Southern National Insurance Company

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Ix THE 1A TTER OF SOUTHERN NATIONAL INSUHANCE CmlPAKY CO:KSE r ORDER, ETC., I REGAlil TO THE ALI.,EGED VIOLATION OF 'rhe FEDERAL TRADE COllDIISSIOX AOT Docket 6251. Complaint Od. 14, 1954.-Decisioll, Apr. 14, 1955 , to eeaseConsent order requiring an insurance company in Little Rock, Ark. ac1,crtising falsely the uUJ'ation, rncllical examination requirement.s, indemni. fication, and coverage of its nccident and health insurance poUcies. Before lrlr. J. Earl Cox hearing examiner. Mr. William A. Somers and 311. Robert R. Sills for the Commission. Catlett cI II ended1'on of Little Rock, Ark., for respondent. C031l'LATNT Pursuant to the provisions of the Federal Trade Commission Act: as that Act is applicable to the business of jnsllrancc under the plo\"isions of Public Law 15, 7Dth Congress (Title 15, U. S. Code, Sections 1011 to J 015, inc.usivc), and by virtue of the authority vested in it by said1-z\ct the. Federal Trade Commission, having reason to believe that Southern Xational lnsurance Company, a corporation, hereinafter referred to as respondent, has violated the provisions of said Act and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint, stating its charges in that respect as follows:

PARAGRAPH 1. The respondent, Southern Rational Insurance Company, is a corporation duly organized, existing and doing business under and by virtue of the la,ys of the State of Arkansas, with its offce and principal place of business located at Little Hock, Arkansas. PAR. 2. Respondent is now, and for more than two years last past has been, engaged as an insurcr in the business of insurance in commerce, as "commerce is defined in the Federal Trade Commission Act by entering into insurance contracts with insureds located in various States of the United States other than the State of Arkansas, in which states the business of insurance is not regulated by state 1nw to the extent of regulating the practices of respondent alleged in this com plaint to be, illegal. Respondent maintains, and at all times mentioned herein has maintained, a substantial course of trade in said insurance policies in commerce between and arllongthe several States of the United States.

SOUTHERN NATIONAL INSL'RANCE CO. 895 894 Complaint Respondent during the two years last past has issued a variety of policies providing indemnification for losses resulting from accidental injury and sickness, including those designated and identified by it as Hospital and Surgical Benefit Policies, forms H-752 and 853- The respondent is licensed as provided by state law to conduct an insurance business in the States of Oklahoma, Texas, Louisiana, Alabama, :Mississippi, and Arkansas. The respondent is not now, and for more than two years last past has not been, licensed as provided by state law to conduct an insurance business in any state other than those last above mentioned.

JIany purchasers of responc1cnfs aforesaid policies are now residents of and locatell in states other than those in which the respondent has been duly lic.ensed as aforesaid, and respondent mails to such purchasers notices and receipts relating to the payment of renewal premiums and receives from such purchasers premiums ma,filed to it repurchasing the coverage purchased for the period of time covered by the premium submittecl. The renewal of term insurance in this manner constitutes trade in commerce to the same extent as the original purchase of said insurance, PAR. 3. In the course and conduct of its said business, and for the purpose of inducing the purchase of said insurance policy, the respondent has made, and is now making, numerous statements and representations concerning the benefits provided in said policies of insurance, by means of circulars, f01c1ers, form letters, and other advertising material dist.ributed throughout various States of the "Cnitec1 States, including caeh of the states in which it is licensed to do business. Typieal, but not, all inclusive, of such statements and representations are the follow ing :

J. Does not Terminate as you get older-ol' Reduce in-'Benefits. Pays full benefits regardless of age. Southern Xational neithet' cuts the benefit". nor raises the rates when our Policyholder reaches 65 years of age, or at. any age after the policy is issued.

lXSCRE O:\E OR THE WIlOLlC FAMILY AGES 0-80 2. 1\0 rigid medical examination required.

3. Let rs Pay Your HOSPITAL and DOCTOR BILLS. A small premium deposit ".il IJl'o,icle fHll'(juate hOSIJital care in the event of acrident or sicl;:ness.

42:- 7S:J- ris- 896 FEDERAL TRADE COl1MISSION DECISIONS Complaint 51 F. T. C.

YOUR POLICY IS ON DU Y 365 DAYS EACH YEAR FOR YOVR SPECIAL BENEFIT.

