hundred forty-six
days.
(b) Both the date that the individual first sought coverage, as evidenced by a
substantially complete application, and the date that creditable coverage began.
6. The date creditable coverage ended, unless the certificate indicates that
creditable coverage is continuing from the date of the certificate.
7. The consumer assistance telephone number for the department.
8. The following statement in at least fourteen point type:
Important Notice!
Keep this certificate with your important personal records to protect your
rights under the health insurance portability and accountability act of 1996
("HIPAA"). This certificate is proof of your prior health insurance coverage.
You may need to show this certificate to have a guaranteed right to buy new
health insurance ("Guaranteed issue"). This certificate may also help you
avoid waiting periods or exclusions for preexisting conditions. Under HIPAA,
these rights are guaranteed only for a very short time period. After your
group coverage ends, you must apply for new coverage within 63 days to be
protected by HIPAA. If you have questions, call the ARIZONA department of
insurance.
M. A health care insurer has satisfied the certification requirement under this
section if the insurer offering the health benefits plan provides the certificate of
creditable coverage in accordance with this section within thirty days after the event
that triggered the issuance of the certificate.
N. Periods of creditable coverage for an individual are established by the
presentation of the certificate described in this section and section 20-2310. In
addition to the written certificate of creditable coverage as described in this section,
individuals may establish creditable coverage through the presentation of documents or
other means. In order to make a determination that is based on the relevant facts and
circumstances of the amount of creditable coverage that an individual has, a health care
insurer shall take into account all information that the insurer obtains or that is
presented to the insurer on behalf of the individual.
O. A health care insurer shall calculate creditable coverage according to the
following rules:
1. The health care insurer shall allow an individual credit for each day the
individual was covered by creditable coverage.
2. The health care insurer shall not count a period of creditable coverage for an
individual enrolled under any form of health insurance coverage if after the period of
coverage and before the enrollment date there were sixty-three consecutive days during
which the individual was not covered by any creditable coverage.
3. The health care insurer shall not include any period that an individual is in a
waiting period or an affiliation period for any health coverage or is awaiting action by
a health care insurer on an application for the issuance of health insurance coverage
when the health care insurer determines the continuous period pursuant to paragraph 1 of
this subsection.
4. The health care insurer shall not include any period that an individual is
waiting for approval of an application for health care coverage, provided the individual
submitted an application to the health care insurer for health care coverage within
sixty-three consecutive days after the individual's most recent creditable coverage.
5. The health care insurer shall not count a period of creditable coverage with
respect to enrollment of an individual, if, after the most recent period of creditable
coverage and before the enrollment date, sixty-three consecutive days lapse during all of
which the individual was not covered under any creditable coverage. The health care
insurer shall not include in the determination of the period of continuous coverage
described in this section any period that an individual is in a waiting period for health
insurance coverage offered by a health care insurer, is in a waiting period for benefits
under a health benefits plan offered by an accountable health plan or is in an
affiliation period.
6. In determining the extent to which an individual has satisfied any portion of
any applicable preexisting condition period the health care insurer shall count a period
of creditable coverage without regard to the specific benefits covered during that
period.
P. An individual is an eligible individual if, on the date the individual seeks
coverage pursuant to this section, the individual has an aggregate period of creditable
coverage as defined and calculated pursuant to this section of at least eighteen months
and all of the following apply:
1. The most recent creditable coverage for the individual was under a plan offered
by:
(a) An employee welfare benefit plan that provides medical care to employees or the
employees' dependents directly or through insurance, reimbursement or otherwise pursuant
to the employee retirement income security act of 1974 (P.L. 93-406; 88 Stat. 829; 29
United States Code sections 1001 through 1461).
(b) A church plan as defined in the employee retirement income security act of
1974.
(c) A governmental plan as defined in the employee retirement income security act
of 1974, including a plan established or maintained for its employees by the government
of the United States or by any agency or instrumentality of the United States.
(d) An accountable health plan as defined in section 20-2301.
(e) A plan made available to a person defined as eligible pursuant to section
36-2901, paragraph 6, subdivision (d) or a dependent pursuant to section 36-2901,
paragraph 6, subdivision (e) of a person eligible under section 36-2901, paragraph 6,
subdivision (d), provided the person was most recently employed by a business in this
state with at least two but not more than fifty full-time employees.
2. The individual is not eligible for coverage under:
(a) An employee welfare benefit plan that provides medical care to employees or the
employees' dependents directly or through insurance, reimbursement or otherwise pursuant
to the employee retirement income security act of 1974.
(b) A health benefits plan issued by an accountable health plan as defined in
section 20-2301.
(c) Part A or part B of title XVIII of the social security act.
(d) Title 36, chapter 29, except coverage to persons defined as eligible under
section 36-2901, paragraph 6, subdivisions (b), (c), (d) and (e), or any other plan
established under title XIX of the social security act, and the individual does not have
other health insurance coverage.
3. The most recent coverage within the coverage period was not terminated based on
any factor described in section 20-2309, subsection B, paragraph 1 or 2 relating to
nonpayment of premiums or fraud.
4. The individual was offered and elected the option of continuation coverage under
a COBRA continuation provision pursuant to the consolidated omnibus budget reconciliation
act of 1985 (P.L. 99-272; 100 Stat. 82) or a similar state program.
5. The individual exhausted the continuation coverage pursuant to the consolidated
omnibus budget reconciliation act of 1985.
Q. Notwithstanding subsection P of this section, an individual is an eligible
individual if:
1. The individual is an individual enrollee in a health care services organization
that is domiciled in this state on the date that the health care services organization is
declared insolvent, including any health care services organization that is not an
accountable health plan as defined in section 20-2301.
2. The individual's coverage terminates during the delinquency proceeding, after
the health care services organization is declared insolvent.
3. The individual satisfies the requirements of an eligible individual as
prescribed in this section other than the required period of creditable coverage.
R. Notwithstanding subsection P of this section, a newborn child, adopted child or
child placed for adoption is an eligible individual if the child was timely enrolled and
otherwise would have met the definition of an eligible individual as prescribed in this
section other than the required period of creditable coverage and the child is not
subject to any preexisting condition exclusion or limitation if the child has been
continuously covered under health insurance coverage or a health benefits plan offered by
an accountable health plan since birth, adoption or placement for adoption.
S. If a health care insurer imposes a waiting period for coverage of preexisting
conditions, within a reasonable period of time after receiving an individual's proof of
creditable coverage and not later than the date by which the individual must select an
insurance plan, the health care insurer shall give the individual written disclosure of
the insurer's determination regarding any preexisting condition exclusion period that
applies to that individual. The disclosure shall include all of the following
information:
1. The period of creditable coverage allowed toward the waiting period for coverage
of preexisting conditions.
2. The basis for the insurer's determination and the source and substance of any
information on which the insurer has relied.
3. A statement of any right the individual may have to present additional evidence
of creditable coverage and to appeal the insurer's determination, including an
explanation of any procedures for submission and appeal.
T. This section and section 20-1380 apply to all health insurance coverage that is
offered, sold, issued, renewed, in effect or operated in the individual market after June
30, 1997, regardless of when a period of creditable coverage occurs.
U. For the purposes of this section and section 20-1380 as applicable:
1. "Affiliation period" has the same meaning prescribed in section 20-2301.
2. "Bona fide association" means, for health care coverage issued by a health care
insurer, an association that meets the requirements of section 20-2324.
3. "Creditable coverage" means coverage solely for an individual, other than
limited benefits coverage, under any of the following:
(a) An employee welfare benefit plan that provides medical care to employees or the
employees' dependents directly or through insurance, reimbursement or otherwise pursuant
to the employee retirement income security act of 1974.
(b) A church plan as defined in the employee retirement income security act of
1974.
(c) A health benefits plan issued by an accountable health plan as defined in
section 20-2301.
(d) Part A or part B of title XVIII of the social security act.
(e) Title XIX of the social security act, other than coverage consisting solely of
benefits under section 1928.
(f) Title 10, chapter 55 of the United States Code.
(g) A medical care program of the Indian health service or of a tribal
organization.
(h) A health benefits risk pool operated by any state of the United States.
(i) A health plan offered pursuant to title 5, chapter 89 of the United States
Code.
(j) A public health plan as defined by federal law.
(k) A health benefit plan pursuant to section 5(e) of the peace corps act (P.L.
87-293; 75 Stat. 612; 22 United States Code sections 2501 through 2523).
(l) A policy or contract, including short-term limited duration insurance, issued
on an individual basis by an insurer, a health care services organization, a hospital
service corporation, a medical service corporation or a hospital, medical, dental and
optometric service corporation or made available to persons defined as eligible under
section 36-2901, paragraph 6, subdivision (b), (c), (d) or (e).
(m) A policy or contract issued by a health care insurer or an accountable health
plan to a member of a bona fide association.
4. "Delinquency proceeding" has the same meaning prescribed in section 20-611.
5. "Different policy forms" means variations between policy forms offered by a
health care insurer, including policy forms that have different cost sharing arrangements
or different riders.
6. "Genetic information" means information about genes, gene products and inherited
characteristics that may derive from the individual or a family member, including
information regarding carrier status and information derived from laboratory tests that
identify mutations in specific genes or chromosomes, physical medical examinations,
family histories and direct analysis of genes or chromosomes.
7. "Health care insurer" means a disability insurer, group disability insurer,
blanket disability insurer, health care services organization, hospital service
corporation, medical service corporation or a hospital, medical, dental and optometric
service corporation.
8. "Health status-related factor" means any factor in relation to the health of the
individual or a dependent of the individual enrolled or to be enrolled in a health care
services organization including:
(a) Health status.
(b) Medical condition, including physical and mental illness.
(c) Claims experience.
(d) Receipt of health care.
(e) Medical history.
(f) Genetic information.
(g) Evidence of insurability, including conditions arising out of acts of domestic
violence as defined in section 20-448.
(h) The existence of a physical or mental disability.
9. "Higher level of coverage" means a policy form for which the actuarial value of
the benefits under the health insurance coverage offered by a health care insurer is at
least fifteen per cent more than the actuarial value of the health insurance coverage
offered by the health care insurer as a lower level of coverage in this state but not
more than one hundred twenty per cent of a policy form weighted average.
10. "Individual health insurance coverage" means health insurance coverage offered
by a health care insurer to individuals in the individual market but does not include
limited benefit coverage or short-term limited duration insurance. A health care insurer
that offers limited benefit coverage or short-term limited duration insurance to
individuals and no other coverage to individuals in the individual market is not a health
care insurer that offers health insurance coverage in the individual market.
11. "Limited benefit coverage" has the same meaning prescribed in section 20-1137.
12. "Lower level of coverage" means a policy form offered by a health care insurer
for which the actuarial value of the benefits under the health insurance coverage is at
least eighty-five per cent but not more than one hundred per cent of the policy form
weighted average.
13. "Network plan" means a health care plan provided by a health care insurer under
which the financing and delivery of health care services are provided, in whole or in
part, through a defined set of providers under contract with the health care insurer in
accordance with the determination made by the director pursuant to section 20-1053
regarding the geographic or service area in which a health care insurer may operate.
14. "Policy form weighted average" means the average actuarial value of the benefits
provided by a health care insurer that issues health coverage in this state that is
provided by either the health care insurer or, if the data are available, by all health
care insurers that issue health coverage in this state in the individual health coverage
market during the previous calendar year, except coverage pursuant to this section,
weighted by the enrollment for all coverage forms.
15. "Preexisting condition" means a condition, regardless of the cause of the
condition, for which medical advice, diagnosis, care, or treatment was recommended or
received within not more than six months before the date of the enrollment of the
individual under the health insurance policy or other contract that provides health
coverage benefits. A genetic condition is not a preexisting condition in the absence of a
diagnosis of the condition related to the genetic information and shall not result in a
preexisting condition limitation or preexisting condition exclusion.
16. "Preexisting condition limitation" or "preexisting condition exclusion" means a
limitation or exclusion of benefits for a preexisting condition under a health insurance
policy or other contract that provides health coverage benefits.
17. "Short-term limited duration insurance" means health insurance coverage that is
offered by a health care insurer, that remains in effect for no more than one hundred
eighty-five days, that cannot be renewed or otherwise continued for more than one hundred
eighty days and that is not intended or marketed as health insurance coverage subject to
guaranteed issuance or guaranteed renewal provisions of the laws of this state but that
is creditable coverage within the meaning of this section and section 20-2301. 20-1380 Guaranteed renewability of individual health coverage
A. Except as provided in this section, on request of the insured individual, a
health care insurer that provides individual health coverage to the individual shall
renew or continue that coverage.
B. A health care insurer may nonrenew or discontinue the health insurance coverage
of an individual in the individual market only for one or more of the following reasons:
1. The individual has failed to pay premiums or contributions pursuant to the terms
of the health insurance coverage or the health care insurer has not received premium
payments in a timely manner.
2. The individual has performed an act or practice that constitutes fraud or has
made an intentional misrepresentation of material fact under the terms of the coverage.
3. The health care insurer has ceased to offer coverage in the individual market
pursuant to subsection C of this section.
4. If the health care insurer offers health care coverage through a network plan in
this state, the individual no longer resides, lives or works in the service area or in an
area served by the network plan for which the health care insurer is authorized to do
business but only if the coverage is terminated uniformly without regard to any health
status-related factor of any covered individual.
5. If the health care insurer offers health coverage in the individual market only
through one or more bona fide associations, the membership of an individual in the
association has ceased but only if that coverage is terminated uniformly without regard
to any health status-related factor of any covered individual.
C. If a health care insurer decides to discontinue offering a particular policy
form offered in the individual market, the health care insurer may discontinue that
policy form only if:
1. The health care insurer provides notice to the director at least five business
days before the health care insurer gives notice to each individual covered under that
policy form of the intention to discontinue offering that policy form in this state.
2. The health care insurer provides notice to each individual who is covered by
that policy form in the individual market at least ninety days before the date of the
discontinuation of that policy form.
3. The health care insurer offers to each individual in the individual market whose
coverage is discontinued pursuant to this subsection the option to purchase all other
individual health insurance coverage currently offered by the health care insurer for
individuals in that market.
4. In exercising the option to discontinue that type of coverage and in offering
the option of coverage prescribed in paragraph 3 of this subsection, the health care
insurer acts uniformly without regard to any health status-related factor of enrolled
individuals or individuals who may become eligible for that coverage.
D. If a health care insurer elects to discontinue offering all health insurance
coverage in the individual market in this state, the health care insurer may discontinue
that coverage only if all of the following occur:
1. The health care insurer gives notice to the director at least five business days
before the health care insurer gives notice to each individual of the intention to
discontinue offering health insurance coverage in the individual market in this state.
2. The health care insurer provides notice to each individual of that
discontinuation at least one hundred eighty days before the date of the expiration of
that coverage.
3. The health care insurer discontinues all individual insurance or coverage that
was issued or delivered for issuance in this state and does not renew any coverage that
was offered or sold in this state.
E. If the health care insurer discontinues offering health insurance coverage
pursuant to subsection D of this section, the health care insurer shall not issue any
health insurance coverage in this state in the individual market for five years after the
date that the last individual health insurance coverage was not renewed.
F. Subsection C of this section does not apply if the health care insurer modifies
the health coverage at the time of renewal and that modification is otherwise consistent
with this title and effective on a uniform basis among all individuals covered by that
policy form.
G. A health care insurer shall provide the certification described in section
20-2310, subsection G if the individual:
1. Ceases to be covered under a policy offered by a health care insurer or
otherwise becomes covered under a COBRA continuation provision.
2. Who was covered under a COBRA continuation provision ceases to be covered under
the COBRA continuation provision.
3. Requests certification from the health care insurer within twenty-four months
after the coverage under a policy offered by a health care insurer ceases.
H. The director may use independent contractor examiners pursuant to sections
20-148 and 20-159 to review the higher level of coverage and lower level of coverage
policy forms offered by a health care insurer in compliance with this section and section
20-1379. All examination and examination related expenses shall be borne by the insurer
and shall be paid by the insurance examiners' revolving fund pursuant to section 20-159.
20-1381 Suspension of health care insurer obligation to issue coverage on a guaranteed issuance basis to eligible individuals
A. A health care insurer may apply to the director to suspend its obligation to
issue coverage to eligible individuals pursuant to section 20-1379 for a specified period
if all of the following conditions are met:
1. The health care insurer can demonstrate to the director that its financial or
administrative capacity to serve eligible individuals would impair the ability of the
health care insurer to serve previously enrolled individuals in the individual market.
2. The health care insurer requests that its obligation to issue coverage to
eligible individuals pursuant to section 20-1379 be suspended for a specified period, of
not more than one year, and provides a rationale for suspending its obligation to issue
coverage to eligible individuals for that period of time.
3. The health care insurer provides sufficient information for the director to
determine that the health care insurer has met the requirements of this subsection.
B. A health care insurer that refuses to enroll an eligible individual shall not
enroll any eligible individuals until the earlier of:
1. The date on which the director determines that the health care insurer has the
capacity to enroll eligible individuals.
2. The date on which the health care insurer enrolls an eligible individual. The
health care insurer shall notify the director within ten days after that enrollment.
C. The director shall approve or disapprove an application submitted by a health
care insurer within sixty days after the filing. The director may extend the period for
good cause for up to an additional sixty days. The director may suspend a health care
insurer's obligation to issue coverage to eligible individuals for a period of less time
than requested in the application.
