Session of 1999
HOUSE BILL No. 2089
By Committee on Insurance
1-21
9 AN ACT concerning insurance; relating to discriminatory practices;
10 amending K.S.A. 40-4103 and K.S.A. 1998 Supp. 40-2404 and repeal-
11 ing the existing sections.
12
13 Be it enacted by the Legislature of the State of Kansas:
14 Section 1. K.S.A. 1998 Supp. 40-2404 is hereby amended to read as
15 follows: 40-2404. The following are hereby defined as unfair methods of
16 competition and unfair or deceptive acts or practices in the business of
17 insurance:
18 (1) (a) Misrepresentations and false advertising of insurance policies.
19 Making, issuing, circulating or causing to be made, issued or circulated,
20 any estimate, illustration, circular, statement, sales presentation, omission
21 or comparison which:
22 (a) (1) Misrepresents the benefits, advantages, conditions or terms of
23 any insurance policy;
24 (b) (2) misrepresents the dividends or share of the surplus to be re-
25 ceived on any insurance policy;
26 (c) (3) makes any false or misleading statements as to the dividends
27 or share of surplus previously paid on any insurance policy;
28 (d) (4) is misleading or is a misrepresentation as to the financial con-
29 dition of any person, or as to the legal reserve system upon which any life
30 insurer operates;
31 (e) (5) uses any name or title of any insurance policy or class of in-
32 surance policies misrepresenting the true nature thereof;
33 (f) (6) is a misrepresentation for the purpose of inducing or tending
34 to induce the lapse, forfeiture, exchange, conversion or surrender of any
35 insurance policy;
36 (g) (7) is a misrepresentation for the purpose of effecting a pledge or
37 assignment of or effecting a loan against any insurance policy; or
38 (h) (8) misrepresents any insurance policy as being shares of stock.
39 (2) (b) False information and advertising generally. Making, publish-
40 ing, disseminating, circulating or placing before the public, or causing,
41 directly or indirectly, to be made, published, disseminated, circulated or
42 placed before the public, in a newspaper, magazine or other publication,
43 or in the form of a notice, circular, pamphlet, letter or poster, or over any
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1 radio or television station, or in any other way, an advertisement, an-
2 nouncement or statement containing any assertion, misrepresentation or
3 statement with respect to the business of insurance or with respect to any
4 person in the conduct of such person's insurance business, which is un-
5 true, deceptive or misleading.
6 (3) (c) Defamation. Making, publishing, disseminating or circulating,
7 directly or indirectly, or aiding, abetting or encouraging the making, pub-
8 lishing, disseminating or circulating of any oral or written statement or
9 any pamphlet, circular, article or literature which is false, or maliciously
10 critical of or derogatory to the financial condition of any person, and which
11 is calculated to injure such person.
12 (4) (d) Boycott, coercion and intimidation. Entering into any agree-
13 ment to commit, or by any concerted action committing, any act of boy-
14 cott, coercion or intimidation resulting in or tending to result in unrea-
15 sonable restraint of the business of insurance, or by any act of boycott,
16 coercion or intimidation monopolizing or attempting to monopolize any
17 part of the business of insurance.
18 (5) (e) False statements and entries. (a) (1) Knowingly filing with any
19 supervisory or other public official, or knowingly making, publishing, dis-
20 seminating, circulating or delivering to any person, or placing before the
21 public, or knowingly causing directly or indirectly, to be made, published,
22 disseminated, circulated, delivered to any person, or placed before the
23 public, any false material statement of fact as to the financial condition
24 of a person.
25 (b) (2) Knowingly making any false entry of a material fact in any
26 book, report or statement of any person or knowingly omitting to make
27 a true entry of any material fact pertaining to the business of such person
28 in any book, report or statement of such person.
29 (6) (f) Stock operations and advisory board contracts. Issuing or de-
30 livering or permitting agents, officers or employees to issue or deliver,
31 agency company stock or other capital stock, or benefit certificates or
32 shares in any common-law corporation, or securities or any special or
33 advisory board contracts or other contracts of any kind promising returns
34 and profits as an inducement to insurance. Nothing herein shall prohibit
35 the acts permitted by K.S.A. 40-232, and amendments thereto.
