By Ratliff S.B. No. 597 74R5519 DLF-F A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to mandatory reinstatement of certain life or accident and 1-3 sickness insurance policies in case of mental incapacity of an 1-4 insured. 1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-6 SECTION 1. Subchapter C, Chapter 21, Insurance Code, is 1-7 amended by adding Article 21.24-3 to read as follows: 1-8 Art. 21.24-3. MANDATORY REINSTATEMENT OF POLICY OR 1-9 CERTIFICATE IN CASE OF MENTAL INCAPACITY 1-10 Sec. 1. SCOPE OF ARTICLE. (a) This article applies to: 1-11 (1) an insurer authorized to engage in business in 1-12 this state as a life or accident or sickness insurance company or 1-13 to provide life or accident or sickness insurance in this state; 1-14 (2) a nonprofit hospital and medical service plan 1-15 corporation subject to Chapter 20 of this code; 1-16 (3) a health maintenance organization subject to the 1-17 Texas Health Maintenance Organization Act (Chapter 20A, Vernon's 1-18 Texas Insurance Code); 1-19 (4) a stipulated premium insurance company subject to 1-20 Chapter 22 of this code; and 1-21 (5) a domestic or foreign fraternal benefit society 1-22 subject to Chapter 10 of this code. 1-23 (b) This article does not apply to a life insurance product 1-24 that provides nonforfeiture benefits in accordance with the 2-1 requirements of this code. 2-2 Sec. 2. REINSTATEMENT REQUIRED. (a) A licensed entity 2-3 subject to this article shall reinstate a policy, contract, 2-4 certificate, or evidence of coverage that is the subject of an 2-5 unintentional lapse for failure to pay a required premium during a 2-6 period in which the policyholder, contract holder, certificate 2-7 holder, or covered person is mentally incapacitated. 2-8 (b) The reinstatement requirements of this section are in 2-9 addition to any other reinstatement provisions required by another 2-10 provision of law. 2-11 (c) For the purposes of this article, mental incapacity may 2-12 not be defined more restrictively than the deterioration or loss of 2-13 intellectual capacity resulting in the need for continual 2-14 supervision for protection of the patient and others, as 2-15 established by the clinical diagnosis of a practitioner licensed in 2-16 this state and authorized to make the diagnosis. The diagnosis 2-17 must consider the patient's history, the patient's physical, 2-18 neurological, psychological, and psychiatric evaluations, and 2-19 laboratory findings. 2-20 Sec. 3. PROCEDURE FOR REINSTATEMENT. (a) A request for 2-21 reinstatement of coverage or a claim for benefits payable under the 2-22 policy, certificate, contract, or evidence of coverage and proof of 2-23 mental incapacity may be filed with the licensed entity by: 2-24 (1) a policyholder, contract holder, certificate 2-25 holder, or covered person; or 2-26 (2) the legal guardian, legal representative of the 2-27 estate, member of the family, or beneficiary of a person described 3-1 by Subdivision (1) of this subsection. 3-2 (b) The proof of mental incapacity and accompanying request 3-3 for reinstatement or claim for benefits must be made not later than 3-4 the second anniversary of the date on which the policyholder, 3-5 certificate holder, contract holder, or covered person first became 3-6 mentally incapacitated. 3-7 (c) A certification of mental incapacity by a qualified 3-8 practitioner satisfies the requirement for proof of mental 3-9 incapacity or similar proof required under the coverage. 3-10 Sec. 4. EFFECT OF REINSTATEMENT. (a) After the 3-11 requirements of Section 3 of this article have been satisfied, a 3-12 licensed entity subject to this article shall reinstate, without 3-13 evidence of insurability, coverage that has lapsed under the 3-14 circumstances described by Section 2 of this article. 3-15 (b) Except as provided by Section 5 of this article, a 3-16 licensed entity may require, as a condition of reinstatement, 3-17 payment of premiums owed for the period from the date of initial 3-18 lapse to the date of reinstatement. 3-19 (c) On reinstatement of the coverage, the original 3-20 contractual provisions apply as if coverage had been continuous and 3-21 without interruption. 3-22 (d) If an insured under a life insurance policy dies before 3-23 the request for reinstatement, the reinstatement covers the period 3-24 beginning after the initial lapse of coverage and ending on the 3-25 date of death. 3-26 Sec. 5. REDUCTION IN BENEFITS. A licensed entity shall pay 3-27 the amount of benefits owed under a policy, certificate, contract, 4-1 or evidence of coverage that is eligible for reinstatement under 4-2 this article, reduced by the amount of premiums owed and unpaid on 4-3 the date on which the benefits are paid, if there is an immediate 4-4 uncontroverted claim for benefits that exceeds the amount of 4-5 premiums owed. 4-6 Sec. 6. EXCEPTION. A licensed entity is not required to 4-7 reinstate coverage or pay benefits under this article if the 4-8 policyholder, contract holder, certificate holder, or covered 4-9 person first became mentally incapacitated after the expiration of 4-10 an applicable grace period contained in the policy, contract, 4-11 certificate, or evidence of coverage. 4-12 Sec. 7. REQUIRED DISCLOSURE. A licensed entity shall 4-13 disclose fully the requirements of this article to each 4-14 policyholder, contract holder, certificate holder, or covered 4-15 person. The disclosure must be made in the form and manner 4-16 prescribed by the commissioner. 4-17 SECTION 2. This Act takes effect September 1, 1995, and 4-18 applies only to coverage lapsing on or after that date. The 4-19 coverage of a policyholder, contract holder, certificate holder, or 4-20 other covered person that lapses before the effective date of this 4-21 Act is governed by the law as it existed immediately before the 4-22 effective date of this Act, and that law is continued in effect for 4-23 that purpose. 4-24 SECTION 3. The importance of this legislation and the 4-25 crowded condition of the calendars in both houses create an 4-26 emergency and an imperative public necessity that the 4-27 constitutional rule requiring bills to be read on three several 5-1 days in each house be suspended, and this rule is hereby suspended.