Chapter 300

2009 -- H 5826 SUBSTITUTE A

Enacted 11/13/09

A N A C T

RELATING TO INSURANCE

Introduced By: Representative Brian C. Newberry

Date Introduced: February 26, 2009

It is enacted by the General Assembly as follows:

SECTION 1. Title 27 of the General Laws entitled "INSURANCE" is hereby amended

by adding thereto the following chapter:

CHAPTER 4.8

GROUP LIFE INSURANCE

27-4.8-1. Group Life Insurance Definitions. – Except as provided in 27-4.8-2, no

policy of group life insurance shall be delivered in this state unless it conforms to one of the

following descriptions:

(1) A policy issued to an employer, or to the trustees of a fund established by an

employer, which employer or trustees shall be deemed the policyholder, to insure employees of

the employer for the benefit of persons other than the employer, subject to the following

requirements:

(i) The employees eligible for insurance under the policy shall be all of the employees of

the employer, or all of any class or classes thereof. The policy may provide that the term

“employees” shall include the employees of one or more subsidiary corporations, and the

employees, individual proprietors, and partners of one or more affiliated corporations,

proprietorships or partnerships if the business of the employer and of the affiliated corporations,

proprietorships or partnerships is under common control. The policy may provide that the term

“employees” shall include the individual proprietor or partners if the employer is an individual

proprietorship or partnership. The policy may provide that the term “employees” may include

retired employees, former employees and directors of a corporate employer. A policy issued to

insure the employees of a public body may provide that the term “employees” shall include

elected or appointed officials.

(ii) The premium for the policy shall be paid either from the employer’s funds or from

funds contributed by the insured employees, or from both. Except as provided in paragraph (iii), a

policy on which no part of the premium is to be derived from funds contributed by the insured

employees shall insure all eligible employees, except those who reject the coverage in writing.

(iii) An insurer may exclude or limit the coverage on any person as to whom evidence of

individual insurability is not satisfactory to the insurer.

(2) A policy issued to a creditor or its parent holding company or to a trustee or trustees

or agent designated by two (2) or more creditors, which creditor, holding company, affiliate,

trustee, trustees or agent shall be deemed the policyholder, to insure debtors of the creditor or

creditors subject to the following requirements:

(i) The debtors eligible for insurance under the policy shall be all of the debtors of the

creditor or creditors, or all of any class or classes thereof. The policy may provide that the term

“debtors” shall include:

(A) Borrowers of money or purchasers or lessees of goods, services or property for which

payment is arranged through a credit transaction;

(B) The debtors of one or more subsidiary corporations; and

(C) The debtors of one or more affiliated corporations, proprietorships or partnerships if

the business of the policyholder and of the affiliated corporations, proprietorships or partnerships

is under common control.

(ii) The premium for the policy shall be paid either from the creditor’s finds, or from

charges collected from the insured debtors, or from both. Except as provided in paragraph (3), a

policy on which no part of the premium is to be derived from the funds contributed by insured

debtors specifically for their insurance shall insure all eligible debtors.

(iii) An insurer may exclude any debtors as to whom evidence of individual insurability is

not satisfactory to the insurer.

(iv) The amount of the insurance on the life of any debtor shall at no time exceed the

greater of the scheduled or actual amount of unpaid indebtedness to the creditor, except that

insurance written in connection with open-end credit having a credit limit exceeding ten-thousand

dollars ($10,000) may be in an amount not exceeding the credit limit.

(v) The insurance may be payable to the creditor or any successor to the right, title, and

interest of the creditor. The payment shall reduce or extinguish the unpaid indebtedness of the

debtor to the extent of the payment and any excess of the insurance shall be payable to the estate

of the insured.

(vi) Notwithstanding the provisions of the above subsections, insurance on agricultural

credit transaction commitments may be written up to the amount of the loan commitment on a

non-decreasing or level term plan. Insurance on educational credit transaction commitments may

be written up to the amount of the loan commitment less the amount of any repayments made on

the loan.

