Bill Text: CA AB1804 | 2013-2014 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Insurance: notice of lapse.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Passed) 2014-09-17 - Chaptered by Secretary of State - Chapter 380, Statutes of 2014. [AB1804 Detail]

Download: California-2013-AB1804-Amended.html

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BILL NUMBER: AB 1804	AMENDED
	BILL TEXT

	AMENDED IN SENATE  AUGUST 7, 2014
	AMENDED IN SENATE  JULY 1, 2014
	AMENDED IN ASSEMBLY  MAY 28, 2014
	AMENDED IN ASSEMBLY  MAY 15, 2014
	AMENDED IN ASSEMBLY  APRIL 29, 2014
	AMENDED IN ASSEMBLY  APRIL 10, 2014

INTRODUCED BY   Assembly Member Perea

                        FEBRUARY 18, 2014

   An act to add Section 396 to the Insurance Code, relating to
insurance.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 1804, as amended, Perea. Insurance: notice of lapse.
    Existing law requires an insurance policy to specify certain
information, including, but not limited to, the parties to the
contract, the property or life insured, the risks insured against,
premium, and the coverage period.
   This bill, commencing January 1, 2016, and with regard to private
passenger automobile insurance that provides coverage for 6 months or
longer, specified residential property insurance, and policies of
individual disability income insurance that are issued and take
effect or that are renewed on or after January 1, 2016, would require
an insurer to maintain a verifiable  delivery 
process or adopt a procedure that allows an applicant or policyholder
to designate one additional person to receive notice of lapse,
termination, expiration, nonrenewal, or cancellation of a policy for
nonpayment of premium, as specified. The bill would prohibit an
insurance policy from lapsing or being terminated for nonpayment of
premium unless the insurer, at least 10 days prior to the effective
date of the lapse, termination, expiration, nonrenewal, or
cancellation, gives notice, as provided, to the individual
designated, if any, at the address provided by the policyholder for
these purposes. The bill would specify that an individual designated
by a policyholder does not have any rights, whether as an additional
insured or otherwise, to any benefits under the policy, other than
the right to receive the notice of lapse, termination, expiration,
nonrenewal, or cancellation for nonpayment of premium.
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 396 is added to the Insurance Code, to read:
   396.  (a) An insurer shall do either of the following:
   (1) Maintain a verifiable  delivery  process that
allows a policyholder to designate in writing or by electronic
transmission pursuant to Section 38.5 one additional person to
receive notice of lapse, termination, expiration, nonrenewal, or
cancellation of a policy for nonpayment of premium. The insurer shall
notify the policyholder in writing or by electronic transmission
pursuant to Section 38.5 of this right at the time of the application
or within 30 days after the inception date of an individual policy
described in subdivision  (e),   (f),  and
at least every two years thereafter. The notification described in
this subdivision shall instruct the policyholder how to request the
designation and how to replace or delete a designee. If a
policyholder initiates contact with the insurer after the insurer has
provided notice and the insurer complies with the policyholder's
request to establish or change the additional person to receive the
notice described in this section, the insurer shall not be required
to maintain additional verification.
   (2) Comply with subdivision (b).
   (b) An insurer that adopts the following procedure shall be deemed
to have complied with subdivision (a).
   (1) Unless an applicant for insurance has been provided notice of
the right set forth in this section prior to inception of the policy,
the insurer shall provide the policyholder, within 30 days after the
inception date of an individual policy described in subdivision
 (e),   (f),  with notice of the right to
designate one person, in addition to the policyholder, to receive
notice of lapse, termination, expiration, nonrenewal, or cancellation
of a policy for nonpayment of premium. The insurer shall provide
each applicant or policyholder with notice in writing or by
electronic transmission pursuant to Section 38.5 of the opportunity
to make the designation. That notice shall instruct the applicant or
policyholder on how he or she is to submit the  name,
address, and telephone number   name and address 