36 (7) (g) Unfair discrimination. (a) (1)Making or permitting any unfair
37 discrimination between individuals of the same class and equal expecta-
38 tion of life in the rates charged for any contract of life insurance or life
39 annuity or in the dividends or other benefits payable thereon, or in any
40 other of the terms and conditions of such contract.
41 (b) (2) Making or permitting any unfair discrimination between in-
42 dividuals of the same class and of essentially the same hazard in the
43 amount of premium, policy fees or rates charged for any policy or contract
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1 of accident or health insurance or in the benefits payable thereunder, or
2 in any of the terms or conditions of such contract, or in any other manner
3 whatever.
4 (c) (3) Refusing to insure, or refusing to continue to insure, or limiting
5 the amount, extent or kind of coverage available to an individual, or charg-
6 ing an individual a different rate for the same coverage solely because of
7 blindness or partial blindness. With respect to all other conditions, in-
8 cluding the underlying cause of the blindness or partial blindness, persons
9 who are blind or partially blind shall be subject to the same standards of
10 sound actuarial principles or actual or reasonably anticipated experience
11 as are sighted persons. Refusal to insure includes denial by an insurer of
12 disability insurance coverage on the grounds that the policy defines "dis-
13 ability" as being presumed in the event that the insured loses such per-
14 son's eyesight. However, an insurer may exclude from coverage disabili-
15 ties consisting solely of blindness or partial blindness when such condition
16 existed at the time the policy was issued.
17 (d) (4) Refusing to insure, or refusing to continue to insure, or limi-
18 ting the amount, extent or kind of coverage available for accident and
19 health and life insurance to an applicant who is the proposed insured or
20 charge a different rate for the same coverage or excluding or limiting
21 coverage for losses or denying a claim incurred by an insured as a result
22 of abuse based on the fact that the applicant who is the proposed insured
23 is, has been, or may be the subject of domestic abuse, except as provided
24 in subpart (v) (F). "Abuse" as used in this subsection (7)(d) means one
25 or more acts defined in subsection (a) or (b) of K.S.A. 60-3102 and
26 amendments thereto between family members, current or former house-
27 hold members, or current or former intimate partners.
28 (i) (A) An insurer may not ask an applicant for life or accident and
29 health insurance who is the proposed insured if the individual is, has been
30 or may be the subject of domestic abuse or seeks, has sought or had reason
31 to seek medical or psychological treatment or counseling specifically for
32 abuse, protection from abuse or shelter from abuse.
33 (ii) (B) Nothing in this section shall be construed to prohibit a person
34 from declining to issue an insurance policy insuring the life of an individ-
35 ual who is, has been or has the potential to be the subject of abuse if the
36 perpetrator of the abuse is the applicant or would be the owner of the
37 insurance policy.
38 (C) If a policy excludes property and casualty coverage for interna-
39 tional acts, the insurer may not deny payment to an innocent coinsured
40 if:
41 (i) The loss is caused by an act of domestic abuse by another insured
42 under the policy;
43 (ii) the insured claiming the loss files a police report and cooperates
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1 with any law enforcement investigation relating to the act of domestic
2 abuse; and
3 (iii) the insured claiming the loss did not cooperate in or contribute
4 to the creation of the property loss.
5 Payment by the insurer to an insured may be limited to the person's
6 insurable interest in the property less payments made to a mortgagee or
7 other party with a legal secured interest in the property. An insurer mak-
8 ing payment to an insured under this section has all rights of subrogation
9 to recover against the perpetrator of the act that caused the loss.
10 (iii) (D) No insurer that issues a life or accident and health policy to
11 an individual who is, has been or may be the subject of domestic abuse
12 shall be subject to civil or criminal liability for the death or any injuries
13 suffered by that individual as a result of domestic abuse.
