2012 -- H 7441

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LC00555

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

____________

A N A C T

RELATING TO INSURANCE - ACCIDENT AND SICKNESS INSURANCE POLICIES

     Introduced By: Representative Stephen R. Ucci

     Date Introduced: February 09, 2012

     Referred To: House Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Sections 27-18-3 and 27-18-4 of the General Laws in Chapter 27-18

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entitled "Accident and Sickness Insurance Policies" are hereby amended to read as follows:

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     27-18-3. Required provisions. -- (a) Except as provided in section 27-18-5, each policy

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delivered or issued for delivery to any person in this state shall contain the provisions specified in

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this section in the words in which the provisions appear in this section; provided, that the insurer

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may, at its option, substitute, for one or more of the provisions, corresponding provisions of

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different wording approved by the commissioner which are in each instance not less favorable in

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any respect to the insured or the beneficiary. The provisions shall be preceded individually by the

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caption appearing in this subsection or, at the option of the insurer, by the appropriate individual

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or group captions or subcaptions as the commissioner may approve:

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     (1) A provision as follows:

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     "ENTIRE CONTRACT; CHANGES: This policy, including the endorsements and the

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attached papers, if any, constitutes the entire contract of insurance. No change in this policy shall

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be valid until approved by an executive officer of the insurer and unless the approval is endorsed

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on it or attached to it. No agent has authority to change this policy or to waive any of its

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provisions."

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     (2) A provision as follows:

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      "TIME LIMIT ON CERTAIN DEFENSES: (a) After three (3) years from the date of

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issue of this policy no misstatements, except fraudulent misstatements, made by the applicant in

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the application for this policy shall be used to void the policy or to deny a claim for loss incurred

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or disability (as defined in the policy) commencing after the expiration of that three-year period."

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(This policy provision shall not be construed as to affect any legal requirement for

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avoidance of a policy or denial of a claim during the initial three (3) year period, nor to limit the

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application of section 27-18-4(1), (2), (3), (4) and (5) in the event of a misstatement with respect

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to age or occupation or other insurance.)

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     (A policy which the insured has the right to continue in force subject to its terms by the

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timely payment of premium: (i) until at least age fifty (50); or (ii) in the case of a policy issued

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after age forty-four (44), for at least five (5) years from its date of issue, may contain in lieu of

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this provision the following provision (from which the clause in parentheses may be omitted at

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the insurer's option) under the caption "INCONTESTABLE":

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     "After this policy has been in force for a period of three (3) years during the lifetime of

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the insured (excluding any period during which the insured is disabled), it shall become

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incontestable as to the statements contained in the application.")

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     "(b) No claim for loss incurred or disability (as defined in the policy) commencing after

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three (3) years from the date of issue of this policy shall be reduced or denied on the ground that a

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disease or physical condition not excluded from coverage by name or specific description

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effective on the date of loss had existed prior to the effective date of coverage of this policy."

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     (3) A provision as follows:

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      "GRACE PERIOD: A grace period of ________" (insert a number not less than "seven"

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(7) for weekly premium policies, "ten" (10) for monthly premium policies and "thirty-one" (31)

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for all other policies) "days will be granted for the payment of each premium falling due after the

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first premium, during which grace period the policy shall continue in force."

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      (A policy which contains a cancellation provision may add, at the end of the above

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provision:

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      "subject to the right of the insurer to cancel in accordance with the cancellation provision

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of this policy.")

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      (A policy in which the insurer reserves the right to refuse any renewal shall have, at the

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beginning of the above provision:

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      "Unless not less than ten (10) days prior to the premium due date the insurer has

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delivered to the insured or has mailed to his or her last address as shown by the records of the

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insurer written notice of its intention not to renew this policy beyond the period for which the

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premium has been accepted,")

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      (4) A provision as follows:

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      "REINSTATEMENT: If any renewal premium is not paid within the time granted the

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insured for payment, a subsequent acceptance of premium by the insurer or by any agent duly

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authorized by the insurer to accept this premium, without requiring in connection with it an

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application for reinstatement, shall reinstate the policy; provided, that if the insurer or the agent