PAYS FOR:

Ambulance Hospital Room Xurses Care Operating HUGil Emergency First Aid Anesthetics Laboratory Service Infant Mothers Care Blood Transfusion ::Uaternity Benefits Doctors Surgical Fees PeniciHin Medicinesray Streptomycin Surgical Supplies Aureomycin Hypodermics Accidental Dea tl1 Oxygen And many other benefits Iron Lung The day your policy is issued we become obligated to you-your surgeon-and the hospital for the full amount of benefits provided by your policy.

4. Doctors' fees for surgical operations np to 8300.00. Up to 810.00 a day for room and board; up to $300.00 for surgeon s fees. PAR. 4. Through the use of such statements and representations and others of similar import and meaning not specifically set out here- , respondent represents and has represented, directly or by implication:

1. That the benefits provided by the insurance policy referred to can be continued, at the option of the insured, until the insured reaches the age of 80.

2. Full coverage regardless of Pl' evious conditions of health can be secured without a medical examination.

3, That the benefits provided for are payable for any sickness or accident suiIered by the insured, 4. That said policy provides for payment to the insured in all cases of sickness or accident for the cost of hospital room and board np to $10.00 a day and for the cost of surgical fees up to $300. 00 plus other incidental hospitalization costs in full.

PAR. 5, The aforesaid statements and representations are false, misleading and deceptive. In truth and in fact: 1, The benefits provided by said insurance policy can not be continued at the option of the insured until he or she attains the age of , or any other age, but on the contrary, said insurance policy can be terminated at any premium-paying period at the option of the respondent by refusing to accept the renewal premium. 2. Full coverage regardless of previous conditions of health cannot be secured as said policy does not provide for the payment of any benefits if the cause of the sickne,ss is traceable to a conditjon existing prior to 15 days after the eiIcctive date of the policy. SOL'THEM KATIOKAL INSL'RANCE co. 897 B94 Complaint 3. The benefits are not payable for any sickness or accident suffered by the insured. On the contrary, if the cause of any sickness is traceable to a condition existing prior to or 15 days after the effective date of the policy, or, in cases of accident, if no bodily injury which is effected solely through accidental means is suffered, no benefits wil be payable.

Said insurance policy excludes the payment of benefits to the insured resulting wholly or partly from "tuberculosis, heart trouble, cancer hernia, fibroid tumor, gallstone or gall bladder or any of the gcnerative organs not common to both sex, or any organic functional disorder of the brain or nervous system" if such loss occurs before the said policy luis been maint!dnccl in continuous force for six months, and in cases of cancer or tuberculosis the hospital benefits shall not exceed 15 days. No benefits are payable to insured before six months have elapsed for tonsillectomy or adenoidectomy and after which time the respondent will pay the insured $50.00 in lieu of all hospitalization benefits for such losses. In lieu of all other benefits the respondent will pay the insured ten times the daily hospital room benefit for childbirth or miscarriage.

1\0 benefits will be paid by respondent for injury or sickness from which the insured received benefits by workmen s compensation or employer s liability insurance, and if the insured carries additional insurance covering the same loss, without giving respondent written notice, the respondent shall not be liable except for that portion of the indemnity as the said indemnity bears to the total amount of like indemnity in all other policies covering such loss. 4. Said policy does not provide for payment to the insured in all cases of sick11ess or accident for the cost of hospital room and board up to $10.00 a day or for the cost of surgical fees up to $300. , plus other incidental hospitalization costs in full. Benefits for surgical operations necessitated by anyone accident or 8ich'Less up to $300.00 will not be paid to the insured except in three instances in \which the "Schedule of Surgical Operation Fees" sets up and allmvs such amount for three different operations. Said "Schedule of Operation Fees" sets out fees allowable for 99 diflerent operations and for 69 of said listed operations the respondent provides a maximum benefit of $75.00 or less. Payment shall not be made for more than one operation as t.he result of anyone sickness or accident. No payment for surgical operation shall be paid because of any sickness which is traceable to a condition existing prior to 15 days after the effective date of the policy or because of any siclmess necessitating an operation before the policy has been in effect three months. Surgi- , ..

898 FEDERAL TRADE COJYThIISSION DECISIONS Decision 51 F. T. C. cal operation benefits will not be aid the insured if resultin" whollv or partially from "tuberculosis, heart trouble, cancer, hernia, fibroid tumor, gallstone or gall bladder or any of the generative organs not common to both sex, or any organic functional disorder of the brain or nervous system" until the said insurance policy has been maintained in continuous force for the six preceding months. :K 0 payment for hospital room and board is provided for by said policy under the circumstances described in subparagraph 3 above in which no benefits arc payable.

