Sec. 1. 24-A MRSA §2737-A is enacted to read:

§2737-A.__Retroactive cancellation of disability insurance

prohibited

A disability income insurance policy may not, on a retroactive basis, be terminated, lapsed or cancelled for any reason other than nonpayment of the premium.

Sec. 2. 24-A MRSA §2809-A, sub-§1-A, as amended by PL 2003, c. 428, Pt. B, §2, is further amended to read:

1-A. Notification of cancellation. An insurer may not cancel or refuse to renew any policy for hospital, disability income, surgical, dental or major medical expense insurance until the insurer has provided by first class mail at least 10 days' prior notification according to this section. The notice must include the date of cancellation of coverage and, if applicable, the time period for exercising policy conversion rights. The notice also must include an explanation of any applicable grace period. Notification is not required when the insurer has received written notice from the group policyholder that replacement coverage has been obtained.

A. Notice must be mailed to the group policyholder or subgroup sponsor.

B-1. At the time of notification under paragraph A, notice must be mailed to the certificate holder at the last address provided to the insurer by the subgroup sponsor, the group policyholder or the certificate holder. If the insurer does not have an address on file for the certificate holder, the notice must be mailed to the office of the subgroup sponsor, if any, or the group policy holder policyholder. The notice must also include information to the certificate holder about the availability of individual coverage as described in subsection 1-B.

SUMMARY

This bill prohibits the retroactive cancellation of individual disability insurance for any reason other than the nonpayment of the premium. It also clarifies that at least 10 days' prior notice be given before cancellation of group disability insurance.