Section 60. Prohibited policy provisions

A. No policy, rider or endorsement form for additional coverage may be issued as a dividend unless an equivalent cash payment is offered to the policyholder as an alternative to such dividend form. No such dividend form shall be issued for an initial term of less than six months.

The initial renewal subsequent to the issuance of any policy, rider or endorsement form as a dividend shall clearly disclose that the policyholder is renewing the coverage that was provided as a dividend for the previous term and that such renewal is optional with the policyholder.

B. No policy shall exclude coverage for a loss due to a preexisting condition for a period greater than 12 months following policy issue where the application for such insurance does not seek disclosure of prior illness, disease or physical conditions or prior medical care and treatment and such preexisting condition is not specifically excluded by the terms of the policy.

C. A policy may contain a "return of premium" or "cash value benefit" so long as: (i) such return of premium or cash value benefit is not reduced by an amount greater than the aggregate of any claims paid under the policy; and (ii) the insurer demonstrates that the reserve basis for such policies is adequate.

D. Policies providing hospital confinement indemnity coverage shall not contain provisions excluding coverage because of confinement in a hospital operated by the federal government.

E. No policy shall limit or exclude coverage by type of illness, treatment or medical condition, except as follows:

1. Preexisting conditions or diseases subject to the requirements of the "preexisting condition" provisions of 14VAC5-120-40 and subsections B and H of this section, except for congenital anomalies of a covered dependent child;

2. Cosmetic surgery, except that "cosmetic surgery" shall not include reconstructive surgery when such service is incidental to or follows surgery resulting from infection or other diseases of the involved part, and reconstructive surgery because of congenital disease or anomaly of a covered dependent child which has resulted in a functional defect;

3. Treatment provided in a government hospital subject to 14VAC5-120-60 D;

4. Benefits provided under Medicare or other governmental program (except Medicaid), any state or federal workmen's compensation, employer's liability or occupational disease law;

5. Services rendered by employees of hospitals, laboratories or other institutions;

6. Services performed by a member of the covered person's immediate family;

7. Services for which no charge is normally made in the absence of insurance;

8. Dental care or treatment;

9. Rest cures, custodial care and routine physical examinations;

10. Territorial limitations;

11. Services or care not medically necessary.

F. Other provisions of this chapter (14VAC5-120-10 et seq.) shall not impair or limit the use of waivers to exclude, limit or reduce coverage or benefits for specifically named or described preexisting diseases, physical condition or extra hazardous activity. Where waivers are required as a condition of issuance, renewal or reinstatement, signed acceptance by the insured is required unless on initial issuance the full text of the waiver is contained either on the first page or specification page of the policy or unless notice of the waiver appears on the first page or specification page.

G. Policy provisions precluded in this section shall not be construed as a limitation on the authority of the Commission to disapprove other policy provisions in accordance with § 38.2-3518 of the Code of Virginia which, in the opinion of the Commission, are unjust, unfair, or unfairly discriminatory to the policyholder, beneficiary, or any person insured under the policy.

H. Except as provided in the "preexisting condition" provision of 14VAC5-120-40, no policy shall exclude coverage for sickness or a specifically named disease which manifests itself (makes itself known) or was diagnosed prior to the effective date of the policy.

Historical Notes

Derived from Regulation 21, Case No. INS810010, § 7, eff. June 1, 1981.

Statutory Authority

§§ 38.2-514, 38.2-3516 through 38.2-3520 of the Code of Virginia.