Bill Text: CA AB2802 | 2017-2018 | Regular Session | Amended

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

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Bill Title: Insurance payments: interception.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Passed) 2018-09-17 - Chaptered by Secretary of State - Chapter 439, Statutes of 2018. [AB2802 Detail]

Download: California-2017-AB2802-Amended.html

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Amended  IN  Assembly  March 22, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Assembly Bill

No. 2802

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Introduced by Assembly Member Friedman

February 16, 2018

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An act to add Article 8 (commencing with Section 13550) to Chapter 2 of Division 3 of the Insurance Code, relating to insurance.

LEGISLATIVE COUNSEL'S DIGEST

AB 2802, as amended, Friedman. Insurance payments: interception.

Existing law creates the Department of Child Support Services and provides for the interception of funds from state tax refunds, lottery winnings, unemployment compensation benefits, and benefits under the Public Employees’ Retirement System that otherwise would be paid to a person owing past due child support. Existing law creates the Department of Insurance, headed by the Insurance Commissioner, and prescribes the department’s powers and duties.

This bill would create the Insurance Payment Intercept Program within the Department of Insurance and would require the department, in consultation with the Department of Child Support Services and representatives of the insurance industry in the state, to establish the program to improve the enforcement of child support, as specified. would, beginning January 1, 2020, require an insurer to cooperate with the Department of Child Support Services to match claimants with obligors who owe past-due child support, and to report those claimants to the department. The bill would require an insurer to match and report a claimant if his or her claim seeks an economic benefit, as defined, but would exempt specified economic benefits, including a claim under a personal automobile insurance policy for actual repair, replacement, or loss of use of an insured vehicle. The bill would provide that an insurer who participates in the program may not incur an obligation or insurer, specified agent, or specified insured who releases information in accordance with this bill, withholds payments as specified, or makes disbursements as specified is immune from liability in specified circumstances. The bill would also require that the data obtained pursuant to the program by the department, or by an insurer or its designated agent, only be used for the purpose of identifying child support obligors, as defined, matching claimants with obligors who owe past-due child support, and would specify that various laws protecting the privacy and security of data apply. The bill would require the Department of Insurance, on or before January 1, 2020, to measure admitted insurer participation in the Insurance Payment Intercept Program, and, if participation is less than 90% of the marketplace, as defined, would require all admitted insurers to participate in the program no later than January 1, 2021. The bill would authorize the commissioner to adopt rules and regulations if the program becomes mandatory. The bill would also require the Department of Insurance to prepare a report on insurer participation in the program and provide the report on its Internet Web site. The bill would make related findings and declarations. authorize an insurer to use a 3rd-party service to automate its claims matching process, and require an insurer that does not use a 3rd-party service to determine if a claimant owes past-due child support before paying a claim, as specified.

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

Digest Key

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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Bill Text

The people of the State of California do enact as follows:

SECTION 1.

 Article 8 (commencing with Section 13550) is added to Chapter 2 of Division 3 of the Insurance Code, to read:

Article  8. Insurance Payment Intercept Program

13550.

 (a) An insurer shall cooperate with the Department of Child Support Services to match claimants with obligors who owe past-due child support and report those claimants to the Department of Child Support Services.

(b) An insurer shall match and report a claimant to the Department of Child Support Services if the claim seeks an economic benefit for an obligor who owes past-due child support.

(1) An “economic benefit” under a life insurance policy, disability income insurance policy, or annuity means a payment in which an individual is paid as the payee or copayee for any of the following:

(A) A claim by a beneficiary under a life insurance policy.

(B) A payment of the cash surrender value of a life insurance policy or annuity.

(C) A payment to an annuitant.

(D) A payment from a disability income insurance policy.

(E) A loan against the cash value or surrender value of an insurance policy or annuity, including loans for premium payments.

(2) (A) An “economic benefit” under a property and casualty insurance policy means a payment involving loss of, or damage to, property.

(B) An insurer shall not match and report a claimant if his or her economic benefit under a property and casualty insurance policy is any of the following:

(i) A claim under a personal automobile insurance policy for actual repair, replacement, or loss of use of an insured vehicle.

(ii) A payment compensating the insured for the total loss of an insured vehicle.

(iii) A claim under a residential property insurance policy for actual repair, replacement, or loss of use of an insured dwelling and contents, including additional living expenses actually incurred.