D. In calculating the period of creditable coverage to determine if a person is an
eligible individual, if the person was an eligible individual when the person submitted
an application for coverage to a health care insurer and the health care insurer has
received an order pursuant to this section, the person continues to be an eligible
individual until the later of the expiration of the original sixty-three day period or an
additional thirty days after the individual receives a written notice from the health
care insurer pursuant to an order of the director that the health care insurer will not
issue coverage to the individual pursuant to section 20-1379.
20-1382 Health care insurers; reporting requirements
A. On or before March 1 of each year, each health care insurer shall submit to the
director a written report that contains the following information:
1. The number of eligible individuals covered by policies that were written by that
health care insurer in the individual market during the previous calendar year.
2. The number of individuals covered by policies that were issued other than to
eligible individuals during the previous calendar year.
3. The earned premium for each category of individual policy for the previous
calendar year.
4. The total number of eligible individuals covered by policies that were issued by
the health care insurer as of the end of the previous calendar year.
B. Each health care insurer shall submit the following information to the
department, if applicable, to demonstrate compliance with sections 20-1379, 20-1380 and
20-1381:
1. The health care insurer's name and address.
2. The identification, form number and summary of all products that the health care
insurer offers in the individual market.
3. If the health care insurer elects the option prescribed in section 20-1379,
subsection C, paragraph 2, subdivision (a) the data on premium volumes of all policy
forms that the health care insurer offers in the individual market and the number of
individuals who are covered under each form during the preceding calendar year.
4. If the health care insurer elects the option prescribed in section 20-1379,
subsection C, paragraph 2, subdivision (b) the data, assumptions and methods used to
calculate the actuarial values of the two representative policy forms.
5. An explanation of how the health care insurer is complying with sections
20-1379, 20-1380 and 20-1381.
6. A list of all products, including all marketing material, that the health care
insurer is making or will make available to eligible individuals and an explanation of
how the health care insurer will inform individuals of these policy forms.
7. A description of the risk spreading and financial subsidization mechanism.
C. The health care insurer shall submit the information described in subsection B
of this section to the department by March 1 of each year.
D. If all or part of the information required by subsection B, paragraph 5, 6 or 7
of this section has not changed since the health care insurer's last previous submission,
instead of refiling the information the health care insurer may indicate the information
that has not changed. 20-1401.01 Group disability insurers; notice; copies
A. No person or insurer may deliver or issue for delivery to an employer in this
state a certificate of insurance or other evidence of coverage of a group disability
policy issued outside this state unless the certificate or other evidence of coverage
contains the following notice, prominently displayed: "Notice: This certificate of
insurance may not provide all benefits and protections provided by law in
ARIZONA. Please read this certificate carefully."
B. At least thirty days before offering coverage under a group disability policy
issued outside this state to an employer in this state, any person or insurer offering
this coverage shall make available to the director copies of the policies and
certificates of insurance or other evidences of coverage issued under such policies.
C. The director may adopt rules prescribing disclosure standards for advertising,
solicitation and similar representations. Such standards shall apply to all
representations made prior to sale or at the point of sale.
20-1401 Eligible groups
A. Group disability insurance is that form of disability insurance covering groups
of persons as defined below, with or without one or more members of their families or one
or more of their dependents, or covering one or more members of the families or one or
more dependents of persons in such groups, and issued upon the following basis:
1. Under a policy issued to an employer or trustees of a fund established by an
employer, who shall be deemed the policyholder, insuring at least five employees of the
employer, for the benefit of persons other than the employer. The term "employees" as
used herein shall be deemed to include the officers, managers and employees of the
employer, the individual proprietor or partners if the employer is an individual
proprietor or partnership, the officers, managers and employees of subsidiary or
affiliated corporations, the individual proprietors, partners and employees of
individuals and firms, if the business of the employer and such individual or firm is
under common control through stock ownership, contract or otherwise. The term
"employees" as used herein shall be deemed to include retired employees. A policy issued
to insure employees of a public body may provide that the term "employees" shall include
elected or appointed officials.
2. Under a policy issued to an association, including a labor union, which shall
have a constitution and bylaws and which has been organized and is maintained in good
faith for purposes other than that of obtaining insurance, insuring at least twenty-five
members, employees or employees of members of the association for the benefit of persons
other than the association or its officers or trustees. The term "employees" as used
herein shall be deemed to include retired employees.
3. Under a policy issued to the trustees of a fund established by two or more
employers in the same industry or by one or more labor unions or by one or more employers
and one or more labor unions, which trustees shall be deemed the policyholder, to insure
employees of the employers or members of the unions for the benefit of persons other than
the employers or the unions. The term "employees" as used herein shall be deemed to
include the officers, managers and employees of the employer, and the individual
proprietor or partners if the employer is an individual proprietor or partnership. The
term "employees" as used herein shall be deemed to include retired employees. The policy
may provide that the term "employees" shall include the trustees or their employees, or
both, if their duties are principally connected with such trusteeship.
4. Under a policy issued to any persons or organizations to which a policy of group
life insurance may be delivered in this state, to insure any class or classes of
individuals that could be insured under such group life policy.
5. Under a policy issued to cover any other substantially similar group which, in
the discretion of the director, may be subject to the issuance of a group disability
policy or contract.
B. Nothing in this article validates any charge or practice illegal under any rule
of law or regulation governing usury, consumer lender loans, retail installment sales or
the like, or extends the application of any such rule of law or regulation to any
transaction not otherwise subject thereto.
20-1402.01 Group disability insurance; clinical trials; cancer; definitions
A. A group disability insurer is not obligated to pay any costs, other than covered
patient costs, that are directly associated with a cancer clinical trial that is offered
in this state and in which the insured participates voluntarily. A cancer clinical trial
is a course of treatment in which all of the following apply:
1. The treatment is part of a scientific study of a new therapy or intervention
that is being conducted at an institution in this state, that is for the treatment,
palliation or prevention of cancer in humans and in which the scientific study includes
all of the following:
(a) Specific goals.
(b) A rationale and background for the study.
(c) Criteria for patient selection.
(d) Specific directions for administering the therapy and monitoring patients.
(e) A definition of quantitative measures for determining treatment response.
(f) Methods for documenting and treating adverse reactions.
2. The treatment is being provided as part of a study being conducted in a phase I,
phase II, phase III or phase IV cancer clinical trial.
3. The treatment is being provided as part of a study being conducted in accordance
with a clinical trial approved by at least one of the following:
(a) One of the national institutes of health.
(b) A national institutes of health cooperative group or center.
(c) The United States food and drug administration in the form of an
investigational new drug application.
(d) The United States department of defense.
(e) The United States department of veterans affairs.
(f) A qualified research entity that meets the criteria established by the national
institutes of health for grant eligibility.
(g) A panel of qualified recognized experts in clinical research within academic
health institutions in this state.
4. The proposed treatment or study has been reviewed and approved by an
institutional review board of an institution in this state.
5. The personnel providing the treatment or conducting the study:
(a) Are providing the treatment or conducting the study within their scope of
practice, experience and training and are capable of providing the treatment because of
their experience, training and volume of patients treated to maintain expertise.
(b) Agree to accept reimbursement as payment in full from the insurer at the rates
that are established by the insurer and that are not more than the level of reimbursement
applicable to other similar services provided by health care providers with the insurer's
provider network.
6. There is no clearly superior, noninvestigational treatment alternative.
7. The available clinical or preclinical data provide a reasonable expectation that
the treatment will be at least as efficacious as any noninvestigational alternative.
B. Pursuant to the patient informed consent document, no party is liable for
damages associated with the treatment provided during any phase of a cancer clinical
trial.
C. Each contract delivered or issued for delivery in this state shall provide
benefits under the contract, and those benefits shall not supplant any portion of the
clinical trial that is customarily paid for by government, biotechnical, pharmaceutical
or medical device industry sources.
D. This section does not create any private right or cause of action for or on
behalf of any patient against the insurer. This section provides solely an administrative
remedy to the director for any violation of this section or any related rule.
E. Nothing in this section prohibits the insurer from imposing deductibles,
coinsurance or other cost sharing measures in relation to benefits provided pursuant to
this section.
F. For the purposes of this section:
1. "Cooperative group" means a formal network of facilities that collaborates on
research projects and that has an established national institutes of health approved peer
review program operating within the group, including the national cancer institute
clinical cooperative group and the national cancer institute community clinical oncology
program.
2. "Institutional review board" means any board, committee or other group that is
both:
(a) Formally designated by an institution to approve the initiation of and to
conduct periodic review of biomedical research involving human subjects and in which the
primary purpose of such review is to assure the protection of the rights and welfare of
the human subjects and not to review a clinical trial for scientific merit.
(b) Approved by the national institutes of health office for protection from
research risks.
3. "Multiple project assurance contract" means a contract between an institution
and the United States department of health and human services that defines the
relationship of the institution to the United States department of health and human
services and that sets out the responsibilities of the institution and the procedures
that will be used by the institution to protect human subjects.
4. "Patient" means the insured or the insured's covered dependent.
5. "Patient cost" means any fee or expense that is covered under the contract and
that is for a service or treatment that would be required if the patient were receiving
usual and customary care. Patient cost does not include the cost:
(a) Of any drug or device provided in a phase I cancer clinical trial.
(b) Of any investigational drug or device.
(c) Of nonhealth services that might be required for a person to receive treatment
or intervention.
(d) Of managing the research of the clinical trial.
(e) That would not be covered under the patient's contract.
(f) Of treatment or services provided outside this state.
20-1402 Provisions of group disability policies; definitions
A. Each group disability policy shall contain in substance the following
provisions:
1. A provision that, in the absence of fraud, all statements made by the
policyholder or by any insured person shall be deemed representations and not warranties,
and that no statement made for the purpose of effecting insurance shall avoid such
insurance or reduce benefits unless contained in a written instrument signed by the
policyholder or the insured person, a copy of which has been furnished to the
policyholder or to the person or beneficiary.
2. A provision that the insurer will furnish to the policyholder, for delivery to
each employee or member of the insured group, an individual certificate setting forth in
summary form a statement of the essential features of the insurance coverage of the
employee or member and to whom benefits are payable. If dependents or family members are
included in the coverage additional certificates need not be issued for delivery to the
dependents or family members. Any policy, except accidental death and dismemberment,
applied for that provides family coverage shall, as to such coverage of family members,
also provide that the benefits applicable for children shall be payable with respect to a
newly born child of the insured from the instant of such child's birth, to a child
adopted by the insured, regardless of the age at which the child was adopted, and to a
child who has been placed for adoption with the insured and for whom the application and
approval procedures for adoption pursuant to section 8-105 or 8-108 have been completed
to the same extent that such coverage applies to other members of the family. The
coverage for newly born or adopted children or children placed for adoption shall include
coverage of injury or sickness including the necessary care and treatment of medically
diagnosed congenital defects and birth abnormalities. If payment of a specific premium is
required to provide coverage for a child, the policy may require that notification of
birth, adoption or adoption placement of the child and payment of the required premium
must be furnished to the insurer within thirty-one days after the date of birth, adoption
or adoption placement in order to have the coverage continue beyond such thirty-one day
period.
3. A provision that to the group originally insured may be added from time to time
eligible new employees or members or dependents, as the case may be, in accordance with
the terms of the policy.
4. Each contract shall be so written that the corporation shall pay benefits:
(a) For performance of any surgical service that is covered by the terms of such
contract, regardless of the place of service.
(b) For any home health services that are performed by a licensed home health
agency and that a physician has prescribed in lieu of hospital services, as defined by
the director, providing the hospital services would have been covered.
(c) For any diagnostic service that a physician has performed outside a hospital in
lieu of inpatient service, providing the inpatient service would have been covered.
(d) For any service performed in a hospital's outpatient department or in a
freestanding surgical facility, providing such service would have been covered if
performed as an inpatient service.
5. A group disability insurance policy that provides coverage for the surgical
expense of a mastectomy shall also provide coverage incidental to the patient's covered
mastectomy for the expense of reconstructive surgery of the breast on which the
mastectomy was performed, surgery and reconstruction of the other breast to produce a
symmetrical appearance, prostheses, treatment of physical complications for all stages of
the mastectomy, including lymphedemas, and at least two external postoperative prostheses
subject to all of the terms and conditions of the policy.
6. A contract, except a supplemental contract covering a specified disease or other
limited benefits, that provides coverage for surgical services for a mastectomy shall
also provide coverage for mammography screening performed on dedicated equipment for
diagnostic purposes on referral by a patient's physician, subject to all of the terms and
conditions of the policy and according to the following guidelines:
(a) A baseline mammogram for a woman from age thirty-five to thirty-nine.
(b) A mammogram for a woman from age forty to forty-nine every two years or more
frequently based on the recommendation of the woman's physician.
(c) A mammogram every year for a woman fifty years of age and over.
7. Any contract that is issued to the insured and that provides coverage for
maternity benefits shall also provide that the maternity benefits apply to the costs of
the birth of any child legally adopted by the insured if all the following are true:
(a) The child is adopted within one year of birth.
(b) The insured is legally obligated to pay the costs of birth.
(c) All preexisting conditions and other limitations have been met by the insured.
(d) The insured has notified the insurer of the insured's acceptability to adopt
children pursuant to section 8-105, within sixty days after such approval or within sixty
days after a change in insurance policies, plans or companies.
8. The coverage prescribed by paragraph 7 of this subsection is excess to any other
coverage the natural mother may have for maternity benefits except coverage made
available to persons pursuant to title 36, chapter 29, but not including coverage made
available to persons defined as eligible under section 36-2901, paragraph 6, subdivisions
(b), (c), (d) and (e). If such other coverage exists the agency, attorney or individual
arranging the adoption shall make arrangements for the insurance to pay those costs that
may be covered under that policy and shall advise the adopting parent in writing of the
existence and extent of the coverage without disclosing any confidential information such
as the identity of the natural parent. The insured adopting parents shall notify their
insurer of the existence and extent of the other coverage.
B. Any policy that provides maternity benefits shall not restrict benefits for any
hospital length of stay in connection with childbirth for the mother or the newborn child
to less than forty-eight hours following a normal vaginal delivery or ninety-six hours
following a cesarean section. The policy shall not require the provider to obtain
authorization from the insurer for prescribing the minimum length of stay required by
this subsection. The policy may provide that an attending provider in consultation with
the mother may discharge the mother or the newborn child before the expiration of the
minimum length of stay required by this subsection. The insurer shall not:
1. Deny the mother or the newborn child eligibility or continued eligibility to
enroll or to renew coverage under the terms of the policy solely for the purpose of
avoiding the requirements of this subsection.
2. Provide monetary payments or rebates to mothers to encourage those mothers to
accept less than the minimum protections available pursuant to this subsection.
3. Penalize or otherwise reduce or limit the reimbursement of an attending provider
because that provider provided care to any insured under the policy in accordance with
this subsection.
4. Provide monetary or other incentives to an attending provider to induce that
provider to provide care to an insured under the policy in a manner that is inconsistent
with this subsection.
5. Except as described in subsection C of this section, restrict benefits for any
portion of a period within the minimum length of stay in a manner that is less favorable
than the benefits provided for any preceding portion of that stay.
C. Nothing in subsection B of this section:
1. Requires a mother to give birth in a hospital or to stay in the hospital for a
fixed period of time following the birth of the child.
2. Prevents an insurer from imposing deductibles, coinsurance or other cost sharing
in relation to benefits for hospital lengths of stay in connection with childbirth for a
mother or a newborn child under the policy, except that any coinsurance or other cost
sharing for any portion of a period within a hospital length of stay required pursuant to
subsection B of this section shall not be greater than the coinsurance or cost sharing
for any preceding portion of that stay.
3. Prevents an insurer from negotiating the level and type of reimbursement with a
provider for care provided in accordance with subsection B of this section.
D. Any contract that provides coverage for diabetes shall also provide coverage for
equipment and supplies that are medically necessary and that are prescribed by a health
care provider including:
1. Blood glucose monitors.
2. Blood glucose monitors for the legally blind.
3. Test strips for glucose monitors and visual reading and urine testing strips.
4. Insulin preparations and glucagon.
5. Insulin cartridges.
6. Drawing up devices and monitors for the visually impaired.
7. Injection aids.
8. Insulin cartridges for the legally blind.
9. Syringes and lancets including automatic lancing devices.
10. Prescribed oral agents for controlling blood sugar that are included on the plan
formulary.
11. To the extent coverage is required under medicare, podiatric appliances for
prevention of complications associated with diabetes.
12. Any other device, medication, equipment or supply for which coverage is required
under medicare from and after January 1, 1999. The coverage required in this paragraph
is effective six months after the coverage is required under medicare.
E. Nothing in subsection D of this section prohibits a group disability insurer
from imposing deductibles, coinsurance or other cost sharing in relation to benefits for
equipment or supplies for the treatment of diabetes.
F. Any contract that provides coverage for prescription drugs shall not limit or
exclude coverage for any prescription drug prescribed for the treatment of cancer on the
basis that the prescription drug has not been approved by the United States food and drug
administration for the treatment of the specific type of cancer for which the
prescription drug has been prescribed, if the prescription drug has been recognized as
safe and effective for treatment of that specific type of cancer in one or more of the
standard medical reference compendia prescribed in subsection G of this section or
medical literature that meets the criteria prescribed in subsection G of this section.
