September 22, 2010, Introduced by Senator SWITALSKI and referred to the Committee on Economic Development and Regulatory Reform.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending sections 2236, 2242, 3606, and 4430 (MCL 500.2236,
500.2242, 500.3606, and 500.4430), section 2236 as amended by 2002
PA 664, sections 2242 and 3606 as amended by 1990 PA 305, and
section 4430 as amended by 1993 PA 349.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 2236. (1) A basic insurance policy form or annuity
contract form shall not be issued or delivered to any person in
this state, and an insurance or annuity application form if a
written application is required and is to be made a part of the
policy or contract, a printed rider or indorsement form or form of
renewal certificate, and a group certificate in connection with the
policy or contract, shall not be issued or delivered to a person in
this
state, until a copy of the form is filed with the insurance
bureau
office of financial and
insurance regulation and approved by
the commissioner as conforming with the requirements of this act
and not inconsistent with the law. Failure of the commissioner to
act within 30 days after submittal constitutes approval. All such
forms, except policies of disability insurance as defined in
section 3400, shall be plainly printed with type size not less than
8-point
unless the commissioner determines that portions of such a
the form printed with type less than 8-point is not deceptive or
misleading.
(2) An insurer may satisfy its obligations to make form
filings by becoming a member of, or a subscriber to, a rating
organization,
licensed under section 2436 or 2630, which makes such
those filings and by filing with the commissioner a copy of its
authorization of the rating organization to make the filings on its
behalf. Every member of or subscriber to a rating organization
shall adhere to the form filings made on its behalf by the
organization except that an insurer may file with the commissioner
a substitute form, and thereafter if a subsequent form filing by
the rating organization affects the use of the substitute form, the
insurer shall review its use and notify the commissioner whether to
withdraw its substitute form.
(3) Beginning January 1, 1992, the commissioner shall not
approve a form filed pursuant to this section providing for or
relating to an insurance policy or an annuity contract for
personal, family, or household purposes if the form fails to obtain
the readability score or meet the other requirements of this
subsection, as applicable:
(a) The readability score for a form for which approval is
required by this section shall not be less than 45, as determined
by the method provided in subdivisions (b) and (c).
(b) The readability score for a form shall be determined as
follows:
(i) For a form containing not more than 10,000 words, the
entire form shall be analyzed. For a form containing more than
10,000 words, not less than two 200-word samples per page shall be
analyzed instead of the entire form. The samples shall be separated
by at least 20 printed lines.
(ii) Count the number of words and sentences in the form or
samples and divide the total number of words by the total number of
sentences. Multiply this quotient by a factor of 1.015.
(iii) Count the total number of syllables in the form or samples
and divide the total number of syllables by the total number of
words. Multiply this quotient by a factor of 84.6. As used in this
subparagraph, "syllable" means a unit of spoken language consisting
of 1 or more letters of a word as indicated by an accepted
dictionary. If the dictionary shows 2 or more equally acceptable
pronunciations of a word, the pronunciation containing fewer
syllables may be used.
(iv) Add the figures obtained in subparagraphs (ii) and (iii) and
subtract this sum from 206.835. The figure obtained equals the
readability score for the form.
(c) For the purposes of subdivision (b)(ii) and (iii), the
following procedures shall be used:
(i) A contraction, hyphenated word, or numbers and letters when
separated by spaces shall be counted as 1 word.
(ii) A unit of words ending with a period, semicolon, or colon,
but excluding headings and captions, shall be counted as 1
sentence.
(d) In determining the readability score, the method provided
in subdivisions (b) and (c):
(i) Shall be applied to an insurance policy form or an annuity
contract, together with a rider or indorsement form usually
associated with such an insurance policy form or annuity contract.
(ii) Shall not be applied to words or phrases that are defined
in an insurance policy form, an annuity contract, or riders,
indorsements, or group certificates pursuant to an insurance policy
form or annuity contract.
(iii) Shall not be applied to language specifically agreed upon
through collective bargaining or required by a collective
bargaining agreement.
(iv) Shall not be applied to language that is prescribed by
state or federal statute or by rules or regulations promulgated
pursuant to a state or federal statute.
(e) Each form for which approval is required by this section
shall contain both of the following:
(i) Topical captions.
(ii) An identification of exclusions.
(f) Each insurance policy and annuity contract that has more
than 3,000 words printed on not more than 3 pages of text or that
has more than 3 pages of text regardless of the number of words
shall contain a table of contents. This subdivision does not apply
to indorsements.
(g) Each rider or indorsement form that changes coverage shall
do all of the following:
(i) Contain a properly descriptive title.
(ii) Reproduce either the entire paragraph or the provision as
changed.
(iii) Be accompanied by an explanation of the change.
(h) If a computer system approved by the commissioner
calculates the readability score of a form as being in compliance
with this subsection, the form is considered in compliance with the
readability score requirements of this subsection.
(4) After January 1, 1992, any change or addition to a policy
or annuity contract form for personal, family, or household
purposes, whether by indorsement, rider, or otherwise, or a change
or addition to a rider or indorsement form to such policy or
annuity contract form, which policy or annuity contract form has
not been previously approved under subsection (3), shall be
submitted for approval pursuant to subsection (3).