(c) Notwithstanding subdivision (b), a claimant with any of following economic benefits shall not be reported:

(1) Payments made after the claimant presents a final bill or signed invoice from a vendor or repair facility showing payment made by the claimant for repair or replacement of the damaged property in an amount equal to or greater than the insurance payment.

(2) Payments to the mortgagee or lienholder of the property.

(3) Payments resulting from an accelerated death benefit.

(d) An insurer in California subject to the requirements of this article shall match and report a claimant to the Department of Child Support Services if any of the following apply:

(1) A payment is made to the owner of a life policy or annuity that was issued to the owner while residing or located in California.

(2) A beneficiary making a claim resides or is located in California.

(3) A claimant is making a property claim for property located in California.

(e) If an insurer matches a claimant with an obligor who owes past-due child support and reports the claimant to the Department of Child Support Services, the Department of Child Support Services shall provide the insurer with either of the following to secure the payment of the amount of past-due child support:

(1) A notice of child support lien.

(2) An income-withholding order.

(f) For the purposes of this section, “insurer” includes a fraternal benefit society.

13551.

 Notwithstanding any other law, an insurer or insurance company, its directors, agents, and employees, an insured individual on whose behalf the company makes a payment, and a central reporting organization and its respective employees authorized by an insurer to act on its behalf who release information in accordance with this article, who withhold amounts from payment based on the latest information supplied by the Department of Child Support Services pursuant to Section 13550, and who make disbursements in accordance with Section 13550 shall be in compliance with this section and any applicable fair claim settlement act, and shall be immune from any liability to the claimant or other interested party arising from the payment.

13552.

 (a) Data obtained pursuant to this article shall only be used for the purpose of matching claimants with obligors who owe past-due child support. If the Department of Child Support Services does not find a match in the data obtained pursuant to this article with a child support obligor, the Department of Child Support Services shall not maintain that data and shall immediately destroy that data.

(b) An insurer that provides, attempts to provide, or in any way accesses data pursuant to this article shall comply with all applicable state and federal laws for the protection of the privacy and the security of that data, including, but not limited to, the Insurance Information and Privacy Protection Act (Article 6.6 (commencing with Section 791) of Chapter 1 of Part 2 of Division 1), the Information Practices Act of 1977 (Chapter 1 (commencing with Section 1798) of Title 1.8 of Part 4 of Division 3 of the Civil Code), and the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191).

(c) The Department of Child Support Services shall consider any information received from an insurer as confidential. That information shall be used or disclosed only for the purpose of collecting past-due child support.

(d) Information provided by the Department of Child Support Services to an insurer, or its designated agent, for the purpose of conducting a data match shall not be used by the insurer or its agent for any other purpose, and shall not be disclosed to any person except to the extent necessary to match and report a claimant who owes past-due child support. The insurer or its agent shall destroy or erase all information provided to the insurer after completion of matching and reporting. This subdivision does not apply to information contained in a child support lien or an income-withholding order received from the Department of Child Support Services after the insurer has matched and reported a claimant.

13553.

 (a) An insurer may satisfy its obligation to match and report a claimant who owes past-due child support through the use of a third-party service that automates the claims matching process or provides interactive lookups. If an insurer does not use a third-party service to automate the process, the insurer shall determine if the claimant owes past-due child support before paying a claim.

(b) For claims involving periodic payments after the insurer has determined that benefits will be paid, the insurer shall only determine if the claimant owes past-due child support before the initial payment and every 12 months thereafter.

13554.

 This article shall become operative on January 1, 2020.

SEC. 2.

 The Legislature finds and declares that Section 1 of this act, which adds Section 13552 to the Insurance Code, imposes a limitation on the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 3 of Article I of the California Constitution. Pursuant to that constitutional provision, the Legislature makes the following findings to demonstrate the interest protected by this limitation and the need for protecting that interest:

In order to protect the privacy of insurance claimants and persons owed past-due support, it is necessary that the data obtained by the Department of Child Support Services from insurers pursuant to this act be kept confidential.

SECTION 1.

The Legislature finds and declares the following:

(a)In 1996, the United States Congress passed the federal Personal Responsibility and Work Opportunity Reconciliation Act of 1996, which allowed state child support agencies to obtain access, subject to privacy safeguards, to government and private records, including information about assets held by financial institutions, including insurance companies, and records held by private entities with respect to individuals who owe child support.