14 (iv) (E) No person shall refuse to insure, refuse to continue to insure,
15 limit the amount, extent or kind of coverage available to an individual or
16 charge a different rate for the same coverage solely because of physical
17 or mental condition, except where the refusal, limitation or rate differ-
18 ential is based on sound actuarial principles.
19 (v) (F) Nothing in this section shall be construed to prohibit a person
20 from underwriting or rating a risk on the basis of a preexisting physical
21 or mental condition, even if such condition has been caused by abuse,
22 provided that:
23 (A) (i) The person routinely underwrites or rates such condition in
24 the same manner with respect to an insured or an applicant who is not a
25 victim of abuse;
26 (B) (ii) the fact that an individual is, has been or may be the subject
27 of abuse may not be considered a physical or mental condition; and
28 (C) (iii) such underwriting or rating is not used to evade the intent
29 of this section or any other provision of the Kansas insurance code.
30 (vi) (G) Any person who underwrites or rates a risk on the basis of
31 preexisting physical or mental condition as set forth in subsection
32 (7)(d)(v), shall treat such underwriting or rating as an adverse underwrit-
33 ing decision pursuant to K.S.A. 40-2,112, and amendments thereto.
34 (vii) (H) The provisions of subsection (d) (4) shall apply to all policies
35 of life and accident and health insurance issued in this state after the
36 effective date of this act and all existing contracts which are renewed on
37 or after the effective date of this act.
38 (8) (h) Rebates. (a) (1) Except as otherwise expressly provided by law,
39 knowingly permitting, offering to make or making any contract of life
40 insurance, life annuity or accident and health insurance, or agreement as
41 to such contract other than as plainly expressed in the insurance contract
42 issued thereon; paying, allowing, giving or offering to pay, allow or give,
43 directly or indirectly, as inducement to such insurance, or annuity, any
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1 rebate of premiums payable on the contract, any special favor or advan-
2 tage in the dividends or other benefits thereon, or any valuable consid-
3 eration or inducement whatever not specified in the contract; or giving,
4 selling, purchasing or offering to give, sell or purchase as inducement to
5 such insurance contract or annuity or in connection therewith, any stocks,
6 bonds or other securities of any insurance company or other corporation,
7 association or partnership, or any dividends or profits accrued thereon,
8 or anything of value whatsoever not specified in the contract.
9 (b) (2) Nothing in subsection (7) (g) or (8)(a) (h)(1) shall be construed
10 as including within the definition of discrimination or rebates any of the
11 following practices:
12 (i) (A) In the case of any contract of life insurance or life annuity,
13 paying bonuses to policyholders or otherwise abating their premiums in
14 whole or in part out of surplus accumulated from nonparticipating insur-
15 ance. Any such bonuses or abatement of premiums shall be fair and eq-
16 uitable to policyholders and for the best interests of the company and its
17 policyholders;
18 (ii) (B) in the case of life insurance policies issued on the industrial
19 debit plan, making allowance to policyholders who have continuously for
20 a specified period made premium payments directly to an office of the
21 insurer in an amount which fairly represents the saving in collection ex-
22 penses; or
23 (iii) (C) readjustment of the rate of premium for a group insurance
24 policy based on the loss or expense experience thereunder, at the end of
25 the first or any subsequent policy year of insurance thereunder, which
26 may be made retroactive only for such policy year.
27 (9) (i) Unfair claim settlement practices. It is an unfair claim settle-
28 ment practice if any of the following or any rules and regulations pertain-
29 ing thereto are: (A) Committed committed flagrantly and in conscious
30 disregard of such provisions, or (B) committed with such frequency as to
31 indicate a general business practice.
