2013 -- H 5451

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LC01235

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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 - LIFE INSURANCE POLICIES AND RESERVES

     Introduced By: Representatives Kennedy, San Bento, Valencia, Naughton, and O`Grady

     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 27-4 of the General Laws entitled "Life Insurance Policies and

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

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     27-4-28. Certain insurance provisions prohibited. -- Notwithstanding any provision of

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law to the contrary contained in any general or public law, rule or regulation:

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     (1) If a policy, contract, certificate, or agreement offered, issued, delivered, or renewed,

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whether or not in Rhode Island, that provides or funds life insurance, long-term care insurance, or

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disability insurance coverage for any Rhode Island resident contains a provision that reserves

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discretionary authority to the insurer, or an agent of the insurer, to determine eligibility for

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benefits or coverage, to interpret the terms of the policy, contract, certificate, or agreement, or to

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provide standards of interpretation or review that are inconsistent with the laws of this state, that

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provision is void and unenforceable.

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     (2) 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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     (3) 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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     (4) 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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     (5) This section applies to both group and individual products.

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     (6) The department of business regulation shall not approve any life or disability policy

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for issuance or delivery in Rhode Island if it includes a provision that reserves discretionary

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authority, as defined by subdivision (3), to the insurer, or an agent of the insurer, to determine

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eligibility for benefits or coverage or to interpret the terms of the policy; or if it provides

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standards of interpretation or review that are inconsistent with the laws of Rhode Island; or if it

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contains or incorporates by reference, where the incorporation is otherwise permissible, any grant

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of authority inconsistent with this section; or if it fails to conform in any respect with any law of

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Rhode Island.

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     (7) If a life insurance or disability insurance contract, certificate, or agreement contains a

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provision rendered void and unenforceable by this section, the parties to the policy, contract,

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certificate, or agreement and the courts shall treat that provision as void and unenforceable.

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     SECTION 2. 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. Certain insurance provisions prohibited. -- Notwithstanding any provision

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of law to the contrary contained in any general or public law, rule or regulation:

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     (1) If a policy, contract, certificate, or agreement offered, issued, delivered, or renewed,

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whether or not in Rhode Island, that provides or funds life insurance, long-term care insurance, or

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disability insurance coverage for any Rhode Island resident contains a provision that reserves

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discretionary authority to the insurer, or an agent of the insurer, to determine eligibility for

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benefits or coverage, to interpret the terms of the policy, contract, certificate, or agreement, or to

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provide standards of interpretation or review that are inconsistent with the laws of this state, that

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provision is void and unenforceable.

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     (2) 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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     (3) 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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     (4) 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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     (5) This section applies to both group and individual products.

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     (6) The department of business regulation shall not approve any life or disability policy

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for issuance or delivery in Rhode Island if it includes a provision that reserves discretionary

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authority, as defined by subdivision (3), to the insurer, or an agent of the insurer, to determine

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eligibility for benefits or coverage or to interpret the terms of the policy; or if it provides

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standards of interpretation or review that are inconsistent with the laws of Rhode Island; or if it

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contains or incorporates by reference, where the incorporation is otherwise permissible, any grant

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of authority inconsistent with this section; or if it fails to conform in any respect with any law of

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Rhode Island.

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     (7) If a life insurance or disability insurance contract, certificate, or agreement contains a

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provision rendered void and unenforceable by this section, the parties to the policy, contract,

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certificate, or agreement and the courts shall treat that provision as void and unenforceable.

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     (8) The provisions of this section apply to chapters 27-18.2, 27-18.5 and 27-18.6.

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     SECTION 3. Chapter 27-34.2 of the General Laws entitled "Long-Term Care Insurance"

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is hereby amended by adding thereto the following section:

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     27-34.2-22. Certain insurance provisions prohibited. -- Notwithstanding any provision

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of law to the contrary contained in any general or public law, rule or regulation:

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     (1) If a policy, contract, certificate, or agreement offered, issued, delivered, or renewed,

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whether or not in Rhode Island, that provides or funds life insurance, long-term care insurance, or

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disability insurance coverage for any Rhode Island resident contains a provision that reserves

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discretionary authority to the insurer, or an agent of the insurer, to determine eligibility for

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benefits or coverage, to interpret the terms of the policy, contract, certificate, or agreement, or to

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provide standards of interpretation or review that are inconsistent with the laws of this state, that

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provision is void and unenforceable.

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     (2) 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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     (3) 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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     (4) 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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     (5) This section applies to both group and individual products.

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     (6) The department of business regulation shall not approve any life or disability policy

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for issuance or delivery in Rhode Island if it includes a provision that reserves discretionary

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authority, as defined by subdivision (3), to the insurer, or an agent of the insurer, to determine

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eligibility for benefits or coverage or to interpret the terms of the policy; or if it provides

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standards of interpretation or review that are inconsistent with the laws of Rhode Island; or if it

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contains or incorporates by reference, where the incorporation is otherwise permissible, any grant

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of authority inconsistent with this section; or if it fails to conform in any respect with any law of

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Rhode Island.

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     (7) If a life insurance or disability insurance contract, certificate, or agreement contains a

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provision rendered void and unenforceable by this section, the parties to the policy, contract,

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certificate, or agreement and the courts shall treat that provision as void and unenforceable.

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     SECTION 4. Chapter 27-62 of the General Laws entitled "Life Insurance Policy

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

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     27-62-12. Certain insurance provisions prohibited. -- Notwithstanding any provision

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of the law to the contrary contained in any general public law, rule or regulation:

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     (1) If a policy, contract, certificate, or a agreement offered, issued, delivered, or renewed,

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whether or not in Rhode Island, that provides or funds life insurance, long-term care insurance,

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or disability insurance coverage for any Rhode island resident contains a provision that reserves

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discretionary authority to the insurer, or an agent of the insurer, to determine eligibility for

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benefits or coverage, to interpret the terms of the policy, contract, certificate, or a agreement, or

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to provide standards of interpretation or review that are inconsistent with the laws of this state,

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that provision is void and unenforceable.

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     (2) 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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     (3) For the 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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     (4) 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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     (5) This section applies to both group and individual products.

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     (6) The department of business regulation shall not approve any life or disability policy

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for issuance or delivery in Rhode island if it includes a provision that reserves discretionary

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authority, as defined by subdivision (3), to the insurer, or an agent of the insurer, to determine

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eligibility for benefits or coverage or to interpret the terms of the policy; or if it provides; or if it

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provides standards of interpretation or review that are inconsistent with the laws of Rhode Island;

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or if it contains or incorporates by reference, where the incorporation is otherwise permissible,

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any grant of authority inconsistent with this section; or if it fails to conform in any respect with

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any law of Rhode Island.

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     (7) If a life insurance or disability insurance contract, certificate, or a agreement contains

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a provision rendered void and unenforceable by this section, the parties to the policy, contract,

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certificate, or agreement and the courts shall teat that provision as void and unenforceable.

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     SECTION 5. This act shall take effect upon passage.

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LC01235

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO INSURANCE - LIFE INSURANCE POLICIES AND RESERVES

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     This act would provide that if a policy, contract, certificate, or agreement offered, issued,

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delivered, or renewed, whether or not in Rhode Island that provides, backs up, reinsures or funds,

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in whole or in part, life insurance, long-term care insurance, or disability insurance coverage for

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

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

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

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review that are inconsistent with the laws of Rhode Island, that provision would be void and

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unenforceable. The act would define the term "discretionary authority" for these purposes. The

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act would also require the department of business regulation to disapprove any life, long-term

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care, or disability policy that contains a provision of this type.

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     This act would take effect upon passage.

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LC01235

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