Incorporation by Reference

BULLETIN 94-1

(Revised 10/96)

INCORPORATION BY REFERENCE

Utah Code Ann. §31A-21-106(1) states, in part:

(a) . . .an insurance policy may not contain any agreement or incorporate any

provision not fully set forth in the policy or in an application or other document

attached to and made a part of the policy at the time of its delivery, unless the

policy, application, or agreement accurately reflects the terms of the incorporated

agreement, provision, or attached document.

(b)(i) A policy may by reference incorporate rate schedules and classifications

of risks and short-rate tables filed with the commissioner.

The Utah Supreme Court addressed this section of the Insurance Code, in

CALLUM v. FARMERS INSURANCE EXCHANGE (217 Utah Adv. Rep. 13, 1993).

The Court stated:

. . .Section 31A-21-106...directs that all provisions [of an insurance contract]

must be physically present in the written contract itself or in other documents

attached to the contract at the time of its delivery.

. . .Its aim is to ensure that the entire insurance contract is contained in one

document so that the insured can determine from the policy exactly what

coverage he or she has....

When drafting insurance policy forms insurers must be careful to ensure that

those forms contain all provisions of the insurance contract. An insurance policy

must include all the terms and conditions applicable to the coverage. Reference

to another document or source to find the terms and provisions of coverage is not

in compliance with the statute.

Insurance forms may not contain provisions incorporating or "deeming attached

as if physically attached" applications or any other documents into the policy

unless the form also clearly states that such documents will be attached to the

policy no later than at the time of its delivery. Documents "on file with the insurer"

are not considered part of the insurance policy.

Neither should definitions of terms be incorporated by reference

sions incorporating or "deeming attached

as if physically attached" applications or any other documents into the policy

unless the form also clearly states that such documents will be attached to the

policy no later than at the time of its delivery. Documents "on file with the insurer"

are not considered part of the insurance policy.

Neither should definitions of terms be incorporated by reference. If key terms in

an insurance contract are not clearly defined, the contract can be misleading,

obscure and even deceptive. If terms are not defined other than by a general

reference to a Federal or state law, an insured will not know the terms and

conditions of coverage.

Materials such as financial reports, articles of incorporation, copies of contracts,

procedural and diagnostic codes, etc., which are the basis for underwriting,

should not be incorporated into the

policy. Rather, these documents should remain a part of the underwriting file. A

reference in the application may state that the company has relied upon materials

provided by the insured when determining that a policy would be issued.

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To assure compliance with the statute, policy forms must not contain any

incorporation provision or the policy language must state that the application and

any other relevant documents will be attached to and be part of the policy at the

time of its delivery, and these documents must then be attached. Failure to

comply with the statute is a violation of the Utah Insurance Code and appropriate

penalties may be imposed. Policy forms that do not comply are subject to

disapproval upon examination by the Department. Policy forms that are not in

compliance and that have been previously filed and not disapproved may be

corrected and refiled with the commissioner without penalty. Sample application

forms must be included in all filings where the application will be attached to the

policy.

DATED this 23rd day of September, 1996

orms that do not comply are subject to

disapproval upon examination by the Department. Policy forms that are not in

compliance and that have been previously filed and not disapproved may be

corrected and refiled with the commissioner without penalty. Sample application

forms must be included in all filings where the application will be attached to the

policy.

DATED this 23rd day of September, 1996.

Insurance Commissioner

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Bulletin

http://www.insurance.utah.gov/bulletin/94-1.htm

2 of 2

6/25/2008 3:43 PM