An Act relating to insurance; concerning unfair trade practices; prohibiting discrimination against victims of domestic abuse; amending K.S.A. 1995 Supp. 40-2404 and repealing the existing section.
Be it enacted by the Legislature of the State of Kansas:
Section 1. K.S.A. 1995 Supp. 40-2404 is hereby amended to read as follows: 40-2404. The following are hereby defined as unfair methods of competition and unfair or deceptive acts or practices in the business of insurance:
(1) Misrepresentations and false advertising of insurance policies. Making, issuing, circulating or causing to be made, issued or circulated, any estimate, illustration, circular, statement, sales presentation, omission or comparison which:
(a) Misrepresents the benefits, advantages, conditions or terms of any insurance policy;
(b) misrepresents the dividends or share of the surplus to be received on any insurance policy;
(c) makes any false or misleading statements as to the dividends or share of surplus previously paid on any insurance policy;
(d) is misleading or is a misrepresentation as to the financial condition of any person, or as to the legal reserve system upon which any life insurer operates;
(e) uses any name or title of any insurance policy or class of insurance policies misrepresenting the true nature thereof;
(f) is a misrepresentation for the purpose of inducing or tending to induce the lapse, forfeiture, exchange, conversion or surrender of any insurance policy;
(g) is a misrepresentation for the purpose of effecting a pledge or assignment of or effecting a loan against any insurance policy; or
(h) misrepresents any insurance policy as being shares of stock.
(2) False information and advertising generally. Making, publishing, disseminating, circulating or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated or placed before the public, in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio or television station, or in any other way, an advertisement, announce- ment or statement containing any assertion, misrepresentation or state- ment with respect to the business of insurance or with respect to any person in the conduct of such person's insurance business, which is un- true, deceptive or misleading.
(3) Defamation. Making, publishing, disseminating or circulating, di- rectly or indirectly, or aiding, abetting or encouraging the making, pub- lishing, disseminating or circulating of any oral or written statement or any pamphlet, circular, article or literature which is false, or maliciously critical of or derogatory to the financial condition of any person, and which is calculated to injure such person.
(4) Boycott, coercion and intimidation. Entering into any agreement to commit, or by any concerted action committing, any act of boycott, coercion or intimidation resulting in or tending to result in unreasonable restraint of the business of insurance, or by any act of boycott, coercion or intimidation monopolizing or attempting to monopolize any part of the business of insurance.
(5) False statements and entries. (a) Knowingly filing with any super- visory or other public official, or knowingly making, publishing, dissemi- nating, circulating or delivering to any person, or placing before the pub- lic, or knowingly causing directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false material statement of fact as to the financial condition of a person.
(b) Knowingly making any false entry of a material fact in any book, report or statement of any person or knowingly omitting to make a true entry of any material fact pertaining to the business of such person in any book, report or statement of such person.
(6) Stock operations and advisory board contracts. Issuing or deliv- ering or permitting agents, officers or employees to issue or deliver, agency company stock or other capital stock, or benefit certificates or shares in any common-law corporation, or securities or any special or advisory board contracts or other contracts of any kind promising returns and profits as an inducement to insurance. Nothing herein shall prohibit the acts permitted by K.S.A. 40-232, and amendments thereto.
(7) Unfair discrimination. (a) Making or permitting any unfair dis- crimination between individuals of the same class and equal expectation of life in the rates charged for any contract of life insurance or life annuity or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of such contract.
(b) Making or permitting any unfair discrimination between individ- uals of the same class and of essentially the same hazard in the amount of premium, policy fees or rates charged for any policy or contract of accident or health insurance or in the benefits payable thereunder, or in any of the terms or conditions of such contract, or in any other manner whatever.
(c) Refusing to insure, or refusing to continue to insure, or limiting the amount, extent or kind of coverage available to an individual, or charg- ing an individual a different rate for the same coverage solely because of blindness or partial blindness. With respect to all other conditions, in- cluding the underlying cause of the blindness or partial blindness, persons who are blind or partially blind shall be subject to the same standards of sound actuarial principles or actual or reasonably anticipated experience as are sighted persons. Refusal to insure includes denial by an insurer of disability insurance coverage on the grounds that the policy defines ``dis- ability'' as being presumed in the event that the insured loses such per- son's eyesight. However, an insurer may exclude from coverage disabili- ties consisting solely of blindness or partial blindness when such condition existed at the time the policy was issued.
