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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-of-time 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-of-time 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
($300) 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-of-time 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 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
(2)
(3)
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-of-time 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 ($5) 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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