The coverage required under this subsection includes covered medically necessary services
associated with the administration of the prescription drug. This subsection does not:
1. Require coverage of any prescription drug used in the treatment of a type of
cancer if the United States food and drug administration has determined that the
prescription drug is contraindicated for that type of cancer.
2. Require coverage for any experimental prescription drug that is not approved for
any indication by the United States food and drug administration.
3. Alter any law with regard to provisions that limit the coverage of prescription
drugs that have not been approved by the United States food and drug administration.
4. Require reimbursement or coverage for any prescription drug that is not included
in the drug formulary or list of covered prescription drugs specified in the contract.
5. Prohibit a contract from limiting or excluding coverage of a prescription drug,
if the decision to limit or exclude coverage of the prescription drug is not based
primarily on the coverage of prescription drugs required by this section.
6. Prohibit the use of deductibles, coinsurance, copayments or other cost sharing
in relation to drug benefits and related medical benefits offered.
G. For the purposes of subsection F of this section:
1. The acceptable standard medical reference compendia are the following:
(a) The American medical association drug evaluations, a publication of the
American medical association.
(b) The American hospital formulary service drug information, a publication of the
American society of health system pharmacists.
(c) Drug information for the health care provider, a publication of the United
States pharmacopoeia convention.
2. Medical literature may be accepted if all of the following apply:
(a) At least two articles from major peer reviewed professional medical journals
have recognized, based on scientific or medical criteria, the drug's safety and
effectiveness for treatment of the indication for which the drug has been prescribed.
(b) No article from a major peer reviewed professional medical journal has
concluded, based on scientific or medical criteria, that the drug is unsafe or
ineffective or that the drug's safety and effectiveness cannot be determined for the
treatment of the indication for which the drug has been prescribed.
(c) The literature meets the uniform requirements for manuscripts submitted to
biomedical journals established by the international committee of medical journal editors
or is published in a journal specified by the United States department of health and
human services as acceptable peer reviewed medical literature pursuant to section
186(t)(2)(B) of the social security act (42 United States Code section 1395x(t)(2)(B)).
H. Any contract that is offered by a group disability insurer and that contains a
prescription drug benefit shall provide coverage of medical foods to treat inherited
metabolic disorders as provided by this section.
I. The metabolic disorders triggering medical foods coverage under this section
shall:
1. Be part of the newborn screening program prescribed in section 36-694.
2. Involve amino acid, carbohydrate or fat metabolism.
3. Have medically standard methods of diagnosis, treatment and monitoring including
quantification of metabolites in blood, urine or spinal fluid or enzyme or DNA
confirmation in tissues.
4. Require specially processed or treated medical foods that are generally
available only under the supervision and direction of a physician who is licensed
pursuant to title 32, chapter 13 or 17, that must be consumed throughout life and without
which the person may suffer serious mental or physical impairment.
J. Medical foods eligible for coverage under this section shall be prescribed or
ordered under the supervision of a physician licensed pursuant to title 32, chapter 13 or
17 as medically necessary for the therapeutic treatment of an inherited metabolic
disease.
K. An insurer shall cover at least fifty per cent of the cost of medical foods
prescribed to treat inherited metabolic disorders and covered pursuant to this section.
An insurer may limit the maximum annual benefit for medical foods under this section to
five thousand dollars, which applies to the cost of all prescribed modified low protein
foods and metabolic formula.
L. Any group disability policy that provides coverage for:
1. Prescription drugs shall also provide coverage for any prescribed drug or device
that is approved by the United States food and drug administration for use as a
contraceptive. A group disability insurer may use a drug formulary, multitiered drug
formulary or list but that formulary or list shall include oral, implant and injectable
contraceptive drugs, intrauterine devices and prescription barrier methods if the group
disability insurer does not impose deductibles, coinsurance, copayments or other cost
containment measures for contraceptive drugs that are greater than the deductibles,
coinsurance, copayments or other cost containment measures for other drugs on the same
level of the formulary or list.
2. Outpatient health care services shall also provide coverage for outpatient
contraceptive services. For the purposes of this paragraph, "outpatient contraceptive
services" means consultations, examinations, procedures and medical services provided on
an outpatient basis and related to the use of United States food and drug prescription
contraceptive methods to prevent unintended pregnancies.
M. Notwithstanding subsection L of this section, a religious employer whose
religious tenets prohibit the use of prescribed contraceptive methods may require that
the insurer provide a group disability policy without coverage for all federal food and
drug administration approved contraceptive methods. A religious employer shall submit a
written affidavit to the insurer stating that it is a religious employer. On receipt of
the affidavit, the insurer shall issue to the religious employer a group disability
policy that excludes coverage of prescription contraceptive methods. The insurer shall
retain the affidavit for the duration of the group disability policy and any renewals of
the policy. Before a policy is issued, every religious employer that invokes this
exemption shall provide prospective insureds written notice that the religious employer
refuses to cover all federal food and drug administration approved contraceptive methods
for religious reasons. This subsection shall not exclude coverage for prescription
contraceptive methods ordered by a health care provider with prescriptive authority for
medical indications other than to prevent an unintended pregnancy. An insurer may require
the insured to first pay for the prescription and then submit a claim to the insurer
along with evidence that the prescription is for a noncontraceptive purpose. An insurer
may charge an administrative fee for handling these claims. A religious employer shall
not discriminate against an employee who independently chooses to obtain insurance
coverage or prescriptions for contraceptives from another source.
N. For the purposes of:
1. This section:
(a) "Inherited metabolic disorder" means a disease caused by an inherited
abnormality of body chemistry and includes a disease tested under the newborn screening
program prescribed in section 36-694.
(b) "Medical foods" means modified low protein foods and metabolic formula.
(c) "Metabolic formula" means foods that are all of the following:
(i) Formulated to be consumed or administered enterally under the supervision of a
physician who is licensed pursuant to title 32, chapter 13 or 17.
(ii) Processed or formulated to be deficient in one or more of the nutrients
present in typical foodstuffs.
(iii) Administered for the medical and nutritional management of a person who has
limited capacity to metabolize foodstuffs or certain nutrients contained in the
foodstuffs or who has other specific nutrient requirements as established by medical
evaluation.
(iv) Essential to a person's optimal growth, health and metabolic homeostasis.
(d) "Modified low protein foods" means foods that are all of the following:
(i) Formulated to be consumed or administered enterally under the supervision of a
physician who is licensed pursuant to title 32, chapter 13 or 17.
(ii) Processed or formulated to contain less than one gram of protein per unit of
serving, but does not include a natural food that is naturally low in protein.
(iii) Administered for the medical and nutritional management of a person who has
limited capacity to metabolize foodstuffs or certain nutrients contained in the
foodstuffs or who has other specific nutrient requirements as established by medical
evaluation.
(iv) Essential to a person's optimal growth, health and metabolic homeostasis.
2. Subsection A of this section, the term "child", for purposes of initial coverage
of an adopted child or a child placed for adoption but not for purposes of termination of
coverage of such child, means a person under the age of eighteen years.
3. Subsection M of this section, "religious employer" means an entity for which all
of the following apply:
(a) The entity primarily employs persons who share the religious tenets of the
entity.
(b) The entity serves primarily persons who share the religious tenets of the
entity.
(c) The entity is a nonprofit organization as described in section 6033(a)(2)(A)i
or iii of the internal revenue code of 1986, as amended.
20-1403 Direct payment of hospital and medical services
Any group disability policy may provide that all or any portion of any indemnities
provided by any such policy on account of hospital, nursing, medical or surgical services
may, at the insurer's option, be paid directly to the hospital or person rendering such
services, but the policy may not require that the service be rendered by a particular
hospital or person. Payments so made shall discharge the insurer's obligation with
respect to the amount of insurance so paid.
20-1404.01 Blanket disability insurance; clinical trials; cancer; definitions
A. A blanket disability insurer is not obligated to pay any costs, other than
patient costs, that are directly associated with a cancer clinical trial that is offered
in this state and in which the insured participates voluntarily. A cancer clinical trial
is a course of treatment in which all of the following apply:
1. The treatment is part of a scientific study of a new therapy or intervention
that is being conducted at an institution in this state, that is for the treatment,
palliation or prevention of cancer in humans and in which the scientific study includes
all of the following:
(a) Specific goals.
(b) A rationale and background for the study.
(c) Criteria for patient selection.
(d) Specific directions for administering the therapy and monitoring patients.
(e) A definition of quantitative measures for determining treatment response.
(f) Methods for documenting and treating adverse reactions.
2. The treatment is being provided as part of a study being conducted in a phase I,
phase II, phase III or phase IV cancer clinical trial.
3. The treatment is being provided as part of a study being conducted in accordance
with a clinical trial approved by at least one of the following:
(a) One of the national institutes of health.
(b) A national institutes of health cooperative group or center.
(c) The United States food and drug administration in the form of an
investigational new drug application.
(d) The United States department of defense.
(e) The United States department of veterans affairs.
(f) A qualified research entity that meets the criteria established by the national
institutes of health for grant eligibility.
(g) A panel of qualified recognized experts in clinical research within academic
health institutions in this state.
4. The proposed treatment or study has been reviewed and approved by an
institutional review board of an institution in this state.
5. The personnel providing the treatment or conducting the study:
(a) Are providing the treatment or conducting the study within their scope of
practice, experience and training and are capable of providing the treatment because of
their experience, training and volume of patients treated to maintain expertise.
(b) Agree to accept reimbursement as payment in full from the insurer at the rates
that are established by the insurer and that are not more than the level of reimbursement
applicable to other similar services provided by health care providers with the insurer's
provider network.
6. There is no clearly superior, noninvestigational treatment alternative.
7. The available clinical or preclinical data provide a reasonable expectation that
the treatment will be at least as efficacious as any noninvestigational alternative.
B. Pursuant to the patient informed consent document, no party is liable for
damages associated with the treatment provided during any phase of a cancer clinical
trial.
C. Each contract delivered or issued for delivery in this state shall provide
benefits under the contract, and those benefits shall not supplant any portion of the
clinical trial that is customarily paid for by government, biotechnical, pharmaceutical
or medical device industry sources.
D. This section does not create any private right or cause of action for or on
behalf of any patient against the insurer. This section provides solely an administrative
remedy to the director for any violation of this section or any related rule.
E. Nothing in this section prohibits the insurer from imposing deductibles,
coinsurance or other cost sharing measures in relation to benefits provided pursuant to
this section.
F. For the purposes of this section:
1. "Cooperative group" means a formal network of facilities that collaborates on
research projects and that has an established national institutes of health approved peer
review program operating within the group, including the national cancer institute
clinical cooperative group and the national cancer institute community clinical oncology
program.
2. "Institutional review board" means any board, committee or other group that is
both:
(a) Formally designated by an institution to approve the initiation of and to
conduct periodic review of biomedical research involving human subjects and in which the
primary purpose of such review is to assure the protection of the rights and welfare of
the human subjects and not to review a clinical trial for scientific merit.
(b) Approved by the national institutes of health office for protection from
research risks.
3. "Multiple project assurance contract" means a contract between an institution
and the United States department of health and human services that defines the
relationship of the institution to the United States department of health and human
services and that sets out the responsibilities of the institution and the procedures
that will be used by the institution to protect human subjects.
4. "Patient" means the insured or the insured's covered dependent.
5. "Patient cost" means any fee or expense that is covered under the contract and
that is for a service or treatment that would be required if the patient were receiving
usual and customary care. Patient cost does not include the cost:
(a) Of any drug or device provided in a phase I cancer clinical trial.
(b) Of any investigational drug or device.
(c) Of nonhealth services that might be required for a person to receive treatment
or intervention.
(d) Of managing the research of the clinical trial.
(e) That would not be covered under the patient's contract.
(f) Of treatment or services provided outside this state.
20-1404 Blanket disability insurance; definitions
A. Blanket disability insurance is that form of disability insurance covering
special groups of persons as enumerated in one of the following paragraphs:
1. Under a policy or contract issued to any common carrier, which shall be deemed
the policyholder, covering a group defined as all persons who may become passengers on
such common carrier.
2. Under a policy or contract issued to an employer, who shall be deemed the
policyholder, covering all employees or any group of employees defined by reference to
exceptional hazards incident to such employment. Dependents of the employees and guests
of the employer may also be included where exposed to the same hazards.
3. Under a policy or contract issued to a college, school or other institution of
learning or to the head or principal thereof, who or which shall be deemed the
policyholder, covering students or teachers.
4. Under a policy or contract issued in the name of any volunteer fire department
or first aid or other such volunteer group, or agency having jurisdiction thereof, which
shall be deemed the policyholder, covering all of the members of such fire department or
group.
5. Under a policy or contract issued to a creditor, who shall be deemed the
policyholder, to insure debtors of the creditor.
6. Under a policy or contract issued to a sports team or to a camp or sponsor
thereof, which team or camp or sponsor thereof shall be deemed the policyholder, covering
members or campers.
7. Under a policy or contract that is issued to any other substantially similar
group and that, in the discretion of the director, may be subject to the issuance of a
blanket disability policy or contract.
B. An individual application need not be required from a person covered under a
blanket disability policy or contract, nor shall it be necessary for the insurer to
furnish each person with a certificate.
C. All benefits under any blanket disability policy shall be payable to the person
insured, or to the insured's designated beneficiary or beneficiaries, or to the insured's
estate, except that if the person insured is a minor, such benefits may be made payable
to the insured's parent or guardian or any other person actually supporting the insured,
and except that the policy may provide that all or any portion of any indemnities
provided by any such policy on account of hospital, nursing, medical or surgical services
may, at the insurer's option, be paid directly to the hospital or person rendering such
services, but the policy may not require that the service be rendered by a particular
hospital or person. Payment so made shall discharge the insurer's obligation with respect
to the amount of insurance so paid.
D. Nothing contained in this section shall be deemed to affect the legal liability
of policyholders for the death of or injury to any member of the group.
E. Any policy or contract, except accidental death and dismemberment, applied for
that provides family coverage shall, as to such coverage of family members, also provide
that the benefits applicable for children shall be payable with respect to a newly born
child of the insured from the instant of such child's birth, to a child adopted by the
insured, regardless of the age at which the child was adopted, and to a child who has
been placed for adoption with the insured and for whom the application and approval
procedures for adoption pursuant to section 8-105 or 8-108 have been completed to the
same extent that such coverage applies to other members of the family. The coverage for
newly born or adopted children or children placed for adoption shall include coverage of
injury or sickness including necessary care and treatment of medically diagnosed
congenital defects and birth abnormalities. If payment of a specific premium is required
to provide coverage for a child, the policy or contract may require that notification of
birth, adoption or adoption placement of the child and payment of the required premium
must be furnished to the insurer within thirty-one days after the date of birth, adoption
or adoption placement in order to have the coverage continue beyond the thirty-one day
period.
F. Each policy or contract shall be so written that the insurer shall pay benefits:
1. For performance of any surgical service that is covered by the terms of such
contract, regardless of the place of service.
2. For any home health services that are performed by a licensed home health agency
and that a physician has prescribed in lieu of hospital services, as defined by the
director, providing the hospital services would have been covered.
3. For any diagnostic service that a physician has performed outside a hospital in
lieu of inpatient service, providing the inpatient service would have been covered.
4. For any service performed in a hospital's outpatient department or in a
freestanding surgical facility, providing such service would have been covered if
performed as an inpatient service.
G. A blanket disability insurance policy that provides coverage for the surgical
expense of a mastectomy shall also provide coverage incidental to the patient's covered
mastectomy for the expense of reconstructive surgery of the breast on which the
mastectomy was performed, surgery and reconstruction of the other breast to produce a
symmetrical appearance, prostheses, treatment of physical complications for all stages of
the mastectomy, including lymphedemas, and at least two external postoperative prostheses
subject to all of the terms and conditions of the policy.
H. A contract that provides coverage for surgical services for a mastectomy shall
also provide coverage for mammography screening performed on dedicated equipment for
diagnostic purposes on referral by a patient's physician, subject to all of the terms and
conditions of the policy and according to the following guidelines:
1. A baseline mammogram for a woman from age thirty-five to thirty-nine.
2. A mammogram for a woman from age forty to forty-nine every two years or more
frequently based on the recommendation of the woman's physician.
3. A mammogram every year for a woman fifty years of age and over.
I. Any contract that is issued to the insured and that provides coverage for
maternity benefits shall also provide that the maternity benefits apply to the costs of
the birth of any child legally adopted by the insured if all the following are true:
1. The child is adopted within one year of birth.
2. The insured is legally obligated to pay the costs of birth.
3. All preexisting conditions and other limitations have been met by the insured.
4. The insured has notified the insurer of his acceptability to adopt children
pursuant to section 8-105, within sixty days after such approval or within sixty days
after a change in insurance policies, plans or companies.
J. The coverage prescribed by subsection I of this section is excess to any other
coverage the natural mother may have for maternity benefits except coverage made
available to persons pursuant to title 36, chapter 29, but not including coverage made
available to persons defined as eligible under section 36-2901, paragraph 6, subdivisions
(b), (c), (d) and (e). If such other coverage exists the agency, attorney or individual
arranging the adoption shall make arrangements for the insurance to pay those costs that
may be covered under that policy and shall advise the adopting parent in writing of the
existence and extent of the coverage without disclosing any confidential information such
as the identity of the natural parent. The insured adopting parents shall notify their
insurer of the existence and extent of the other coverage.
