Section 2602.10  Authority

 

This Rule is promulgated by the Director of Insurance under Section 401 (Ill. Rev. Stat. 1981, ch. 73, Section 1013) of the Illinois Insurance Code which empowers the Director ". . . to make reasonable rules and regulations as may be necessary for making effective . . ." the insurance laws of this State.  This rule implements Sections 154.6(d) and 154.6(e), and Article XXVI (Ill. Rev. Stat. 1981, ch. 73, pars. 766.6(d) and (e) and 1028 et seq.) of the Illinois Insurance Code.  Failure to adhere to the standards herein set forth shall subject the offender, in addition to any other penalties or remedies provided by law, to proceedings under Article XXVI of the Illinois Insurance Code.

 

Section 2602.20  Purpose

 

The purpose of this Rule is to establish as an Unfair and Deceptive Act and Practice the reduction or denial of any claim to satisfy a previous overpayment except in accordance with this Rule.  Compliance with this Rule shall be accomplished as set forth in Section 2602.40 of this Part.

 

Section 2602.30  Scope

 

This Rule shall apply to all companies authorized to write the class or classes of business set forth in Clause b of Class 1 or Clause a of Class 2 of Section 4 (Ill. Rev. Stat. 1981, ch. 73, par. 616) of the Illinois Insurance Code as they apply to those specific clauses.

 

Section 2602.40  Standards

 

No company shall withhold any portion of any benefit payable as the result of a claim on the basis that the sum withheld is an adjustment or correction for an overpayment made on a prior claim arising under the same policy unless:

 

a)         The company has within its files clear, documented evidence of overpayment and written authorization from the insured permitting such withholding procedure, or

 

b)         The company has within its files clear, documented evidence of all of the following:

 

1)         The amount of the claim payment was clearly erroneous under the provisions of the policy.  If the amount is the subject of a legitimate dispute between the insured and the company as to coverage or other policy provisions, this procedure may not be used.

 

2)         The error which resulted in the payment is not a mistake of law.

 

3)         The company notifies the insured in writing within six (6) months of the date of the error, or within twelve (12) months for errors arising from billing errors made by providers of services or treatment on the compensable claim.  Such six (6) or twelve (12) months period shall be measured from the date of the claim check or draft which contains the erroneous payment.

 

4)         Such notice states clearly the nature of the error and the states the amount of the overpayment.

 

Section 2602.50  Limitation

 

A company may use the procedure set forth in Section 2602.40(b) of this Rule provided that the claim used to adjust the first overpayment is made no later than 3 years after the date of the error.

Nothing herein shall be in any way interpreted as a limitation of any kind on the right of any company to use the courts of any state.

 

Section 2602.60  Exemptions

 

This Rule shall not apply to any group or blanket contracts or to adjustments between different payments on the same claim.

 

Section 2602.70  Effective Date

 

This Rule shall become effective April 1, 1976, and shall apply to all claims made on or after that date.