2013 -- H 5530

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LC01393

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO INSURANCE

     Introduced By: Representative Brian P. Kennedy

     Date Introduced: February 14, 2013

     Referred To: House Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Chapter 27-18 of the General Laws entitled "Accident and Sickness

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Insurance Policies" is hereby amended by adding thereto the following section:

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     27-18-79. Prohibition against discretionary clauses. – (a) If a policy, contract,

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certificate, or agreement offered, issued, delivered, or renewed, whether or not in Rhode Island,

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that provides, backs up, reinsures, or funds, in whole or in part, life insurance, health insurance,

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annuities, accident insurance, long term care insurance, or disability insurance coverage for any

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Rhode Island resident contains a provision that reserves discretionary authority to the insurer, or

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an agent of the insurer, to determine eligibility for benefits or coverage, to interpret the terms of

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the policy, contract, certificate, or agreement, or to provide standards of interpretation or review

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that are inconsistent with the laws of this state, that provision is void and unenforceable.

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     (b) For purposes of this section, “renewed” means continued in force on or after the

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policy’s anniversary date.

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     (c) For purposes of this section, the term “discretionary authority” means a policy

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provision that has the effect of conferring discretion on an insurer or other claim administrator to

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determine entitlement to benefits or interpret policy language that, in turn, could lead to a

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deferential standard of review by any reviewing court.

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     (d) Nothing in this section prohibits an insurer from including a provision in a contract

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that informs an insured that as part of its routine operations the insurer applies the terms of its

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contracts for making decisions, including making determinations regarding eligibility, receipt of

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benefits and claims, or explaining policies, procedures, and processes, so long as the provision

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could not give rise to a deferential standard of review by any reviewing court.

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     (e) The commissioner of insurance shall not approve any health, life or disability policy

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for issuance or delivery in Rhode Island in any of the following circumstances:

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     (1) If it includes a provision that reserves discretionary authority, as defined by

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subsection (c), to the insurer, or an agent of the insurer, to determine eligibility for benefits or

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coverage or to interpret the terms of the policy; or

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     (2) If it provides standards of interpretation or review that are inconsistent with the laws

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of Rhode Island; or if it contains or incorporates by reference, where the incorporation is

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otherwise permissible, any inconsistent, ambiguous, or misleading clauses or exceptions and

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conditions that deceptively affect the risk purported to be assumed in the general coverage of the

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contract; or if it has any title, heading, or other indication of its provisions that is misleading; or

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     (3) If it is printed or otherwise reproduced in a manner that renders any provision of the

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form substantially illegible; or

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     (4) If it fails to conform in any respect with any law of Rhode Island.

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     (f) If any provision of this section or its application to any person or circumstance is held

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to be illegal, invalid, or unenforceable, no other provisions or applications of this section that can

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be given effect without the illegal, invalid or unenforceable provision or application shall be

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affected; and to this end the provisions of this section are severable.

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     SECTION 2. Chapter 27-19 of the General Laws entitled "Nonprofit Hospital Service

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Corporations" is hereby amended by adding thereto the following section:

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     27-19-70. Prohibition against discretionary clauses. – (a) If a policy, contract,

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certificate, or agreement offered, issued, delivered, or renewed, whether or not in Rhode Island,

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that provides, backs up, reinsures, or funds, in whole or in part, life insurance, health insurance,

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annuities, accident insurance, long term care insurance, or disability insurance coverage for any

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Rhode Island resident contains a provision that reserves discretionary authority to the insurer, or

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an agent of the insurer, to determine eligibility for benefits or coverage, to interpret the terms of

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the policy, contract, certificate, or agreement, or to provide standards of interpretation or review

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that are inconsistent with the laws of this state, that provision is void and unenforceable.

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     (b) For purposes of this section, “renewed” means continued in force on or after the

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policy’s anniversary date.

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     (c) For purposes of this section, the term “discretionary authority” means a policy

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provision that has the effect of conferring discretion on an insurer or other claim administrator to

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determine entitlement to benefits or interpret policy language that, in turn, could lead to a

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deferential standard of review by any reviewing court.

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     (d) Nothing in this section prohibits an insurer from including a provision in a contract

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that informs an insured that as part of its routine operations the insurer applies the terms of its

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contracts for making decisions, including making determinations regarding eligibility, receipt of

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benefits and claims, or explaining policies, procedures, and processes, so long as the provision

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could not give rise to a deferential standard of review by any reviewing court.

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     (e) The commissioner of insurance shall not approve any health, life or disability policy

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for issuance or delivery in Rhode Island in any of the following circumstances:

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     (1) If it includes a provision that reserves discretionary authority, as defined by

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subsection (c), to the insurer, or an agent of the insurer, to determine eligibility for benefits or

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coverage or to interpret the terms of the policy; or

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     (2) If it provides standards of interpretation or review that are inconsistent with the laws

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of Rhode Island; or if it contains or incorporates by reference, where the incorporation is

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otherwise permissible, any inconsistent, ambiguous, or misleading clauses or exceptions and

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conditions that deceptively affect the risk purported to be assumed in the general coverage of the

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contract; or if it has any title, heading, or other indication of its provisions that is misleading; or

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     (3) If it is printed or otherwise reproduced in a manner that renders any provision of the

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form substantially illegible; or

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     (4) If it fails to conform in any respect with any law of Rhode Island.

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     (f) If any provision of this section or its application to any person or circumstance is held

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to be illegal, invalid, or unenforceable, no other provisions or applications of this section that can

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be given effect without the illegal, invalid or unenforceable provision or application shall be

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affected; and to this end the provisions of this section are severable.