32 (a) (1) Misrepresenting pertinent facts or insurance policy provisions
33 relating to coverages at issue;
34 (b) (2) failing to acknowledge and act reasonably promptly upon com-
35 munications with respect to claims arising under insurance policies;
36 (c) (3) failing to adopt and implement reasonable standards for the
37 prompt investigation of claims arising under insurance policies;
38 (d) (4) refusing to pay claims without conducting a reasonable inves-
39 tigation based upon all available information;
40 (e) (5) failing to affirm or deny coverage of claims within a reasonable
41 time after proof of loss statements have been completed;
42 (f) (6) not attempting in good faith to effectuate prompt, fair and
43 equitable settlements of claims in which liability has become reasonably
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1 clear;
2 (g) (7) compelling insureds to institute litigation to recover amounts
3 due under an insurance policy by offering substantially less than the
4 amounts ultimately recovered in actions brought by such insureds;
5 (h) (8) attempting to settle a claim for less than the amount to which
6 a reasonable person would have believed that such person was entitled
7 by reference to written or printed advertising material accompanying or
8 made part of an application;
9 (i) (9) attempting to settle claims on the basis of an application which
10 was altered without notice to, or knowledge or consent of the insured;
11 (j) (10) making claims payments to insureds or beneficiaries not ac-
12 companied by a statement setting forth the coverage under which pay-
13 ments are being made;
14 (k) (11) making known to insureds or claimants a policy of appealing
15 from arbitration awards in favor of insureds or claimants for the purpose
16 of compelling them to accept settlements or compromises less than the
17 amount awarded in arbitration;
18 (l) (12) delaying the investigation or payment of claims by requiring
19 an insured, claimant or the physician of either to submit a preliminary
20 claim report and then requiring the subsequent submission of formal
21 proof of loss forms, both of which submissions contain substantially the
22 same information;
23 (m) (13) failing to promptly settle claims, where liability has become
24 reasonably clear, under one portion of the insurance policy coverage in
25 order to influence settlements under other portions of the insurance pol-
26 icy coverage; or
27 (n) (14) failing to promptly provide a reasonable explanation of the
28 basis in the insurance policy in relation to the facts or applicable law for
29 denial of a claim or for the offer of a compromise settlement.
30 (10) (j) Failure to maintain complaint handling procedures. Failure
31 of any person, who is an insurer on an insurance policy, to maintain a
32 complete record of all the complaints which it has received since the date
33 of its last examination under K.S.A. 40-222, and amendments thereto; but
34 no such records shall be required for complaints received prior to the
35 effective date of this act. The record shall indicate the total number of
36 complaints, their classification by line of insurance, the nature of each
37 complaint, the disposition of the complaints, the date each complaint was
38 originally received by the insurer and the date of final disposition of each
39 complaint. For purposes of this subsection, "complaint" means any writ-
40 ten communication primarily expressing a grievance related to the acts
41 and practices set out in this section.
42 (11) (k) Misrepresentation in insurance applications. Making false or
43 fraudulent statements or representations on or relative to an application
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1 for an insurance policy, for the purpose of obtaining a fee, commission,
2 money or other benefit from any insurer, agent, broker or individual.
3 (12) (l) Statutory violations. Any violation of any of the provisions of
4 K.S.A. 40-276a, 40-1515, and amendments thereto, or K.S.A. 1998 Supp.
5 40-2,155 and amendments thereto.
6 (13) (m) Disclosure of information relating to adverse underwriting
7 decisions and refund of premiums. Failing to comply with the provisions
8 of K.S.A. 40-2,112, and amendments thereto, within the time prescribed
9 in such section.
10 (14) (n) Rebates and other inducements in title insurance. (a) (1) No
11 title insurance company or title insurance agent, or any officer, employee,
12 attorney, agent or solicitor thereof, may pay, allow or give, or offer to pay,
13 allow or give, directly or indirectly, as an inducement to obtaining any
14 title insurance business, any rebate, reduction or abatement of any rate
15 or charge made incident to the issuance of such insurance, any special
16 favor or advantage not generally available to others of the same classifi-
17 cation, or any money, thing of value or other consideration or material
18 inducement. The words "charge made incident to the issuance of such
19 insurance" includes, without limitations, escrow, settlement and closing
20 charges.
