2010 Tennessee Code
Title 56 - Insurance
Chapter 26 - Accident and Sickness Insurance
Part 1 - General Provisions
56-26-109 - Form of permissible policy provisions.

56-26-109. Form of permissible policy provisions.

Except as provided in § 56-26-110, no such policy delivered or issued for delivery to any person in this state shall contain provisions respecting the matters set forth in subdivisions (1)-(11), unless the provisions are in the substance of the words in which the same appear in this section; provided, that the insurer may, at its option, use in lieu of any such provision a corresponding provision of different wording, approved by the commissioner, which is not less favorable in any respect to the insured or the beneficiary. Any such provision contained in the policy shall be preceded individually by the appropriate caption appearing in this section or, at the option of the insurer, by the appropriate individual or group captions or subcaptions as the commissioner may approve.

     (1)  Change of Occupation.  If the insured be injured or contract sickness after having changed occupation to one classified by the insurer as more hazardous than that stated in this policy or while doing for compensation anything pertaining to an occupation so classified, the insurer will pay only the portion of the indemnities provided in this policy as the premium paid would have purchased at the rates and within the limits fixed by the insurer for the more hazardous occupation. If the insured changes occupation to one classified by the insurer as less hazardous than that stated in this policy, the insurer, upon receipt of proof of the change of occupation, will reduce the premium rate accordingly, and will return the excess pro rata unearned premium from the date of change of occupation or from the policy anniversary date immediately preceding receipt of the proof, whichever is the more recent. In applying this provision, the classification of occupational risk and the premium rates shall be such as have been last filed by the insurer prior to the occurrence of the loss for which the insurer is liable or prior to date of proof of change in occupation with the state official having supervision of insurance in the state where the insured resided at the time this policy was issued; but if the filing was not required, then the classification of occupational risk and the premium rates shall be those last made effective by the insurer in that state prior to the occurrence of the loss or prior to the date of proof of change in occupation.

     (2)  Misstatement of Age.  If the age of the insured has been misstated, all amounts payable under this policy shall be such as the premium paid would have purchased at the correct age.

     (3)  Other Insurance in This Insurer.  If an accident or sickness or accident and sickness policy or policies previously issued by the insurer to the insured be in force concurrently herewith, making the aggregate indemnity for  _____________________________________________________________________  (insert type of coverage or coverages) in excess of $ ___________________  (insert maximum limit of indemnity or indemnities) the excess insurance shall be void and all premiums paid for the excess shall be returned to the insured or to the insured's estate or, in lieu thereof:

“Insurance effective at any one time on the insured under a like policy or policies in this insurer is limited to the one (1) such policy elected by the insured, the insured's beneficiary or the insured's estate, as the case may be, and the insurer will return all premiums paid for all other such policies.”

     (4)  Insurance with Other Insurer.  If there is other valid coverage, not with this insurer, providing benefits for the same loss on a provision of service basis or on an expense incurred basis and of which this insurer has not been given written notice prior to the occurrence or commencement of loss, the only liability under any expense incurred coverage of this policy shall be for the proportion of the loss as the amount that would otherwise have been payable hereunder, plus the total of the like amounts under all such other valid coverages for the same loss that this insurer had notice bears to the total like amounts under all valid coverages for the loss, and for the return of the portion of the premiums paid as shall exceed the pro rata portion for the amount so determined. For the purpose of applying this provision when other coverage is on a provision of service basis, the “like amount” of the other coverage shall be taken as the amount that the services rendered would have cost in the absence of the coverage.

If the foregoing policy provision is included in a policy that also contains the next following policy provision, there shall be added to the caption of the foregoing provision the phrase “EXPENSE INCURRED BENEFITS.” The insurer may, at its option, include in this provision a definition of “other valid coverage,” approved as to form by the commissioner, which definition shall be limited in subject matter to coverage provided by organizations subject to regulation by insurance law or by insurance authorities of this or any other state of the United States or any province of Canada, and by hospital or medical service organizations, and to any other coverage, the inclusion of which may be approved by the commissioner. In the absence of the definition, the term shall not include group insurance, automobile medical payments insurance, or coverage provided by hospital or medical service organizations or by union welfare plans or employer or employee benefit organizations. For the purpose of applying the foregoing policy provision with respect to any insured, any amount of benefit provided for the insured pursuant to any compulsory benefit statute (including any workers' compensation or employer's liability statute), whether provided by a governmental agency or otherwise, shall in all cases be deemed to be “other valid coverage” of which the insurer has had notice. In applying the foregoing policy provision, no third-party liability coverage shall be included as “other valid coverage.”