K. Any contract that provides maternity benefits shall not restrict benefits for
any hospital length of stay in connection with childbirth for the mother or the newborn
child to less than forty-eight hours following a normal vaginal delivery or ninety-six
hours following a cesarean section. The contract shall not require the provider to obtain
authorization from the insurer for prescribing the minimum length of stay required by
this subsection. The contract may provide that an attending provider in consultation with
the mother may discharge the mother or the newborn child before the expiration of the
minimum length of stay required by this subsection. The insurer shall not:
1. Deny the mother or the newborn child eligibility or continued eligibility to
enroll or to renew coverage under the terms of the contract solely for the purpose of
avoiding the requirements of this subsection.
2. Provide monetary payments or rebates to mothers to encourage those mothers to
accept less than the minimum protections available pursuant to this subsection.
3. Penalize or otherwise reduce or limit the reimbursement of an attending provider
because that provider provided care to any insured under the contract in accordance with
this subsection.
4. Provide monetary or other incentives to an attending provider to induce that
provider to provide care to an insured under the contract in a manner that is
inconsistent with this subsection.
5. Except as described in subsection L of this section, restrict benefits for any
portion of a period within the minimum length of stay in a manner that is less favorable
than the benefits provided for any preceding portion of that stay.
L. Nothing in subsection K of this section:
1. Requires a mother to give birth in a hospital or to stay in the hospital for a
fixed period of time following the birth of the child.
2. Prevents an insurer from imposing deductibles, coinsurance or other cost sharing
in relation to benefits for hospital lengths of stay in connection with childbirth for a
mother or a newborn child under the contract, except that any coinsurance or other cost
sharing for any portion of a period within a hospital length of stay required pursuant to
subsection K of this section shall not be greater than the coinsurance or cost sharing
for any preceding portion of that stay.
3. Prevents an insurer from negotiating the level and type of reimbursement with a
provider for care provided in accordance with subsection K of this section.
M. Any contract that provides coverage for diabetes shall also provide coverage for
equipment and supplies that are medically necessary and that are prescribed by a health
care provider including:
1. Blood glucose monitors.
2. Blood glucose monitors for the legally blind.
3. Test strips for glucose monitors and visual reading and urine testing strips.
4. Insulin preparations and glucagon.
5. Insulin cartridges.
6. Drawing up devices and monitors for the visually impaired.
7. Injection aids.
8. Insulin cartridges for the legally blind.
9. Syringes and lancets including automatic lancing devices.
10. Prescribed oral agents for controlling blood sugar that are included on the plan
formulary.
11. To the extent coverage is required under medicare, podiatric appliances for
prevention of complications associated with diabetes.
12. Any other device, medication, equipment or supply for which coverage is required
under medicare from and after January 1, 1999. The coverage required in this paragraph
is effective six months after the coverage is required under medicare.
N. Nothing in subsection M of this section prohibits a blanket disability insurer
from imposing deductibles, coinsurance or other cost sharing in relation to benefits for
equipment or supplies for the treatment of diabetes.
O. Any contract that provides coverage for prescription drugs shall not limit or
exclude coverage for any prescription drug prescribed for the treatment of cancer on the
basis that the prescription drug has not been approved by the United States food and drug
administration for the treatment of the specific type of cancer for which the
prescription drug has been prescribed, if the prescription drug has been recognized as
safe and effective for treatment of that specific type of cancer in one or more of the
standard medical reference compendia prescribed in subsection P of this section or
medical literature that meets the criteria prescribed in subsection P of this section.
The coverage required under this subsection includes covered medically necessary services
associated with the administration of the prescription drug. This subsection does not:
1. Require coverage of any prescription drug used in the treatment of a type of
cancer if the United States food and drug administration has determined that the
prescription drug is contraindicated for that type of cancer.
2. Require coverage for any experimental prescription drug that is not approved for
any indication by the United States food and drug administration.
3. Alter any law with regard to provisions that limit the coverage of prescription
drugs that have not been approved by the United States food and drug administration.
4. Require reimbursement or coverage for any prescription drug that is not included
in the drug formulary or list of covered prescription drugs specified in the contract.
5. Prohibit a contract from limiting or excluding coverage of a prescription drug,
if the decision to limit or exclude coverage of the prescription drug is not based
primarily on the coverage of prescription drugs required by this section.
6. Prohibit the use of deductibles, coinsurance, copayments or other cost sharing
in relation to drug benefits and related medical benefits offered.
P. For the purposes of subsection O of this section:
1. The acceptable standard medical reference compendia are the following:
(a) The American medical association drug evaluations, a publication of the
American medical association.
(b) The American hospital formulary service drug information, a publication of the
American society of health system pharmacists.
(c) Drug information for the health care provider, a publication of the United
States pharmacopoeia convention.
2. Medical literature may be accepted if all of the following apply:
(a) At least two articles from major peer reviewed professional medical journals
have recognized, based on scientific or medical criteria, the drug's safety and
effectiveness for treatment of the indication for which the drug has been prescribed.
(b) No article from a major peer reviewed professional medical journal has
concluded, based on scientific or medical criteria, that the drug is unsafe or
ineffective or that the drug's safety and effectiveness cannot be determined for the
treatment of the indication for which the drug has been prescribed.
(c) The literature meets the uniform requirements for manuscripts submitted to
biomedical journals established by the international committee of medical journal editors
or is published in a journal specified by the United States department of health and
human services as acceptable peer reviewed medical literature pursuant to section
186(t)(2)(B) of the social security act (42 United States Code section 1395x(t)(2)(B)).
Q. Any contract that is offered by a blanket disability insurer and that contains a
prescription drug benefit shall provide coverage of medical foods to treat inherited
metabolic disorders as provided by this section.
R. The metabolic disorders triggering medical foods coverage under this section
shall:
1. Be part of the newborn screening program prescribed in section 36-694.
2. Involve amino acid, carbohydrate or fat metabolism.
3. Have medically standard methods of diagnosis, treatment and monitoring including
quantification of metabolites in blood, urine or spinal fluid or enzyme or DNA
confirmation in tissues.
4. Require specially processed or treated medical foods that are generally
available only under the supervision and direction of a physician who is licensed
pursuant to title 32, chapter 13 or 17, that must be consumed throughout life and without
which the person may suffer serious mental or physical impairment.
S. Medical foods eligible for coverage under this section shall be prescribed or
ordered under the supervision of a physician licensed pursuant to title 32, chapter 13 or
17 as medically necessary for the therapeutic treatment of an inherited metabolic
disease.
T. An insurer shall cover at least fifty per cent of the cost of medical foods
prescribed to treat inherited metabolic disorders and covered pursuant to this section.
An insurer may limit the maximum annual benefit for medical foods under this section to
five thousand dollars which applies to the cost of all prescribed modified low protein
foods and metabolic formula.
U. Any blanket disability policy that provides coverage for:
1. Prescription drugs shall also provide coverage for any prescribed drug or device
that is approved by the United States food and drug administration for use as a
contraceptive. A blanket disability insurer may use a drug formulary, multitiered drug
formulary or list but that formulary or list shall include oral, implant and injectable
contraceptive drugs, intrauterine devices and prescription barrier methods if the blanket
disability insurer does not impose deductibles, coinsurance, copayments or other cost
containment measures for contraceptive drugs that are greater than the deductibles,
coinsurance, copayments or other cost containment measures for other drugs on the same
level of the formulary or list.
2. Outpatient health care services shall also provide coverage for outpatient
contraceptive services. For the purposes of this paragraph, "outpatient contraceptive
services" means consultations, examinations, procedures and medical services provided on
an outpatient basis and related to the use of United States food and drug prescription
contraceptive methods to prevent unintended pregnancies.
V. Notwithstanding subsection U of this section, a religious employer whose
religious tenets prohibit the use of prescribed contraceptive methods may require that
the insurer provide a blanket disability policy without coverage for all federal food and
drug administration approved contraceptive methods. A religious employer shall submit a
written affidavit to the insurer stating that it is a religious employer. On receipt of
the affidavit, the insurer shall issue to the religious employer a blanket disability
policy that excludes coverage of prescription contraceptive methods. The insurer shall
retain the affidavit for the duration of the blanket disability policy and any renewals
of the policy. Before a policy is issued, every religious employer that invokes this
exemption shall provide prospective insureds written notice that the religious employer
refuses to cover all federal food and drug administration approved contraceptive methods
for religious reasons. This subsection shall not exclude coverage for prescription
contraceptive methods ordered by a health care provider with prescriptive authority for
medical indications other than to prevent an unintended pregnancy. An insurer may require
the insured to first pay for the prescription and then submit a claim to the insurer
along with evidence that the prescription is for a noncontraceptive purpose. An insurer
may charge an administrative fee for handling these claims under this paragraph. A
religious employer shall not discriminate against an employee who independently chooses
to obtain insurance coverage or prescriptions for contraceptives from another source.
W. For the purposes of:
1. This section:
(a) "Inherited metabolic disorder" means a disease caused by an inherited
abnormality of body chemistry and includes a disease tested under the newborn screening
program prescribed in section 36-694.
(b) "Medical foods" means modified low protein foods and metabolic formula.
(c) "Metabolic formula" means foods that are all of the following:
(i) Formulated to be consumed or administered enterally under the supervision of a
physician who is licensed pursuant to title 32, chapter 13 or 17.
(ii) Processed or formulated to be deficient in one or more of the nutrients
present in typical foodstuffs.
(iii) Administered for the medical and nutritional management of a person who has
limited capacity to metabolize foodstuffs or certain nutrients contained in the
foodstuffs or who has other specific nutrient requirements as established by medical
evaluation.
(iv) Essential to a person's optimal growth, health and metabolic homeostasis.
(d) "Modified low protein foods" means foods that are all of the following:
(i) Formulated to be consumed or administered enterally under the supervision of a
physician who is licensed pursuant to title 32, chapter 13 or 17.
(ii) Processed or formulated to contain less than one gram of protein per unit of
serving, but does not include a natural food that is naturally low in protein.
(iii) Administered for the medical and nutritional management of a person who has
limited capacity to metabolize foodstuffs or certain nutrients contained in the
foodstuffs or who has other specific nutrient requirements as established by medical
evaluation.
(iv) Essential to a person's optimal growth, health and metabolic homeostasis.
2. Subsection E of this section, the term "child", for purposes of initial coverage
of an adopted child or a child placed for adoption but not for purposes of termination of
coverage of such child, means a person under the age of eighteen years.
3. Subsection V of this section, "religious employer" means an entity for which all
of the following apply:
(a) The entity primarily employs persons who share the religious tenets of the
entity.
(b) The entity serves primarily persons who share the religious tenets of the
entity.
(c) The entity is a nonprofit organization as described in section 6033(a)(2)(A)i
or iii of the internal revenue code of 1986, as amended.
20-1405 Provisions of group and blanket disability policy
The provisions of article 4 of chapter 6 of this title shall not apply to group
disability or blanket disability insurance policies, but no such policy of group or
blanket disability insurance shall contain any provision relative to notice or proof of
loss, or to the time for paying benefits, or to the time within which suit may be brought
on the policy, which is less favorable to the individuals insured than would be permitted
by the standard provisions required for individual disability insurance policies.
20-1406.01 Prohibiting denial of chiropractic contract benefits; direct reimbursement
If a group disability insurance contract or blanket disability insurance contract
provides for or offers reimbursement for any service which is within the lawful scope of
the practice of a chiropractor holding a certificate or license issued by the state in
which the services are rendered, a subscriber covered under such contract may select
either a physician or chiropractor to provide the examination, care or treatment for
which the subscriber is eligible and which falls within the scope of practice of the
chiropractor or physician. Reimbursement for the cost of the service may be made
directly to the person licensed or certified pursuant to title 32, chapter 8 or 13 or to
the subscriber if the cost of the service has not been reimbursed to another provider or
health care institution.
20-1406.02 Prohibiting denial of psychologist contract benefits
If a group disability insurance contract or blanket disability insurance contract
provides for or offers reimbursement for any service which is within the lawful scope of
the practice of a psychologist holding a certificate or license issued by the state in
which the services are rendered, a subscriber covered under such contract may select
either a physician or psychologist to provide the examination, care or treatment for
which the subscriber is eligible and which falls within the scope of practice of the
psychologist or physician.
20-1406.03 Prohibiting denial of contract benefits; nursing; reimbursement
If a group disability or blanket disability insurance contract provides or offers
reimbursement for any service which is within the scope of the practice of a registered
nurse practitioner or a certified registered nurse qualified under the rules adopted by
the state board of nursing regarding extended nursing practice and licensed pursuant to
title 32, chapter 15, the contract benefits shall not be denied to the subscriber who
receives the services of the certified registered nurse or registered nurse
practitioner. The cost of the service may be reimbursed directly to the certified
registered nurse or registered nurse practitioner or to the subscriber if another
provider or health care institution was not reimbursed for the cost of the service.
20-1406.04 Prohibiting denial of occupational or physical therapist contract benefits If a group disability or blanket disability insurance contract provides coverage for occupational or physical therapy services, and provides both an in-network and out-of-network benefit, an insurer shall not deny a claim for covered occupational or physical therapy services obtained out-of-network solely on the basis that a physician did not refer the insured to the occupational or physical therapist or prescribe specific occupational or physical therapy services. An insurer may impose coinsurance, copayments, deductibles, dollar caps, limitations on the number of visits, provider network restrictions or other cost containment measures as a condition of coverage of occupational and physical therapy services for both in-network and out-of-network benefits. 20-1406 Prohibiting denial of certain contract benefits
A. Notwithstanding any provision of any group disability insurance contract or
blanket disability insurance contract, benefits shall not be denied under the contract
for any medical or surgical service performed by a holder of a license issued pursuant to
title 32, chapter 7 or 11, if the service performed is within the lawful scope of such
person's license, and if the service is surgical, such person is a member of the staff of
an accredited hospital, and if such contract would have provided benefits if such service
had been performed by a holder of a license issued pursuant to title 32, chapter 13.
B. If any group disability insurance contract or blanket disability insurance
contract provides for or offers eye care services, the subscriber shall have freedom of
choice to select either an optometrist or a physician and surgeon skilled in diseases of
the eye to provide the examination, care, or treatment for which the subscriber is
eligible and which falls within the scope of practice of the optometrist or physician and
surgeon. Unless such group disability insurance contract or blanket disability insurance
contract otherwise provides, there shall be no reimbursement for ophthalmic materials,
lenses, spectacles, eyeglasses, or appurtenances thereto.
C. If any group disability insurance contract is written to provide coverage for
psychiatric, drug abuse or alcoholism services, reimbursement for such services shall be
made in accordance with the terms of the contract without regard to whether the covered
services are rendered in a psychiatric special hospital or general
hospital. Reimbursement for the cost of the service may be made directly to the person
licensed or certified pursuant to title 32, chapter 13 or 19.1 or to the subscriber if
the cost of the service has not been reimbursed to another provider or health care
institution.
20-1407 Handicapped children
A group hospital or medical expense insurance policy delivered or issued for
delivery in this state more than one hundred twenty days after the effective date of this
section, which provides that coverage of a dependent child of an employee or other member
of the covered group shall terminate upon attainment of the limiting age for dependent
children specified in the policy, shall also provide in substance that attainment of such
limiting age shall not operate to terminate the coverage of such child while the child is
and continues to be both incapable of self-sustaining employment by reason of mental
retardation or physical handicap and chiefly dependent upon the employee or member for
support and maintenance. Proof of such incapacity and dependency shall be furnished to
the insurer by the employee or member within thirty-one days of the child's attainment of
the limiting age and subsequently as may be required by the insurer, but not more
frequently than annually after the two-year period following the child's attainment of
the limiting age.
20-1408 Right to obtain individual policy; requirements; exceptions; definition
A. Each group disability insurance policy delivered or issued for delivery in this
state shall provide for the right of all persons covered under the group contract to
convert to an individual disability policy on the death of the named insured, the entry
of a decree of dissolution of marriage or any other condition other than the failure of
the insured to pay the required premium specifically stated in the policy under which
coverage would otherwise terminate as to a covered spouse or covered dependent children
of the named insured.
B. All persons exercising their right to an individual disability policy under
subsection A are entitled to have an individual disability policy issued to them by the
issuer on a form provided for conversion which provides coverage most similar to that
provided under the group policy. Each person entitled to have a conversion policy issued
to him may elect a lesser form of coverage.
C. A written application and the first premium payment for the converted policy
shall be made to the insurer within thirty-one days following termination of coverage
under the existing policy. A monthly premium rate shall be offered to the person
exercising continuation or conversion rights, and payment of one monthly premium shall be
deemed sufficient consideration to enact the continuation or conversion policy. The
effective date of the conversion policy is the day following the termination of insurance
under the group policy.
D. Coverage provided through the conversion policy shall be without additional
evidence of insurability and shall not impose any preexisting condition limitations,
exclusions or other contractual time limitations other than those remaining unexpired
under the policy or contract from which conversion is exercised.
E. Conversion of coverage may, at the option of the spouse exercising the right,
include covered dependent children for whom the spouse has responsibility for care or
support.
F. The insurer may elect to provide group insurance coverage in lieu of the
issuance of a converted individual policy.
