(a) If a group health insurance policy or subscriber contract provides for automatic termination of the policy or contract after a premium or subscription charge has remained unpaid through the grace period allowed for such payment, the carrier shall be liable for valid claims for covered losses incurred prior to the end of the grace period.

(b) If the actions of the carrier after the end of the grace period indicate that it considers the policy or contract to be continuing in force beyond the end of the grace period, including actions such as continuing to recognize claims subsequently incurred, or in some other manner, the carrier shall be liable for valid claims for losses incurred prior to the effective date of written notice of termination to the policyholder or other entity responsible for making payments or submitting subscription charges to the carrier.

(c) The carrier shall notify a policyholder or other responsible entity of any premium payment due on a policy at least 21 days before the due date. The effective date of termination of a policy or contract shall not be prior to midnight at the end of the 14th day following mailing of notice of termination. (Added 1989, No. 113, § 2; amended 1997, No. 112 (Adj. Sess.), § 2.)