Section 3409 of the insurance code

Issued and entered March 19, 1992 by David J. Dykhouse, Commissioner of Insurance

In 1978, the Legislature enacted Section 3409 of the Insurance Code of 1956, MCLA 500.3409; MSA 24.13409. The section provided a 10 day free look for disability policies. It expressly did not apply to group policies.

In 1980, the Legislature amended this section. It now begins, "(1) Except as provided in subsection (2)." Subsection (2) provides for a 30 day free look period for a policy of disability insurance which is sold through solicitation to a person who is eligible for Medicare. The second subsection does not expressly exclude group insurance.

Given the structure of Section 3409, questions have arisen as to whether the exclusion of group insurance applies to the second subsection. This makes an interpretation necessary.

A review of the legislative history shows that a primary concern of the Legislature in 1980 was the sale of disability coverage to older persons by direct solicitation, such as by mail. Direct solicitation is used in the sale of both group and individual disability policies. Applying the 30 day free look period to group certificates, therefore, will further the legislative intent.

In 1990, Section 3409 was further amended to provide for cancellation after 10 days in Subsection (1) and to provide for cancellation after 30 days with respect to Subsection (2). Both subsections now provide for pro-rata refunds. Again, no exclusion with respect to group coverages was set forth in Subsection 3409(2).

Based upon the above considerations, the Commissioner of Insurance concludes that the provisions of Subsection 3409(2) apply to both individual and group policies.