(d) Refusing to insure, or refusing to continue to insure, or limiting the amount, extent or kind of coverage available for accident and health and life insurance to an applicant who is the proposed insured or charge a different rate for the same coverage or excluding or limiting coverage for losses or denying a claim incurred by an insured as a result of abuse based on the fact that the applicant who is the proposed insured is, has been, or may be the subject of domestic abuse, except as provided in subpart (v). ``Abuse'' as used in this subsection (7)(d) means one or more acts defined in subsection (a) or (b) of K.S.A. 60-3102 and amendments thereto between family members, current or former household members, or current or former intimate partners.
(i) An insurer may not ask an applicant for life or accident and health insurance who is the proposed insured if the individual is, has been or may be the subject of domestic abuse or seeks, has sought or had reason to seek medical or psychological treatment or counseling specifically for abuse, protection from abuse or shelter from abuse.
(ii) Nothing in this section shall be construed to prohibit a person from declining to issue an insurance policy insuring the life of an individ- ual who is, has been or has the potential to be the subject of abuse if the perpetrator of the abuse is the applicant or would be the owner of the insurance policy.
(iii) No insurer that issues a life or accident and health policy to an individual who is, has been or may be the subject of domestic abuse shall be subject to civil or criminal liability for the death or any injuries suffered by that individual as a result of domestic abuse.
(iv) No person shall refuse to insure, refuse to continue to insure, limit the amount, extent or kind of coverage available to an individual or charge a different rate for the same coverage solely because of physical or mental condition, except where the refusal, limitation or rate differential is based on sound actuarial principles.
(v) Nothing in this section shall be construed to prohibit a person from underwriting or rating a risk on the basis of a preexisting physical or mental condition, even if such condition has been caused by abuse, provided that:
(A) The person routinely underwrites or rates such condition in the same manner with respect to an insured or an applicant who is not a victim of abuse;
(B) the fact that an individual is, has been or may be the subject of abuse may not be considered a physical or mental condition; and
(C) such underwriting or rating is not used to evade the intent of this section or any other provision of the Kansas insurance code.
(vi) Any person who underwrites or rates a risk on the basis of pre- existing physical or mental condition as set forth in subsection (7)(d)(v), shall treat such underwriting or rating as an adverse underwriting deci- sion pursuant to K.S.A. 40-2,112, and amendments thereto.
(vii) The provisions of subsection (d) shall apply to all policies of life and accident and health insurance issued in this state after the effective date of this act and all existing contracts which are renewed on or after the effective date of this act.
(8) Rebates. (a) Except as otherwise expressly provided by law, know- ingly permitting, offering to make or making any contract of life insur- ance, life annuity or accident and health insurance, or agreement as to such contract other than as plainly expressed in the insurance contract issued thereon; paying, allowing, giving or offering to pay, allow or give, directly or indirectly, as inducement to such insurance, or annuity, any rebate of premiums payable on the contract, any special favor or advan- tage in the dividends or other benefits thereon, or any valuable consid- eration or inducement whatever not specified in the contract; or giving, selling, purchasing or offering to give, sell or purchase as inducement to such insurance contract or annuity or in connection therewith, any stocks, bonds or other securities of any insurance company or other corporation, association or partnership, or any dividends or profits accrued thereon, or anything of value whatsoever not specified in the contract.
(b) Nothing in subsection (7) or (8)(a) shall be construed as including within the definition of discrimination or rebates any of the following practices:
(i) In the case of any contract of life insurance or life annuity, paying bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from nonparticipating insurance. Any such bonuses or abatement of premiums shall be fair and equitable to policyholders and for the best interests of the company and its poli- cyholders;
(ii) in the case of life insurance policies issued on the industrial debit plan, making allowance to policyholders who have continuously for a spec- ified period made premium payments directly to an office of the insurer in an amount which fairly represents the saving in collection expenses; or
(iii) readjustment of the rate of premium for a group insurance policy based on the loss or expense experience thereunder, at the end of the first or any subsequent policy year of insurance thereunder, which may be made retroactive only for such policy year.
(9) Unfair claim settlement practices. It is an unfair claim settlement practice if any of the following or any rules and regulations pertaining thereto are: (A) Committed flagrantly and in conscious disregard of such provisions, or (B) committed with such frequency as to indicate a general business practice.
(a) Misrepresenting pertinent facts or insurance policy provisions re- lating to coverages at issue;
(b) failing to acknowledge and act reasonably promptly upon com- munications with respect to claims arising under insurance policies;
(c) failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;
(d) refusing to pay claims without conducting a reasonable investi- gation based upon all available information;
(e) failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;
(f) not attempting in good faith to effectuate prompt, fair and equi- table settlements of claims in which liability has become reasonably clear;
(g) compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds;
(h) attempting to settle a claim for less than the amount to which a reasonable person would have believed that such person was entitled by reference to written or printed advertising material accompanying or made part of an application;
(i) attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of the insured;
(j) making claims payments to insureds or beneficiaries not accom- panied by a statement setting forth the coverage under which payments are being made;
(k) making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;
(l) delaying the investigation or payment of claims by requiring an insured, claimant or the physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same in- formation;
(m) failing to promptly settle claims, where liability has become rea- sonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy cov- erage; or
(n) failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.