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requires an application for reinstatement and issues a conditional receipt for the premium

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tendered, the policy will be reinstated upon approval of the application by the insurer or, lacking

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approval, upon the forty-fifth day following the date of the conditional receipt unless the insurer

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has previously notified the insured in writing of its disapproval of the application. The reinstated

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policy shall cover only loss resulting from an accidental injury as may be sustained after the date

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of reinstatement and loss due to a sickness as may begin more than ten (10) days after this date. In

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all other respects the insured and insurer shall have the same rights under the reinstated policy as

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they had under the policy immediately before the due date of the defaulted premium, subject to

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any provisions endorsed on it or attached to it in connection with the reinstatement. Any premium

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accepted in connection with a reinstatement shall be applied to a period for which the premium

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has not been previously paid, but not to any period more than sixty (60) days prior to the date of

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reinstatement."

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      (The last sentence of this provision may be omitted from any policy which the insured

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has the right to continue in force subject to its terms by the timely payment of premiums: (i) until

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at least age fifty (50); or (ii) in the case of a policy issued after age forty-four (44), for at least five

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(5) years from its date of issue.)

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      (5) A provision as follows:

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      "NOTICE OF CLAIM: Written notice of claim must be given to the insurer within

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twenty (20) days after the occurrence or commencement of any loss covered by the policy, or as

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soon after this as is reasonably possible. Notice given by or on behalf of the insured or the

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beneficiary to the insurer at ________________________" (insert the location of any office as

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the insurer may designate for the purpose), "or to any authorized agent of the insurer, with

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information sufficient to identify the insured, shall be deemed notice to the insurer." (In a policy

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providing a loss of time benefit which may be payable for at least two (2) years, an insurer may at

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its option insert the following between the first and second sentences of this provision: "Subject

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to the qualifications set forth below, if the insured suffers loss of time on account of disability for

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which indemnity may be payable for at least two (2) years, the insured shall, at least once in every

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six (6) months after having given notice of claim, give to the insurer notice of continuance of the

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disability, except in the event of legal incapacity. The period of six (6) months following any

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filing of proof by the insured or any payment by the insurer on account of the claim or any denial

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of liability in whole or in part by the insurer shall be excluded in applying this provision. Delay in

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the giving of notice shall not impair the insured's right to any indemnity which would have

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accrued during the period of six (6) months preceding the date on which the notice is actually

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given.")

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      (6) A provision as follows:

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      "CLAIM FORMS: The insurer, upon receipt of a notice of claim, will furnish to the

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claimant any forms as are usually furnished by it for filing proofs of loss. If the forms are not

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furnished within fifteen (15) days after the giving of notice, the claimant shall be deemed to have

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complied with the requirements of this policy as to proof of loss upon submitting, within the time

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fixed in the policy for filing proofs of loss, written proof covering the occurrence, the character,

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and the extent of the loss for which claim is made."

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      (7) A provision as follows:

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      "PROOFS OF LOSS: Written proof of loss must be furnished to the insurer at its office

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in the case of a claim for loss for which this policy provides any periodic payment contingent

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upon continuing loss within ninety (90) days after the termination of the period for which the

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insurer is liable and in the case of a claim for any other loss within ninety (90) days after the date

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of the loss. Failure to furnish proof within the time required shall not invalidate nor reduce any

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claim if it was not reasonably possible to give proof within this time, provided the proof is

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furnished as soon as reasonably possible and in no event, except in the absence of legal capacity,

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later than one year from the time proof is required."

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      (8) A provision as follows:

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      "TIME OF PAYMENT OF CLAIMS: Indemnities payable under this policy for any loss

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other than loss for which this policy provides any periodic payment will be paid immediately

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upon receipt of due written proof of this loss. Subject to due written proof of loss, all accrued

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indemnities for loss for which this policy provides periodic payment will be paid

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________________________" (insert period for payments which must not be less frequently than

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monthly) "and any balance remaining unpaid upon the termination of liability will be paid

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immediately upon receipt of due written proof."

