H.B. 342

1

INSURANCE CODE AMENDMENTS
2 2008 GENERAL SESSION
3 STATE OF UTAH
4 Chief Sponsor: James A. Dunnigan
5 Senate Sponsor: Sheldon L. Killpack
6
7 LONG TITLE
8 General Description:
9 This bill modifies the Insurance Code to make various amendments.
10 Highlighted Provisions:
11 This bill:
12 . modifies definition provisions;
13 . addresses the timing of examinations;
14 . changes the requirements for appointments to the Title and Escrow Commission;
15 . addresses requirements to conduct an insurance business in Utah;
16 . addresses filing of evidence of preemption;
17 . addresses service contract providers and service contract reimbursement insurance
18 policies including:
19 . prohibiting a captive insurance company from writing certain reimbursement
20 policies for service contract providers;
21 . requiring registration;
22 . requiring disclosures; and
23 . addressing prohibited acts;
24 . addresses how to calculate monies paid a beneficiary in certain circumstances where
25 a suicide occurs;
26 . addresses certain circumstances related to annuity payments;
27 . addresses the Basic Health Care Plan;

28 . clarifies language related to catastrophic coverage of mental health conditions;
29 . provides for the payment of interest on life insurance proceeds;
30 . provides for special enrollment for individuals receiving premium assistance;
31 . clarifies circumstances when the commissioner can prohibit a policy, contract,
32 certificate, or form;
33 . requires submission to criminal background checks in certain circumstances;
34 . modifies the contents of a form used in a license;
35 . addresses grounds involving a viatical settlement for action against a licensee;
36 . makes technical changes regarding delinquency proceedings;
37 . expands the purposes of the Individual, Small Employer, and Group Health
38 Insurance Act;
39 . addresses when individual carriers must accept individuals; and
40 . makes additional technical amendments.
41 Monies Appropriated in this Bill:
42 None
43 Other Special Clauses:
44 None
45 Utah Code Sections Affected:
46 AMENDS:
47 31A-1-301, as last amended by Laws of Utah 2007, Chapter 307
48 31A-2-203, as last amended by Laws of Utah 2007, Chapter 309
49 31A-2-403, as last amended by Laws of Utah 2007, Chapter 325
50 31A-4-102, as last amended by Laws of Utah 1998, Chapter 293
51 31A-4-106, as last amended by Laws of Utah 2003, Chapter 298
52 31A-6a-103, as last amended by Laws of Utah 2005, Chapter 124
53 31A-6a-104, as enacted by Laws of Utah 1992, Chapter 203
54 31A-6a-105, as enacted by Laws of Utah 1992, Chapter 203
55 31A-22-404, as last amended by Laws of Utah 2002, Chapter 308
56 31A-22-409, as last amended by Laws of Utah 2005, Chapter 125
57 31A-22-613.5, as last amended by Laws of Utah 2007, Chapter 307
58 31A-22-625, as last amended by Laws of Utah 2002, Chapter 308

59 31A-22-807, as last amended by Laws of Utah 2001, Chapter 116
60 31A-23a-105, as last amended by Laws of Utah 2007, Chapter 307
61 31A-23a-110, as renumbered and amended by Laws of Utah 2003, Chapter 298
62 31A-23a-111, as last amended by Laws of Utah 2006, Chapter 312
63 31A-23a-116, as renumbered and amended by Laws of Utah 2003, Chapter 298
64 31A-25-203, as last amended by Laws of Utah 2006, Chapter 312
65 31A-26-203, as last amended by Laws of Utah 2006, Chapter 312
66 31A-27a-513, as enacted by Laws of Utah 2007, Chapter 309
67 31A-27a-515, as enacted by Laws of Utah 2007, Chapter 309
68 31A-27a-516, as enacted by Laws of Utah 2007, Chapter 309
69 31A-30-102, as last amended by Laws of Utah 1997, Chapter 265
70 31A-30-108, as last amended by Laws of Utah 2004, Chapters 2 and 329
71 31A-30-112, as last amended by Laws of Utah 2007, Chapter 307
72 ENACTS:
73 31A-22-428, Utah Code Annotated 1953
74 31A-22-610.6, Utah Code Annotated 1953
75
76 Be it enacted by the Legislature of the state of Utah:
77 Section 1. Section 31A-1-301 is amended to read:
78 31A-1-301. Definitions.
79 As used in this title, unless otherwise specified:
80 (1) (a) "Accident and health insurance" means insurance to provide protection against
81 economic losses resulting from:
82 (i) a medical condition including:
83 (A) a medical care [expenses] expense; or
84 (B) the risk of disability;
85 (ii) accident; or
86 (iii) sickness.
87 (b) "Accident and health insurance":
88 (i) includes a contract with disability contingencies including:
89 (A) an income replacement contract;