(3) A policy issued to a labor union, or similar employee organization, which shall be

deemed to be the policyholder, to insure members of the union or organization for the benefit of

persons other than the union or organization or any of its officials, representatives or agents,

subject to the following requirements:

(i) The members eligible for insurance under the policy shall be all of the members of the

union or organization, or all of any class or classes thereof.

(ii) The premium for the policy shall be paid either from funds of the union or

organization, or from funds contributed by the insured members specifically for their insurance,

or from both. Except as provided in paragraph (iii), a policy on which no part of the premium is

to be derived from funds contributed by the insured members specifically for their insurance shall

insure all eligible members, except those who reject the coverage in writing.

(iii) An insurer may exclude or limit the coverage on any persons to whom evidence of

individual insurability is not satisfactory to the insurer.

(4) A policy issued to a trust or to the trustees of a fund established or adopted by two (2)

or more employers, or by one or more labor unions or similar employee organizations, or by one

or more employers and one or more labor unions or similar employee organizations, which trust

or trustees shall be deemed the policyholder, to insure employees of the employers or members of

the unions or organizations for the benefit of person other than the employers or the unions or

organizations, subject to the following requirements:

(i) The persons eligible for insurance shall be all of the employees of the employers or all

of the members of the unions or organizations, or all of any class or classes thereof. The policy

may provide that the term “employees” shall include the employees of one or more subsidiary

corporations, and the employees, individual proprietors, and partners of one or more affiliated

corporations, proprietorships or partnerships if the business of the employer and of the affiliated

corporations, proprietorships or partnerships is under common control. The policy may provide

that the term “employees” shall include the individual proprietor or partners if the employer is an

individual proprietorship or partnership. The policy may provide that the term “employees” shall

include retired employees, former employees and directors of a corporate employer. The policy

may provide that the term “employees” shall include the trustees or their employees, or both, if

their duties are principally connected with the trusteeship.

(ii) The premium for the policy shall be paid from funds contributed by the employer or

employers of the insured persons, or by the union or unions or similar employee organizations, or

by both, or from funds contributed by the insured persons or from both the insured persons and

the employers or unions or similar employee organizations. Except as provided in paragraph (iii),

a policy on which no part of the premium is to be derived from funds contributed by the insured

persons specifically for their insurance shall insure all eligible persons, except those who reject

the coverage in writing.

(iii) An insurer may exclude or limit the coverage on any person as to whom evidence of

individual insurability is not satisfactory to the insurer.

(5) A policy issued to an association or to a trust or to the trustees of a fund established,

created, or maintained for the benefit of members of one or more associations. The association or

associations shall have at the outset a minimum of one hundred (100) persons; shall have been

organized and maintained in good faith for purposes other than that obtaining insurance; shall

have been in active existence for at least two (2) years; and shall have a constitution and by-laws

which provides that:

(i) The association or associations hold regular meetings not less than annually to further

purposes of the members,

(ii) Except for credit unions, the association or associations, collect dues or solicit

contributions from members, and

(iii) The members have voting privileges and representation on the governing board and

committees. The policy shall be subject to the following requirements:

(A) The policy may insure members of the association or associations, employees thereof

or employees of members, or one or more of the preceding or all of any class or classes thereof

for the benefit of persons other than the employee’s employer.

(B) The premium for the policy shall be paid from funds contributed by the association or

associations, or by employer members, or by both, or from funds contributed by the covered

persons or from both the covered persons and the association, associations, or employer members.

(C) Except as provided in paragraph (D), a policy on which no part of the premium is to

be derived from funds contributed by the covered persons specifically for the insurance shall

insure all eligible persons, except those who reject the coverage in writing.

(D) An insurer may exclude or limit the coverage on any person as to whom evidence of

individual insurability is not satisfactory to the insurer.

(6) A policy issued to a credit union or to a trustee or trustees or agent designated by two

(2) or more credit unions, which credit union, trustee, trustees, or agent shall be deemed

policyholder, to insure members of the credit union or credit unions for the benefit of persons

other than the credit union or credit unions, trustee or trustees, or agent or any of their officials,

subject to the following requirements:

(i) The members eligible for insurance shall be all of the members of the credit union or

credit unions, or all of any class or classes thereof.

