304.17-240 Relation of earnings to insurance.
(1)
There may be a provision as follows:
"After the loss-of-time benefit of this policy has been payable for ninety (90) days,
such benefit will be adjusted, as provided below, if the total amount of unadjusted
loss-of-time benefits provided in all valid loss-of-time coverage upon the insured
should exceed -- % of the insured's earned income; provided, however, that if the
information contained in the application discloses that the total amount of loss-oftime benefits under this policy and under all other valid loss-of-time coverage
expected to be effective upon the insured in accordance with the application for this
policy exceeded -- % of the insured's earned income at the time of such application,
such higher percentage will be used in the place of -- %. Such adjusted loss-of-time
benefit under this policy for any month shall be only such proportion of the loss-oftime benefit otherwise payable under this policy as:
(a) The product of the insured's earned income and -- % (or, if higher, the
alternative percentage described at the end of the first sentence of this
provision) bears to
(b) The total amount of loss-of-time benefits payable for such month under this
policy and all other valid loss-of-time coverage on the insured (without giving
effect of the overinsurance provision in this or any other coverage) less in both
paragraphs (a) and (b) of this subsection any amount of loss-of-time benefits
payable under other valid loss-of-time coverage which does not contain an
'overinsurance provision.' In making such computation, all benefits and
earnings shall be converted to a consistent (insert 'weekly' if the loss-of-time
benefit of this policy is payable weekly, 'monthly' if such benefit is payable
monthly, etc.) basis. If the numerator of the foregoing ratio is zero (0) or is
negative, no benefit shall be payable under this policy. In no event shall this
provision
1.
Operate to reduce the total combined amount of loss-of-time benefits for
such month payable under this policy and all other valid loss-of-time
coverage below the lesser of three hundred dollars (0) and the total
combined amount of loss-of-time benefits determined without giving
effect to any 'overinsurance provision' nor
2.
Operate to increase the amount of benefits payable under this policy
above the amount which would have been paid in the absence of this
provision, nor
3.
Take into account or operate to reduce any benefit other than the loss-oftime benefit.
(c) For purposes of this provision:
1.
'Earned income,' except where otherwise specified, means the greater of
the monthly earnings of the insured at the time disability commences
and his or her average monthly earnings for a period of two (2) years
immediately preceding the commencement of such disability, and shall
(2)
(3)
not include any investment income or any other income not derived from
the insured's vocational activities.
2.
'Overinsurance provision' shall include this provision and any other
provision with respect to any loss-of-time coverage which may have the
effect of reducing an insurer's liability if the total amount of loss-of-time
benefits under all coverage exceeds a stated relationship to the insured's
earnings."
The foregoing provision may be included only in a policy which provides a loss-oftime benefit which may be payable for at least fifty-two (52) weeks, which is issued
on the basis of selective underwriting of each individual application, and for which
the application includes a question designed to elicit information necessary either to
determine the ratio of the total loss-of-time benefits of the insured to the insured's
earned income or to determine that such ratio does not exceed the percentage of
earnings, not less than sixty percent (60%), selected by the insurer and inserted in
lieu of the blank factor above. The insurer may require, as part of the proof of claim,
the information necessary to administer this provision. If the application indicates
that other loss-of-time coverage is to be discontinued, the amount of such other
coverage shall be excluded in computing the alternative percentage in the first
sentence of the overinsurance provision. The policy shall include a definition of
"valid loss-of-time coverage," approved as to form by the commissioner, which
definition may include coverage provided by governmental agencies and by
organizations subject to regulations by insurance law and by insurance authorities of
this or any other state of the United States or any other country or subdivision
thereof, coverage provided for such insured pursuant to any disability benefits
statute or any workers' compensation or employer's liability statute, benefits
provided by labor-management trusteed plans or union welfare plans or by
employer or employee benefit organizations, or by salary continuance or pension
programs, and any other coverage the inclusion of which may be approved by the
commissioner.
If by application of any of the foregoing provisions the insurer effects a material
reduction of benefits otherwise payable under the policy, the insurer shall refund to
the insured any premium unearned on the policy by reason of such reduction of
coverage during the policy year current and that next preceding at the time the loss
commenced, subject to the insurer's right to provide in the policy that no such
reduction of benefits or refund will be made unless the unearned premium to be so
refunded amounts to five dollars () or such larger sum as the insurer may so
specify.
Effective: July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1206, effective July 15, 2010. -- Created
1970 Ky. Acts ch. 301, subtit. 17, sec. 24, effective June 18, 1970.
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