G. Each certificate of coverage shall include notice of the conversion privilege.
H. This section does not apply to disability income policies, to accidental death
or dismemberment policies or to single term nonrenewable policies.
I. Conversion is not available to a person eligible for medicare or eligible for or
covered by other similar disability benefits which together with the conversion coverage
would constitute overinsurance.
J. At the time of filing a petition for dissolution of marriage, the clerk of the
court shall provide to the petitioner for a dissolution of marriage two copies of the
notice of the right of a dependent spouse to convert health insurance coverage under this
section. The petitioner shall cause one copy of the notice to be served on the
respondent together with a copy of the petition, summons and preliminary injunction. The
director shall prepare the notice which must include a summary of this section. The
clerk of the court or the director is not liable for damages arising from information
contained in or omitted from the notices prepared or provided under this section.
K. This section also applies to blanket accident and sickness insurance policies
and to all disability insurance issued by hospital, medical, dental and optometric
service corporations, health care services organizations and fraternal benefit societies.
L. Any person who is a United States armed forces reservist, who is ordered to
active military duty on or after August 22, 1990 and who had coverage under a disability
insurance policy provided by the person's employer at such time shall have the right to
reinstate such coverage upon release from active military duty subject to the following
conditions:
1. Following reemployment by the reservist's former employer, the reservist shall
make written application to the insurer within ninety days of discharge from active
military duty or within one year of hospitalization continuing after discharge. Coverage
shall be effective upon receipt of application by the insurer.
2. The coverage reinstated shall be the same coverage provided by the employer to
other employees and their dependents in the employer group health insurance plan at the
time of application.
3. The insurer may exclude from such coverage any health or physical condition
arising during and occurring as a direct result of active military duty.
M. Each dependent of a person eligible for reinstatement under this provision shall
be afforded the same rights and be subject to the same conditions as the insured, if the
dependent was insured under the disability insurance policy at the time the eligible
person entered active duty. Any dependent of such person born during the period of
active military duty shall have the same rights as other dependents noted in this
section.
N. The director shall adopt emergency rules applicable to persons who are leaving
active service in the armed forces of the United States and returning to civilian status
consistent with the provisions of subsection L of this section, including:
1. Conditions of eligibility.
2. Coverage of dependents.
3. Preexisting conditions.
4. Termination of insurance.
5. Probationary periods.
6. Limitations.
7. Exceptions.
8. Reductions.
9. Elimination periods.
10. Requirements for replacement.
11. Any other conditions of group and blanket disability contracts.
O. A group policy or any conversion policy that is issued under this section shall
not be cancelled or nonrenewed except if:
1. The individual has failed to pay premiums or contributions pursuant to the terms
of the health insurance coverage or the insurer has not received premium payments in a
timely manner.
2. The individual has performed an act or practice that constitutes fraud or has
made an intentional misrepresentation of material fact under the terms of the coverage.
3. The insurer has ceased to offer coverage to individuals that is consistent with
the requirements of sections 20-1379 and 20-1380.
4. In the case of an insurer that offers health care coverage in this state through
a network plan, no member of the group resides, lives or works in the service area served
by the network plan or in an area for which the insurer is authorized to transact
business but only if the coverage is terminated uniformly without regard to any health
status-related factor of any covered individual.
5. In the case of an insurer who offers health coverage in the group market only
through one or more bona fide associations, the membership of an employer in the
association has ceased but only if that coverage is terminated uniformly without regard
to any health status-related factor or any covered individual.
P. A conversion policy may be modified if the modification complies with the notice
and disclosure requirements set forth in the group policy and evidence of coverage. A
modification of a conversion policy which has already been issued to an insured shall not
result in the effective elimination of any benefit originally included in the conversion
policy.
Q. For the purposes of this section, "network plan" means a health care plan
provided by an insurer under which the financing and delivery of health care services are
provided, in whole or in part, through a defined set of providers under contract with the
insurer.
20-1409 Right to open enrollment period; insureds; definition
A. With respect to insureds who are members of a group with more than one carrier,
if there is an insolvency of an insurer, all other carriers that participated in an open
enrollment with the insolvent insurer at a group's last regular open enrollment period
shall offer insureds of the insolvent insurer who are members of that group a thirty day
open enrollment period beginning on the date the insolvency is declared. Each carrier
shall offer these insureds the same coverages and rates that it currently offers to other
insureds in the group without any waiting periods or preexisting conditions, exclusions,
limitations or restrictions. On declaration of insolvency, the insurer shall notify the
remaining carrier or carriers of the insolvency and notify its members of their right to
open enrollment as provided in this section.
B. Entitlement to continuation of benefits under subsection A is contingent on
timely payment of the premium by the insured or by the insured's representative to the
carrier selected through the open enrollment.
C. For purposes of this section, "carrier" means an insurer, a health care services
organization, a hospital service corporation, a medical service corporation, a dental
service corporation, an optometric service corporation or a hospital, medical, dental and
optometric service corporation or any combination.
20-1410 Mail order prescription drugs; prohibition
From and after September 30, 1990, no medical benefits contract on a group basis
delivered or issued for delivery in this state, whether issued by an insurance company, a
hospital service corporation, a medical service corporation or a health care services
organization, may require any person covered under the policy to purchase prescription
drugs exclusively from a mail order pharmacy as a condition of obtaining benefits for the
drugs. Under this section the receipt of a discount for a prescription drug off of a
mail order pharmacy's regular list price is not construed as a requirement to purchase
prescription drugs.
20-1411 Eligibility; prohibiting cancellation because of eligibility for certain benefits
A. An insurer issuing group disability or blanket disability insurance contracts
shall not consider the availability of or a person's eligibility for medical assistance
pursuant to title XIX of the social security act (P.L. 89-97; 79 Stat. 344; 42 United
States Code section 1396a (1980)) when considering eligibility for coverage or
calculating payments under its plans for eligible policyholders.
B. To the extent that payment for covered expenses has been made under the state
program pursuant to title XIX of the social security act for health care items or
services furnished to an individual, the state is considered to have acquired the rights
of the individual to payment by any other party for those health care items or
services. On presentation of proof that the state program pursuant to title XIX of the
social security act has paid for covered items or services, the insurer shall make
payments to the state program pursuant to title XIX of the social security act according
to the coverage provided in the policy or certificate.
C. An insurer issuing group disability or blanket disability insurance contracts
may not impose on a state agency that has been assigned the rights of an individual who
is eligible for medical assistance and who is covered for health benefits from the
insurer any requirements that are different from the requirements applicable to an agent
or assignee of any other covered individual.
D. An insurer issuing group disability or blanket disability insurance contracts
shall not cancel or fail to renew the contract of any person based on that person's
eligibility for or enrollment in a program funded under title XIX of the social security
act or title 36, chapter 29 or 34. Nothing in this section prohibits cancellation or
failure to renew for nonpayment of monies due under the contract.
20-1412 Group and blanket disability insurance policies or contracts; varying copayments and deductibles allowed
A. Except as provided in sections 20-1379 and 20-2304, a group disability insurer
or a blanket disability insurer may offer one or more disability insurance policies or
contracts that contain a choice of deductibles, coinsurance, copayments, out-of-pocket
and any other cost sharing levels. Plans offered under this section shall clearly
disclose in marketing materials, certificates of coverage and contracts the insured's
financial responsibilities. A group disability insurer or blanket disability insurer that
offers such a disability insurance policy or contract shall continue to provide any
mandated health coverage that is required by this state or by federal law.
B. This section does not prohibit a health benefits plan that is intended to
qualify as a high deductible health plan as defined by 26 United States Code section
223(c)(2) from requiring the application of deductibles, copayments or coinsurance to
benefits provided under the health benefits plan. 20-1501 Scope of article
This article shall not apply to vehicle, casualty, inland marine or ocean marine
insurance, or reinsurance.
20-1502 "Fire insurance" defined
"Fire insurance" is insurance against the perils of fire or lightning as written
under the ARIZONA standard fire policy.
20-1503 ARIZONA standard fire policy
A. No policy of fire insurance covering property located in this state shall be
made, issued or delivered unless it conforms as to all provisions and the sequence
thereof with the basic policy commonly known as the New York standard fire policy,
edition of 1943. Such policy is designated as the ARIZONA standard fire policy.
B. The ARIZONA standard fire policy may exclude coverage for loss by fire or other
perils insured against if the loss is caused directly or indirectly by terrorism and
involves risks other than a type of risk to which article 12 of this chapter applies.
C. The director shall file in his office and thereafter maintain so on file, a true
copy of the ARIZONA standard fire policy, designated as such and bearing the director's
authenticating certificate and signature and the date of filing. Provisions to be
contained on the first page of the policy may be rewritten, supplemented and rearranged
to facilitate policy issuance and to include matter which may otherwise properly be added
by endorsement. 20-1504 Variations from standard policy format and page numbers
The pages of the standard fire insurance policy may be renumbered and the format
rearranged for convenience in the preparation of individual contracts, and to provide
space for the listing of rates and premiums for coverages insured thereunder or under
endorsements attached or printed thereon, and such other data as may be conveniently
included for duplication on daily reports for office records.
20-1505 Policy description of insurer
There shall be printed on the first or front page at the head of the standard fire
insurance policy the name of the insurer or insurers issuing the policy, the location of
the home office or United States office of the insurer or insurers, a statement whether
the insurer or insurers are stock corporations, mutual corporations, reciprocal insurers,
Lloyd's underwriters or otherwise, and there may be added thereto such device or emblem
as the insurer or insurers issuing the policy may desire. Any insurer organized under
special charter provisions may so indicate upon its policy, and may add a statement of
the plan under which it operates in this state. If the policy is issued by a mutual or
reciprocal insurer having special regulations with respect to the payment of assessments
by the policyholder or subscriber, such regulations shall be printed on the policy, and
any such insurer may print upon the policy such regulations as may be appropriate to or
required by its form of organization. There may be substituted for the word "company" a
more accurate descriptive term for the type of insurer. There may also be added a
statement of the group of insurers with which the insurer is financially affiliated. In
lieu of the facsimile signatures of the president and secretary of the insurer there may
be used the name or names of the officers or managers authorized to execute the contract.
20-1506 Provisions required by charter or laws of other states
A domestic insurer may print in the standard fire policy any provisions which it is
authorized or required by law to insert therein. A foreign or alien insurer may print in
the policy any provision required by its charter or deed of settlement, or by the laws of
its own state or country, not contrary to the laws of this state.
20-1507 Riders; endorsements; additional perils
A. Appropriate forms of additional contracts, riders or endorsements, insuring
against indirect or consequential loss or damage, or against any one or more perils other
than those of fire and lightning, or providing coverage which the insurer issuing the
policy is authorized by charter and by the laws of this state to assume or issue, may be
used in connection with the standard fire policy.
B. Such other perils or coverages may include those excluded in the standard fire
insurance policy, and may include any of the perils or coverages permitted to be insured
against or issued by property and casualty insurers. Such forms of contracts, riders and
endorsements may contain provisions and stipulations inconsistent with such standard fire
insurance policy, if such provisions and stipulations are applicable only to such
additional coverage or to the additional peril or perils insured against.
20-1508 Designation as standard policy; producer's name
A. There may be printed upon the standard fire policy the words, "standard fire
insurance policy for ARIZONA", and there may be inserted before and after the word
"ARIZONA" a designation of any state or states in which such form of policy is standard.
B. There may be endorsed on the outside of any such policy the name, with the word
"producer" or "producers" and place of business, of any insurance producer, either by
writing, printing, stamping or otherwise.
20-1509 Loss or damage caused by nuclear reaction, or nuclear radiation or radio-active contamination not covered by ARIZONA standard fire policy
Insurers issuing the standard policy pursuant to section 20-1503, are authorized to
affix thereto a written statement that the policy does not cover loss or damage caused by
nuclear reaction, nuclear radiation or radio-active contamination, all whether directly
or indirectly resulting from an insured peril under said policy, provided, that nothing
here contained shall be construed to prohibit the attachment to any such policy of an
endorsement or endorsements specifically assuming coverage for loss or damage caused by
nuclear reaction, nuclear radiation or radio-active contamination; however, subject to
the foregoing and all provisions of the said policy, direct loss by fire resulting from
nuclear reaction or nuclear radiation or radio-active contamination is insured against by
such policy.
20-1531 Sole surety on official bonds
When any bond, recognizance or undertaking is required or permitted to be made for
the security or protection of any person or municipality, the state, or any department
thereof, or organization, conditioned for the doing or not doing of anything therein
specified, any such board, court, organization or officer required or permitted to accept
or approve the sufficiency of the bond, recognizance or undertaking, may accept and
approve it when executed, or when the conditions thereof are guaranteed, solely by an
insurer authorized to transact a surety business in this state in accordance with the
requirements of this title. When any such bond, recognizance or undertaking is required
to be made with one surety or with two or more sureties, the execution of the bond,
recognizance or undertaking, or the guarantee of the performance of the conditions
thereof, shall be sufficient when so executed or guaranteed solely by one such insurer,
and shall be a full compliance with every requirement of every law, ordinance or
regulation relating thereto, and no justification by such insurer shall be necessary.
20-1532 Venue of actions against surety insurers
Any surety insurer may be sued in respect of any surety bond issued by it in the
county where the bond, recognizance, stipulation or undertaking was made or guaranteed,
or in the county where the principal office of the insurer in this state is located, and
for the purposes hereof, it shall be treated as made or guaranteed in the county in which
such office is located or in which it is filed, or in the county in which the principal
resided when it was made or guaranteed.
20-1533 Surety companies; arrest bond certificates issued by motor clubs; definition
A. A domestic or foreign surety company that has qualified to transact surety
business in this state may become surety in an amount of not more than three hundred
dollars with respect to a guaranteed arrest bond certificate issued by a motor club by
filing with the director an undertaking to become surety.
B. The undertaking shall both:
1. Be in a form prescribed by the director.
2. State the following:
(a) The name and address of the motor club with respect to the guaranteed arrest
bond certificates of which the surety company undertakes to be surety.
(b) The unqualified obligation of the surety company to pay the forfeiture in an
amount of not more than three hundred dollars of a person who, after posting a guaranteed
arrest bond certificate with respect to which the surety company has undertaken to be
surety, fails to make the appearance for which the guaranteed arrest bond certificate was
posted.
C. An undertaking filed by a domestic or foreign surety company with the director
pursuant to this section expires on December 31 of each year.
D. Motor clubs may issue guaranteed arrest bond certificates that are guaranteed by
a domestic or foreign surety company for the year covered by the undertaking filed with
the director pursuant to this section.
E. For the purposes of this section "motor club" means an individual, firm,
partnership, company, association or corporation engaged in selling, furnishing or
procuring for consideration any one or a combination of the following for a member
pursuant to an agreement:
1. "Bail bond service", which means furnishing or procuring for the member accused
of a violation of any law a cash deposit, a bond, a guaranteed arrest bond certificate or
any other undertaking.
2. "Buying and selling service", which means any act by which the member is aided
in any way in the purchase or sale of a motor vehicle.
3. "Discount service", which means any act resulting in giving special discounts,
rebates or reductions to the member.
4. "Emergency road service", which means any act consisting of the adjustment,
repair or replacement of the equipment, tires or mechanical parts of a motor vehicle to
permit it to be operated under its own power by or for the member.
5. "Financial service", which means any act by which loans or other advances of
money are made to the member.
6. "Insurance service", which means any act consisting of selling or giving, with
the agreement or as a result of membership in or affiliation with a motor club, a policy
of insurance.
7. "Map service", which means furnishing road maps without cost to the member.
8. "Safety service", which means examining and testing motor vehicles and giving
advice in connection with the safe and proper operation of the motor vehicles to the
member.
9. "Theft service", which means any act the purpose of which is to locate, identify
or recover a motor vehicle for the member, or to detect or apprehend the person guilty of
the theft.
10. "Touring service", which means furnishing touring information without cost to
the member.
11. "Towing service", which means any act consisting of moving for or on behalf of
the member a motor vehicle from one place to another other than under its own power.
20-1534 Guaranteed arrest bond certificate; cash bail or other bond; forfeiture
A. A guaranteed arrest bond certificate that conforms to section 20-1533 shall:
1. Be accepted as a bail bond in lieu of cash bail or any other bond if posted by
the person whose signature appears on the certificate.
2. Be accepted to guarantee the appearance of the person whose signature appears on
the certificate in any court in this state, including all municipal courts, at the time
the court requires if the person is arrested or required to post a bond for a violation
of a motor vehicle law of this state or a motor vehicle ordinance of a city or town.
3. Not be accepted as bail bonds for:
(a) The offense of driving under the influence of intoxicating liquor or of drugs.
(b) Any felony.
B. A guaranteed arrest bond certificate posted as bail bond in any court in this
state shall be treated like a bail bond in any criminal case and:
1. Is subject to the same forfeiture and enforcement provisions that govern bail
bonds in criminal cases.
2. If in any municipal court of this state, is subject to the forfeiture and
enforcement provisions of the charter or ordinance of the particular city or town
pertaining to bail bonds posted.
20-1541 Definitions
In this article, unless the context otherwise requires:
1. "Authorized real estate security" means either:
(a) Any amortized note, bond or other evidence of indebtedness that is secured by
both a mortgage, deed of trust or other instrument that constitutes or is equivalent to a
first lien or charge on real estate and the balance on any pledged cash account or
collateralized guaranty agreement that is contracted for by a parent, blood relative,
employer or nonprofit corporation for the benefit of the borrower if all of the following
apply:
(i) The loan amount does not exceed one hundred three per cent of the fair market
value of the combined security at the time that the loan is made where any percentage
greater than one hundred per cent is used to finance fees and closing costs on the
indebtedness.