(ii) The premium for the policy shall be paid by the policyholder from the credit union’s

funds and, except as provided in paragraph (iii), shall insure all eligible members.

(iii) An insurer may exclude or limit the coverage on any member as to whom evidence

of individual insurability is not satisfactory to the insurer.

27-4.8-2. Limits of group life insurance. – Group life insurance offered to a resident of

this state under a group life insurance policy issued to a group other than one described in section

27-4.8-1 shall be subject to the following requirements:

(1) A group life insurance policy shall not be delivered in this state unless the

commissioner finds that:

(i) The issuance of the group policy is not contrary to the best interest of the public;

(ii) The issuance of the group policy would result in economies of acquisition or

administration; and

(iii) The benefits are reasonable in relation to the premiums charged.

(2) A group life insurance coverage may not be offered in this state by an insurer under a

policy issued in another state unless this state or another state having requirements substantially

similar to those contained in subdivisions (i), (ii), and (iii) has made a determination that the

requirements have been met.

(3) The premium for the policy shall be paid either from the policyholder’s funds or from

funds contributed by the covered persons, or from both.

(4) An insurer may exclude or limit the coverage on any person as to whom evidence of

individual insurability is not satisfactory to the insurer.

27-4.8-3. Notice of compensation. – (a) With respect to a program of insurance which, if

issued on a group basis, would not qualify under section 27-4.8-1 of this act, the insurer shall

cause to be distributed to prospective insureds a written notice that compensation will or may be

paid, if compensation of any kind will or may be paid to:

(1) A policyholder or sponsoring or endorsing entity in the case of a group policy; or

(2) A sponsoring or endorsing entity in the case of individual, blanket or franchise

policies marketed by means of direct response solicitation.

(b) The notice shall be distributed:

(1) Whether compensation is direct or indirect; and

(2) Whether the compensation is paid to or retained by the policyholder or sponsoring or

endorsing entity, or paid to or retained by a third-party at the direction of the policyholder or

sponsoring or endorsing entity, or an entity affiliated therewith by way of ownership, contract or

employment.

(c) The notice required by this section shall be placed on or accompany an application or

enrollment form provided to prospective insureds.

(d) The following terms shall have the meanings indicated:

(1) “Direct response solicitation” means a solicitation through a sponsoring or endorsing

entity through the mails, telephone or other mass communications media;

(2) “Sponsoring or endorsing entity” means an organization that has arranged for the

offering of a program of insurance in a manner that communicates that eligibility for participation

in the program is dependent upon affiliation with the organization or that it encourages

participation in the program.

27-4.8-4. Dependent group life insurance. – Except for a policy issued under

subdivision 27-4.8-1(2), a group life insurance policy may be extended to insure the employees or

members against loss due to the death of their spouses and dependent children, or any class or

classes thereof, subject to the following:

(1) The premium for the insurance shall be paid either from funds contributed by the

employer, union, association or other person to whom the policy has been issued, or from funds

contributed by the covered persons, or from both. Except as provided in subdivision (2), a policy

on which no part of the premium for the spouse’s and dependent child’s coverage is to be derived

from funds contributed by the covered persons shall insure all eligible employees or members

with respect to their spouses and dependent children, or any class or classes thereof.

(2) An insurer may exclude or limit the coverage on any spouse or dependent child as to

whom evidence of individual insurability is not satisfactory to the insurer.

(3) The amounts of insurance for any covered spouse or dependent child under the policy

may not exceed the amount of insurance for which the employee or member is insured.