     (5)  Insurance with Other Insurers. 

          (A)  If there is other valid coverage, not with this insurer, providing benefits for the same loss on other than an expense incurred basis and of which this insurer has not been given written notice prior to the occurrence or commencement of loss, the only liability for the benefits under this policy shall be for the proportion of the indemnities otherwise provided hereunder for the loss as the like indemnities of which the insurer had notice, including the indemnities under this policy, bear to the total amount of all like indemnities for the loss, and for the return of the portion of the premium paid as shall exceed the pro rata portion for the indemnities thus determined.

          (B)  If the policy provision in subdivision (5)(A) is included in a policy that also contains the next preceding policy provision, there shall be added to the caption of the foregoing provision the phrase “ OTHER BENEFITS.” The insurer may, at its option, include in this provision a definition of “other valid coverage,” approved as to form by the commissioner, which definition shall be limited in subject matter to coverage provided by organizations subject to regulation by insurance law or by insurance authorities of this or any other state of the United States or any province of Canada, and to any other coverage the inclusion of which may be approved by the commissioner. In the absence of the definition, the term shall not include group insurance, or benefits provided by union welfare plans or by employer or employee benefit organizations. For the purpose of applying the foregoing policy provision with respect to any insured, any amount of benefit provided for the insured pursuant to any compulsory benefit statute, including any workers' compensation or employer's liability statute, whether provided by a governmental agency or otherwise shall in all cases be deemed to be “other valid coverage” of which the insurer has had notice. In applying the foregoing policy provision, no third-party liability coverage shall be included as “other valid coverage.”

     (6)  Relation of Earnings to Insurance. 

          (A)  If the total monthly amount of loss of time benefits promised for the same loss under all valid loss of time coverage upon the insured, whether payable on a weekly or monthly basis, exceeds the monthly earnings of the insured at the time disability commenced or the insured's average monthly earnings for the period of two (2) years immediately preceding a disability for which claim is made, whichever is the greater, the insurer will be liable only for the proportionate amount of the benefits under this policy as the amount of the monthly earnings or the average monthly earnings of the insured bears to the total amount of monthly benefits for the same loss under all such coverage upon the insured at the time the disability commences and for the return of the part of the premiums paid during the two (2) years as shall exceed the pro rata amount of the premiums for the benefits actually paid hereunder; but this shall not operate to reduce the total monthly amount of benefits payable under all such coverage upon the insured below the sum of two hundred dollars ($200), or the sum of the monthly benefits specified in the coverages, whichever is the lesser, nor shall it operate to reduce benefits other than those payable for loss of time.

The policy provision in this subdivsion (6)(A) may be inserted only in a policy that the insured has the right to continue in force, subject to its terms by the timely payment of premiums:

                (i)  Until at least age fifty (50); or

                (ii)  In the case of a policy issued after age forty-four (44), for at least five (5) years from its date of issue.

The insurer may, at its option, include in this provision a definition of “valid loss of time coverage,” approved as to form by the commissioner, which definition shall be limited in subject matter to coverage provided by governmental agencies or by organizations subject to regulation by insurance law or by insurance authorities of this, or any other state of the United States or any province of Canada, or to any other coverage, the inclusion of which may be approved by the commissioner, or any combination of the coverages. In the absence of the definition, the term shall not include any coverage provided for the insured pursuant to any compulsory benefit statute, including any workers' compensation or employer's liability statute, or benefits provided by union welfare plans or by employer or employee benefit organization.