(ii) The pledged cash account or collateralized guaranty agreement does not exceed
thirty-five per cent of the fair market value of the real estate at the time the loan is
made.
(iii) The lender has a first position lien on the pledged cash account or
collateralized guaranty agreement.
(iv) The loan amount does not exceed the fair market value of the real estate at
the time the loan is made plus three per cent for financing fees and closing costs.
(v) The requirements of subdivision (b) of this paragraph are met.
(b) Any amortized note, bond or other evidence of indebtedness that does not exceed
one hundred three per cent of the fair market value of the real estate and that is
secured by any mortgage, deed of trust or other instrument that constitutes, or is
equivalent to, a first lien or charge on real estate if:
(i) The real estate loan secured in such manner is one of a type which a bank, a
savings and loan association or an insurance company, which is supervised and regulated
by a department of this state or an agency of the federal government, is authorized to
make, or would be authorized to make, disregarding any requirement applicable to such an
institution that the amount of the loan not exceed a certain percentage of the value of
the real estate.
(ii) The improvement on such real estate is a building or buildings designed for
occupancy as specified by paragraph 4, subdivisions (a) and (b) of this section.
(iii) The lien on such real estate may be subject to and subordinate to the lien of
any public bond, assessment or tax, when no installment, call or payment of or under such
bond, assessment or tax is delinquent, or to any outstanding mineral, oil, water or
timber rights, rights-of-way, easements or rights-of-way of support, sewer rights,
building restrictions or other restrictions or covenants, conditions or regulations of
use or outstanding leases upon such real property under which rents or profits are
reserved to the owner of such real property.
2. "Contingency reserve" means an additional premium reserve established to protect
policyholders against the effect of adverse economic cycles.
3. "Minimum policyholder position" means the amount computed pursuant to section
20-1550.
4. "Mortgage guaranty insurance" means insurance against financial loss by reason
of nonpayment of:
(a) Principal, interest or other sums agreed to be paid under the terms of any note
or bond or other evidence of indebtedness secured by a mortgage, deed of trust or other
instrument constituting a lien or charge on real estate if the improvement on such real
estate is a residential building or a condominium unit or buildings designed for
occupancy by not more than four families.
(b) Principal, interest or other sums agreed to be paid under the terms of any
note, bond or other evidence of indebtedness secured by a mortgage, deed of trust or
other instrument constituting a lien or charge on real estate if the improvement on such
real estate is a building or buildings designed for occupancy by five or more families or
designed to be occupied for industrial or commercial purposes.
(c) Rent or other sums agreed to be paid under the terms of a written lease for the
possession, use or occupancy of real estate if the improvement on such real estate is a
building or buildings designed to be occupied for industrial or commercial purposes.
5. "Policyholder position" means the contingency reserve prescribed in section
20-1556 and surplus as regards policyholders.
20-1542 Capital and surplus
A. A mortgage guaranty insurance company shall not transact the business of
mortgage guaranty insurance unless:
1. If a stock insurance company, it has paid in capital of at least one million
dollars and paid in surplus of at least one million dollars.
2. If a mutual insurance company, it has a minimum initial surplus of two million
dollars.
B. A stock company or a mutual company shall at all times thereafter maintain a
minimum policyholders' surplus of at least one million five hundred thousand dollars.
20-1543 Limitation on geographic concentration
A. A mortgage guaranty insurance company shall not:
1. Insure loans secured by a single risk in excess of ten per cent of the company's
aggregate capital, surplus and contingency reserve.
2. Have more than twenty per cent of its total insurance in force in any one
standard metropolitan statistical area, as defined by the United States department of
commerce.
B. The provisions of this section shall not apply to a mortgage guaranty insurance
company until it has possessed a certificate of authority in this state for three years.
20-1544 Limitation on advertising
A mortgage guaranty insurance company or any agent or representative of a mortgage
guaranty insurance company shall not prepare or distribute or assist in preparing or
distributing any brochure, pamphlet, report or any form of advertising to the effect that
the real estate investments of any financial institution are "insured investments",
unless the brochure, pamphlet, report or advertising clearly states that the loans are
insured by mortgage guaranty insurance companies possessing a certificate of authority to
transact mortgage guaranty insurance in this state or are insured by an agency of the
federal government.
20-1545 Limitation on investment
A mortgage guaranty insurance company shall not invest in notes or other evidences
of indebtedness secured by mortgage or other lien upon real property. This section shall
not apply to obligations secured by real property, or contracts for the sale of real
property, which are acquired in the course of the good faith settlement of claims under
policies of insurance issued by the mortgage guaranty insurance company or in the good
faith disposition of real property so acquired.
20-1546 Limitation on coverage
A mortgage guaranty insurance company shall limit its coverage net of reinsurance
ceded to a maximum of twenty-five per cent of the entire indebtedness to the insured or
may elect to pay the entire indebtedness to the insured and acquire title to the
authorized real estate security.
20-1547 Mortgage guaranty insurance as monoline
A. A mortgage guaranty insurance company that anywhere transacts any class of
insurance other than mortgage guaranty insurance is not eligible for the issuance or
renewal of a certificate of authority to transact mortgage guaranty insurance in this
state.
B. A mortgage guaranty insurance company that anywhere transacts the classes of
insurance defined in section 20-1541, paragraph 4, subdivision (b) or (c) is not eligible
for a certificate of authority to transact in this state the class of mortgage guaranty
insurance defined in section 20-1541, paragraph 4, subdivision (a). A mortgage guaranty
insurance company that transacts a class of insurance defined in section 20-1541,
paragraph 4, subdivision (a) may write up to five per cent of its insurance in force on
residential property designed for occupancy by five or more families.
20-1548 Underwriting discrimination
A. Nothing in this article shall be construed as limiting the right of any mortgage
guaranty insurance company to impose reasonable requirements upon the lender with regard
to the terms of any note or bond or other evidence of indebtedness secured by a mortgage
or deed of trust, such as requiring a stipulated down payment by the borrower.
B. A mortgage guaranty insurance company shall not discriminate in the issuance or
extension of mortgage guaranty insurance on the basis of the applicant's sex, marital
status, race, color, creed or national origin.
C. No policy of mortgage guaranty insurance, excluding policies of reinsurance,
shall be written unless the insurer shall have conducted a reasonable and thorough
examination of:
1. The evidence supporting credit worthiness of the borrower.
2. The appraisal report reflecting market evaluation of the property and shall have
determined that prudent underwriting standards have been met.
20-1549 Policy forms and premium rates filed
A. A mortgage guaranty insurer shall file all policy forms, endorsements and rates
a mortgage guaranty insurer proposes to use with the director pursuant to chapter 2,
article 4.1. With respect to owner-occupied, single-family dwellings, the mortgage
guaranty insurance policy shall provide that the borrower shall not be liable to the
insurance company for any deficiency arising from a foreclosure sale.
B. Each mortgage guaranty insurance company shall adopt, print and make available a
schedule of premium charges for mortgage guaranty insurance policies. Premium charges
made pursuant to the provisions of this article shall not be deemed to be interest or
other charges under any other provision of law limiting interest or other charges in
connection with mortgage loans. The schedule shall show the entire amount of premium
charge for each type of mortgage guaranty insurance policy issued by the insurance
company. 20-1550 Minimum policyholder position; definitions
A. A mortgage guaranty insurer shall maintain at all times a minimum policyholder
position in an amount not less than the amount required by this section. The face amount
of the mortgage shall include reinsurance assumed and shall be calculated net of
reinsurance that is ceded to an insurer either:
1. Authorized to transact insurance or accredited to assume reinsurance in this
state.
2. Pursuant to section 20-1557, subsection C.
3. Otherwise approved by the director.
B. If a policy of mortgage guaranty insurance insures individual loans with a
percentage claim settlement option on the loans, the insurer shall maintain a minimum
policyholder position based on each one hundred dollars of the face amount of the
mortgage, the percentage coverage or claim settlement option and the loan-to-value
category. The required amount of minimum policyholder position is calculated in the
following manner:
1. If the total indebtedness is greater than seventy-five per cent of the value of
the collateral property at the date of insurance, the following applies:
Minimum policyholder
position per one hundred
Per cent dollars of the face
coverage amount of the mortgage
5% $ .20
10 .40
15 .60
20 .80
25 1.00
30 1.10
35 1.20
40 1.30
45 1.35
50 1.40
55 1.50
60 1.55
65 1.60
70 1.65
75 1.75
80 1.80
85 1.85
90 1.90
95 1.95
100 2.00
If the per cent coverage is between any five percentage point increment, the factor for
minimum policyholder position per one hundred dollars of the face amount of the mortgage
shall be prorated.
2. If the total indebtedness is at least fifty per cent and not more than
seventy-five per cent of the value of the collateral property at the date of insurance,
the required amount of minimum policyholder position is fifty per cent of the amount
required by paragraph 1 of this subsection.
3. If the total indebtedness is less than fifty per cent of the value of the
collateral property at the date of insurance, the required amount of minimum policyholder
position is twenty-five per cent of the amount required by paragraph 1 of this
subsection.
C. If a policy of mortgage guaranty insurance provides coverage on a pool of loans
subject to an aggregate loss limit and if the equity:
1. Is not more than fifty per cent and not less than twenty per cent, or equity
plus any prior insurance or a deductible equals twenty-five per cent of the value of the
collateral property at the date of insurance, the required amount of minimum policyholder
position is calculated as follows:
Minimum policyholder
position per one hundred
Per cent dollars of the face
coverage amount of the mortgage
1% $ .30
5 .50
10 .60
15 .65
20 .70
25 .75
30 .775
40 .80
50 .825
60 .85
70 .875
75 .90
80 .925
90 .95
1.00 1.00
If the per cent coverage is between any specified increment, the factor for minimum
policyholder position per one hundred dollars of the face amount of the mortgage shall be
prorated.
2. Is less than twenty per cent or the equity plus prior insurance or a deductible
is less than twenty-five per cent of the value of the collateral property at the date of
insurance, the required amount of minimum policyholder position is two hundred per cent
of the amount required by paragraph 1 of this subsection.
3. Is more than fifty per cent or the equity plus prior insurance or a deductible
is more than fifty-five per cent of the value of the collateral property at the date of
insurance, the required amount of minimum policyholder position is fifty per cent of the
amount of minimum policyholder position required by paragraph 1 of this subsection.
D. If a policy of mortgage guaranty insurance provides for layers of coverage,
deductibles or excess reinsurance, the required amount of minimum policyholder position
may be computed by subtracting the required minimum policyholder position for the lower
percentage coverage limits from the required minimum policyholder position for the upper
or greater coverage limit.
E. If a policy of mortgage guaranty insurance provides for coverage on loans
secured by second liens:
1. If the policy provides coverage on individual loans, the required amount of
minimum policyholder position is calculated according to subsection B after the per cent
of coverage and the loan-to-value ratios have been determined as follows:
(a) Divide the insured portion of the second loan by the entire loan indebtedness
on the collateral property to determine the per cent coverage.
(b) Divide the entire loan indebtedness on the property by the value of the
collateral property at the date of insurance to determine loan-to-value per cent.
2. If the policy provides coverage on a group of loans subject to an aggregate loss
limit, the minimum policyholder position is calculated according to subsection C after
the per cent of coverage and the loan-to-value ratios have been determined in accordance
with this subsection.
F. If a policy of mortgage guaranty insurance provides for coverage on leases, the
minimum policyholder position is four dollars for each one hundred dollars of the insured
amount of the lease.
G. If a mortgage guaranty insurer does not have the amount of minimum policyholder
position required by this section, it shall cease transacting new business until such
time that its minimum policyholder position is in compliance with this section.
H. A mortgage guaranty insurer shall include with its annual statement a report of
its minimum policyholder position on a form approved by the director.
I. For the purposes of this section, except as otherwise provided:
1. "Equity" means the complement of the loan-to-value per cent.
2. "Face amount of the mortgage" means the outstanding principal balance computed
without any reduction because of an insurer's option limiting its coverage, except that
for the purposes of determining a minimum policyholder position under subsection E "face
amount of the mortgage" means the entire loan indebtedness on the property.
20-1551 Rebates, commissions and charges
A. A mortgage guaranty insurance company shall not pay or cause to be paid either
directly or indirectly, to any owner, purchaser, lessor, lessee, mortgagee or prospective
mortgagee of the real property which secures the authorized real estate security or which
is the fee of an insured lease, or any interest in such lease, or any person who is
acting as an agent, representative, attorney or employee of such owner, purchaser or
mortgagee, any commission, or any part of its premium charges or any other consideration
as an inducement for or as compensation on any mortgage guaranty insurance business.
B. In connection with the placement of any mortgage guaranty insurance, a mortgage
guaranty insurance company shall not cause or permit any commission, fee, remuneration or
other compensation to be paid to or received by any insured lender or lessor, any
subsidiary or affiliate of any insured, any officer, director or employee of any insured
or any member of such person's immediate family, any corporation, partnership, trust,
trade association in which any insured is a member or other entity in which any insured
or any such officer, director or employee or any member of such person's immediate family
has a financial interest, or any designee, trustee, nominee or other agent or
representative of any of the foregoing.
C. A mortgage guaranty insurance company shall not make any rebate of any portion
of the premium charge shown by the schedule required by section 20-1549, subsection B. A
mortgage guaranty insurance company shall not quote any rate or premium charge to any
person which is different than that currently available to others for the same type of
coverage. The amount by which any premium charge is less than that called for by the
current schedule of premium charges is an unlawful rebate.
D. Notwithstanding section 20-451, section 20-452, section 20-1553, subsection B or
any other provision of this section, a mortgage guaranty insurance company may enter into
an agreement with a mortgage lender or an affiliate of a mortgage lender to provide
financial incentives to the mortgage lender for the performance of the mortgage loans
insured by the mortgage guaranty insurance company. The agreement to provide financial
incentives to mortgage lenders shall not take effect unless it is filed with the director
and either approved or not disapproved within thirty days after being filed. The
director's disapproval shall be in writing and shall specify the reason for the
disapproval. The director shall approve the agreement upon finding that:
1. The agreement is not contrary to other applicable law.
2. The agreement is supported by information that establishes that the mortgage
guaranty insurer's rates are not inadequate when considered in conjunction with the
financial incentives of the agreement.
E. The director may after notice and hearing suspend or revoke the certificate of
authority of any mortgage guaranty insurance company, or in the director's discretion,
issue a cease and desist order to any mortgage guaranty insurance company which pays any
commission or makes any unlawful rebate in willful violation of the provisions of this
article. In the event of the issuance of a cease and desist order, the director may,
after notice and hearing, suspend or revoke the certificate of authority of any mortgage
guaranty insurance company which does not comply with the terms of such certificate. 20-1552 Compensating balances prohibited
A. Except for commercial checking accounts and normal deposits in support of an
active bank line of credit, a mortgage guaranty insurance company, its holding company or
any affiliate of either such companies shall not maintain funds on deposit with the
lender for which the mortgage guaranty insurance company has insured loans.
B. Any deposit account bearing interest at rates less than what is currently being
paid other depositors on similar deposits or any deposit in excess of amounts insured by
an agency of the federal government shall be presumed to be an account in violation of
this section. A mortgage guaranty insurance company shall not use compensating balances,
special deposit accounts or engage in any practice which unduly delays its receipt of
monies due or which involves the use of its financial resources for the benefit of any
owner, mortgagee of the real property or any interest in such property or any person who
is acting as agent, representative, attorney or employee of such owner, purchaser or
mortgagee as a means of circumventing any part of this section.
20-1553 Conflict of interest
A. If it is a member of a holding company system, a mortgage guaranty insurance
company licensed to transact business in this state shall not, as a condition of its
certificate of authority, knowingly underwrite mortgage guaranty insurance on mortgages
originated by the holding company system or an affiliate or on mortgages originated by
any mortgage lender to which credit is extended, directly or indirectly, by the holding
company system or any affiliate unless such insurance is underwritten on the same basis,
for the same consideration and subject to the same insurability requirements as insurance
provided to nonaffiliated lenders.
B. A mortgage guaranty insurance company, the holding company system of which it is
a part or any affiliate shall not, as a condition of the mortgage guaranty insurance
company's certificate of authority, pay any commissions, remuneration, rebates or engage
in activities proscribed in sections 20-1551 and 20-1552.
20-1554 Unearned premium reserve
A mortgage guaranty insurance company shall compute and maintain an unearned premium
reserve that is according to the method approved by the director and that is consistent
with the accounting practices and procedures manual adopted by the national association
of insurance commissioners.
20-1555 Loss reserve
A mortgage guaranty insurance company shall compute and maintain adequate case basis
and other loss reserves which accurately reflect loss frequency and loss severity and
shall include components for claims reported and unpaid, and for claims incurred but not
reported, including estimated losses on:
1. Insured loans which have resulted in the conveyance of property which remains
unsold.
2. Insured loans in the process of foreclosure.
3. Insured loans in default for four months or for any lesser period which is
defined as default for such purposes in the policy provisions.
4. Insured leases in default for four months or for any lesser period which is
defined as default for such purposes in policy provisions.
