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DEPARTMENT OF LABOR AND ECONOMIC GROWTH OFFICE OF FINANCIAL AND INSURANCE SERVICES INSURANCE POLICY FORMS - NONCONFORMING CLAUSES
Filed with the Secretary of State on
These rules become effective immediately upon filing with the Secretary of State unless adopted under sections 33, 44, or 45a(6) of 1969 PA 306. Rules adopted under these sections become effective 7 days after filing with the Secretary of State.
(By authority conferred on the commissioner of the Office of Financial and Insurance Services by section 210 of the insurance code of 1956, 1956 PA 218, 1969 PA 306, E.R.O. No 2000-2 and E.R.O.
No 2003-1; MCL 500.210, MCL 500.2236, MCL 24.231 to MCL 24.233, MCL 445.2003, and MCL
445.2011)
Draft June 7, 2006 R 500.2231 and R 500.2232 are added to the Michigan Administrative Code as follows:
R 500.2231 Definitions.
Rule 1. As used in these rules:
(a) “Act” means the insurance code of 1956, 1956 PA 218, MCL 500.100.
(b) “Commissioner” means the commissioner of the office of financial and insurance services.
(c) “Form” means a form identified in section 2236(1) of the act.
(d) “Nonconforming clause” means a clause, exception, or condition identified in R 500.2232.
(e) “Personal insurance” means all insurance policies underwritten and sold on an individual or group basis for personal, family, or household use.
(f) Terms defined in the insurance code of 1956, 1956 PA 218, MCL 500.100 to MCL 500.8302, have the same meanings when used in these rules.
R 500.2232 Nonconforming clauses.
Rule 2. (a) Within the meaning of section 2236(5) of the act, the following clauses violate a provision of the act, or are inconsistent, ambiguous, or misleading, or are exceptions and conditions that unreasonably or deceptively affect the risk purported to be assumed in the general coverage of a policy:
(i) A clause in a disability income policy that precludes benefits if the policyholder is denied social security disability benefits, while providing in another clause a more inclusive definition of disability than that used in social security determinations.
(ii) An intentional acts exclusion that limits benefits otherwise payable to a person on the basis of an intentional act committed by someone else.
(iii) A blank or manuscript endorsement in connection with a personal insurance policy.
(iv) An arbitration provision that does any of the following:
(A) Requires the claimant to pay any costs of the arbitration.
(B) Requires the claimant to travel more than 10 miles from the claimant’s residence address, unless the claimant consents to another location after the arbitrable dispute occurs.
(C) Fails to provide that the arbitration proceeding shall be conducted by neutral arbitrator who was not and is not currently an employee of the insurer and who has no financial interest in a party to the arbitration.
(D) Fails to provide the claimant with all the substantive rights and defenses that the claimant would have if his or her claim were asserted in a court proceeding in Michigan.
(b) On and after the first day of the third month following the effective date of these rules, an insurer shall not issue, advertise, or deliver to any person in this state a policy, contract, rider, indorsement, certificate, or similar contract document that contains a nonconforming clause. This does not apply to a contract document in use before that date, but does apply to any such document revised in any respect on or after that date.
(c) On and after the first day of the third month following the effective date of these rules, a nonconforming clause issued or delivered to any person in this state in a policy, contract, rider, indorsement, certificate, or similar contract document is void and of no effect. This does not apply to contract documents in use before that date, but does apply to any such document revised in any respect on or after that date.
(d) Nothing in this rule limits the commissioner’s authority under section 2236 of the act to disapprove or withdraw approval of any form that contains a nonconforming clause.
(e) By the first day of the fourth month following the effective date of these rules, each insurer transacting insurance in this state shall submit to the commissioner a list of all forms in effect in Michigan that contain nonconforming clauses and shall submit a certification that the list is complete and accurate. If an insurer has no such forms in effect, it shall submit a letter to the commissioner reporting and certifying that fact.