          (B)  Overinsurance.  After the loss-of-time benefit of this policy has been payable for ninety (90) days, the 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 (insert amount) percent of the insured's earned income; provided, 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 (insert amount) percent of the insured's earned income at the time of the application, the higher percentage will be used in place of (insert amount) percent. The adjusted loss-of-time benefit under this policy for any month shall be only the proportion of the loss-of-time benefit otherwise payable under this policy as (i) the product of the insured's earned income and (insert amount) percent (or, if higher, the alternative percentage described at the end of the first sentence of this provision) bears to (ii) the total amount of loss-of-time benefits payable for the month under this policy and all other valid loss-of-time coverage on the insured (without giving effect to the overinsurance provision in this or any other coverage) less in both (i) and (ii) any amount of loss-of-time benefits payable under other valid loss-of-time coverage that does not contain an overinsurance provision. In making the 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 the benefit is payable monthly, etc.] basis. If the numerator of the foregoing ratio is zero (0) or is negative, no such benefit shall be payable under this policy. In no event shall this provision operate to reduce the total combined amount of loss-of-time benefits for the month payable under this policy, and all other valid loss-of-time coverage below the lesser of three hundred dollars ($300), or the total combined amount of loss-of-time benefits determined without giving effect to any overinsurance provision, or operate to increase the amount of benefits payable under this policy above the amount that would have been paid in the absence of this provision, or take into account or operate to reduce any benefit other than the loss-of-time benefit.

For purposes of this provision:

                (i)  “Earned income,” except where otherwise specified, means the greater of the monthly earnings of the insured at the time disability commences and the insured's average monthly earnings for a period of two (2) years immediately preceding the commencement of disability, and shall not include any investment income or any other income not derived from the insured's vocational activities.

                (ii)  “Overinsurance provision” includes this provision and any other provision with respect to any loss-of-time coverage that 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.

          (C)  The policy provision in subdivision (6)(B) may be inserted only in a policy that provides a loss-of-time benefit that 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 the 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 the 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 regulation by insurance law and by insurance authorities of this or any other state of the United States, or of any other country or subdivision thereof, coverage provided for the 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 salary continuance or pension programs, and any other coverage, the inclusion of which may be approved by the commissioner.

          (D)  If by application of any of the policy provisions in (6)(B) the insurer effects a material reduction of benefits otherwise payable under the policy, the insurer shall refund, for the period two (2) years preceding the disability for which a claim is made, any premium unearned on the policy by reason of the reduction of coverage, 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 ($5.00) or such larger sum as the insurer may so specify.

     (7)  Unpaid Premium.  Upon the payment of a claim under this policy, any premium then due and unpaid or covered by any note or written order may be deducted therefrom.

     (8)  Cancellation.  The insurer may cancel this policy at any time by written notice delivered to the insured, or mailed to the insured's last address as shown by the records of the insurer, stating when, not less than five (5) days thereafter, the cancellation shall be effective; and after the policy has been continued beyond its original term, the insured may cancel this policy at any time by written notice delivered or mailed to the insurer, effective upon receipt or on the later date as may be specified in the notice. In the event of cancellation, the insurer will return promptly the unearned portion of any premium paid. If the insured cancels, the earned premium shall be computed by the use of the short-rate table last filed with the state official having supervision of insurance in the state where the insured resided when the policy was issued. If the insurer cancels, the earned premium shall be computed pro rata. Cancellation shall be without prejudice to any claim originating prior to the effective date of cancellation.

     (9)  Conformity with State Statutes.  Any provision of this policy that, on its effective date, is in conflict with the statutes of the state in which the insured resides on the effective date is hereby amended to conform to the minimum requirements of those statutes.

     (10)  Illegal Occupation.  The insurer shall not be liable for any loss to which a contributing cause was the insured's commission of or attempt to commit a felony, or to which a contributing cause was the insured's being engaged in an illegal occupation.

     (11)  Intoxicants and Narcotics.  The insurer shall not be liable for any loss sustained or contracted in consequence of the insured's being intoxicated or under the influence of any narcotic unless administered on the advice of a physician.

[Acts 1955, ch. 4, § 4; T.C.A., § 56-3309; Acts 1981, ch. 415, § 13; 1998, ch. 718, § 1.]