P.'\R. 6. The use by the respondent of said false statements anc1rcpresentations with respect to its insurance policies has had, and now has, the capacity.y and tendency to mislead and deceive, and has misled and deceived, a substantial portion of the purchasing public. into the erroneous and Inistaken belief that the statements !lnd representations v.. ele and ate true, and to induce' such portion of t.he purchasing public to purchase a substantial munber of snic1 insurnnce policies by reason of said erroneous ancll1mistaken belief.

PAn. 7. The aforesaid acts and practices of the respondent, as here in alleged, are an to the prejudice and injury of the public and constitute unfair and deceptive :lets and practices in coml1eree within the intent and meaning of the Federal Tnlde Commission Act. DECIS-lox OF Tne CO:\DnssIOX Pursuant to Rule XXII of the COl1rnission s Rules of Practice and as set forth in the ConullissioH s "Decision of the Commission and Order to File Report of Compliance, dated April 14 , 1855, the E,I1'1initial decision in the instrmt mattel' of hearing examiner .J. Cox, as set out as follows. becmne on that date the decision of the Commission.

INITIAIJ DECIS-lox BY J. EARL cox, HL-\HIXG EXA3TlXEH Southern Xational Insurance Company, a corporation duly organized, existing, ami doing business under and by virtue of the laws of the State of Arkansas witll its othce nnd principal place of business loc.ated at Little Hock Arkansas, is named respondent in the aboventitled proceeding and charged with having violated the Federal L\.ctTrade Commission by misrepresenting various provisions of the insurance policies which.h it isslles.

-- St.ipulation For Consent Order has been entered into between said respondent and cOllnsel support.ing the complaint herein which tipulation has been approved by t1w. director and Assistant Director SOUTHERX NATIONAL INSURA CE CO. 899 894 Order of the Commission s Bureau of Litigation and transmitted to the Hearing Examiner.

The stipulation provides, among other things, that respondent admits all the jurisdictional allegations set forth in the complaint and that the record here.in may be taken as if findings of jurisdictional facts had been made in accordance with such allegations; that the stipulation, together with the complaint, shall constitute the entire record herein; that the complaint may be used in construing the order agreed upon) which may be altered, modified or set aside in the mallner provided by statute for orders of the Commission; that the signing of the stipulation is for settlement purposes only and does not consti tute an admission by respondent that it has violated the law as alleged in the complaint; and that the order provided for in the stipulation and hereinafter included in this decision shall have the same force and efiect as if made after a. full hearing, presentation of evidence and findings and conclusions thereon.

All parties ,waive the fiing of answer heaI"ings before a :Hearil1g Examiner or the Commission, the making-of findings of fact or conclusions of Inw by the I-Iearing Examiner or the Commission, the fiing of exceptions and oral argument. before the Commission, and all furthe-r and other procedure before the Hearing Examiner and the Commission to which respondent may be entitled under the Federal Trade Commission Act or the rules oJ the Commission, including any and all right, 11O\ycr or privilege to c.challenge 01' contest the validity of the order entered in accordance with the stipulation. The order agreed upon conforms in substance to the order contained in the notice accompanying the complaint, and disposes of an t.he isslles raised in the complaint. The Stipulation For Consent Order is therefore accepted, this proceeding is found to be in the public interest, and the following order is issued: It is ordered That respondent Southern K ational Insurance Company, a corporation, and its offcers, agents, representatives ancl employees, directly or through any corporate or other device, in connection with the offering for sale, sale and distribution in commerce as "commerce" is defined in the Federal Trade Commission Act, of any accident, health, hospital or surgical insurance policy, do forthwith cease and desist from representing, directly or by implication: 1. That said policy may be continued in effect indefinitely or for any period of time, when, in fact, said policy provides that it may be cancelled by respondent or terminated under any circnmsta,nces over which insured has no control, during the period of time represented; Order 51 P.

2. That no medical examination is required or that applicant' health is not a factor in securing insurance, unless the representation is clearly and conspicuously limited in immediate connection therewith to insurance on claims not caused by previous condit.ions of health of the insured;

3. That said policy provides for indemnificat.ion to insured in cases of sickness or accident generally or in any or all cases of sickness or accident, when such is not the fact;

4. That said policy will pay in fuJl or in any specified amount or will pay up to any specified amount for any medical, surgical or hospital service unless the pollcy provides that the actual cost to the insured for that service will be paid in all cases up to the amount represented.

Order TO FILE REPORT OF CO::IPLIANCE It is ordel' That respondent Southern National Insurance Company, a corporation, shall, within sixty (60) days after service upon it of this order, file with the Commission a report in -.writing setting forth in detail the manner and form in which it has complied with the order to cease and desist (as required by said declaratory decision and order of April 14, 1955J.

v. LA ROSA & SONS, INC. 901 Complaint