SECTIONS 1812.400-1812.410 - California Statutes

CIVIL CODE

SECTION 1812.400-1812.410

1812.400. The Legislature finds and declares that it is unfair for
a creditor who has directly participated in, arranged, or received a
commission or other compensation for the sale of credit disability
insurance to the debtor, or that creditor's successor in interest, to
invoke a creditor's remedy because of a debtor's nonpayment of any
sum which has become due during a period of disability until a
reasonable time has passed for the disability insurance claim to be
filed, verified and processed.

1812.401. For the purposes of this title:
(a) "Credit disability insurance" means insurance of a debtor to
provide indemnity for payments becoming due on a specific loan or
other credit transaction while the debtor is disabled as defined in
the policy.
(b) "Creditor" means the lender of money or vendor or lessor of
goods, services, property, rights, or privileges, for which payment
is arranged through a credit transaction, who has directly
participated in, arranged, or received a commission or other
compensation for the sale of credit disability insurance to the
debtor, or any successor to the right, title, or interest of any such
lender, vendor, or lessor, and an affiliate, associate, or
subsidiary of any of them or any director, officer, or employee of
any of them, or any other person in any way associated with any of
them.
(c) "Debtor" means a borrower of money or a purchaser or lessee of
goods, services, property, rights, or privileges for which payment
is arranged through a credit transaction.
(d) "Creditor's remedy" means and includes the imposition of any
late charge or penalty, the acceleration of the maturity of all or
any part of the indebtedness, the collection or assignment for the
collection of all or any part of the indebtedness, the commencement
of any action or special proceeding, or the enforcement of any
security interest in any manner, including, but not limited to,
repossession, foreclosure, or the exercise of a power of sale
contained in a deed of trust or mortgage.
(e) "Disability claim period" or "claim period" means the period
beginning on the due date of the first payment not paid by the debtor
for which the debtor claims disability coverage arising from a then
current disability and continuing until three calendar months
thereafter or until the insurer pays or rejects the claim, whichever
occurs sooner.
(f) "Notice" to a creditor means written notice deposited in the
United States mail, postage prepaid, addressed to the creditor at the
location where payments on the loan or credit transaction are
normally required to be sent by the debtor. A creditor may elect to
require that written notice, otherwise complying with the
requirements of this subdivision, be sent to a different location or
may elect to accept telephonic notice to a telephone number specified
by the creditor, in either case in lieu of notice being sent to the
location where payments are regularly required to be sent, if that
location or telephone number is clearly and conspicuously disclosed
as the proper place to direct any notice to the creditor relating to
any claim of disability on each monthly billing, or on or in each
payment coupon book (by adhesive attachment, republication, or
otherwise), as the case may be, or (if payments are automatically
deducted from an account of the debtor) on the annual statement of
loan activity. In any particular instance a creditor may waive the
requirement that notice be in writing and accept oral notice.

1812.402. (a) No creditor, as defined in Section 1812.401, shall
invoke any creditor's remedy against a debtor because of the debtor's
nonpayment of any sum which becomes due during any disability claim
period and for which credit disability insurance coverage, subject to
this title, is provided.
(b) Upon initially receiving notice, as defined in subdivision (f)
of Section 1812.401, of the debtor's claim of disability, the
creditor shall inform the debtor in writing of the name, address, and
telephone number of the insurer or its designated representative
from whom the debtor may obtain claim forms. Upon receiving notice of
the disability claim, the insurer or its designated representative
shall send necessary claim forms to the debtor. The debtor shall
submit the claim to the insurer or its designated representative and
shall notify the creditor, as specified in subdivision (f) of Section
1812.401, that a claim has been submitted.
This subdivision shall apply to the original creditor who sold the
disability insurance and shall not apply to that creditor's
successor in interest if the successor in interest (1) is not related
by common ownership or control to that creditor and (2) has no
information regarding the name, address, and telephone number of the
insurer or its designated representative.
(c) Nothing in this section prohibits a creditor from invoking any
creditor's remedy during or after the claim period for the debtor's
nonpayment of any sum due prior to the claim period, whether or not
the nonpayment is related to the claimed disability, or for the
debtor's nonpayment of any interest, finance charge, or late charge
accruing during the claim period of any sum due prior to the period.
(d) Nothing in this section prohibits a creditor from foreclosing
a lien on any property to protect that creditor's security interest
if a senior lienholder on that property (1) has initiated the
foreclosure of its lien, (2) is not prohibited from continuing the
foreclosure by any law or order of court, or (3) will not otherwise
suspend or delay its foreclosure proceeding until after the
disability claim period.
(e) If the insurer pays the claim within the disability claim
period, the creditor shall treat each payment made by the insurer as
though it were timely made by the debtor. If the insurer rejects the
claim within the disability claim period or accepts the claim within
the claim period as a partial disability which results in a payment
of less than the full benefit which would be paid for the total
disability, the debtor shall have the opportunity to pay the entire
amount which became due during the claim period or the difference
between the amount which became due during the claim period and the
amount paid by the insurer for the partial disability without being
subject to any creditor's remedy, except the imposition of late
charges, for 35 days following the date on which the insurer sends
notice of the rejection of the claim or acceptance of the claim as a
partial disability. In the event the debtor does not pay the entire
amount which became due during the claim period plus any accrued late
charges within 35 days from that date, the creditor may then invoke
any creditor's remedy.
(f) The obligations of the creditor and debtor pursuant to this
section shall be disclosed in writing in at least 10-point type by
the creditor to the debtor at the time the creditor sells the
insurance, in the manner provided in paragraph (1), and by the
insurer to the debtor at the time the insurer sends claim forms
pursuant to subdivision (b), in the manner provided in paragraph (2).
(1) The disclosure required by the creditor shall be substantially
in the following form:

CLAIM PROCEDURE

If you become disabled, tell us (your creditor) right away. (We
advise you to send this information to the same address to which you
are normally required to send your payments, unless a different
address or telephone number is given to you in writing by us as the
location where we would like to be notified.) We will tell you where
to get claim forms. Send in the completed form to the insurance
company as soon as possible and tell us as soon as you do.
If your disability insurance covers all of your missed payment, WE
CANNOT TRY TO COLLECT WHAT YOU OWE OR FORECLOSE UPON OR REPOSSESS
ANY COLLATERAL UNTIL THREE CALENDAR MONTHS AFTER your first missed
payment is due or until the insurance company pays or rejects your
claim, whichever comes first. We can, however, try to collect,
foreclose, or repossess if you have money due and owing us or are
otherwise in default when your disability claim is made or if a
senior mortgage or lien holder is foreclosing.
If the insurance company pays the claim within the three calendar
months, we must accept the money as though you paid on time. If the
insurance company rejects the claim within the three calendar months
or accepts the claim within the three calendar months as a partial
disability and pays less than for a total disability, you will have
35 days from the date that the rejection or the acceptance of the
partial disability claim is sent to pay past due payments, or the
difference between past due payments and what the insurance company
pays for the partial disability, plus late charges. You can contact
us, and we will tell you how much you owe. After that time, we can
take action to collect or foreclose or repossess any collateral you
may have given.
If the insurance company accepts your claim but requires that you
send in additional forms to remain eligible for continued payments,
you should send in these completed additional forms no later than
required. If you do not send in these forms on time, the insurance
company may stop paying, and we will then be able to take action to
collect or foreclose or repossess any collateral you may have given.

(2) The disclosure required by the insurer shall be substantially
in the following form:

CLAIM PROCEDURE

Send in the completed form to the insurance company as soon as
possible and tell your creditor as soon as you do. (Your creditor has
already advised you of the address or telephone number to use to
confirm that you have submitted your completed form to the insurance
company.)
If your disability insurance covers all of your missed payments,
YOUR CREDITOR CANNOT TRY TO COLLECT WHAT YOU OWE OR FORECLOSE UPON OR
REPOSSESS ANY COLLATERAL UNTIL THREE CALENDAR MONTHS AFTER your
first missed payment is due or until the insurance company pays or
rejects your claim, whichever comes first. Your creditor can,
however, try to collect, foreclose, or repossess if you have money
due and owing or are otherwise in default when your disability claim
is made or if a senior mortgage or lienholder is foreclosing.
If the insurance company pays the claim within the three calendar
months, your creditor must accept the money as though you paid on
time. If the insurance company rejects the claim within the three
calendar months or accepts the claim within the three calendar months
as a partial disability and pays less than for a total disability,
you will have 35 days from the date that the rejection or the
acceptance of the partial disability claim was sent to pay past due
payments, or the difference between past due payments and what the
insurance company pays for the partial disability, plus late charges.
You can contact your creditor who will tell you how much you owe.
After that time, your creditor can take action to collect or
foreclose or repossess any collateral you may have given.
If the insurance company accepts your claim, but requires that you
send in additional forms to remain eligible for continued payments,
you should send in these completed additional forms no later than
required. If you do not send in these forms on time, the insurance
company may stop paying, and your creditor will then be able to take
action to collect or foreclose or repossess any collateral you have
given.

