HB 2189--
By Representative Tanner
[ol12](By Request) 2-3

AN ACT relating to insurance; concerning the mandatory reinstatement of certain life insurance policies in case of mental incapacity of an insured. Be it enacted by the Legislature of the State of Kansas: Section 1. (a) The provisions of sections 1 through 8 shall apply to all individual life insurance policies issued to residents of this state that are subject to lapsing on and after the effective date of this act, issued by an insurer authorized to do business in this state. (b) The provisions of sections 1 through 8 shall not apply to a life insurance policy that provides nonforfeiture benefits, which would main- tain the contract for one year. (c) As used in sections 1 through 8, ``policy'' means an individual life insurance policy. Sec. 2. (a) A policy shall be entitled to reinstatement under this act if: (1) Such policy has been in effect continuously for at least five years immediately preceding the lapse; (2) such policy has been without default in the payment of premiums during such period; and (3) there is a subsequent unintentional default in premium payments caused by mental incapacity of the insured. (b) A policy shall be reinstated within one year from the date of lapse if such policy meets the requirements of subsection (a), on payment of arrears of premiums with interest. The rate of interest may not exceed 6% per annum. Sec. 3. (a) For purposes of this act, ``mental incapacity'' means lack- ing the ability, based on reasonable medical judgment, to understand and appreciate the nature and consequences of a decision regarding failure to pay a premium when due and the ability to reach an informed decision in the matter. (b) Mental incapacity must be established by the clinical diagnosis of a physician licensed in this state and qualified to make the diagnosis. Sec. 4. (a) A request for reinstatement of coverage under this act and proof of mental incapacity may be filed with the insurer by: (1) The insured; (2) the legal guardian of the insured; (3) other legal representative of the insured; or (4) the legal representative of the estate of the insured. (b) Proof of mental incapacity and an accompanying request for re- instatement must be made not later than the first anniversary date after the lapse of a policy eligible for reinstatement. Sec. 5. (a) After the requirements of section 4 have been satisfied, an insurer subject to this act shall reinstate, without evidence of insura- bility, coverage that has lapsed under the circumstances described by section 2. (b) An insurer may require, as a condition of reinstatement, payment of premiums plus interest owed for the period from the date of initial lapse to the date of reinstatement. (c) On reinstatement of the coverage, the initial contractual provi- sions apply as if coverage had been continuous and without interruption. Sec. 6. An insurer shall pay the amount of benefits owed under a policy that is eligible for reinstatement under this act, reduced by the amount of premiums and interest owed and unpaid on the date on which the benefits are paid, if there is an uncontroverted claim for benefits that exceed the amount of premiums and interest owed. Sec. 7. An insurer is not required to reinstate coverage or pay ben- efits under this act if the insured first became mentally incapacitated after the expiration of an applicable grace period contained in the policy. Sec. 8. (a) Each insurer shall disclose fully to each of its policyhol- ders, contract holders or covered persons the requirements of this act. (b) The disclosure shall be forwarded to applicable policyholders, contract holders or covered persons either: (1) Within 90 days following a lapse of a policy regulated by this act; or (2) within 90 days after the effective date of this act to each existing policyholder whose policy is regulated by this act. Disclosure thereafter on policies issued after the effective date of this act may be made by including the disclosure information in the policy or in an endorsement attached to the policy. (c) Notice will be deemed to be in compliance with this act if mailed by first-class mail to the last known address of the policyholder or if contained in the policy form or as an endorsement thereto. (d) The commissioner of insurance may adopt reasonable rules and regulations to implement the provisions of this act. Such disclosure shall be made in the form and manner prescribed by the commissioner of insurance. Sec. 9. This act shall take effect and be in force from and after its publication in the statute book.