27-4.8-5. Group life insurance standard provision. – (a) No policy of group life

insurance shall be delivered in this state unless it contains in substance the following provisions,

or provisions which in the opinion of the commissioner are more favorable to the persons insured,

or at least as favorable to the persons insured and more favorable to the policyholder, however:

(1) Subsections (f) to (k) inclusive shall not apply to policies insuring the lives of

debtors;

(2) The standard provisions required for individual life insurance policies shall not

apply to group life insurance policies; and

(3) If the group life insurance policy is on a plan of insurance other than the term

plan, it shall contain a nonforfeiture provision or provisions which, in the opinion of the

commissioner, is or are equitable to the insured persons and to the policyholder. Nothing herein

shall be construed to require that group life insurance policies contain the same nonforfeiture

provisions as are required for individual life insurance policies.

(b) The policy shall contain a provision that the policyholder is entitled to a grace period

of thirty-one (31) days for the payment of any premium due except the first, during which grace

period the death benefit coverage shall continue in force, unless the policyholder gives the insurer

written notice of discontinuance in advance of the date of discontinuous and in accordance with

the terms of the policy. The policy may provide that the policyholder shall be liable to the insurer

for the payment of a pro rata premium for the time the policy was in force during the grace

period.

(c) The policy shall contain a provision that the validity of the policy shall not be

contested except for nonpayment of premiums after it has been in force for two (2) years from its

date of issue; and that no statement made by any person insured under the policy relating to his or

her insurability shall be used in contesting the validity of the insurance with respect to which the

statement was made after the insurance has been in force prior to the contest for a period of two

(2) years during the person’s lifetime nor unless it is contained in a written instrument signed by

him or her. This provision shall not preclude the assertion at any time of defenses based upon

provisions in the policy that relate to eligibility for coverage.

(d) The policy shall contain a provision that a copy of the application, if any, of the

policy holder shall be attached to the policy when issued, that all statements made by the

policyholder or by the persons insured shall be deemed representations and not warranties and

that no statement made by any person insured shall be used in any contest unless a copy of the

instrument containing the statement is or has been furnished to the person or, in the event of death

or incapacity of the insured person, to his or her beneficiary or personal representative.

(e) The policy shall contain a provision setting forth the conditions, if any, under which

the insurer reserves the right to require a person eligible for insurance to furnish evidence of

individual insurability satisfactory to the insurer as a condition to part or all of his coverage.

(f) The policy shall contain a provision specifying an equitable adjustment of premiums

or benefits, or both, to be made in the event the age of a person insured has been misstated. The

provision to contain a clear statement of the method of adjustment to be made.

(g) The policy shall contain a provision that any sum becoming due by reason of the

death of the person insured shall be payable to the beneficiary designated by the person insured,

except that, where the policy contains conditions pertaining to family status, the beneficiary may

be the family member specified by the policy terms, subject to the provisions of the policy in the

event there is no designated beneficiary, as to all or any part of the sum, living at the death of the

person insured, and subject to any right reserved by the insurer in the policy and set forth in the

certificate to pay at its option a part of the sum not exceeding two thousand dollars ($2000) to any

person appearing to the insurer to be equitably entitled to it by reason of having incurred funeral

or other expenses incident to the last illness or death of the person insured.

(h) The policy shall contain a provision that the insurer will issue to the policyholder for

delivery to each person insured a certificate setting forth a statement as to the insurance

protection to which he or she is entitled, to whom the insurance benefits are payable, a statement

as to any dependent’s coverage included in the certificate, and the rights and conditions set forth

in subsections (h), (i), (j) and (k) following.

(i) The policy shall contain a provision that, if the insurance, or any portion of it, on a

person covered under the policy or on the dependent of a person covered, ceases because of

termination of employment or of membership in the class or classes eligible for coverage under

the policy, the person shall be entitled to have issued to him or her by the insurer, without

evidence of insurability, an individual policy of life insurance without disability or other

supplementary benefits, provided application for the individual policy shall be made, and the first

premium paid to the insurer, within thirty-one (31) days after termination and provided further

that:

(1) The individual policy shall, at the option of the person, be on any one of the forms

then customarily issued by the insurer at the age and for the amount applied for, except that the

group policy may exclude the option to elect term insurance;

