Laws, Rules & Decisions Chapter 585

02 DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION

031 BUREAU OF INSURANCE

Chapter 585: LIFE INSURANCE THIRD-PARTY NOTICE OF CANCELLATION; RIGHTS OF REINSTATEMENT FOR INDIVIDUALS AFFLICTED WITH ORGANIC BRAIN DISEASE

SECTION 1. AUTHORITY

This Rule is adopted by the Superintendent pursuant to 24-A M.R.S.A. §§ 212 and 2556.

SECTION 2. PURPOSE

The purpose of this Rule is twofold. First, the Rule’s third-party notice provisions allow a policyholder to establish in advance a line of communication that will increase the likelihood that adequate notice is given if an insurer intends to terminate coverage for nonpayment of premiums. Second, the Rule establishes conditions and procedures to reduce the danger that persons suffering from organic brain disease will lose life insurance coverage because of their disease.

SECTION 3. SCOPE

This Rule applies to all individual life insurance policies and riders delivered, issued for delivery, continued, or renewed in the State of Maine.

SECTION 4. REQUIREMENT FOR NOTIFICATION PRIOR TO CANCELLATION

An individual life insurance policy that has been in force for at least one year may not be terminated for nonpayment of premium, unless at least 21 days prior to the expiration of the policy’s grace period, the insurer has mailed a notice of cancellation to the policyholder and any third party designated by the policyholder by name and address in writing. The notice shall state the reason(s) for cancellation and the date that coverage is to terminate. If the policy is subject to cancellation for nonpayment of premium, the notice shall include the amount of unpaid premium and the date by which premium must be paid to avoid policy cancellation.

It its option, an insurer may provide other notification regarding termination of coverage or other rights to the policyholder and any designated third party. The notice shall include an explanation of the reason for termination and the time and method by which termination may be avoided. If the reason for termination is beyond the policyholder’s control, the notice shall so state. This optional notification is in addition to, not a substitute for, other requirements of law or contract.

SECTION 5. PROVISION FOR NOTIFICATION TO THIRD PARTIES

All policies subject to this Rule shall include notice of the right:
1. To receive notification pursuant to Section 4 of the Rule;
2. To designate a third party to receive notification pursuant to Section 4 of the Rule; and
3. To change a third-party designation.
Insurers shall provide each policyholder with a "Third-Party Notice Request Form" giving the policyholder the opportunity to designate an additional person to receive notice of any intent to cancel a policy.
1. The Third-Party Notice Request Form may be included as part of each initial or renewal application, or it may be a supplemental form.
2. If separate from an application, the Third-Party Notice Request Form shall be furnished to the policyholder before or at the time of delivery of the policy to the covered person, and it shall indicate that it is part of the policy.
3. Within 10 days after a request by a policyholder, a Third-Party Notice Request Form shall be provided by First Class U. S. mail or delivered in-hand by a duly-authorized representative of the insurer.
4. If the policyholder does not return the Third-Party Notice Request Form within 30 days, the insurer may assume that the policyholder elects not to designate a third party. However, by written request, the policyholder may designate a third party at any subsequent time.

SECTION 6. LIMITATIONS ON LOSS OF COVERAGE AND RIGHT TO REINSTATEMENT FOR PERSONS WITH ORGANIC BRAIN DISEASE

All policies subject to this Rule shall include notice of the right to seek reinstatement after cancellation, termination, or lapse, if loss of coverage is attributable to the policyholder’s affliction with organic brain disease. For purposes of this rule, “organic brain disease" means a mental or nervous disorder with a demonstrable organic origin causing significant cognitive impairment, including, but not limited to, Pick's Disease, Parkinson's Disease, Huntington's Chorea, and Alzheimer's Disease and related dementia.
Within 90 days after termination of coverage, the policyholder, any person authorized to act on behalf of the policyholder, or any dependent of the policyholder covered under the policy may request reinstatement of the policy on the basis that loss of coverage was a result of the policyholder’s organic brain disease at the time of cancellation, termination, or lapse.
If a policyholder requests reinstatement of coverage pursuant to this Section, an insurer may request a medical demonstration that the policyholder suffered from organic brain disease at the time of cancellation, termination, or lapse. If the insurer waives its right to request a medical demonstration or a medical demonstration substantiates that loss of coverage was the result of the existence of organic brain disease at the relevant time, the policy shall be reinstated. The medical demonstration may be at the expense of the policyholder.
A policy reinstated pursuant to this Section shall be issued without any evidence of insurability.
Premium for policy reinstatement pursuant to this Section shall be paid from the date of the last premium payment at the rate which would have been in effect had the policy remained in force. Payment shall be made within 15 days after request by the insurer.

SECTION 7. ADMINISTRATIVE APPEAL RIGHTS

If a request for reinstatement of coverage pursuant to this Rule is denied, notice of denial shall be provided to the policyholder, to any third party designated pursuant to Section 5 of this Rule, and to the person making the request, if different. The notice of denial shall include notification of a 30-day period following receipt of the notice during which a hearing before the Superintendent may be requested.

Hearing before the Superintendent shall be for the purposes of determining whether a violation of this Rule or the Maine Insurance Code has occurred and whether policy reinstatement is required.

SECTION 8. TRANSITION

Within 60 days after the effective date of this Rule, every insurer shall file with the Superintendent any new forms or policy provisions and all revisions to existing forms or policies to be used to comply with the Rule. An insurer may submit a single form that meets all the requirements of Sections 5(A) and 6(A) of this Rule.
If the forms submitted pursuant to Section 8(A) will be part of an application or policy, the requirements of 24-A M.R.S.A. § 2412 and any other applicable form-filing requirement must be satisfied.
Every insurer shall send approved forms and amended policy provisions to existing individual policyholders within 120 days after the first billing date subsequent to the Superintendent’s approval of the forms or policy provisions.

SECTION 9. SEVERABILITY

If any section, term, or provision of this Rule shall be deemed invalid for any reason, any remaining section, provision, or definition shall remain in full force and effect.

SECTION 10. EFFECTIVE DATE

This Rule shall be effective _________________.