§ 3320 — Overinsurance; all coverages

(a) There may be a provision as follows:

“Overinsurance: If, with respect to a person covered under this policy, benefits for allowable expense incurred during a claim determination period under this policy together with benefits for allowable expense during such period under all other valid coverage (without giving effect to this provision or to any ‘overinsurance provision’ applying to such other valid coverage), exceed the total of such person’s allowable expense during such period, this company shall be liable only for such proportionate amount of the benefits for allowable expense under this policy during such period as:

(1) The total allowable expense during such period bears to

(2) The total amount of benefits payable during such period for such expense under this policy and all other valid coverage (without giving effect to this provision or to any ‘overinsurance provision’ applying to such other valid coverage) less in both (1) and (2) any amount of benefits for allowable expense payable under other valid coverage which does not contain an ‘overinsurance provision.’ In no event shall this provision operate to increase the amount of benefits for allowable expense payable under this policy with respect to a person covered under this policy above the amount which would have been paid in the absence of this provision. This company may pay benefits to any insurer providing other valid coverage in the event of overpayment by such insurer. Any such payment shall discharge the liability of this company as fully as if the payment had been made directly to the insured, his/her assignee or his/her beneficiary. In the event that this company pays benefits to the insured, his/her assignee or his/her beneficiary, in excess of the amount which would have been payable if the existence of other valid coverage had been disclosed, this company shall have a right of action against the insured, his/her assignee or his/her beneficiary, to recover the amount which would not have been paid had there been a disclosure of the existence of the other valid coverage. The amount of other valid coverage which is on a provision of service basis shall be computed as the amount the services rendered would have cost in the absence of such coverage.

For the purposes of this provision:

(1) ‘Allowable expense’ means 110% of any necessary, reasonable and customary item of expense which is covered, in whole or in part, as a hospital, surgical, medical or major medical expense under this policy or under any other valid coverage.

(2) ‘Claim determination period’ with respect to any covered person means the initial period of . . . (insert period of not less than 30 days) and each successive period of a like number of days, during which allowable expense covered under this policy is incurred on account of such person. The first such period begins on the date when the first such expense is incurred, and successive periods shall begin when such expense is incurred after expiration of a prior period.

or, in lieu thereof:

‘Claim determination period’ with respect to any covered person means each . . . (insert calendar or policy period of not less than a month) during which allowable expense covered under this policy is incurred on account of such person.

(3) ‘Overinsurance provision’ means this provision and any other provision which may reduce an insurer’s liability because of the existence of benefits under other valid coverage.”

(b) The foregoing policy provisions may be inserted in all policies providing hospital, surgical, medical or major medical benefits. The insurer may make this provision applicable to either or both (1) other valid coverage with other insurers, and (2) other valid coverage with the same insurer. The insurer shall include in this provision a definition of “other valid coverage” approved as to form by the Commissioner. Such term may include hospital, surgical, medical or major medical benefits provided by group, blanket or franchise coverage, individual and family-type coverage, Blue Cross-Blue Shield coverage and other prepayment plans, group practice and individual practice plans, uninsured benefits provided by labor-management trusteed plans, or union welfare plans, or by employer or employee benefit organizations, benefits provided under governmental programs, workers’ compensation insurance or any coverage required or provided by any other statute, and medical payments under automobile liability and personal liability policies. Other valid coverage shall not include payments made under third-party liability coverage as a result of a determination of negligence, but an insurer may at its option include a subrogation clause in its policy. The insurer may require, as part of the proof of claim, the information necessary to administer this provision.

(c) If by application of any of the foregoing provisions the insurer effects a material reduction of benefits otherwise payable under the policy, the insurer shall refund to the insured any premium unearned on the policy by reason of such reduction of coverage subject to the insurer’s right to provide in the policy that no such reduction of benefits or refund will be made unless the unearned premium to be so refunded amounts to $5.00 or such larger sum as the insurer may specify.

Legislative History

18 Del. C. 1953, § 3321; 56 Del. Laws, c. 380, § 1 ; 70 Del. Laws, c. 186, § 1 ; 80 Del. Laws, c. 310, § 1