26-18-122. Relation of earnings to insurance.

(a) "After the loss-of-time benefit of this policy has been payable for ninety (90) days, that benefit shall be adjusted, as provided in this section, if the total amount of unadjusted loss-of-time benefits provided in all valid loss-of-time coverage upon the insured exceeds .... % of the insured's earned income. However, if the information contained in the application discloses that the total amount of loss-of-time benefits under this policy and under all other valid loss-of-time coverage expected to be effective upon the insured in accordance with the application for this policy exceeded .... % of the insured's earned income at the time of the application, the higher percentage shall be used in the place of .... %. The adjusted loss-of-time benefit under this policy for any month shall be only that proportion of the loss-of-time benefit otherwise payable under this policy as:

(i) The product of the insured's earned income and .... % or, if higher, the alternative percentage described at the end of the first sentence of this provision bears to;

(ii) The total amount of loss-of-time benefits payable for that month under this policy and all other valid loss-of-time coverage on the insured, without giving effect to the overinsurance provision in this or any other coverage; less

(iii) In both paragraphs (i) and (ii) of this subsection any amount of loss-of-time benefits payable under other valid loss-of-time coverage which does not contain an 'overinsurance provision'.

(b) In making the computation specified in subsection (a) of this section, all benefits and earnings shall be converted to a consistent (insert 'weekly' if the loss-of-time benefit of this policy is payable weekly, 'monthly' if the benefit is payable monthly, etc.) basis. If the numerator of the ratio obtained in the computation in subsection (a) of this section is zero or is negative, no benefit is payable under this policy. This provision does not operate to:

(i) Reduce the total combined amount of loss-of-time benefits for the month payable under this policy and all other valid loss-of-time coverage below the lesser of three hundred dollars ($300.00) and the total combined amount of loss-of-time benefits determined without giving effect to any 'overinsurance provision';

(ii) Increase the amount of benefits payable under this policy above the amount which would have been paid in the absence of this provision; nor

(iii) Take into account or reduce any benefit other than the loss-of-time benefit.

(c) For the purpose of subsections (a) and (b) of this section:

(i) 'Earned income', unless otherwise specified, means the greater of the monthly earnings of the insured at the time disability commences and his average monthly earnings for a period of two (2) years immediately preceding the commencement of that disability and does not include any investment income or any other income not derived from the insured's vocational activities;

(ii) 'Overinsurance provision' includes this provision and any other provision with respect to any loss-of-time coverage which may have the effect of reducing an insurer's liability if the total amount of loss-of-time benefits under all coverage exceeds a stated relationship to the insured's earnings."

(d) The provisions of subsections (a) through (c) of this section may be included only in a policy providing a loss-of-time benefit which is payable for at least fifty-two (52) weeks, which is issued on the basis of selective underwriting of each individual application and for which the application includes a question designed to elicit information necessary either to determine the ratio of the total loss-of-time benefits of the insured to the insured's earned income or to determine that the ratio does not exceed the percentage of earnings, not less than sixty percent (60%), the insurer selects and inserts instead of the blank factor specified in this section. As part of the proof of claim, the insurer may require the information necessary to administer this provision. If the application indicates that other loss-of-time coverage is to be discontinued, the amount of the other coverage shall be excluded in computing the alternative percentage in the first sentence of the overinsurance provision.

(e) The policy shall include a definition of "valid loss-of-time coverage", which the commissioner approves as to form. The definition may include:

(i) Coverage provided by:

(A) Governmental agencies; and

(B) Organizations subject to regulation by insurance law and by insurance authorities of this or any other state of the United States or of any other country or subdivision thereof.

(ii) Coverage provided for the insured pursuant to:

(A) Any disability benefits statute; or

(B) Any worker's compensation or employer's liability statute.

(iii) Benefits provided by labor-management trusteed plans, union welfare plans, employer or employee benefit organizations or by salary continuance or pension programs; and

(iv) Any other coverage the inclusion of which the commissioner approves.