20-1556.01 Premium deficiency reserve
If the mortgage guaranty insurance company's anticipated losses, loss adjustment
expenses, commissions and other acquisition costs and maintenance costs are more than the
recorded unearned premium reserve, contingency reserve and estimated future renewal
premiums on existing policies, the company shall establish a premium deficiency reserve
by recording an additional liability for the deficiency according to the accounting
practices and procedures manual adopted by the national association of insurance
commissioners.
20-1556 Contingency reserve
A. In addition to the paid in capital and surplus provided in section 20-1542 each
mortgage guaranty insurer shall establish a contingency reserve after establishment of
the unearned premium reserve. The mortgage guaranty insurer shall annually contribute to
the contingency reserve an amount which in the aggregate is the greater of either fifty
per cent of the net earned premium or the minimum policyholder position required by
section 20-1550 divided by ten. The annual contributions to the contingency reserve made
during each calendar year shall be maintained for a period of one hundred twenty months,
except that withdrawals may be made by the insurer in any year in which the actual
incurred losses and loss expenses exceed thirty-five per cent of the corresponding net
earned premiums, and these releases shall not be made without prior approval by the
director of insurance of the insurer's state of domicile.
B. In addition to withdrawals made pursuant to subsection A of this section, with
the prior approval of the director or commissioner of the department of insurance of the
insurer's state of domicile, the mortgage guaranty insurer may withdraw from the
contingency reserve an amount that is not more than the amount by which the policyholder
position exceeds the minimum policyholder position prescribed in section 20-1550. The
mortgage guaranty insurer shall provide or identify any information, analysis and other
necessary documentation that supports the request submitted to the director or
commissioner.
20-1557 Reinsurance
A. If a mortgage guaranty insurance company obtains reinsurance from an insurance
company which is properly licensed to provide such reinsurance or from an appropriate
governmental agency, the mortgage guaranty insurer and the reinsurer shall establish and
maintain the reserves required in this article in appropriate proportions in relation to
the risk retained by the original insurer and ceded to the assuming reinsurer so that the
total reserves established shall not be less than the reserves required by this article.
B. Section 20-261, subsection D does not apply to a mortgage guaranty insurer.
C. Notwithstanding section 20-261, subsection A, a domestic mortgage guaranty
insurer may reinsure its risks with a solvent insurer that has surplus to policyholders
less than the minimum capital stock prescribed in section 20-1542 if the reinsurance
agreement is approved by the director or the agreement both:
1. Cedes to a reinsurer that insures or reinsures only mortgage guaranty insurance.
2. Requires that reserves ceded to the reinsurer are secured in the manner
prescribed in section 20-261.02.
D. A mortgage guaranty insurer shall file a report with the director that includes
all information regarding its reinsurance agreements as required by the director. The
mortgage guaranty insurer shall file the report prescribed in this subsection with its
annual and quarterly financial statements.
E. Except as provided in subsection B of this section, this section does not alter
or diminish a domestic mortgage guaranty insurer's obligation to report to the director,
file documents with the director or obtain the director's approval as prescribed in this
title.
F. Notwithstanding title 39, chapter 1, the information submitted pursuant to
subsection D of this section is confidential and proprietary and the director shall not
make the information available for public inspection without the written consent of the
domestic mortgage guaranty insurer, except that:
1. This subsection does not prevent the department's use of the information for any
regulatory purpose, disciplinary action or hearing.
2. The director shall release the information if the information is required by a
subpoena issued in connection with an administrative, civil or criminal investigation by
a government agency.
3. In a civil action or contested case in which the domestic mortgage guaranty
insurer that submitted the information is a party, any other party to the action or case
may obtain the information if the party seeking to discover the information shows all of
the following:
(a) The information sought is relevant to and necessary for the furtherance of the
action or case.
(b) The information sought is not available from any other nonconfidential source.
(c) A subpoena issued by a judicial or administrative officer of competent
jurisdiction has been submitted to the director.
4. The director may disclose the information to a public official who has
jurisdiction over the regulation of insurance in another state if the public official
agrees in writing to maintain the confidentiality of the information and the laws of the
state in which the public official serves allow or require the information to be and
remain confidential.
20-1558 Miscellaneous reserves
A. If the laws of any other jurisdiction in which a mortgage guaranty insurance
company, subject to the requirement of this article is also licensed to transact mortgage
guaranty insurance, require a larger unearned premium reserve or contingency reserve in
the aggregate than that set forth in this article, the establishment of such larger
unearned premium reserve or contingency reserve in the aggregate shall be deemed to be in
compliance with this article.
B. Unearned premium reserves and contingency reserves shall be computed and
maintained on risks insured after the effective date of this article as required by
sections 20-1554 and 20-1556. Unearned premium reserves and contingency reserves on
risks insured before the effective date of this article may be computed and maintained as
required previously.
20-1559 Mortgage guaranty insurers; dividend payment
A. Notwithstanding section 20-722, a domestic mortgage guaranty insurance company
may pay dividends out of any available surplus monies if the mortgage guaranty insurance
company continues to comply with the policyholder surplus and reserve requirements under
this article.
B. The payment of a dividend by a domestic mortgage guaranty insurance company is
subject to the requirements of section 20-481.19.
C. A domestic mortgage guaranty insurance company shall maintain sufficient
liquidity.
20-1560 Examinations; rules
A. The director may use independent contractor examiners pursuant to sections
20-148 and 20-159 to conduct examinations to review compliance with this article. All
examination and examination related expenses shall be borne by the mortgage guaranty
insurer and shall be paid by the insurance examiners' revolving fund pursuant to section
20-159.
B. The director may adopt rules to carry out this article.
20-1561 Law governing title insurers
A. This article applies to all title insurers, title insurance rating
organizations, title insurance agents, applicants for title insurance and policyholders
and to all persons and business entities engaged in the business of title insurance.
B. To the extent not modified by this article, title insurers are subject to and
governed by the other applicable sections of this title.
C. Any new insurance law enacted after January 1, 1968 does not apply to title
insurers, title insurance rating organizations, title insurance agents, applicants for
title insurance, title insurance policyholders or title insurance, except by express
reference therein.
D. Section 20-223 applies to title insurers.
E. Title insurance agents shall be licensed pursuant to this article. Chapter 2,
article 3 of this title does not apply to licensure of title agents except by specific
reference in that article, except that to the extent not inconsistent with this article,
section 20-285, section 20-286, subsections C and D and sections 20-287, 20-289,
20-289.01, 20-290, 20-291, 20-292, 20-295, 20-296, 20-297, 20-298, 20-299, 20-300 and
20-301 apply to title insurance agents.
20-1562 Definitions
In this article, unless the context otherwise requires:
1. "Abstract of title" means a written representation that is provided pursuant to
a written or oral contract that is intended to be relied on by the person who has
contracted for the receipt of the representation. The abstract of title shall include
all recorded conveyances, instruments or documents that impart constructive notice with
respect to the chain of title to the real property described in the abstract. An
abstract of title is not a title insurance policy.
2. "Applicants for insurance" shall be deemed to include all those, whether or not
prospective insureds, who from time to time apply to a title insurer, or to its agent,
for title insurance, and who at the time of such application are not agents for such
title insurer.
3. "Business of title insurance" shall be deemed to be:
(a) The making as insurer, guarantor or surety, or proposing to make as insurer,
guarantor or surety, of any contract or policy of title insurance.
(b) The transacting of, or proposing to transact, any phase of title insurance,
including solicitation, negotiation preliminary to execution, execution of a contract of
title insurance, insuring and transacting matters subsequent to the execution of the
contract and arising out of it, including reinsurance.
(c) The doing of, or proposing to do, any business in substance equivalent to any
of the foregoing.
4. "Net retained liability" means the total liability retained by a title insurer
under any policy or contract of insurance, or under a single insurance risk as defined in
or computed in accordance with paragraph 7, after the purchase of reinsurance.
5. "Preliminary report", "commitment" or "binder" means a report that is furnished
in connection with an application for title insurance and that offers to issue a title
insurance policy subject to the stated exceptions set forth in the report or incorporated
by reference. The reports are not abstracts of title and the rights, duties and
responsibilities relating to the preparation and issuance of an abstract of title do not
apply to the issuance of a report. The report is not a representation as to the
condition of title to real property but does constitute a statement of the terms and
conditions on which the issuer is willing to issue its title insurance policy if the
offer is accepted.
6. "Risk premium" for title insurance means that portion of the fee charged by a
title insurer, or agent of a title insurer, to an insured or to an applicant for
insurance, for the assumption by the title insurer of the risk created by the issuance of
the title insurance policy.
7. "Single insurance risk" means the insured amount of any policy or contract of
title insurance issued by a title insurer unless two or more policies or contracts are
simultaneously issued on different estates in identical real property, in which event, it
means the sum of the insured amounts of all such policies or contracts, except that any
such policy or contract that insures a mortgage interest or a vendor's interest that is
excepted in a fee or leasehold policy or contract, and which does not exceed the insured
amount of such fee or leasehold policy or contract, shall be excluded in computing the
amount of a single insurance risk.
8. "Title insurance" means insuring, guaranteeing or indemnifying owners of real
property or others interested therein against loss or damage suffered by reason of liens,
encumbrances upon, defects in or the unmarketability of the title to such property,
guaranteeing, warranting or otherwise insuring the correctness of searches relating to
the title to real property, or doing any business in substance equivalent to any of the
foregoing.
9. "Title insurance agent" means a domestic or foreign stock corporation or limited
liability company authorized in writing by a title insurer to solicit insurance and
collect premiums and to issue or countersign policies in its behalf, except that the term
"title insurance agent" shall not include officers or salaried employees of any title
insurer authorized to do a title insurance business within this state.
10. "Title insurance plant" means a set of records in which an entry has been made
of all documents or matters which under the law impart constructive notice of matters
affecting title to real property or any interest therein or encumbrance thereon and which
have been filed or recorded in the county for which such title plant is maintained for a
period of not less than the immediately preceding twenty years. In order to constitute a
title insurance plant such records shall include:
(a) An index or indices in which notations of or references to any such documents
that describe the property affected thereby are posted, entered or otherwise included,
according to the property described therein, or copies or briefs of all such documents
that describe the property affected thereby which are sorted and filed according to the
property described therein.
(b) An index or indices in which all other such documents are posted, entered or
otherwise included, according to the name or names of the parties whose title to real
property or any interest therein or encumbrance thereon is affected.
11. "Title insurance policy" means a written instrument or contract by means of
which title insurance liability is accepted.
12. "Title insurer" means any domestic company organized under the provisions of
this title for the purpose of insuring titles to real property, any title insurance
company organized under the laws of another state and licensed to insure titles to real
estate within this state pursuant to the provisions of this article, and any domestic or
foreign company having the power and authorized to insure titles to real estate within
this state as of January 1, 1968 which meet the requirements of this article. 20-1563 Qualifications
A. Any foreign or domestic stock insurer authorized by its corporate charter to
engage in business as a title insurer shall be entitled to the issuance of a certificate
of authority as a title insurer in this state upon meeting the applicable requirements of
article 1 of chapter 2 of this title, together with the following additional
requirements:
1. The insurer shall not transact any other kind of insurance.
2. The insurer shall have on deposit in public trust pursuant to section 20-213,
the sum of two hundred fifty thousand dollars, plus fifty thousand dollars for each state
or territorial subdivision of the United States, other than the state of its domicile, in
which it shall be or become qualified to engage in the business of title insurance. When
the aggregate of amounts so deposited in this or such other states or territorial
subdivision has reached the sum of seven hundred fifty thousand dollars no further
deposit shall be required of any domestic or foreign insurer.
3. The capital, surplus and accumulations of every foreign insurer shall be
invested in obligations, assets and property of a kind and quality equal in value and
safety to those permitted to domestic insurers by this title, and such investments,
except with the consent of the director, shall not exceed the limitations provided hereby
with respect to domestic insurers. Subsection A of section 20-559 shall not apply to
title insurers.
B. If the provisions of this title require a greater amount of capital, surplus or
deposit than the capital, surplus or deposit of a title insurer which was the holder of a
validly issued, unexpired and unrevoked certificate of authority immediately prior to the
effective date hereof, such title insurer shall have the period ending July 1 five years
after the effective date hereof within which to comply with any such increased
requirement.
20-1564 Investments
A. A domestic title insurer shall invest and maintain invested funds to the amount
of minimum paid-in capital required under this title only in cash and the securities
described in subsection B, paragraph 1 of this section and sections 20-537, 20-538 and
20-551.
B. A domestic title insurer may invest its capital, surplus and accumulations in
excess of the amount of minimum paid-in capital required under this title in the
investments made eligible for funds of domestic insurers by sections 20-537 through
20-541, sections 20-543 through 20-548 and sections 20-551, 20-554 and 20-555 and in
addition in the following investments:
1. Real estate loans. Ground rents and bonds, notes or other evidences of
indebtedness, secured by first mortgages or trust deeds on unencumbered and improved real
property located in any state, district or territory of the United States, and in
investments in the equity of the seller under contracts covering the entire balance due
on bona fide sales of the real property, provided, however, that a loan guaranteed or
insured in full by the administrator of veterans' affairs pursuant to the federal
servicemen's readjustment act of 1944, as amended, may be subject to a prior encumbrance.
Real property shall not be considered to be encumbered within the meaning of this
subsection by reason of the existence of instruments reserving mineral, oil, water or
timber rights, rights-of-way, sewer rights, rights in walls or driveways, by reason of
liens inferior to the lien securing the loan of the insurer, or liens for taxes or
assessments not yet delinquent, or by reason of building restrictions or other
restrictive covenants or by reason of any lease under which rents or profits are reserved
to the owner, if, in any event, the security for the loan is a first lien on the real
property, and if there is no condition or right of re-entry or forfeiture under which the
lien can be cut off, subordinated or otherwise disturbed. Real property shall be deemed
to be improved if such real property is a lot or portion of a subdivision or development
that has been improved by off-site improvements for the general benefit of all or a
portion of the subdivision or development. No mortgage or trust deed, loan or investment
in a seller's equity under a contract made or acquired by the insurer on any one property
shall at the date of investment exceed seventy-five per cent of the value of the real
property securing the loan, or subject to the contract, provided, however, that the
limitation in respect to value shall not apply to a loan which is:
(a) Insured by, or for which a commitment to insure has been made by, the federal
housing administrator or commissioner pursuant to the federal national housing act, as
amended;
(b) Guaranteed by the administrator of veterans' affairs pursuant to the federal
servicemen's readjustment act of 1944, as amended, except that if only a portion of a
loan is so guaranteed, the limitation shall apply to the portion that is not guaranteed;
(c) Insured by the administrator of veterans' affairs pursuant to the federal
servicemen's readjustment act of 1944, as amended.
2. Federal housing administrators debentures. Debentures issued by the federal
housing administrator or commissioner in settlement of claims pursuant to the federal
national housing act, as amended.
3. National mortgage association securities. Securities of national mortgage
associations or similar national mortgage credit institutions organized under the federal
national housing act, as amended.
4. Federal land bank and related securities. Bonds, debentures and other
obligations of federal land banks or federal intermediate credit banks issued pursuant to
the federal farm loan act, as amended, or of banks for cooperatives issued pursuant to
the farm credit act of 1933, as amended.
5. Loans on leaseholds. Loans on leasehold estates on improved, unencumbered real
estate located in any state, district or territory of the United States, provided that no
loan shall exceed seventy-five per cent of the value of the leasehold at the date of
investment, and provided further that every loan shall provide for amortization by
repayments of principal at least once in each year in amounts sufficient to repay the
loan within a period of four-fifths of the unexpired term of the leasehold, but within a
period of not more than thirty-five years.
6. Federal savings and loan insurance corporation obligations. Bonds, notes or
obligations issued, assumed or guaranteed by the federal savings and loan insurance
corporation, under the federal national housing act, as amended.
7. Federal home loan bank obligations. Bonds, notes or obligations issued, assumed
or guaranteed by the federal home loan bank, or issued, assumed or guaranteed by the
federal home loan bank board under the federal home loan bank act, as amended.
C. Section 20-536, subsections B and C do not apply to domestic title insurers.
D. Any title insurer that is organized under the laws of this state may purchase,
receive, hold and convey real estate or an interest in real estate:
1. Required for its convenient accommodation in the transaction of its business
with reasonable regard to future needs.
2. Acquired in connection with a claim under a policy of title insurance.
3. Acquired in satisfaction or on account of loans, mortgages, liens, judgments or
decrees, previously owing to it in the course of its business.
4. Acquired in part payment of the consideration of the sale of real property owned
by it if the transaction shall result in a net reduction in the company's investment in
real estate.
5. Reasonably necessary for the purpose of maintaining or enhancing the sale value
of real property previously acquired or held by it under paragraph 1, 2, 3 or 4 of this
subsection.
E. A title insurer shall not continue to hold any real estate acquired by it under
paragraph 2, 3 or 4 of subsection D for more than five years from the date of
acquisition, unless it shall obtain the written approval of the director to hold the real
estate for a longer period of time.