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      (9) A provision as follows:

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      "PAYMENT OF CLAIMS: Indemnity for loss of life will be payable in accordance with

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the beneficiary designation and the provisions respecting the payment which may be prescribed in

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this policy and effective at the time of payment. If no designation or provision is effective,

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indemnity shall be payable to the estate of the insured. Any other accrued indemnities unpaid at

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the insured's death may, at the option of the insurer, be paid either to the beneficiary or to the

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estate. All other indemnities will be payable to the insured."

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      (The following provisions, or either of them, may be included with this provision at the

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option of the insurer:

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      "If any indemnity of this policy shall be payable to the estate of the insured, or to an

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insured or beneficiary who is a minor or not competent to give a valid release, the insurer may

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pay the indemnity, up to an amount not exceeding $____________" (insert an amount which shall

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not exceed one thousand dollars ($1,000)), "to any relative by blood or connection by marriage of

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the insured or beneficiary who is deemed by the insurer to be equitably entitled to the payment.

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Any payment made by the insurer in good faith pursuant to this provision shall fully discharge the

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insurer to the extent of the payment." "Subject to any written direction of the insured in the

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application or otherwise, all or a portion of any indemnities provided by this policy on account of

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hospital, nursing, medical, or surgical services may, at the insurer's option and unless the insured

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requests otherwise in writing not later than the time of filing proofs of the loss, be paid directly to

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the hospital or person rendering the services; but it is not required that the service be rendered by

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a particular hospital or person.")

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      (10) A provision as follows:

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     "PHYSICAL EXAMINATIONS AND AUTOPSY: The insurer at its own expense shall

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have the right and opportunity to examine the person of the insured when and as often as it may

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reasonably require during the pendency of a claim under this policy and to make an autopsy in

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case of death where it is not forbidden by law."

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     (11) A provision as follows:

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     "LEGAL ACTIONS: No action at law or in equity shall be brought to recover on this

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policy prior to the expiration of sixty (60) days after written proof of loss has been furnished in

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accordance with the requirements of this policy. No action shall be brought after the expiration of

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three (3) years after the time written proof of loss is required to be furnished."

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     (12) A provision as follows:

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     "CHANGE OF BENEFICIARY: Unless the insured makes an irrevocable designation of

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beneficiary, the right to change of beneficiary is reserved to the insured and the consent of the

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beneficiary or beneficiaries shall not be requisite to surrender or assignment of this policy or to

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any change of beneficiary or beneficiaries, or to any other changes in this policy."

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     (The first clause of this provision, relating to the irrevocable designation of beneficiary,

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may be omitted at the insurer's option.)

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     (13) A provision as follows:

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      "Medical services' means those professional services and supplies rendered by or under

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the direction of persons duly licensed under the laws of this state to practice medicine, surgery, or

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podiatry as may be specified by any medical service plan. Medical service shall not be construed

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to include hospital services."

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     (14) A provision as follows:

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     "CANCELLATION: The insurer may cancel this policy at any time by written notice

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delivered to the insured, or mailed to his or her last address as shown by the records of the

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insurer, stating when, not less than ten (10) days after this, the cancellation shall be effective; and,

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after the policy has been continued beyond its original term, the insured may cancel this policy at

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any time by written notice delivered or mailed to the insurer, effective upon receipt or on a later

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date as may be specified in the notice. In the event of cancellation, the insurer will return

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promptly the unearned portion of any premium paid. If the insured cancels, the earned premium

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shall be computed by the use of the short-rate table last filed with the state official having

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supervision of insurance in the state where the insured resided when the policy was issued. If the

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insurer cancels, the earned premium shall be computed pro rata. Cancellation shall be without

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prejudice to any claim originating prior to the effective date of cancellation."

