Several weeks ago, California Governor Jerry Brown signed a consumer protection bill (Assembly Bill No. 1804) that will allow more policyholders to designate a back-up contact to receive notices from their insurance companies when adverse actions are taken due to nonpayment of premiums.
The bill, which was sponsored by Insurance Commissioner Dave Jones:
[W]ould require an insurer to maintain a verifiable process or adopt a procedure that allows an applicant or policyholder to designate one additional person to receive notice of lapse, termination, expiration, nonrenewal, or cancellation of a policy for nonpayment of premium, as specified. The bill would prohibit an insurance policy from lapsing or being terminated for nonpayment of premium unless the insurer, at least 10 days prior to the effective date of the lapse, termination, expiration, nonrenewal, or cancellation, gives notice, as provided, to the individual designated, if any, at the address provided by the policyholder for these purposes.1
Prior to this bill, in California, only life and long-term care insurers were required to offer their policyholders the option of designating a back-up contact. The bill, which will be codified as Insurance Code section 396 and become law in January 2016, will extend this requirement to also homeowners and renters policies.
From time to time, I receive calls from policyholders who inform me that their insurance claims were denied because coverage lapsed for nonpayment of a premium. Often the nonpayment resulting in the lapse or cancellation is unintentional. Sometimes the policyholder erroneously assumes a premium payment was made when in fact it wasn’t due to a miss-delivery or a technical glitch. In certain cases the opportunity to rectify the nonpayment is missed because the notice of cancellation intended for the policyholder went to a bad address.
According to Insurance Commissioner Jones, having the "additional point of contact can help consumers who have difficulty managing their insurance responsibilities in a timely fashion due to health issues or moving to a new location. Enactment of this bill is another success in carrying out the department’s mission to protect California consumers and ensure fair insurance market practices."2
The idea of having a back-up contact on a policy is a very good one. All homeowners should exercise this option when it becomes available.
1 Calif. Assembly Bill No. 1804.
2 Calif. Dept. of Insurance Press Release dated 9/17/2014.