of one person, in addition to the applicant or policyholder, who is
to receive notice of lapse, termination, expiration, nonrenewal, or
cancellation of the policy for nonpayment of premium.
   (2) If after having been provided notice from the insurer of the
right to designate an individual to receive notice of lapse,
termination, expiration, nonrenewal, or cancellation for nonpayment
of premium, the applicant or policyholder fails to  take
action pursuant to subdivision (a)   designate an
individual  within 30 days, the applicant or policyholder shall
be conclusively presumed to have declined the opportunity to exercise
his or her right at that time.
   (3) Notwithstanding subparagraph (C) of paragraph (2) of
subdivision (a) of Section 791.13 or any other law, the insurer shall
retain and utilize as necessary the contact information provided in
the written designation for the lifetime of the policy, and allow the
policyholder to update the written designation if the policyholder
so requests. 
   (4) 
    (c)   (1)    A policyholder retains
the right to designate the one additional person to receive notice of
lapse, termination, expiration, nonrenewal, or cancellation for
nonpayment of premium at any time, at the initiative of the
policyholder, regardless of whether the policyholder previously
declined to exercise that right. At least every two years, the
insurer shall notify the policyholder in writing or by electronic
transmission pursuant to Section 38.5, of whichever of the following
applies:
   (A) If a policyholder has previously provided a designation
pursuant to this subdivision, in writing or by electronic
transmission pursuant to Section 38.5, the right to change the prior
designation by replacing or deleting a person to receive notice of
lapse, termination, expiration, nonrenewal, or cancellation for
nonpayment of premium.
   (B) If the policyholder has not previously designated a person to
receive the notice of lapse, termination, expiration, nonrenewal, or
cancellation for nonpayment of premium pursuant to this subdivision,
the right to designate a person to receive notice of lapse,
termination, expiration, nonrenewal, or cancellation for nonpayment
of premium. 
   (C) 
    (2)  The notice requirements in subparagraphs (A) and
(B)  of paragraph (1)  may be provided to a policyholder in
a single notice and shall not require two separate notices. 
   (c) 
    (d)  When a policyholder pays the premium for an
insurance policy through a payroll or pension deduction plan, the
requirements contained in paragraph (1) of subdivision (b) need not
be met until 60 days after the policyholder is no longer on that
deduction payment plan. The application form for an insurance policy
shall clearly indicate the deduction payment plan selected by the
applicant. 
   (d) 
    (e)  An insurance policy shall not lapse or be
terminated for nonpayment of premium unless the insurer, at least 10
days prior to the effective date of the lapse, termination,
expiration, nonrenewal, or cancellation, gives notice to the
individual designated pursuant to subdivision (a) or (b) at the
address provided by the policyholder for purposes of receiving the
notice of lapse, termination, expiration, nonrenewal, or cancellation
for nonpayment of premium.  Notice  
Notwithstanding any other law, notice  shall be given by
first-class United States mail, postage prepaid, within 10 days after
the premium is due and unpaid. This subdivision does not modify
requirements for notice to the policyholder of lapse, termination,
expiration, nonrenewal, or cancellation set forth in other sections
of this code. 
   (e) 
    (f)  This section applies only to policies of private
passenger automobile insurance that provide coverage for six months
or longer, policies of residential property insurance as described in
subdivision (a) of Section 10087 that take effect or that are
renewed after the effective date of this section, and policies of
individual disability income insurance as described in subdivision
(i) of Section 799.01. 
   (f) 
    (g)  This section applies to policies that are issued
and take effect or that are renewed on or after January 1, 2016.

   (g) 
    (h)  An individual designated by a policyholder pursuant
to this section to receive notice of lapse, termination, expiration,
nonrenewal, or cancellation of the policy for nonpayment of premium
does not have any rights, whether as an additional insured or
otherwise, to any benefits under the policy, other than the right to
receive notice as provided by this section. 
   (h) 
   (i)  This section shall become operative on January 1,
2016.