21 (b) (2) No insured named in a title insurance policy or contract nor
22 any other person directly or indirectly connected with the transaction
23 involving the issuance of the policy or contract, including, but not limited
24 to, mortgage lender, real estate broker, builder, attorney or any officer,
25 employee, agent representative or solicitor thereof, or any other person
26 may knowingly receive or accept, directly or indirectly, any rebate, re-
27 duction or abatement of any charge, or any special favor or advantage or
28 any monetary consideration or inducement referred to in (14)(a).
29 (c) (3) Nothing in this section shall be construed as prohibiting:
30 (i) (A) The payment of reasonable fees for services actually rendered
31 to a title insurance agent in connection with a title insurance transaction;
32 (ii) (B) the payment of an earned commission to a duly appointed
33 title insurance agent for services actually performed in the issuance of the
34 policy of title insurance; or
35 (iii) (C) the payment of reasonable entertainment and advertising
36 expenses.
37 (d) (4) Nothing in this section prohibits the division of rates and
38 charges between or among a title insurance company and its agent, or
39 one or more title insurance companies and one or more title insurance
40 agents, if such division of rates and charges does not constitute an unlaw-
41 ful rebate under the provisions of this section and is not in payment of a
42 forwarding fee or a finder's fee.
43 (e) (5) No title insurer or title agent may accept any order for, issue
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1 a title insurance policy to, or provide services to, an applicant if it knows
2 or has reason to believe that the applicant was referred to it by any pro-
3 ducer of title business or by any associate of such producer, where the
4 producer, the associate, or both, have a financial interest in the title in-
5 surer or title agent to which business is referred unless the producer has
6 disclosed to the buyer, seller and lender the financial interest of the pro-
7 ducer of title business or associate referring the title insurance business.
8 (f) (6) No title insurer or title agent may accept an order for title
9 insurance business, issue a title insurance policy, or receive or retain any
10 premium, or charge in connection with any transaction if: (i) (A) The title
11 insurer or title agent knows or has reason to believe that the transaction
12 will constitute controlled business for that title insurer or title agent, and
13 (ii) (B) 20% or more of the gross operating revenue of that title insurer
14 or title agent during the six full calendar months immediately preceding
15 the month in which the transaction takes place is derived from controlled
16 business. The prohibitions contained in this subparagraph shall not apply
17 to transactions involving real estate located in a county that has a popu-
18 lation, as shown by the last preceding decennial census, of 10,000 or less.
19 (g) (7) The commissioner shall adopt any regulations necessary to
20 carry out the provisions of this act.
21 Sec. 2. K.S.A. 40-4103 is hereby amended to read as follows: 40-
22 4103. Risk retention groups chartered in states other than this state seek-
23 ing to do business as a risk retention group in this state shall observe and
24 abide by the laws of this state as follows:
25 (a) Notice of operations and designation of commissioner as agent.
26 Before offering insurance in this state, a risk retention group shall submit
27 to the commissioner:
28 (1) A statement identifying the state or states in which the risk re-
29 tention group is chartered and licensed as a liability insurance company,
30 date of chartering, its principal place of business and such other infor-
31 mation including information on its membership, as the commissioner of
32 this state may require to verify that the risk retention group is qualified
33 under subsection (k) of K.S.A. 40-4101 and amendments thereto;
34 (2) a copy of its plan of operations or a feasibility study and revisions
35 of such plan or study submitted to its state of domicile; but the provision
36 relating to the submission of a plan of operation or a feasibility study shall
37 not apply with respect to any line or classification of liability insurance
38 which:
39 (A) Was defined in the product liability risk retention act of 1981
40 before October 27, 1986; and
41 (B) was offered before such date by any risk retention group which
42 had been chartered and operating for not less than three years before
43 such date;
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1 (3) a statement of registration which designates the commissioner as
2 its agent for the purpose of receiving service of legal documents or pro-
3 cess; and
4 (4) a notification fee in the amount of $250.