(g) If a debtor does not make a payment for which the debtor
claims disability coverage arising from a then current disability and
if the creditor, after sending the debtor notice of the debtor's
delinquency, invokes any creditor's remedy because of the nonpayment
without knowledge of the debtor's claim of disability coverage,
subject to this title, the following provisions apply:
(1) Upon receiving notice of the debtor's claim, the creditor
shall not invoke any further creditor's remedy during the remainder
of the claim period and the period provided in subdivision (e).
(2) Upon receiving notice, as specified in subdivision (f) of
Section 1812.401, of the debtor's claim, the creditor shall rescind
every creditor's remedy that has been invoked relating to the
delinquency for which coverage is claimed, except that the creditor
shall not be obligated to restore property which has been sold in a
bona fide lawful sale to any person not related by common ownership
or control to the creditor.
(3) The debtor shall be liable for costs and expenses actually
incurred in connection with the invocation or rescission of any
creditor's remedy.
(4) The creditor shall not be in violation of this title and shall
not be liable under subdivision (i) provided the creditor complies
with paragraphs (1) and (2) of this subdivision.
(h) The rights and remedies afforded debtors by this title shall
be cumulative to each other and to all other rights and remedies
which the debtors may have under other laws.
(i) The debtor may bring an action for damages, equitable relief,
or other relief for any violation of this title.

1812.403. A creditor may invoke any creditor's remedy 15 days after
receiving notice that the insurer has ceased making payments on a
credit disability insurance claim because of the debtor's failure to
timely submit any forms required by the insurer for recertification
of a temporary disability.

1812.404. This title shall apply to a creditor only if the
creditor, the predecessor to the right, title, or interest of the
creditor, or the representative of either of them directly arranges
or participates in the sale or receives a commission or other
compensation for the sale of credit disability insurance to the
debtor.

1812.405. This title shall not prohibit a creditor from invoking
any creditor's remedy as a result of a debtor's nonpayment when due
of any amount obtained under an open-end credit plan, as hereafter
defined, after the debtor has given notice of a disability claim
unless the nonpayment is related to a covered disability then
affecting the debtor other than the disability previously claimed.
The creditor's termination of the open-end credit plan because the
debtor does not meet the creditor's customary credit standards at the
time the debtor notifies the creditor of the disability claim is not
a creditor's remedy.
An "open-end credit plan" means credit extended by a creditor
under a plan in which the creditor reasonably contemplates repeated
transactions, the creditor may impose a finance charge from time to
time on an outstanding unpaid balance, and the amount of credit that
may be extended to the debtor during the term of the plan (up to any
limit set by the creditor) is generally made available to the extent
that any outstanding balance is repaid.

1812.406. (a) This title does not apply to credit disability
insurance covering a key person, as hereinafter defined, which a
creditor requires as a condition to making a loan of at least
twenty-five thousand dollars ($25,000) to be used in the operation of
a business in which the key person is employed or has an ownership
interest.
For the purposes of this subdivision, a "key person" is a person
who the creditor and the debtor or debtors mutually agree must be
involved in the operation of the business to assure its success.
(b) This title does not apply to a loan or other credit
transaction (including an open line of credit) of more than 10 years'
duration which is secured by a mortgage or deed of trust unless (1)
the principal purpose of the loan or credit transaction is for the
construction (other than initial construction), rehabilitation, or
improvement (including "home improvement" as defined in Section 7151
of the Business and Professions Code) of real property consisting of
four or fewer residential units, and (2) any document incident to the
loan or credit transaction at the time the loan or extension of
credit is made, or any course of dealing between the creditor and a
contractor or material supplier assisting the borrower in obtaining
the loan or extension of credit, would indicate that purpose.
(c) Subdivision (b) shall not apply to debtors who were entitled
to receive notice from the creditor pursuant to subdivision (f) of
Section 1812.402 on or after January 1, 1984, and prior to the
effective date of the act which added this subdivision, unless the
debtor receives written notice that the remedies provided in this
title are revoked, the debtor is given an opportunity to cancel the
coverage, and no claim has been made or notice provided as specified
in Section 1812.401. If the debtor fails to cancel the insurance
following receipt of the notice required under this subdivision,
subdivision (b) shall apply to that policy upon payment by the debtor
of the next installment of premium, whether to the insurer or to a
creditor pursuant to a premium finance agreement.

1812.407. The provisions of this title shall apply to the
nonpayment of any sum which becomes due on or after April 1, 1984,
and for which the debtor claims disability coverage.

1812.408. Any waiver by the debtor of the provisions of this title
shall be void and unenforceable.

1812.409. This title shall not affect or defeat an interest in the
debtor's property, acquired after the creditor invokes a creditor's
remedy in violation of this title, by a bona fide purchaser or
encumbrancer for value and without notice of facts that constitute a
violation of this title.

1812.410. If any provision of this title or the application thereof
to any person or circumstance is held to be unconstitutional, the
remainder of the title and the application of the provision to other
persons and circumstances shall not be affected thereby.