(b)In 2005, Congress passed the federal Deficit Reduction Act of 2005, which authorized the United States Secretary of Health and Human Services to conduct matches of child support cases with insurers concerning insurance claims, settlements, awards, and payments and to furnish information resulting from the matches to child support enforcement agencies.

(c)In 2000, Section 138.5 of the Labor Code and Section 17510 of the Family Code created the Workers’ Compensation Notification Project, which required the Division of Workers’ Compensation to cooperate with enforcement of child support obligations.

(d)In 2002, the Department of Child Support Services created a voluntary program in which insurers could participate to match persons receiving insurance claim payments with child support obligors.

(e)In 2015, approximately $17.6 million was intercepted annually through the voluntary program from insurance claim payments to satisfy child support arrearages.

(f)Legislation is needed to increase insurer participation in the program because uniformity within the state will increase participation and interception.

SEC. 2.Article 8 (commencing with Section 13550) is added to Chapter 2 of Division 3 of the Insurance Code, to read:

8.Insurance Payment Intercept Program

13550.

The Insurance Payment Intercept Program is hereby established in furtherance of the enforcement of child support obligations in the state, and to enhance efforts to notify the Department of Child Support Services when an obligor is owed an insurance claim payment.

13551.

For the purposes of this article:

(a)“Child support” means a support obligation owing on behalf of a child pursuant to Section 4001 or 17400 of the Family Code, and includes “child support delinquency,” as defined in subdivision (c) of Section 17500 of the Family Code.

(b)“Obligor” means a person owing a duty of support.

(c)“Arrearage” or “arrearages” means the amount necessary to satisfy a child support judgment or order.

13552.

In consultation with the Department of Child Support Services and representatives of the insurance industry in this state, the Department of Insurance shall establish a program to improve the enforcement of child support. The program shall provide for the procedures, including data matches, under which insurers may voluntarily cooperate with the Department of Child Support Services, which will identify obligors who owe child support arrearages or who are subject to liens for child support arrearages in order to intercept insurance claim payments in satisfaction of the arrearage amounts. This article shall not delay payment of a claim.

13553.

(a)An insurer who participates in the provisions of this article shall not incur any obligation or liability to any person arising from any of the following:

(1)Reporting information pursuant to Section 13552.

(2)Withholding or transmitting payments pursuant to a notice from the Department of Child Support Services as a result of the data matching pursuant to Section 13552.

(3)Any other action taken in good faith to comply with the requirements of this article.

(b)Data obtained pursuant to this article shall only be used for the purpose of identifying child support obligors. If the Department of Child Support Services does not find a match in the data obtained pursuant to this article with a child support obligor, the Department of Child Support Services shall not maintain that data and shall immediately destroy that data.

(c)An insurer that provides, attempts to provide, or in any way accesses data pursuant to this article shall comply with all applicable state and federal laws for the protection of the privacy and the security of that data, including, but not limited to, the Insurance Information and Privacy Protection Act (Article 6.6 (commencing with Section 791) of Chapter 1 of Part 2 of Division 1), the Information Practices Act of 1977 (Chapter 1 (commencing with Section 1798) of Title 1.8 of Part 4 of Division 3 of the Civil Code), and the federal Health Insurance Portability and Accountability Act of 1996 (Public Law 104-191).

13554.

If insurer participation becomes mandatory pursuant to subdivision (a) of Section 13556, the commissioner may adopt reasonable rules and regulations as are necessary to administer this article in accordance with the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).

13555.

On or before January 1, 2020, the department shall prepare a report on insurer participation in the Insurance Payment Intercept Program. The department shall provide the report on its Internet Web site.

13556.

(a)On or before January 1, 2020, the department shall measure admitted insurer participation in the Insurance Payment Intercept Program. If admitted insurer participation is less than 90 percent of the marketplace, then all admitted insurers shall be required to participate in the program described in this article by no later than January 1, 2021. The commissioner shall notify all admitted insurers of the requirement to participate in the program.

(b)For the purposes of this section, “marketplace” means the total direct written premium by admitted insurers in California.

SEC. 3.

The Legislature finds and declares that Section 2 of this act, which adds Section 13553 to the Insurance Code, imposes a limitation on the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 3 of Article I of the California Constitution. Pursuant to that constitutional provision, the Legislature makes the following findings to demonstrate the interest protected by this limitation and the need for protecting that interest:

In order to protect the privacy of insurance claimants and persons owed past-due support, it is necessary that the data obtained by the Department of Child Support Services from insurers pursuant to this act be kept confidential.