Civil Code section 1812.402

(a)

No creditor, as defined in Section 1812.401, shall invoke any creditor’s remedy against a debtor because of the debtor’s nonpayment of any sum which becomes due during any disability claim period and for which credit disability insurance coverage, subject to this title, is provided.

(b)

Upon initially receiving notice, as defined in subdivision (f) of Section 1812.401, of the debtor’s claim of disability, the creditor shall inform the debtor in writing of the name, address, and telephone number of the insurer or its designated representative from whom the debtor may obtain claim forms. Upon receiving notice of the disability claim, the insurer or its designated representative shall send necessary claim forms to the debtor. The debtor shall submit the claim to the insurer or its designated representative and shall notify the creditor, as specified in subdivision (f) of Section 1812.401, that a claim has been submitted.
This subdivision shall apply to the original creditor who sold the disability insurance and shall not apply to that creditor’s successor in interest if the successor in interest (1) is not related by common ownership or control to that creditor and (2) has no information regarding the name, address, and telephone number of the insurer or its designated representative.

(c)

Nothing in this section prohibits a creditor from invoking any creditor’s remedy during or after the claim period for the debtor’s nonpayment of any sum due prior to the claim period, whether or not the nonpayment is related to the claimed disability, or for the debtor’s nonpayment of any interest, finance charge, or late charge accruing during the claim period of any sum due prior to the period.

(d)

Nothing in this section prohibits a creditor from foreclosing a lien on any property to protect that creditor’s security interest if a senior lienholder on that property (1) has initiated the foreclosure of its lien, (2) is not prohibited from continuing the foreclosure by any law or order of court, or (3) will not otherwise suspend or delay its foreclosure proceeding until after the disability claim period.

(e)

If the insurer pays the claim within the disability claim period, the creditor shall treat each payment made by the insurer as though it were timely made by the debtor. If the insurer rejects the claim within the disability claim period or accepts the claim within the claim period as a partial disability which results in a payment of less than the full benefit which would be paid for the total disability, the debtor shall have the opportunity to pay the entire amount which became due during the claim period or the difference between the amount which became due during the claim period and the amount paid by the insurer for the partial disability without being subject to any creditor’s remedy, except the imposition of late charges, for 35 days following the date on which the insurer sends notice of the rejection of the claim or acceptance of the claim as a partial disability. In the event the debtor does not pay the entire amount which became due during the claim period plus any accrued late charges within 35 days from that date, the creditor may then invoke any creditor’s remedy.

(f)

The obligations of the creditor and debtor pursuant to this section shall be disclosed in writing in at least 10-point type by the creditor to the debtor at the time the creditor sells the insurance, in the manner provided in paragraph (1), and by the insurer to the debtor at the time the insurer sends claim forms pursuant to subdivision (b), in the manner provided in paragraph (2).

(1)

The disclosure required by the creditor shall be substantially in the following form:
CLAIM PROCEDURE
If you become disabled, tell us (your creditor) right away. (We advise you to send this information to the same address to which you are normally required to send your payments, unless a different address or telephone number is given to you in writing by us as the location where we would like to be notified.) We will tell you where to get claim forms. Send in the completed form to the insurance company as soon as possible and tell us as soon as you do.
If your disability insurance covers all of your missed payment, WE CANNOT TRY TO COLLECT WHAT YOU OWE OR FORECLOSE UPON OR REPOSSESS ANY COLLATERAL UNTIL THREE CALENDAR MONTHS AFTER your first missed payment is due or until the insurance company pays or rejects your claim, whichever comes first. We can, however, try to collect, foreclose, or repossess if you have money due and owing us or are otherwise in default when your disability claim is made or if a senior mortgage or lien holder is foreclosing.
If the insurance company pays the claim within the three calendar months, we must accept the money as though you paid on time. If the insurance company rejects the claim within the three calendar months or accepts the claim within the three calendar months as a partial disability and pays less than for a total disability, you will have 35 days from the date that the rejection or the acceptance of the partial disability claim is sent to pay past due payments, or the difference between past due payments and what the insurance company pays for the partial disability, plus late charges. You can contact us, and we will tell you how much you owe. After that time, we can take action to collect or foreclose or repossess any collateral you may have given.
If the insurance company accepts your claim but requires that you send in additional forms to remain eligible for continued payments, you should send in these completed additional forms no later than required. If you do not send in these forms on time, the insurance company may stop paying, and we will then be able to take action to collect or foreclose or repossess any collateral you may have given.

(2)

The disclosure required by the insurer shall be substantially in the following form:
CLAIM PROCEDURE
Send in the completed form to the insurance company as soon as possible and tell your creditor as soon as you do. (Your creditor has already advised you of the address or telephone number to use to confirm that you have submitted your completed form to the insurance company.)
If your disability insurance covers all of your missed payments, YOUR CREDITOR CANNOT TRY TO COLLECT WHAT YOU OWE OR FORECLOSE UPON OR REPOSSESS ANY COLLATERAL UNTIL THREE CALENDAR MONTHS AFTER your first missed payment is due or until the insurance company pays or rejects your claim, whichever comes first. Your creditor can, however, try to collect, foreclose, or repossess if you have money due and owing or are otherwise in default when your disability claim is made or if a senior mortgage or lienholder is foreclosing.
If the insurance company pays the claim within the three calendar months, your creditor must accept the money as though you paid on time. If the insurance company rejects the claim within the three calendar months or accepts the claim within the three calendar months as a partial disability and pays less than for a total disability, you will have 35 days from the date that the rejection or the acceptance of the partial disability claim was sent to pay past due payments, or the difference between past due payments and what the insurance company pays for the partial disability, plus late charges. You can contact your creditor who will tell you how much you owe. After that time, your creditor can take action to collect or foreclose or repossess any collateral you may have given.
If the insurance company accepts your claim, but requires that you send in additional forms to remain eligible for continued payments, you should send in these completed additional forms no later than required. If you do not send in these forms on time, the insurance company may stop paying, and your creditor will then be able to take action to collect or foreclose or repossess any collateral you have given.

(g)

If a debtor does not make a payment for which the debtor claims disability coverage arising from a then current disability and if the creditor, after sending the debtor notice of the debtor’s delinquency, invokes any creditor’s remedy because of the nonpayment without knowledge of the debtor’s claim of disability coverage, subject to this title, the following provisions apply:

(1)

Upon receiving notice of the debtor’s claim, the creditor shall not invoke any further creditor’s remedy during the remainder of the claim period and the period provided in subdivision (e).

(2)

Upon receiving notice, as specified in subdivision (f) of Section 1812.401, of the debtor’s claim, the creditor shall rescind every creditor’s remedy that has been invoked relating to the delinquency for which coverage is claimed, except that the creditor shall not be obligated to restore property which has been sold in a bona fide lawful sale to any person not related by common ownership or control to the creditor.

(3)

The debtor shall be liable for costs and expenses actually incurred in connection with the invocation or rescission of any creditor’s remedy.

(4)

The creditor shall not be in violation of this title and shall not be liable under subdivision (i) provided the creditor complies with paragraphs (1) and (2) of this subdivision.

(h)

The rights and remedies afforded debtors by this title shall be cumulative to each other and to all other rights and remedies which the debtors may have under other laws.

(i)

The debtor may bring an action for damages, equitable relief, or other relief for any violation of this title.

Source: Section 1812.402, https://leginfo.­legislature.­ca.­gov/faces/codes_displaySection.­xhtml?lawCode=CIV§ionNum=1812.­402.­ (accessed May 14, 2025).

Last Updated

May 12, 2025

§ 1812.402’s source at ca​.gov