2013 -- H 5530

=======

LC01393

=======

STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

____________

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:

1-1

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

1-2

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

1-3

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

1-4

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

1-5

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

1-6

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

1-7

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

1-8

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

1-9

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

1-10

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

1-11

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

1-12

policy’s anniversary date.

1-13

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

1-14

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

1-15

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

1-16

deferential standard of review by any reviewing court.

1-17

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

1-18

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

1-19

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

1-20

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

2-1

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

2-2

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

2-3

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

2-4

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

2-5

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

2-6

coverage or to interpret the terms of the policy; or

2-7

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

2-8

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

2-9

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

2-10

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

2-11

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

2-12

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

2-13

form substantially illegible; or

2-14

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

2-15

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

2-16

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

2-17

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

2-18

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

2-19

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

2-20

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

2-21

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

2-22

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

2-23

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

2-24

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

2-25

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

2-26

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

2-27

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

2-28

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

2-29

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

2-30

policy’s anniversary date.

2-31

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

2-32

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

2-33

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

2-34

deferential standard of review by any reviewing court.

3-1

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

3-2

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

3-3

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

3-4

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

3-5

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

3-6

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

3-7

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

3-8

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

3-9

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

3-10

coverage or to interpret the terms of the policy; or

3-11

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

3-12

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

3-13

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

3-14

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

3-15

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

3-16

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

3-17

form substantially illegible; or

3-18

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

3-19

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

3-20

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

3-21

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

3-22

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

3-23

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

3-24

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

3-25

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

3-26

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

3-27

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

3-28

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

3-29

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

3-30

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

3-31

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

3-32

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

3-33

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

3-34

policy’s anniversary date.

4-1

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

4-2

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

4-3

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

4-4

deferential standard of review by any reviewing court.

4-5

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

4-6

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

4-7

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

4-8

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

4-9

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

4-10

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

4-11

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

4-12

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

4-13

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

4-14

coverage or to interpret the terms of the policy; or

4-15

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

4-16

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

4-17

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

4-18

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

4-19

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

4-20

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

4-21

form substantially illegible; or

4-22

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

4-23

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

4-24

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

4-25

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

4-26

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

4-27

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

4-28

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

4-29

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

4-30

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

4-31

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

4-32

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

4-33

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

4-34

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

5-1

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

5-2

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

5-3

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

5-4

policy’s anniversary date.

5-5

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

5-6

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

5-8

deferential standard of review by any reviewing court.

5-9

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

5-10

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

5-11

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

5-12

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

5-13

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

5-14

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

5-15

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

5-16

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

5-17

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

5-18

coverage or to interpret the terms of the policy; or

5-19

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

5-20

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

5-21

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

5-22

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

5-23

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

5-24

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

5-25

form substantially illegible; or

5-26

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

5-27

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

5-28

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

5-29

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

5-30

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

     

5-32

SECTION 5. This act shall take effect upon passage.

     

=======

LC01393

========

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO INSURANCE

***

7-1

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

7-2

policies.

7-3

     This act would take effect upon passage.

     

=======

LC01393

=======

H5530