Mandatory provisions II: claim notice, forms, proof of loss, and payment of claims

The claims provisions, in the order a claim happens

The mandatory uniform provisions in an individual accident and health policy include a group that governs how a claim moves from loss to payment. Learn them as a timeline, because that is how the exam asks about them: who does what, and within how many days.

In New York these provisions must appear in the policy in the statutory words, or in different wording the superintendent approves that is not less favorable in any respect to the insured or beneficiary.

Notice of claim: the insured tells the insurer (20 days)

Written notice of claim must be given to the insurer within 20 days after the loss occurs or begins, or as soon thereafter as is reasonably possible. Notice is just the alert that a claim is coming; it does not need to prove anything.

• Notice can come from the insured or from someone on behalf of the insured or the beneficiary.
• Notice given to the insurer's designated office, or to any authorized agent or broker of the insurer, with enough information to identify the insured, counts as notice to the insurer. Telling the producer is telling the company.
• For disability (loss-of-time) benefits that may be payable for at least two years, the insurer may add a requirement that the insured give notice of continuance of the disability at least once every six months, except in the event of legal incapacity.

Claim forms: the insurer sends the paperwork (15 days)

Once it receives notice, the insurer must furnish the claim forms it normally uses for proofs of loss. If the insurer does not furnish them within 15 days, the claimant is treated as having complied with the proof-of-loss requirement by submitting, within the normal proof deadline, written proof covering the occurrence, the character and the extent of the loss. A letter describing what happened and what it cost is enough. The insurer's delay cannot defeat the claim.

Proof of loss: the insured documents the claim (90 or 120 days)

Proof of loss is the evidence that supports the claim: bills, medical records, statements of disability. Under the New York required wording, written proof must reach the insurer:

• for a loss paid by periodic payments that continue while the loss continues (disability income), within 90 days after the end of the period for which the insurer is liable;
• for any other loss, within 120 days after the date of the loss.

(Many other states' policies use 90 days after the loss for every claim. Answer New York questions with the New York wording.)

Missing the deadline does not automatically kill the claim. Late proof does not invalidate or reduce the claim if it was not reasonably possible to give proof on time, so long as proof is furnished as soon as reasonably possible and, except in the absence of legal capacity, no later than one year after it was otherwise due.

Time of payment of claims: the insurer pays

• Benefits for a non-periodic loss (a medical bill, a dismemberment benefit) are paid immediately upon receipt of due written proof of loss.
• Benefits for a periodic loss (disability income) are paid at the interval the policy states, which must be no less frequently than monthly. Any balance left when the insurer's liability ends is paid immediately upon receipt of due written proof.

Payment of claims: who receives the money

• A death benefit (loss of life) is paid to the beneficiary designated in the policy. If no designation is in effect, it is paid to the insured's estate.
• Other benefits that had accrued but were unpaid when the insured died may be paid, at the insurer's option, to the beneficiary or to the estate.
• All other benefits are paid to the insured.

Two optional additions may be included:

• Facility of payment. If benefits are payable to the estate, or to a minor or someone not competent to give a valid release, the insurer may pay up to a stated amount (not more than $1,000) to a relative by blood or marriage it deems equitably entitled. A good-faith payment fully discharges the insurer to that extent.
• Payment to providers. Benefits for hospital, nursing, medical or surgical services may, at the insurer's option, be paid directly to the hospital or provider, unless the insured requests otherwise in writing no later than the time proofs of loss are filed. This is how an assignment of benefits works in practice. The insured is not required to use any particular provider.

Closing out the claim process

Three related mandatory provisions finish the picture:

• Physical examination and autopsy. At its own expense, the insurer may examine the insured as often as it reasonably requires while a claim is pending, and may perform an autopsy in a death claim where not forbidden by law.
• Legal actions. The insured may not sue the insurer until 60 days after proof of loss has been furnished, and may not sue later than 3 years after proof of loss was required. The 60 days give the insurer time to process the claim.
• Change of beneficiary. Unless the beneficiary designation is irrevocable, the insured may change the beneficiary without the beneficiary's consent.

Finally, an insurer does not waive any of its defenses just because it acknowledged the notice, sent claim forms, accepted proofs or investigated the claim. Processing a claim is not the same as agreeing to pay it.

Memory hook: 20, 15, 90 or 120, 60, 3. Notice in 20 days, forms in 15, proof in 90 for disability or 120 for anything else, no lawsuit for 60 days, no lawsuit after 3 years.