5 (b) Financial condition. Any risk retention group doing business in
6 this state shall submit to the commissioner:
7 (1) A copy of the group's financial statement submitted to its state of
8 domicile, which shall be certified by an independent public accountant
9 and contain a statement of opinion on loss and loss adjustment expense
10 reserves made by a member of the American academy of actuaries or a
11 qualified loss reserve specialist (under criteria established by the national
12 association of insurance commissioners);
13 (2) a copy of each examination of the risk retention group as certified
14 by the commissioner or public official conducting the examination;
15 (3) upon request by the commissioner, a copy of any audit performed
16 with respect to the risk retention group; and
17 (4) such information as may be required to verify its continuing qual-
18 ification as a risk retention group under subsection (k) of K.S.A. 40-4101
19 and amendments thereto.
20 (c) Taxation. (1) All premiums paid for coverages within this state to
21 risk retention groups chartered outside this state shall be subject to tax-
22 ation at the same rate and subject to the same interest, fines and penalties
23 for nonpayment as that provided by K.S.A. 40-246c and amendments
24 thereto. Risk retention groups chartered or licensed in this state shall be
25 taxed in accordance with K.S.A. 40-252, and amendments thereto.
26 (2) To the extent agents or brokers are utilized, they shall report and
27 pay the taxes for the premiums for risks which they have placed with or
28 on behalf of a risk retention group not chartered in this state.
29 (3) To the extent agents or brokers are not utilized or fail to pay the
30 tax, each risk retention group shall pay the tax for risks insured within the
31 state. Further, each risk retention group shall report all premiums paid
32 to it for risks insured within the state.
33 (d) Compliance with unfair claims settlement practices law. Any risk
34 retention group, its agents and representatives, shall comply with subsec-
35 tion (9) (i) of K.S.A. 40-2404 and amendments thereto.
36 (e) Deceptive, false or fraudulent practices. Any risk retention group
37 shall comply with the laws of this state regarding deceptive, false or fraud-
38 ulent acts or practices. However, if the commissioner seeks an injunction
39 regarding such conduct, the injunction shall be obtained from a court of
40 competent jurisdiction.
41 (f) Examination regarding financial condition. Any risk retention
42 group shall submit to an examination in accordance with K.S.A. 40-222
43 and 40-223, and amendments thereto, by the commissioner to determine
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1 its financial condition if the commissioner of the jurisdiction in which the
2 group is chartered has not initiated an examination or does not initiate
3 an examination within 60 days after a request by the commissioner of this
4 state.
5 (g) Notice to purchasers. Any policy issued by a risk retention group
6 shall contain in 10 point type on the front page and the declaration page,
7 the following notice:
8 NOTICE
9 This policy is issued by your risk retention group. Your risk retention group may not be
10 subject to all of the insurance laws and regulations of your state. State insurance insolvency
11 guaranty funds are not available for your risk retention group.
12 (h) Prohibited acts regarding solicitation or sale. The following acts
13 by a risk retention group are hereby prohibited:
14 (1) The solicitation or sale of insurance by a risk retention group to
15 any person who is not eligible for membership in such group; and
16 (2) the solicitation or sale of insurance by, or operation of, a risk
17 retention group that is in a hazardous financial condition or is financially
18 impaired.
19 (i) Prohibition on ownership by an insurance company. No risk re-
20 tention group shall be allowed to do business in this state if an insurance
21 company is directly or indirectly a retention group all of whose members
22 are insurance companies.
23 (j) Prohibited coverage. No risk retention group may offer insurance
24 policy coverage prohibited by the laws of this state or declared unlawful
25 by the supreme court of the state of Kansas.
26 (k) Delinquency proceedings. A risk retention group not chartered in
27 this state and doing business in this state must comply with a lawful order
28 issued in a voluntary dissolution proceeding or in a delinquency proceed-
29 ing commenced by a state insurance commissioner if there has been a
30 finding of financial impairment after an examination under subsection (f)
31 of this section.
32 Sec. 3. K.S.A. 40-4103 and K.S.A. 1998 Supp. 40-2404 are hereby
33 repealed.
34 Sec. 4. This act shall take effect and be in force from and after its
35 publication in the statute book.