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      (c) (1) Each policy issued and/or renewed shall contain a minimum home health care

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benefit as follows:

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     (i) "Home health care" is defined as a medically necessary program to reduce the length

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of a hospital stay or to delay or eliminate an otherwise medically necessary hospital admission;

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(ii) The home health care program shall be formulated and supervised by the subscriber's

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physician;

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     (iii) Minimum home health care coverage shall not exceed six (6) home or office

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physician's visits per month, and shall not exceed three (3) nursing visits per week, home health

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aide visits up to twenty (20) hours per week, and the following services as needed: physical or

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occupational therapy as a rehabilitative service, respiratory service, speech therapy, medical

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social work, nutrition counseling, prescription drugs and medication, medical and surgical

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supplies, such as dressings, bandages, and casts, minor equipment such as commodes and

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walkers, laboratory testing, x-rays and E.E.G. and E.K.G. evaluations; and

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     (iv) Communicable diseases and/or nervous, emotional and mental illness are excluded

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from home health care coverage;

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     (2) The commissioner shall approve the wording in each policy that in each instance shall

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not be less favorable in any respect to the insured or the beneficiary, as the benefits are outlined

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in subdivision (1) of this subsection. Any accident and sickness insurance policy whose benefits

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are limited to income protection or the furnishing of disability income or a limited benefit health

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coverage are excluded from this subsection. Notwithstanding the provisions of section 27-18-

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19(3), the minimum home health care benefit shall be included in blanket and/or group policies of

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accident and sickness insurance;

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     (3) A "limited benefit policy," for the purposes of this section, is any accident and

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sickness policy that covers one or more specified risks including, but not limited to, accidental

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death or injury or specified disease. A policy that broadly covers accident and sickness, but which

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contains exclusions and limitations with respect to certain risks or services, is not a limited

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benefit policy;

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     (4) With respect to blanket and/or group policies, the provisions of this subsection shall

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apply only to services provided to residents of Rhode Island or employees of Rhode Island

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employers.

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     27-18-4. Optional provisions. -- Except as provided in section 27-18-5, no policy

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delivered or issued for delivery to any person in this state shall contain provisions respecting the

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matters set forth in this section unless the provisions are in the words in which they appear in this

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section; provided, that the insurer may, at its option, use in lieu of any provision a corresponding

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provision of different wording approved by the commissioner which is not less favorable in any

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respect to the insured or the beneficiary. The provision contained in the policy shall be preceded

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individually by the appropriate caption appearing in this section or, at the option of the insurer, by

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any appropriate individual or group captions or subcaptions as the commissioner may approve:

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      (1) A provision as follows:

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      "CHANGE OF OCCUPATION: If the insured is injured or contracts sickness after

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having changed his or her occupation to one classified by the insurer as more hazardous than that

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stated in this policy or while doing for compensation anything pertaining to an occupation

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classified as more hazardous, the insurer will pay only that portion of the indemnities provided in

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this policy as the premium paid would have purchased at the rates and within the limits fixed by

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the insurer for the more hazardous occupation. If the insured changes his or her occupation to one

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classified by the insurer as less hazardous than that stated in this policy, the insurer, upon receipt

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of proof of the change of occupation, will reduce the premium rate accordingly, and will return

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the excess pro rata unearned premium from the date of change of occupation or from the policy

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anniversary date immediately preceding receipt of the proof, whichever is the more recent. In

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applying this provision, the classification of occupational risk and the premium rates shall be such

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as have been last filed by the insurer, prior to the occurrence of the loss for which the insurer is

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liable or prior to the date of proof of change in occupation, with the state official having

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supervision of insurance in the state where the insured resided at the time this policy was issued;

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but, if the filing was not required, then the classification of occupational risk and the premium

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rates shall be those last made effective by the insurer in the state prior to the occurrence of the

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loss or prior to the date of proof of change in occupation."

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      (2) A provision as follows:

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      "MISSTATEMENT OF AGE: If the age of the insured has been misstated, all amounts

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payable under this policy shall be such as the premium paid would have purchased at the correct

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age."

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      (3) A provision as follows:

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      "OTHER INSURANCE IN THIS INSURER: If an accident or sickness or accident and

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sickness policy or policies previously issued by the insurer to the insured is in force concurrently

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with it, making the aggregate indemnity for ..........." (insert type of coverage or coverages) "in

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excess of $........" (insert maximum limit of indemnity or indemnities) "the excess insurance shall

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be void and all premiums paid for the excess shall be returned to the insured or to his or her

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estate," or, in lieu of this:

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      "Insurance effective at any one time on the insured under a like policy or policies in this

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insurer is limited to the one such policy elected by the insured, his or her beneficiary or his or her

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estate and the insurer will return all premiums paid for all other like policies."