(10) Failure to maintain complaint handling procedures. Failure of any person, who is an insurer on an insurance policy, to maintain a com- plete record of all the complaints which it has received since the date of its last examination under K.S.A. 40-222, and amendments thereto; but no such records shall be required for complaints received prior to the effective date of this act. The record shall indicate the total number of complaints, their classification by line of insurance, the nature of each complaint, the disposition of the complaints, the date each complaint was originally received by the insurer and the date of final disposition of each complaint. For purposes of this subsection, ``complaint'' means any writ- ten communication primarily expressing a grievance related to the acts and practices set out in this section.
(11) Misrepresentation in insurance applications. Making false or fraudulent statements or representations on or relative to an application for an insurance policy, for the purpose of obtaining a fee, commission, money or other benefit from any insurer, agent, broker or individual.
(12) Statutory violations. Any violation of any of the provisions of K.S.A. 40-276a, 40-1515, and amendments thereto, or K.S.A. 1995 Supp. 40-2,155 and amendments thereto.
(13) Disclosure of information relating to adverse underwriting de- cisions and refund of premiums. Failing to comply with the provisions of K.S.A. 40-2,112, and amendments thereto, within the time prescribed in such section.
(14) Rebates and other inducements in title insurance. (a) No title insurance company or title insurance agent, or any officer, employee, attorney, agent or solicitor thereof, may pay, allow or give, or offer to pay, allow or give, directly or indirectly, as an inducement to obtaining any title insurance business, any rebate, reduction or abatement of any rate or charge made incident to the issuance of such insurance, any special favor or advantage not generally available to others of the same classifi- cation, or any money, thing of value or other consideration or material inducement. The words ``charge made incident to the issuance of such insurance'' includes, without limitations, escrow, settlement and closing charges.
(b) No insured named in a title insurance policy or contract nor any other person directly or indirectly connected with the transaction involv- ing the issuance of the policy or contract, including, but not limited to, mortgage lender, real estate broker, builder, attorney or any officer, em- ployee, agent representative or solicitor thereof, or any other person may knowingly receive or accept, directly or indirectly, any rebate, reduction or abatement of any charge, or any special favor or advantage or any monetary consideration or inducement referred to in (14)(a).
(c) Nothing in this section shall be construed as prohibiting:
(i) The payment of reasonable fees for services actually rendered to a title insurance agent in connection with a title insurance transaction;
(ii) the payment of an earned commission to a duly appointed title insurance agent for services actually performed in the issuance of the policy of title insurance; or
(iii) the payment of reasonable entertainment and advertising ex- penses.
(d) Nothing in this section prohibits the division of rates and charges between or among a title insurance company and its agent, or one or more title insurance companies and one or more title insurance agents, if such division of rates and charges does not constitute an unlawful rebate under the provisions of this section and is not in payment of a forwarding fee or a finder's fee.
(e) No title insurer or title agent may accept any order for, issue a title insurance policy to, or provide services to, an applicant if it knows or has reason to believe that the applicant was referred to it by any pro- ducer of title business or by any associate of such producer, where the producer, the associate, or both, have a financial interest in the title in- surer or title agent to which business is referred unless the producer has disclosed to the buyer, seller and lender the financial interest of the pro- ducer of title business or associate referring the title insurance business.
(f) No title insurer or title agent may accept an order for title insur- ance business, issue a title insurance policy, or receive or retain any pre- mium, or charge in connection with any transaction if: (i) The title insurer or title agent knows or has reason to believe that the transaction will constitute controlled business for that title insurer or title agent, and (ii) 20% or more of the gross operating revenue of that title insurer or title agent during the six full calendar months immediately preceding the month in which the transaction takes place is derived from controlled business. The prohibitions contained in this subparagraph shall not apply to transactions involving real estate located in a county that has a popu- lation, as shown by the last preceding decennial census, of 10,000 or less.
(g) The commissioner shall adopt any regulations necessary to carry out the provisions of this act.
Sec. 2. K.S.A. 1995 Supp. 40-2404 is hereby repealed.
Sec. 3. This act shall take effect and be in force from and after its publication in the statute book.
Approved May 3, 1996.