A. A policy of disability insurance delivered or issued for delivery in this state shall provide for the right of covered family members to continue coverage on the death of the named insured, the entry of a decree of dissolution of marriage of the named insured and any other conditions, other than failure of the insured to pay the required premium, specifically stated in the policy under which coverage would otherwise terminate as to the covered spouse or covered dependent children of the named insured.

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B. At the option of the insurer, coverage shall either continue under the existing policy or by the issuance of a converted policy with the person exercising the right to convert designated as the named insured. Coverage provided by a conversion policy must provide benefits most similar to the coverage contained in the policy that was terminated. A person entitled to continuation or conversion rights under this section may elect a lesser form of coverage.

C. Continuation or conversion of coverage may, at the option of the spouse exercising the right, include covered dependent children for whom the spouse has responsibility for care or support.

D. The person exercising the continuation or conversion rights shall notify the insurer and make payment of the appropriate premium within thirty-one days following the termination of the existing policy. A monthly premium rate shall be offered to the person exercising continuation or conversion rights, and payment of one monthly premium shall be deemed sufficient consideration to enact the continuation or conversion policy.

E. Coverage provided through continuation or conversion shall be without additional evidence of insurability and shall not impose any preexisting condition limitations, exclusions or other contractual time limitations other than those remaining unexpired under the policy or contract from which continuation or conversion is exercised.

F. Conversion is not available to a person who is eligible for medicare or eligible for or covered by other similar disability benefits which together with the conversion coverage would constitute overinsurance.

G. This section does not apply to disability income policies, to accidental death or dismemberment policies or to single term nonrenewable policies.

H. Each policy of disability insurance shall include notice of the continuation and conversion privilege.

I. Except as provided in subsection J of this section, any policy, including a conversion or continuation policy, that is issued under this section shall not be cancelled or nonrenewed except for the following reasons:

1. The individual has failed to pay premiums or contributions in accordance with the terms of the coverage or the insurer has not received premium payments in a timely manner.

2. The individual has performed an act or practice that constitutes fraud or the individual made an intentional misrepresentation of material fact under the terms of the coverage.

3. The insurer has ceased to offer coverage to individuals that is consistent with the requirements of sections 20-1379 and 20-1380.

4. If the insurer offers health care coverage in this state through a network plan, the individual no longer resides, lives or works in the service area served by the network plan or in an area for which the insurer is authorized to transact business but only if the coverage is terminated uniformly without regard to any health status-related factor of any covered individual.

5. If the insurer offers health care coverage in this state in the individual market only through one or more bona fide associations, the membership of the individual in the association has ceased but only if that coverage is terminated uniformly without regard to any health status-related factor of any covered individual.

J. An insurer who offers only one form of an individual medical expense policy may modify the conversion policy if the modification complies with the notice and disclosure requirements set forth in the policy and applies uniformly to the policy offered to the general public and to the conversion policy.

K. At the time of filing a petition for dissolution of marriage, the clerk of the court shall provide to the petitioner for a dissolution of marriage two copies of the notice of the right of a dependent spouse to convert health insurance coverage under this section. The petitioner shall cause one copy of the notice to be served on the respondent together with a copy of the petition, summons and preliminary injunction. The director shall prepare the notice which must include a summary of this section. The clerk of the court or the director is not liable for damages arising from information contained in or omitted from the notices prepared or provided under this section.

L. Any person who is a United States armed forces reservist, who is ordered to active military duty on or after August 22, 1990 and who had coverage under an individual disability insurance policy at such time shall have the right to reinstate such coverage upon release from active military duty subject to the following conditions:

1. The reservist shall make written application to the insurer within ninety days of discharge from active military duty or within one year of hospitalization continuing after discharge. Coverage shall be effective upon receipt of application by the insurer.

2. The insurer may exclude from such coverage any health or physical condition arising during and occurring as a direct result of active military duty.

M. Each dependent of a person eligible for reinstatement under this section shall be afforded the same rights and be subject to the same conditions as the insured, if the dependent was insured under the individual disability insurance policy at the time the eligible person entered active duty. Any dependent of such person born during the period of active military duty shall have the same rights as other dependents noted in this section.

N. The director shall adopt emergency rules applicable to persons who are leaving active service in the armed forces of the United States and returning to civilian status consistent with the provisions of subsection L of this section, including:

1. Conditions of eligibility.

2. Coverage of dependents.

3. Preexisting conditions.

4. Termination of insurance.

5. Probationary periods.

6. Limitations.

7. Exceptions.

8. Reductions.

9. Elimination periods.

10. Requirements for replacement.

11. Any other conditions of coverage.