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.