F. A title insurer may invest in a title insurance plant, and that plant shall be
considered an asset at the actual cost of the plant. The aggregate admitted value of the
investment shall not exceed the amount allowed pursuant to the accounting practices and
procedures manual adopted by the national association of insurance commissioners. In
determining the admitted value of a title insurance plant, no value shall be attributed
to furniture and fixtures, and the real estate in which the title plant is housed shall
be carried as real estate. The value of title abstracts, title briefs, copies of
conveyances or other documents, indices and other records comprising the title insurance
plant shall be determined by considering the expenses incurred in obtaining them. Once
the title insurance plant is operational its value may be increased only by the
acquisition of another title insurance plant by purchase, consolidation or merger. In no
event shall the value of the title insurance plant be increased by additions made as part
of the normal course of abstracting and insuring titles to real estate. Subject to the
limitations prescribed in this subsection, a title insurer may enter into agreements with
one or more other title insurers authorized to do business in this state, or with one or
more title insurance agents, to participate in the ownership, management and control of a
title insurance plant to service the needs of all parties, or in lieu of that common
ownership the parties may invest in the stock of a corporation owning and operating a
title plant for the same purposes. Subject to the limitations with respect to value set
forth in this subsection, any joint investment in existence on the effective date of this
section may be continued indefinitely.
G. Funds equal to the unearned premium reserve of a title insurer may be held in
cash or invested, but the funds shall be invested only in those classes of investments
authorized by sections 20-537 through 20-541, sections 20-543, 20-544 and 20-545 and
subsection B, paragraphs 4, 6 and 7 of this section, except that not more than one-fourth
of the reserve may be invested in preferred or guaranteed stocks or shares.
H. Nothing in this section applies to any investments made by a title insurer when
acting as a trustee. 20-1565 Additional powers
A. A title insurer may provide any other services reasonably related to the land
title business and may engage in any other business which is not inconsistent with the
business of issuing title insurance policies and which may be authorized by its corporate
charter, but only if such services and businesses are not prohibited to it by this title
and if the title insurer qualifies for and obtains any other applicable license or
certificate that is required by any other law regulating the services or business.
B. Neither a title insurer nor a title insurance agent shall engage in the business
of guaranteeing the payment of the principal or the interest of bonds or other
obligations.
20-1566 Taxation of title insurers
A. In lieu of the premium tax provisions of section 20-224, title insurers shall be
subject to taxation on income as other private corporations.
B. The income tax required to be paid by title insurers by the provisions of
subsection A of this section shall be payment in full of all demands for all state,
county, district, municipal and school taxes and licenses of whatever kind or character,
excepting only the fees prescribed by article 2 of chapter 1 of this title and taxes on
real and tangible personal property located within this state.
C. If the provisions of section 20-230 shall operate to require any foreign title
insurer to pay premium tax in this state, such tax shall be computed on total risk
premiums received by the insurer during the preceding calendar year on account of title
insurance on real property in this state. The provisions of section 20-230 shall operate
to require such foreign title insurer to pay only the amount of such net premium tax
which is in excess of the net income tax actually paid to this state for the same
calendar year by such foreign title insurer. For the purposes of this section only,
every foreign title insurer which may be required to pay premium tax in this state may
file with the director as a part of or as an amendment to its schedule of fees under
subsection A of section 20-376 a statement of the risk premium included in its schedule
of fees.
20-1567 Determination of insurability required
A. No policy or contract of title insurance shall be written on any risk located in
this state except by a title insurer authorized to do business in this state, nor unless
and until the title insurer has caused to be conducted a reasonable examination of the
title and has caused to be made a determination of insurability of title in accordance
with sound underwriting practices for title insurers.
B. No title insurer shall write title insurance in, nor issue any title insurance
policy with respect to risks located in, any county of this state with a population, as
shown by the latest decennial census, in excess of one hundred thousand persons, unless
the title insurer or its agent in that county maintains a title insurance plant covering
title records of such county, or unless the insurer issues its policy based on a policy
issued to it by another title insurance company, or its agent, who meets the requirements
of this section provided, however, that for the purposes of this subsection a title
insurer or title insurance agent shall be deemed to maintain a title insurance plant if
it is a lessee thereof or joint owner or has a beneficial interest in such a plant.
C. This section shall not apply to a reinsurer or an excess coinsurer, provided the
originating insurer complies with subsections A and B.
20-1568 Unearned premium reserve
A. Every title insurer shall, in addition to other reserves, establish and maintain
a reserve to be known as the "unearned premium reserve" for title insurance on real
estate, which shall, at all times and for all purposes, be deemed and shall constitute
the unearned portions of premiums due or received on account of such insurance and shall
be charged as a reserve liability of such title insurer in determining its financial
condition. A foreign title insurer doing business in this state may establish an
unearned premium reserve for title insurance on real estate in accordance with the laws
of its domiciliary state, provided an unearned premium reserve is mandatory under the law
of its domiciliary state and such law is substantially equivalent to the requirements of
this title.
B. The unearned premium reserve for title insurance on real estate shall be
retained and held by such title insurer for the protection of the policyholders' interest
in policies on real estate which have not expired. Except as provided in section 20-1571,
assets equal to the amount of such reserve shall not be subject to distribution among
other creditors or stockholders of such title insurer until all claims of policyholders
or holders of title insurance contracts or agreements of such title insurer have been
paid in full and all liability on the policies or title insurance contracts or
agreements, whether contingent or actual, has been discharged or lawfully
reinsured. Income from the investment of the amount of such reserve shall be the
unrestricted property of the title insurer.
20-1569 Amount of unearned premium reserve; release
A. The unearned premium reserve of every title insurer shall consist of:
1. The amount of the unearned premium reserve held as of January 1, 1968.
2. The amount of all additions required to be made to the reserve by this section,
less withdrawals permitted by this section.
B. Every title insurer shall add to its unearned premium reserve in respect to each
title insurance policy, whether primary insurance, reinsurance or coinsurance, issued by
it on real estate a sum of money out of the fees due or received for the title insurance
and deemed to be unearned portions of fees and a sum equal to ten cents for each one
thousand dollars of the face amount of net retained liability, as defined in section
20-1562, and shall separately record the aggregate amounts set aside and reserved with
respect to policies, contracts or agreements written in each calendar year.
C. The amounts set aside as additions to the unearned premium reserve shall be
deducted in determining net profits of any title insurer.
D. For the purpose of determining the amounts of the unearned premium reserve that
may be withdrawn pursuant to subsection E of this section, and the interest of the
policyholders under section 20-1571, all policies of title insurance shall be considered
as dated on July 1 in the year of issue.
E. The aggregate of the amounts set aside in unearned premium reserve in any
calendar year pursuant to subsection B of this section shall be released from the reserve
and restored to income in the year of release pursuant to the formula prescribed in the
accounting practices and procedures manual adopted by the national association of
insurance commissioners.
20-1570 Maintenance of the unearned premium reserve
If by reason of any cause, other than depreciation in the market value of
investments, the amount of the assets of a title insurer held as investments of its
unearned premium reserve should on any date be less than the amount required to be
maintained by law in such reserve, and the deficiency shall not be promptly cured, such
title insurer shall forthwith give written notice thereof to the director and shall issue
no further title insurance policies, whether of policy insurance, reinsurance or
coinsurance, until the deficiency shall have been eliminated and until it shall have
received written approval from the director authorizing it again to issue such policies.
20-1571 Use of the unearned premium reserve on liquidation, dissolution or insolvency
A. If an order of rehabilitation or of liquidation shall have been entered with
respect to a title insurer in accordance with the provisions of article 4 of chapter 3 of
this title, then, and notwithstanding the provisions of such article:
1. Such amount of the assets of such title insurer equal to the unearned premium
reserve then remaining as is necessary may be used to pay for reinsurance of the
liability of such title insurer upon all outstanding policies of title insurance, as to
which claims for losses by the holders are not then pending, the balance, if any, of
assets equal to the unearned premium reserve fund then remaining, then to be transferred
to the general assets of the title insurer.
2. The assets other than the unearned premium reserve shall be available to pay
claims for losses sustained by holders of policies then pending or arising up to the time
reinsurance is effected. In the event that claims for losses are in excess of such other
assets of the title insurer, such claims, when established, shall be paid pro rata out of
the surplus assets attributable to the unearned premium reserve, to the extent of such
surplus, if any.
B. In the event that reinsurance is not obtained, the unearned premium reserve and
assets constituting minimum capital, or so much as remains thereof after outstanding
claims have been paid, shall constitute a trust fund to be held by the director for
twenty years, out of which claims of policyholders shall be paid as they arise. The
balance, if any, of such fund shall, at the expiration of twenty years, revert to the
general assets of the title insurer.
20-1572 Reserve for unpaid losses and loss expense
A. Each title insurer shall at all times establish and maintain, in addition to
other reserves, a reserve against unpaid losses, and against loss expense, and shall
calculate the reserves by making a careful estimate in each case of the loss and loss
expense likely to be incurred, by reason of every claim presented, pursuant to notice
from or on behalf of the insured, of a title defect in or lien or adverse claim against
the title insured, that may result in a loss or cause expense to be incurred for the
proper disposition of the claim. The sums of the items estimated pursuant to this section
shall be the total amounts of the reserves against unpaid losses and loss expenses of the
title insurer.
B. In combination with the reserves prescribed in section 20-1569 and subsection A
of this section, each title insurer shall establish a supplemental reserve that consists
of all other reserves that are necessary to cover the insurer's liabilities for all
losses, claims and loss adjustment expenses.
C. The amounts estimated pursuant to this section may be revised from time to time
as circumstances warrant, but shall be redetermined at least once each year.
D. The amounts set aside in the reserves in any year shall be deducted in
determining the net profits of any title insurer for that year.
20-1573 Net retained liability
A. The net retained liability of any title insurer under any single insurance risk
as defined in section 20-1562, paragraphs 4 and 7 shall not exceed fifty per cent of the
net amount remaining after deducting from the sum of its capital, surplus, unearned
premium reserve and voluntary reserves the value, if any, assigned in such summation to
its title insurance plants, all as shown in its most recent report on file with the
director. The same limitation shall apply to any secondary risk assumed by means of
reinsurance or coinsurance except, whenever the primary retained liability of a ceding
company shall equal or exceed ten per cent of the single insurance risk liability, the
net retained or assumed liability limit of this section may be increased by an additional
two hundred fifty thousand dollars, but in no event above one hundred per cent of the net
amount remaining after deducting from the sum of its capital and surplus the value, if
any, assigned in such summation to its title insurance plants, all as shown by its most
recent report on file with the director.
B. Nothing in this section is intended to limit the amount of a single insurance
risk, as defined in section 20-1562, paragraph 7, that may be written or assumed by a
title insurer, provided, however, that every title insurer shall cede, to one or more
other title insurers, on or before the effective date of such writing or assumption, such
portion, or portions, of any risk as shall be sufficient to bring its net retained
liability thereunder within the limits set forth in this section; and provided further
that each such cession of risk shall also be within the limits of this section as applied
to the sum of the capital, surplus, unearned premium reserve and voluntary reserves, less
the value, if any, assigned in such summation to the title insurance plants of the
assuming and reinsuring title insurer, as shown by its most recent report on file with
the supervisory agency in the state of its domicile.
20-1574 Power to reinsure
A. Any title insurer authorized to engage in the business of title insurance in
this state may cede reinsurance of all or any part of its liability under one or more of
its title insurance policies to any title insurer authorized to engage in the business of
title insurance in this or any other state, provided, however, that no larger amount of
reinsurance shall be ceded to any title insurer on a single policy of title insurance, or
on any single title insurance risk, than such title insurer would be permitted to retain
if authorized to engage in the business of title insurance in this state.
B. Any title insurer authorized to do business in this state may also reinsure
policies of title insurance issued by other companies on risks whether located in this
state or elsewhere.
C. Issuance of contracts of reinsurance by a title insurer not authorized to engage
in the business of title insurance in this state, but authorized to engage in the
business of title insurance in any of the United States, reinsuring a title insurer
authorized to engage in the business of title insurance in this state on real property
located in this state, shall not of itself constitute the doing of business in this state
by such reinsurer.
D. No agreement by any domestic title insurer for the reinsurance of all or
substantially all its business in force shall be effective unless it shall comply with
the provisions of section 20-732.
20-1575 Foreign title insurers; resident agent required
A. A title insurer that is not incorporated under the laws of this state, but is
authorized to transact business herein, shall not make, write, place or cause to be made,
written or placed any policy or contract of insurance covering real property in this
state except:
1. Through a title insurance agent as defined in section 20-1562.
2. Through a bona fide branch office located in this state and under the direction
and control of such title insurer, all expenses of which branch office, including
compensation of all employees, are paid by such title insurer.
3. Through a subsidiary title insurer.
B. This section does not apply to contracts of reinsurance or excess coinsurance. 20-1576 Mergers and consolidations of title insurers
A. A title insurer incorporated under the laws of this state may merge, be merged
by or consolidated with, one or more title insurers whether or not so incorporated, by
complying with the provisions of general law governing the merger or consolidation of
stock corporations formed for profit, but subject to the further provisions of this
section:
1. No such merger or consolidation shall be effectuated unless in advance thereof,
the plan and agreement therefor have been filed with the director. The director shall
examine the terms and conditions of such merger or consolidation, and of any exchange of
shares or securities pursuant thereto, after holding a hearing at which all persons or
parties to whom it is proposed to issue shares or securities in such exchange shall have
the right to appear. After such hearing, the director shall either approve or disapprove
the fairness of such terms and conditions of exchange. The director shall give such
approval within a reasonable time after filing of a plan or agreement unless he finds
such plan or agreement:
(a) Is contrary to law; or
(b) Inequitable to the stockholders of such insurer; or
(c) Would substantially reduce the security of and services to be rendered to
policyholders of the domestic title insurer in this state or elsewhere.
2. Where such merger or consolidation involves a parent company absorbing a
wholly-owned subsidiary, the director may, in his discretion, dispense with the holding
of a hearing.
B. No director, officer, agent or employee of any title insurer party to such
acquisition shall receive any fee, commission, compensation or other valuable
consideration whatsoever for in any manner aiding, promoting or assisting therein except
as set forth in such plan or agreement.
C. If the director does not approve any such plan or agreement, he shall notify the
title insurer in writing specifying in detail his reasons therefor.
20-1577 Corporate acquisitions other than by merger or consolidation
A. A title insurer incorporated under the laws of this state may issue stock in
exchange for all or any part of the assets or stock of a domestic or foreign title
insurer, abstract company or title insurance agent if, in advance thereof, a plan or
agreement of acquisition shall have been filed with the director. The director shall
examine the terms and conditions of such plan or agreement of acquisition, and of any
exchange of shares or securities pursuant thereto, after holding a hearing at which all
persons or parties to whom it is proposed to issue shares or securities in such exchange
shall have the right to appear. After such hearing, the director shall either approve or
disapprove the fairness of such terms and conditions of such acquisition and
exchange. The director shall give such approval within a reasonable time after filing of
a plan or agreement unless he finds such plan or agreement either:
1. Is contrary to law.
2. Is inequitable to the stockholders of any title insurer or abstract company
involved.
3. Would substantially reduce the security of and services to be rendered to
policyholders of the domestic title insurer in this state or elsewhere.
B. No director, officer, agent or employee of any title insurer or abstract company
party to such acquisition shall receive any fee, commission, compensation or other
valuable consideration whatsoever for in any manner aiding, promoting or assisting
therein except as set forth in such plan or agreement.
C. If the director does not approve any such plan or agreement, he shall notify the
title insurer in writing specifying in detail his reasons therefor.
D. If the assets or stock to be acquired are held by a domestic corporation, such
corporation shall comply with, and its stockholders shall have the rights set forth in
title 10, chapter 13.
20-1578 Purchase or acquisition of controlling stock
A. In the event any person or persons propose to purchase or acquire the
controlling capital stock of any domestic title insurer, such person or persons shall
first make application to the director for approval of such purchase or acquisition. The
application shall contain the name and address of the proposed new owner or owners of the
controlling stock, and the director shall approve the proposed purchase or acquisition
only after he has become satisfied that such purchase or acquisition will not result in
violation of the anti-rebate provisions or controlled business provisions of this
article, that the proposed new owner or owners of the controlling stock are qualified by
character, experience and financial responsibility to control and operate the title
insurer in a lawful and proper manner, and that the interests of the stockholders and
policyholders of the title insurer and the interests of the public generally will not be
jeopardized by the proposed change in ownership and management. If the director does
not, by affirmative action, approve or disapprove the proposed purchase or acquisition
within thirty days after the date on which such application was so filed with him, the
proposed purchase or acquisition shall be deemed to be approved at the expiration of such
thirty-day period.
B. No such purchase or acquisition of a domestic title insurer shall be effectuated
unless approved as provided in subsection A of this section.
C. In the event the director disapproves the proposed purchase or acquisition, he
shall give written notice thereof to the person or persons so applying for approval,
setting forth in detail the reasons for disapproval.
20-1580 Title insurance agents to be licensed
A. Title insurance agents shall be licensed by the director. Application for
license shall be made on forms approved by the director, and the director shall issue a
license upon completion and filing the application and payment of the license fee
specified in section 20-167.
B. Licenses of title insurance agents shall expire quadrennially at midnight on the
last day of the same month four years after the license was issued or renewed unless
sooner terminated by the withdrawal by the insurer of authority in the agent, or unless
revoked by the director.
C. Title insurance agents' licenses shall be renewed quadrennially on the filing of
an application containing such information as the director deems necessary.
D. The director may grant a temporary license to
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