Session Law

Identifying Information:L. 2001 ch. 202
Other Identifying Information:2001 House Bill 2480
Tax Type:Other
Brief Description:An Act concerning unfair trade practices; relating to privacy of consumer financial and health information; amending K.S.A. 40-2404 and repealing the existing section.
Keywords:


Body:


CHAPTER 202

HOUSE BILL No. 2480


An Act concerning unfair trade practices; relating to privacy of consumer financial and

health information; amending K.S.A. 40-2404 and repealing the existing section.

Be it enacted by the Legislature of the State of Kansas:

Section 1. K.S.A. 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 differ-

ential 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 decision

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 or K.S.A. 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.

(15) Disclosure of nonpublic personal information. (a) No person

shall disclose any nonpublic personal information to a nonaffiliated third

party contrary to the provisions of title V of the Gramm-Leach-Bliley act

of 1999 (public law 106-102). The commissioner may adopt rules and

regulations necessary to carry out this section. Such rules and regulations

shall be consistent with and not more restrictive than standards contained

in regulations promulgated under title V of the Gramm-Leach-Bliley act

of 1999 (public law 106-102) by federal regulatory agencies governing

financial institutions doing business in Kansas the model regulation

adopted on September 26, 2000, by the national association of insurance

commissioners entitled ``Privacy of consumer financial and health infor-

mation regulation''.

(b) Any rules and regulations adopted by the commissioner which

implement article V of the model regulation adopted on September 26,

2000, by the national association of insurance commissioners entitled ``Pri-

vacy of consumer financial and health information regulation'' shall be-

come effective on and after February 1, 2002.

(c) Nothing in this paragraph (15) shall be deemed or construed to

authorize the promulgation or adoption of any regulation which pre-

empts, supersedes or is inconsistent with any provision of Kansas law

concerning requirements for notification of, or obtaining consent from, a

parent, guardian or other legal custodian of a minor relating to any matter

pertaining to the health and medical treatment for such minor.

New Sec. 2. (a) Any person subject to this act shall be deemed to be

in compliance with the rules and regulations adopted by the commis-

sioner which implement article V of the model regulation adopted on

September 26, 2000, by the national association of insurance commis-

sioners entitled ``Privacy of consumer financial and health information

regulation'' upon such person's demonstration of a good faith effort to

comply with:

(1) The rules and regulations adopted pursuant to paragraph (15) of

K.S.A. 40-2404 and amendments thereto; or

(2) the health insurance portability and accountability act of 1996,

public law 104-191, and any regulations adopted thereunder.

(b) The provisions of this section shall expire on April 14, 2003.

Sec. 3. K.S.A. 40-2404 is hereby repealed.

Sec. 4. This act shall take effect and be in force from and after its

publication in the statute book.

Approved May 22, 2000.


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Date Composed: 09/25/2001 Date Modified: 09/25/2001