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     SECTION 3. Chapter 27-20 of the General Laws entitled "Nonprofit Medical Service

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Corporations" is hereby amended by adding thereto the following section:

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     27-20-66. Prohibition against discretionary clauses. -- (a) If a policy, contract,

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certificate, or agreement offered, issued, delivered, or renewed, whether or not in Rhode Island,

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that provides, backs up, reinsures, or funds, in whole or in part, life insurance, health insurance,

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annuities, accident insurance, long term care insurance, or disability insurance coverage for any

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Rhode Island resident contains a provision that reserves discretionary authority to the insurer, or

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an agent of the insurer, to determine eligibility for benefits or coverage, to interpret the terms of

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the policy, contract, certificate, or agreement, or to provide standards of interpretation or review

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that are inconsistent with the laws of this state, that provision is void and unenforceable.

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     (b) For purposes of this section, “renewed” means continued in force on or after the

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policy’s anniversary date.

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     (c) For purposes of this section, the term “discretionary authority” means a policy

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provision that has the effect of conferring discretion on an insurer or other claim administrator to

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determine entitlement to benefits or interpret policy language that, in turn, could lead to a

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deferential standard of review by any reviewing court.

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     (d) Nothing in this section prohibits an insurer from including a provision in a contract

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that informs an insured that as part of its routine operations the insurer applies the terms of its

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contracts for making decisions, including making determinations regarding eligibility, receipt of

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benefits and claims, or explaining policies, procedures, and processes, so long as the provision

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could not give rise to a deferential standard of review by any reviewing court.

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     (e) The commissioner of insurance shall not approve any health, life or disability policy

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for issuance or delivery in Rhode Island in any of the following circumstances:

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     (1) If it includes a provision that reserves discretionary authority, as defined by

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subsection (c), to the insurer, or an agent of the insurer, to determine eligibility for benefits or

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coverage or to interpret the terms of the policy; or

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     (2) If it provides standards of interpretation or review that are inconsistent with the laws

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of Rhode Island; or if it contains or incorporates by reference, where the incorporation is

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otherwise permissible, any inconsistent, ambiguous, or misleading clauses or exceptions and

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conditions that deceptively affect the risk purported to be assumed in the general coverage of the

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contract; or if it has any title, heading, or other indication of its provisions that is misleading; or

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     (3) If it is printed or otherwise reproduced in a manner that renders any provision of the

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form substantially illegible; or

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     (4) If it fails to conform in any respect with any law of Rhode Island.

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     (f) If any provision of this section or its application to any person or circumstance is held

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to be illegal, invalid, or unenforceable, no other provisions or applications of this section that can

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be given effect without the illegal, invalid or unenforceable provision or application shall be

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affected; and to this end the provisions of this section are severable.

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     SECTION 4. Chapter 27-41 of the General Laws entitled "Health Maintenance

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Organizations" is hereby amended by adding thereto the following section:

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     27-41-83. Prohibition against discretionary clauses. -- (a) If a policy, contract,

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certificate, or agreement offered, issued, delivered, or renewed, whether or not in Rhode Island,

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that provides, backs up, reinsures, or funds, in whole or in part, life insurance, health insurance,

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annuities, accident insurance, long term care insurance, or disability insurance coverage for any

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Rhode Island resident contains a provision that reserves discretionary authority to the insurer, or

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an agent of the insurer, to determine eligibility for benefits or coverage, to interpret the terms of

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the policy, contract, certificate, or agreement, or to provide standards of interpretation or review

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that are inconsistent with the laws of this state, that provision is void and unenforceable.

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     (b) For purposes of this section, “renewed” means continued in force on or after the

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policy’s anniversary date.

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     (c) For purposes of this section, the term “discretionary authority” means a policy

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provision that has the effect of conferring discretion on an insurer or other claim administrator to

5-7

determine entitlement to benefits or interpret policy language that, in turn, could lead to a

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deferential standard of review by any reviewing court.

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     (d) Nothing in this section prohibits an insurer from including a provision in a contract

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that informs an insured that as part of its routine operations the insurer applies the terms of its

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contracts for making decisions, including making determinations regarding eligibility, receipt of

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benefits and claims, or explaining policies, procedures, and processes, so long as the provision

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could not give rise to a deferential standard of review by any reviewing court.

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     (e) The commissioner of insurance shall not approve any health, life or disability policy

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for issuance or delivery in Rhode Island in any of the following circumstances:

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     (1) If it includes a provision that reserves discretionary authority, as defined by

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subsection (c), to the insurer, or an agent of the insurer, to determine eligibility for benefits or

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coverage or to interpret the terms of the policy; or

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     (2) If it provides standards of interpretation or review that are inconsistent with the laws

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of Rhode Island; or if it contains or incorporates by reference, where the incorporation is

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otherwise permissible, any inconsistent, ambiguous, or misleading clauses or exceptions and

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conditions that deceptively affect the risk purported to be assumed in the general coverage of the

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contract; or if it has any title, heading, or other indication of its provisions that is misleading; or

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     (3) If it is printed or otherwise reproduced in a manner that renders any provision of the

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form substantially illegible; or

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     (4) If it fails to conform in any respect with any law of Rhode Island.

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     (f) If any provision of this section or its application to any person or circumstance is held

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to be illegal, invalid, or unenforceable, no other provisions or applications of this section that can

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be given effect without the illegal, invalid or unenforceable provision or application shall be

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affected; and to this end the provisions of this section are severable.

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SECTION 5. This act shall take effect upon passage.

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LC01393

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO INSURANCE

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     This act would prohibit certain types of discretionary clauses in insurance contracts and

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policies.

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     This act would take effect upon passage.

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LC01393

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