San Francisco, Calif. (June 19, 2020) - At the start of 2020, a new statute went into effect in California requiring insurers, under certain circumstances, to take steps to determine if a claimant is in arrears on a child support obligation. See California Insurance Code section 13550, et seq. The statute only applies if a claimant would otherwise be entitled to receive a payment of $1,000 or more.
What Types of Claims Apply
The statute applies not only to a claimant under a property and casualty insurance policy or underinsured motorist policy if the insurer is authorized to do business in California, but also to a beneficiary under any life insurance policy, a payment to an annuitant, and a payment under any disability income policy. However, the statute does not apply to a property damage claim if the claimant has a bill or invoice for repairs to damaged property and the insurance payment does not exceed the amount of the bill or invoice.
The statute also does not apply to a claim for benefits assigned
to a healthcare provider for actual medical expenses, to a claim
for benefits for specified health conditions, to accident-only
coverage, to a claim for benefits that is "the result of a
state of emergency," accelerated death benefits, or (with
limited exceptions) to a claim for benefits under a workers'
compensation policy.
How Insurers Can Determine If Child Support is Owed
In instances where the type and amount of the claim falls within
the provisions of this statue, the insurer must cooperate with the
California Department of Child Support Services (CCDCS) to match
claimants who owe past-due child support with claim information.
The Federal Office of Child Support Enforcement and the Child
Support Lien Network are two insurance match programs that can be
utilized for this process. If it is confirmed that the claimant is
in arrears on child support payments, CCDCS will issue a notice of
child support lien or an income-withholding order.
An insurer and its agents and employees who release such
information to CCDCS and comply with a lien or order issued by
CCDCS shall be deemed to be in compliance with California's
Fair Claim Settlement Act and shall be immune from any liability to
the claimant or others arising from the withheld payment. However,
in complying with this statute, the insurer must also comply with
all applicable state and federal laws by properly protecting the
privacy and security of the data. Further, any information CCDCS
provides to an insurer to identify a claimant who is an obligor
owing past due child support shall not be used for any purpose
other than to comply with this statute.
Insurers are permitted to use a "central reporting
organization" to comply with its obligations under this
statute. A central reporting organization is a third-party service
that "automates the claims identifying process or provides
interactive lookups." Insurers who do not use a central
reporting organization for this purpose must determine if the
claimant owes past-due child support before paying a claim.
Takeaway
Unless an insurer arranges to utilize a central reporting organization to handle compliance with this statute (and presumably for other services), that insurer should implement a policy to ensure compliance with this new California statute, if not already done. Information appropriate to obtain to determine if there is a "match" includes the name of the claimant, the claimant's date of birth and social security number, and the date of loss (if applicable).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.