(2) The individual policy shall be in an amount not in excess of the amount of life

insurance that ceases because of termination, less the amount of any life insurance for which the

person becomes eligible under the same or any other group policy within thirty-one (31) days

after termination, provided that any amount of insurance that shall have matured on or before the

date of termination as an endowment payable to the person insured, whether in one sum or in

installments or in the form of an annuity, shall not, for the purposes of this provision, be included

in the amount that is considered to cease because of termination; and

(3) The premium on the individual policy shall be at the insurer’s then customary rate

applicable to the form and amount of the individual policy, to the class of risk to which the person

then belongs, and to the individual age attained on the effective date of the individual policy.

Subject to the same conditions set forth above, the conversion privilege shall be available:

(i) To a surviving dependent, if any, at the death of an employee or member, with respect

to the coverage under the group policy that terminates by reason of the death; and

(ii) To the dependent of the employee or member upon termination of coverage of the

dependent, while the employee or member remains insured under the group policy, by reason of

the dependent ceasing to be a qualified family member under the group policy.

(j) The policy shall contain a provision that if the group policy terminates or is amended

so as to terminate the insurance of any class of insured persons, every person insured thereunder

at the date of termination whose insurance terminates, including the insured dependent of a

covered person, and who has been so insured for at least five (5) years prior to the termination

date shall be entitled to have issued by the insurer an individual policy of life insurance, subject to

the same conditions and limitations as are provided by subsection (h) above, except that the group

policy may provide that the amount of the individual policy shall not exceed the smaller of:

(i) The amount of the person’s life insurance protection ceasing because of the

termination or amendment of the group policy, less the amount of any life insurance for which the

person is or becomes eligible under a group policy issued or reinstated by the same or another

insurer within thirty-one (31) days after termination; or

(ii) Ten-thousand dollars ($10,000).

(k) The policy shall contain a provision that, if a person insured under the group policy,

or the insured dependent of a covered person, dies during the period within which the individual

would have been entitled to have an individual policy issued in accordance with subsection (h) or

(i) above and before the individual policy shall have become effective, the amount of life

insurance which he or she would have been entitled to have issued under the individual policy

shall be payable as a claim under the group policy, whether or not application for the individual

policy or the payment of the first premium therefore has been made.

(l) Where active employment is a condition of insurance, the policy shall contain a

provision that an insured may continue coverage during the insured’s total disability by timely

payment to the policyholder of that portion, if any, of the premium that would have been required

from the insured had total disability not occurred. The continuation shall be on a premium paying

basis for a period of six (6) months from the date on which the total disability started, but not

beyond the earlier of:

(i) Approval by the insurer of continuation of the coverage under any disability provision

which the group insurance policy may contain; or

(ii) The discontinuance of the group insurance policy.

(m) In the case of a policy insuring the lives of debtors, the policy shall contain a

provision that the insurer will furnish to the policyholder for delivery to each debtor insured

under the policy a certificate of insurance describing the coverage and specifying that the death

benefit shall first be applied to reduce or extinguish the indebtedness.

27-4.8-6. Supplementary bill relating to conversion privileges. – If an individual

insured under a group life insurance policy hereafter delivered in this state becomes entitled under

the terms of the policy to have an individual policy of life insurance issued without evidence of

insurability, subject to making of application and payment of the first premium within the period

specified in the policy, and if the individual is not given notice of the existence of the right at

least fifteen (15) days prior to the expiration date of the period, then in that event the individual

shall have an additional period within which to exercise the right, but nothing herein contained

shall be construed to continue any insurance beyond the period provided in the policy. This

additional period shall expire fifteen (15) days next after the individual is given notice but in no

event shall the additional period extend beyond sixty (60) days after the expiration date of the

period provided in the policy. Written notice presented to the individual or mailed by the policy

holder to the last known address of the individual or mailed by the insurer to the last known

address of the individual as furnished by the policyholder shall constitute notice for the purpose

of this paragraph.

SECTION 2. This act shall take effect upon passage.

=======

LC01672/SUB A

=======