(a) Any carrier providing replacement coverage with respect to hospital, medical or surgical benefits on an expense-incurred or service basis within a period of 60 days from the date of discontinuance of a prior policy providing that hospital, medical or surgical benefits shall immediately cover all employees and dependents who were validly covered under the previous policy at the date of discontinuance, including all former employees entitled to continuation coverage under Section 10116.5, who are within the definitions of eligibility under the succeeding carrier’s policy, and who would otherwise be eligible for coverage under the succeeding carrier’s policy, regardless of any provisions of the policy relating to active full-time employment or hospital confinement or pregnancy. However, with respect to employees or dependents who are totally disabled on the date of discontinuance of the prior carrier’s contract or policy and entitled to an extension of benefits pursuant to subdivision (b) of Section 1399.62 of the Health and Safety Code, or pursuant to subdivision (d) of Section 10128.2, the succeeding carrier is not required to provide benefits for services or expenses directly related to any conditions which caused the total disability.

(b) Except as otherwise provided in subdivision (a), until an employee or dependent entitled to coverage under a succeeding carrier’s policy pursuant to subdivision (a) of this section qualifies for full benefits by meeting all effective date requirements of the succeeding carrier’s policy, the level of benefits shall not be lower than the benefits provided under the prior carrier’s policy reduced by the amount of benefits paid by the prior carrier. The employee or dependent shall continue to be covered by the succeeding carrier until the earlier of the following dates:

(1) The date coverage would terminate for an employee or dependent in accordance with the provisions of the succeeding carrier’s policy.

(2) In the case of an employee or dependent who was totally disabled on the date of discontinuance of the prior carrier’s policy and entitled to an extension of benefits pursuant to subdivision (b) of Section 1399.62 of the Health and Safety Code, or subdivision (d) of Section 10128.2, the date the period of extension of benefits terminates, or, if the prior carrier’s policy is not subject to this article, the date to which benefits would have been extended had the prior carrier’s policy been subject to this article.

(c) Except as otherwise provided in this section, and except to the extent that benefits for the condition would have been reduced or excluded under the prior carrier’s policy, no provision in a succeeding carrier’s policy of replacement coverage which would operate to reduce or exclude benefits on the basis that the condition giving rise to benefits preexisted the effective date of the succeeding carrier’s policy shall be applied with respect to those employees, former employees entitled to continuation coverage under Section 10116.5, and dependents validly insured under the prior carrier’s policy on the date of discontinuance.

(d) In a situation where a determination of the prior carrier’s benefit is required by the succeeding carrier, at the succeeding carrier’s request, the prior carrier shall furnish a statement of benefits available or pertinent information, sufficient to permit verification of the benefit determination by the succeeding carrier.

(e) For purposes of subdivision (a), a succeeding carrier’s policy shall not exclude coverage of a dependent child who was covered by the previous carrier solely because the insured does not provide primary support for that dependent child.

(f) The fraudulent failure or refusal of an employee or dependent to disclose a preexisting condition to the succeeding carrier shall not be ascribed to the entire group and shall not alleviate the duty of a succeeding carrier under subdivision (a) to immediately cover all employees, former employees entitled to continuation coverage under Section 10116.5, and dependents who were validly covered under the previous policy on the date of discontinuance. Any denial of benefits on the basis of fraud shall be limited to the employee or dependent who committed the fraud.

(g) Except to the extent that benefits for the condition would have been reduced or excluded under the prior carrier’s contract or policy, no provision in the succeeding carrier’s contract, where an employee changes carriers due to a change in employment or other circumstances, that would operate to reduce or exclude benefits for the following congenital craniofacial anomalies: cleft lip and palate (as defined in ICD-9-CM Diagnosis Code 749, International Classification of Diseases, 9th Revision, Clinical Modification, Volume 1, Second Edition, September, 1980), acrocephalosyndactyly (as defined in ICD-9-CM Diagnosis Code 755.55, cranio only), and other congenital musculoskeletal anomalies (as defined in ICD-9-CM Diagnosis Code 756.0), on the basis that the condition giving rise to benefits preexisted the effective date of the succeeding carrier’s contract, shall be applied to those employees, former employees entitled to continuation coverage under Section 10116.5, and dependents validly covered under the prior carrier’s contract or policy on the date the prior contract or policy terminated when payment or services had been commenced by the previous carrier. That succeeding coverage shall otherwise be subject to all other provisions of the contract between the insured and the succeeding carrier.

(Amended by Stats. 1995, Ch. 489, Sec. 4. Effective January 1, 1996.)