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      (4) A provision as follows:

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      "INSURANCE WITH OTHER INSURERS: If there is other valid coverage, not with

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this insurer, providing benefits for the same loss on a provision of service basis or on an expense

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incurred basis and of which this insurer has not been given written notice prior to the occurrence

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or commencement of loss, the only liability under any expense incurred coverage of this policy

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shall be for the proportion of the loss as the amount which would have been payable under this

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policy plus the total of the like amounts under all the other valid coverage for the same loss of

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which this insurer had notice bears to the total like amounts under all valid coverage for the loss,

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and for the return of the portion of the premiums paid as shall exceed the pro rata portion for the

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determined amount. For the purpose of applying this provision when other coverage is on a

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provision of service basis, the "like amount' of the other coverage shall be taken as the amount

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which the services rendered would have cost in the absence of the coverage."

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      (If this policy provision is included in a policy which also contains the next following

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policy provision, there shall be added to the caption of this provision the phrase " -- EXPENSE

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INCURRED BENEFITS." The insurer may, at its option, include in this provision a definition of

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"other valid coverage", approved as to form by the commissioner, which definition shall be

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limited in subject matter to coverage provided by organizations subject to regulation by insurance

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law or by insurance authorities of this or any other state of the United States or any province of

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Canada, and by hospital or medical service organizations, and to any other coverage the inclusion

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of which may be approved by the commissioner. In the absence of the definition, the term shall

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not include group insurance, automobile medical payments insurance, or coverage provided by

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hospital or medical service organizations or by union welfare plans or employer or employee

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benefit organizations. For the purpose of applying this policy provision with respect to any

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insured, any amount of benefit provided for the insured pursuant to any compulsory benefit

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statute, including any workers' compensation or employer's liability statute, whether provided by

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a governmental agency or otherwise, shall in all cases be deemed to be "other valid coverage" of

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which the insurer has had notice. In applying this policy provision, no third party liability

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coverage shall be included as "other valid coverage".)

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      (5) A provision as follows:

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      "INSURANCE WITH OTHER INSURERS: If there is other valid coverage, not with

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this insurer, providing benefits for the same loss on other than an expense incurred basis and of

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which this insurer has not been given written notice prior to the occurrence or commencement of

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loss, the only liability for those benefits under this policy shall be for the proportion of the

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indemnities otherwise provided under this policy for the loss as the like indemnities of which the

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insurer had notice (including the indemnities under this policy) bear to the total amount of all like

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indemnities for the loss, and for the return of the portion of the premium paid as shall exceed the

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pro rata portion for the determined indemnities."

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      (If this policy provision is included in a policy which also contains the next preceding

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policy provision, there shall be added to the caption of this provision the phrase " -- OTHER

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BENEFITS." The insurer may, at its option, include in this provision a definition of "other valid

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coverage", approved as to form by the commissioner, which definition shall be limited in subject

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matter to coverage provided by organizations subject to regulation by insurance law or by

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insurance authorities of this or any other state of the United States or any province of Canada, and

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to any other coverage the inclusion of which may be approved by the commissioner. In the

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absence of the definition, this term shall not include group insurance, or benefits provided by

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union welfare plans or by employer or employee benefit organizations. For the purpose of

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applying this policy provision with respect to any insured, any amount of benefit provided for the

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insured pursuant to any compulsory benefit statute, including any workers' compensation or

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employer's liability statute, whether provided by a governmental agency or otherwise, shall in all

9-32

cases be deemed to be "other valid coverage" of which the insurer has had notice. In applying this

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policy provision, no third party liability coverage shall be included as "other valid coverage".)