(5) Upon written notice to the insurer, the commissioner may
disapprove, withdraw approval, or prohibit the issuance,
advertising, or delivery of any form to any person in this state if
it violates any provisions of this act, or contains inconsistent,
ambiguous, or misleading clauses, or contains exceptions and
conditions that unreasonably or deceptively affect the risk
purported to be assumed in the general coverage of the policy. The
notice shall specify the objectionable provisions or conditions and
state the reasons for the commissioner's decision. If the form is
legally in use by the insurer in this state, the notice shall give
the effective date of the commissioner's disapproval, which shall
not
be less than 30 days subsequent to after the mailing or
delivery of the notice to the insurer. If the form is not legally
in use, then disapproval shall be effective immediately.
(6) If a form is disapproved or approval is withdrawn under
the provisions of this act, the insurer is entitled upon demand to
a hearing before the commissioner or a deputy commissioner within
30 days after the notice of disapproval or of withdrawal of
approval. After the hearing, the commissioner shall make findings
of fact and law, and either affirm, modify, or withdraw his or her
original order or decision.
(7) Any issuance, use, or delivery by an insurer of any form
without the prior approval of the commissioner as required by
subsection (1) or after withdrawal of approval as provided by
subsection (5) constitutes a separate violation for which the
commissioner may order the imposition of a civil penalty of $25.00
for each offense, but not to exceed the maximum penalty of $500.00
for any 1 series of offenses relating to any 1 basic policy form,
which penalty may be recovered by the attorney general as provided
in section 230.
(8) The filing requirements of this section do not apply to
any of the following:
(a) Insurance against loss of or damage to:
(i) Imports, exports, or domestic shipments.
(ii) Bridges, tunnels, or other instrumentalities of
transportation and communication.
(iii) Aircraft and attached equipment.
(iv) Vessels and watercraft under construction or owned by or
used in a business or having a straight-line hull length of more
than 24 feet.
(b) Insurance against loss resulting from liability, other
than worker's compensation or employers' liability arising out of
the ownership, maintenance, or use of:
(i) Imports, exports, or domestic shipments.
(ii) Aircraft and attached equipment.
(iii) Vessels and watercraft under construction or owned by or
used in a business or having a straight-line hull length of more
than 24 feet.
(c)
Surety bonds other than fidelity bonds.
(c) (d)
Policies, riders, indorsements, or
forms of unique
character designed for and used with relation to insurance upon a
particular subject, or that relate to the manner of distribution of
benefits or to the reservation of rights and benefits under life or
disability insurance policies and are used at the request of the
individual policyholder, contract holder, or certificate holder.
Beginning September 1, 1968, the commissioner by order may exempt
from the filing requirements of this section and sections 2242,
3606, and 4430 for so long as he or she considers proper any
insurance document or form, except that portion of the document or
form that establishes a relationship between group disability
insurance and personal protection insurance benefits subject to
exclusions or deductibles pursuant to section 3109a, as specified
in the order to which this section practicably may not be applied,
or the filing and approval of which are considered unnecessary for
the protection of the public. Insurance documents or forms
providing medical payments or income replacement benefits, except
that portion of the document or form that establishes a
relationship between group disability insurance and personal
protection insurance benefits subject to exclusions or deductibles
pursuant to section 3109a, exempt by order of the commissioner from
the filing requirements of this section and sections 2242 and 3606
are considered approved by the commissioner for purposes of section
3430.
(d) (e)
Insurance that meets both of the
following:
(i) Is sold to an exempt commercial policyholder.
(ii) Contains a prominent disclaimer that states "This policy
is exempt from the filing requirements of section 2236 of the
insurance code of 1956, 1956 PA 218, MCL 500.2236." or words that
are substantially similar.
(9) As used in this section and sections 2401 and 2601,
"exempt commercial policyholder" means an insured that purchases
the insurance for other than personal, family, or household
purposes.
(10) Every order made by the commissioner under the
provisions of this section is subject to court review as provided
in section 244.
Sec. 2242. (1) Except as otherwise provided in section
2236(8)(d),
2236(8)(c), a group disability policy shall not be
issued or delivered in this state unless a copy of the form has
been filed with the commissioner and approved by him or her.
(2) The commissioner may within 30 days after the filing of a
disability insurance policy form applicable to individual or family
expense coverage, disapprove the form for any of the following,
subject to the requirements as to notice, hearing, and appeal set
forth in sections 244 and 2236:
(a) The benefits provided therein are unreasonable in relation
to the premium charged.
(b)
It contains a provision or provisions which that are
unjust, unfair, inequitable, misleading, deceptive, or encourage
misrepresentation of the policy.
(c) It does not comply with other provisions of law.
(3) The commissioner may at any time withdraw his or her
approval of an individual or family expense policy form on any of
the grounds stated in subsection (2), subject to the requirements
as to notice, hearing, and appeal set forth in sections 244 and
2236. An insurer shall not issue the form after the effective date
of the withdrawal of approval.
Sec. 3606. (1) An insurer authorized to write disability
insurance in this state shall have the power to issue group
disability insurance policies.
(2)
Except as otherwise provided in section 2236(8)(d),
2236(8)(c), a group disability insurance policy shall not be issued
or delivered in this state unless a copy of the form shall have
been filed with the commissioner and approved by him or her.
Sec. 4430. (1) Except as otherwise provided in section
2236(8)(d),
2236(8)(c), a policy of group life insurance shall not
be issued or delivered in this state unless and until a copy of the
form of the group life insurance has been filed with and approved
by the commissioner.
(2) A policy of group life insurance shall not be issued or
delivered unless it contains in substance the provisions of
sections 4432 through 4442. A group universal life policy as
defined in section 4001(g) shall not be issued or delivered unless
it complies with the provisions of chapter 40.