Senate Bill 1774c1
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Florida Senate - 1998 CS for SB 1774
By the Committee on Banking and Insurance; and Senator
Holzendorf
311-2180-98
1 A bill to be entitled
2 An act relating to insurance; amending s.
3 627.624, F.S.; revising loss-of-time benefit
4 requirements; providing definitions of the
5 terms "earned income" and "overinsurance
6 provisions"; requiring disclosure for
7 overinsurance provision; authorizing the
8 Department of Insurance to adopt rules;
9 providing an effective date.
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11 Be It Enacted by the Legislature of the State of Florida:
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13 Section 1. Section 627.624, Florida Statutes, is
14 amended to read:
15 (Substantial rewording of section. See
16 s. 627.624, F.S., for present text.)
17 627.624 Overinsurance; valid loss of time coverage.--
18 (1) A disability income insurance policy may include
19 the following overinsurance provision:
20 "Overinsurance: After the loss-of-time benefit of this
21 policy has been payable for 90 days, the benefit will be
22 adjusted, as provided below, if the total amount of unadjusted
23 loss-of-time benefits provided in all valid loss-of-time
24 coverage upon the insured exceeds ...(percent)... of the
25 insured's earned income. If the information contained in the
26 application discloses that the total amount of loss-of-time
27 benefits under this policy and under all other valid
28 loss-of-time coverage expected to be effective upon the
29 insured in accordance with the application for this policy
30 exceeded ...(percent)... of the insured's earned income at the
31 time of such application, the higher percentage will be used
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Florida Senate - 1998 CS for SB 1774
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1 in place of ...(percent).... The adjusted loss-of-time
2 benefit under this policy for any month is the proportion of
3 the loss-of-time benefit otherwise payable under this policy
4 as the product of the insured's earned income and
5 ...(percent)... bears to the total amount of loss-of-time
6 benefits payable for such month under this policy and all
7 other valid loss-of-time coverage on the insured (without
8 giving effect to the overinsurance provision in this or any
9 other coverage) less any amount of loss-of-time benefits
10 payable under other valid loss-of-time coverage that does not
11 contain an overinsurance provision. In making the
12 computation, all benefits and earnings must be converted to a
13 consistent ...(weekly or monthly)... basis. If the numerator
14 of the foregoing ratio is zero or is negative, no benefit is
15 payable under this policy. This provision may not reduce the
16 total combined amount of loss-of-time benefits payable under
17 this policy and all other valid loss-of-time coverage below an
18 amount that is the lesser of $300 or the total combined amount
19 of loss-of-time benefits determined without giving effect to
20 any overinsurance provision. This provision may not increase
21 the amount of benefits payable under this policy above the
22 amount that would have been paid in the absence of this
23 provision, or take into account or operate to reduce any
24 benefit other than the loss-of-time benefit."
25 (2) For purposes of the overinsurance provision of
26 subsection (1), the term:
27 (a) "Earned income," except where otherwise specified,
28 means the greater of monthly earnings of the insured at the
29 time disability commences or the insured's average monthly
30 earnings for a period of 2 years immediately preceding the
31 commencement of disability. The term does not include any
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Florida Senate - 1998 CS for SB 1774
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1 investment income or any other income not derived from the
2 insured's vocational activities.
3 (b) "Overinsurance provision" means the contract
4 provision authorized in subsection (1) and any other provision
5 with respect to any loss-of-time coverage which may have the
6 effect of reducing an insurer's liability if the total amount
7 of loss-of-time benefits under all coverage exceeds a stated
8 relationship to the insured's earnings.
9 (c) "Department" means the Department of Insurance.
10 (3) The overinsurance provision authorized in
11 subsection (1) may be inserted only in a policy that provides
12 a loss-of-time benefit that may be payable for at least 52
13 weeks, that is issued on the basis of selective underwriting
14 of each individual application, and for which the application
15 includes a question designed to elicit information necessary
16 either to determine the ratio of the total loss-of-time
17 benefits of the insured to the insured's earned income or to
18 determine that such ratio does not exceed the percentage of
19 earnings, not less than 60 percent, selected by the insurer
20 and inserted in lieu of the blank factor in the overinsurance
21 provision. The insurer may require, as part of the proof of
22 claim, the information necessary to administer the provision.
23 If the application indicates that other loss-of-time coverage
24 is to be discontinued, the amount of such other coverage must
25 be excluded in computing the alternative percentage in the
26 overinsurance provision. The policy must define the term
27 "valid loss-of-time coverage" as approved by the department,
28 which definition may include coverage provided by governmental
29 agencies and by organizations subject to regulation by
30 insurance law and by insurance authorities of this or any
31 other state or of any country; coverage provided for such
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Florida Senate - 1998 CS for SB 1774
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1 insured pursuant to any disability benefits, workers'
2 compensation benefits, or employer's liability benefits
3 provided by labor-management trustee plans or union welfare
4 plans; salary continuance or pension programs; or any other
5 coverage the inclusion of which has been approved by the
6 department.
7 (4) If by any application of the overinsurance
8 provision an insurer affects a material reduction of benefits
9 otherwise payable under the policy, the insurer must refund,
10 for the period 2 years preceding the disability for which a
11 claim is made, any premium unearned on the policy by reason of
12 such reduction of coverage, subject to the insurer's right to
13 provide in the policy that no such reduction of benefits or
14 refund will be made unless the unearned premium to be refunded
15 amounts to $5.
16 (5) The application for a policy containing the
17 overinsurance provision authorized by this section shall
18 include the following disclosure:
19 "The benefit payable under this policy may be reduced
20 if the total loss-of-time coverage in effect exceeds
21 ...(percent)... of your income."
22 (6) The department may by rule prescribe definitions,
23 forms, and procedures necessary to administer this section.
24 Section 2. This act shall take effect October 1, 1998,
25 and apply to policies issued on or after that date.
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Florida Senate - 1998 CS for SB 1774
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1 STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
COMMITTEE SUBSTITUTE FOR
2 Senate Bill 1774
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4 Provides for an initial 90 days of unreduced benefits and a
refund of unearned premiums, if the application of the
5 overinsurance provision results in a material reduction of
benefits otherwise payable of $5 or more.
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Requires an application for a policy containing such an
7 overinsurance provision to include a statement disclosing that
the benefits payable under the policy may be reduced, if the
8 total loss-of-time coverage in effect exceeds a stated percent
of the applicant's income.
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Authorizes the Department of Insurance to adopt rules
10 prescribing definitions, forms, and procedures necessary to
administer the provisions of the bill.
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