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      (6) A provision as follows:

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      "RELATION OF EARNINGS TO INSURANCE: If the total monthly amount of loss of

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time benefits promised for the same loss under all valid loss of time coverage upon the insured,

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whether payable on a weekly or monthly basis, shall exceed the monthly earnings of the insured

10-38

at the time disability commenced or his or her average monthly earnings for the period of two (2)

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years immediately preceding a disability for which claim is made, whichever is the greater, the

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insurer will be liable only for the proportionate amount of the benefits under this policy as the

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amount of the monthly earnings or the average monthly earnings of the insured bears to the total

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amount of monthly benefits for the same loss under all the coverage upon the insured at the time

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the disability commences, and for the return of the part of the premiums paid during the two (2)

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years that exceeds the pro rata amount of the premiums for the benefits actually paid under this

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policy; but this shall not operate to reduce the total monthly amount of benefits payable under all

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the coverage upon the insured below the sum of two hundred dollars ($200) or the sum of the

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monthly benefits specified in the coverage, whichever is the lesser, nor shall it operate to reduce

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benefits other than those payable for loss of time." (This policy provision may be inserted only in

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a policy which the insured has the right to continue in force subject to its terms by the timely

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payment of premiums: (i) until at least age fifty (50); or (ii) in the case of a policy issued after age

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forty-four (44), for at least five (5) years from its date of issue. The insurer may, at its option,

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include in this provision a definition of "valid loss of time coverage", approved as to form by the

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commissioner, which definition shall be limited in subject matter to coverage provided by

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governmental agencies or by organizations subject to regulation by insurance law or by insurance

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authorities of this or any other state of the United States or any province of Canada, or to any

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other coverage the inclusion of which may be approved by the commissioner or any combination

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of this coverage. In the absence of a definition, the term shall not include any coverage provided

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for the insured pursuant to any compulsory benefit statute, including any workers' compensation

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or employer's liability statute, or benefits provided by union welfare plans or by employer or

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employee benefit organizations.)

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      (7) A provision as follows:

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      "UNPAID PREMIUM: Upon the payment of a claim under this policy, any premium

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then due and unpaid or covered by any note or written order may be deducted from this

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payment."

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      (8) A provision as follows:

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      "CANCELLATION: The insurer may cancel this policy at any time by written notice

10-67

delivered to the insured, or mailed to his or her last address as shown by the records of the

10-68

insurer, stating when, not less than ten (10) days after this, the cancellation shall be effective; and,

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after the policy has been continued beyond its original term, the insured may cancel this policy at

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any time by written notice delivered or mailed to the insurer, effective upon receipt or on a later

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date as may be specified in the notice. In the event of cancellation, the insurer will return

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promptly the unearned portion of any premium paid. If the insured cancels, the earned premium

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shall be computed by the use of the short-rate table last filed with the state official having

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supervision of insurance in the state where the insured resided when the policy was issued. If the

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insurer cancels, the earned premium shall be computed pro rata. Cancellation shall be without

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prejudice to any claim originating prior to the effective date of cancellation."

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      (9) (8) A provision as follows:

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      "CONFORMITY WITH STATE STATUTE: Any provision of this policy which, on its

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effective date, is in conflict with the statutes of the state in which the insured resides on that date,

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is hereby amended to conform to the minimum requirements of those statutes."

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      (10) (9) A provision as follows:

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      "ILLEGAL OCCUPATION: The insurer shall not be liable for any loss to which a

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contributing cause was the insured's commission of or attempt to commit a felony or to which a

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contributing cause was the insured's being engaged in an illegal occupation."

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      (11) (10) A provision as follows included in any policy that is not a medical expense

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policy:

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      "INTOXICANTS AND NARCOTICS: The insurer shall not be liable for any loss

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sustained or contracted in consequence of the insured's being intoxicated or under the influence of

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any narcotic unless administered on the advice of a physician."

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      No such provision may be included in a medical expense policy, which, for purposes of

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this subsection, shall mean an accident and sickness insurance policy that provides hospital,

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medical or surgical expense coverage.

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     SECTION 2. This act shall take effect upon passage.

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LC00555

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO INSURANCE - ACCIDENT AND SICKNESS INSURANCE POLICIES

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     This act would require insurers to send notices of cancellation to policy holders and

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insureds.

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     This act would take effect upon passage.

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LC00555

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