90 (B) a health care contract;
91 (C) an expense reimbursement contract;
92 (D) a credit accident and health contract;
93 (E) a continuing care contract; and
94 (F) a long-term care contract; and
95 (ii) may provide:
96 (A) hospital coverage;
97 (B) surgical coverage;
98 (C) medical coverage; [or]
99 (D) loss of income coverage[.];
100 (E) prescription drug coverage;
101 (F) dental coverage; or
102 (G) vision coverage.
103 (c) "Accident and health insurance" does not include workers' compensation insurance.
104 (2) "Actuary" is as defined by the commissioner by rule, made in accordance with Title
105 63, Chapter 46a, Utah Administrative Rulemaking Act.
106 (3) "Administrator" is defined in Subsection [(157)] (159).
107 (4) "Adult" means a natural person who has attained the age of at least 18 years.
108 (5) "Affiliate" means [any] a person who controls, is controlled by, or is under
109 common control with, another person. A corporation is an affiliate of another corporation,
110 regardless of ownership, if substantially the same group of natural persons manages the
111 corporations.
112 (6) "Agency" means:
113 (a) a person other than an individual, including a sole proprietorship by which a natural
114 person does business under an assumed name; and
115 (b) an insurance organization licensed or required to be licensed under Section
116 31A-23a-301 .
117 (7) "Alien insurer" means an insurer domiciled outside the United States.
118 (8) "Amendment" means an endorsement to an insurance policy or certificate.
119 (9) "Annuity" means an agreement to make periodical payments for a period certain or
120 over the lifetime of one or more natural persons if the making or continuance of all or some of

121 the series of the payments, or the amount of the payment, is dependent upon the continuance of
122 human life.
123 (10) "Application" means a document:
124 (a) (i) completed by an applicant to provide information about the risk to be insured;
125 and
126 (ii) that contains information that is used by the insurer to evaluate risk and decide
127 whether to:
128 (A) insure the risk under:
129 (I) the [coverages] coverage as originally offered; or
130 (II) a modification of the coverage as originally offered; or
131 (B) decline to insure the risk; or
132 (b) used by the insurer to gather information from the applicant before issuance of an
133 annuity contract.
134 (11) "Articles" or "articles of incorporation" means:
135 (a) the original articles[,];
136 (b) a special [laws, charters, amendments,] law;
137 (c) a charter;
138 (d) an amendment;
139 (e) restated articles[,];
140 (f) articles of merger or consolidation[, trust instruments, and other constitutive
141 documents for trusts and other entities that are not corporations, and amendments to any of
142 these.];
143 (g) a trust instrument;
144 (h) another constitutive document for a trust or other entity that is not a corporation;
145 and
146 (i) an amendment to an item listed in Subsections (11)(a) through (h).
147 (12) "Bail bond insurance" means a guarantee that a person will attend court when
148 required, up to and including surrender of the person in execution of [any] a sentence imposed
149 under Subsection 77-20-7 (1), as a condition to the release of that person from confinement.
150 (13) "Binder" is defined in Section 31A-21-102 .
151 (14) "Blanket insurance policy" means a group policy covering [classes] a defined class

152 of persons:
153 (a) without individual underwriting[, where the persons insured are] or application; and
154 (b) that is determined by definition [of the class] with or without designating [the
155 persons] each person covered.
156 (15) "Board," "board of trustees," or "board of directors" means the group of persons
157 with responsibility over, or management of, a corporation, however designated.
158 (16) "Business entity" means:
159 (a) a corporation[,];
160 (b) an association[,];
161 (c) a partnership[,];
162 (d) a limited liability company[,];
163 (e) a limited liability partnership[,]; or [other]
164 (f) another legal entity.
165 (17) "Business of insurance" is defined in Subsection [(84)] (85).
166 (18) "Business plan" means the information required to be supplied to the
167 commissioner under Subsections 31A-5-204 (2)(i) and (j), including the information required
168 when these subsections [are applicable] apply by reference under:
169 (a) Section 31A-7-201 ;
170 (b) Section 31A-8-205 ; or
171 (c) Subsection 31A-9-205 (2).
172 (19) (a) "Bylaws" means the rules adopted for the regulation or management of a
173 corporation's affairs, however designated [and].
174 (b) "Bylaws" includes comparable rules for [trusts and other entities that are not
175 corporations] a trust or other entity that is not a corporation.
176 (20) "Captive insurance company" means:
177 (a) an [insurance company] insurer:
178 (i) owned by another organization; and
179 (ii) whose exclusive purpose is to insure risks of the parent organization and an
180 affiliated [companies] company; or
181 (b) in the case of [groups and associations, an insurance organization] a group or
182 association, an insurer:

183 (i) owned by the insureds; and
184 (ii) whose exclusive purpose is to insure risks of:
185 (A) a member [organizations] organization;
186 (B) a group [members; and] member; or
187 (C) [affiliates] an affiliate of:
188 (I) a member [organizations] organization; or
189 (II) a group [members] member.
190 (21) "Casualty insurance" means liability insurance as defined in Subsection [(96)]
191 (97).
192 (22) "Certificate" means evidence of insurance given to:
193 (a) an insured under a group insurance policy; or
194 (b) a third party.
195 (23) "Certificate of authority" is included within the term "license."
196 (24) "Claim," unless the context otherwise requires, means a request or demand on an
197 insurer for payment of [benefits] a benefit according to the terms of an insurance policy.
198 (25) "Claims-made coverage" means an insurance contract or provision limiting
199 coverage under a policy insuring against legal liability to claims that are first made against the
200 insured while the policy is in force.
201 (26) (a) "Commissioner" or "commissioner of insurance" means Utah's insurance
202 commissioner.
203 (b) When appropriate, the terms listed in Subsection (26)(a) apply to the equivalent
204 supervisory official of another jurisdiction.
205 (27) (a) "Continuing care insurance" means insurance that:
206 (i) provides board and lodging;
207 (ii) provides one or more of the following [services]:
208 (A) a personal [services] service;
209 (B) a nursing [services] service;
210 (C) a medical [services] service; or
211 (D) any other health-related [services] service; and
212 (iii) provides the coverage described in Subsection (27)(a)(i) under an agreement
213 effective:

214 (A) for the life of the insured; or
215 (B) for a period in excess of one year.
216 (b) Insurance is continuing care insurance regardless of whether or not the board and
217 lodging are provided at the same location as [the services] a service described in Subsection
218 (27)(a)(ii).
219 (28) (a) "Control," "controlling," "controlled," or "under common control" means the
220 direct or indirect possession of the power to direct or cause the direction of the management
221 and policies of a person. This control may be:
222 (i) by contract;
223 (ii) by common management;
224 (iii) through the ownership of voting securities; or
225 (iv) by a means other than those described in Subsections (28)(a)(i) through (iii).
226 (b) There is no presumption that an individual holding an official position with another
227 person controls that person solely by reason of the position.
228 (c) A person having a contract or arrangement giving control is considered to have
229 control despite the illegality or invalidity of the contract or arrangement.
230 (d) There is a rebuttable presumption of control in a person who directly or indirectly
231 owns, controls, holds with the power to vote, or holds proxies to vote 10% or more of the
232 voting securities of another person.
233 (29) "Controlled insurer" means a licensed insurer that is either directly or indirectly
234 controlled by a producer.
235 (30) "Controlling person" means [any] a person that directly or indirectly has the power
236 to direct or cause to be directed, the management, control, or activities of a reinsurance
237 intermediary.
238 (31) "Controlling producer" means a producer who directly or indirectly controls an
239 insurer.
240 (32) (a) "Corporation" means an insurance corporation, except when referring to:
241 (i) a corporation doing business:
242 (A) as:
243 (I) an insurance producer;
244 (II) a limited line producer;

245 (III) a consultant;
246 (IV) a managing general agent;
247 (V) a reinsurance intermediary;
248 (VI) a third party administrator; or
249 (VII) an adjuster; and
250 (B) under:
251 (I) Chapter 23a, Insurance Marketing - Licensing Producers, Consultants, and
252 Reinsurance Intermediaries;
253 (II) Chapter 25, Third Party Administrators; or
254 (III) Chapter 26, Insurance Adjusters; or
255 (ii) a noninsurer that is part of a holding company system under Chapter 16, Insurance
256 Holding Companies.
257 (b) "Stock corporation" means a stock insurance corporation.
258 (c) "Mutual" or "mutual corporation" means a mutual insurance corporation.
259 (33) "Creditable coverage" has the same meaning as provided in federal regulations
260 adopted pursuant to the Health Insurance Portability and Accountability Act of 1996, Pub. L.
261 104-191, 110 Stat. 1936.
262 (34) "Credit accident and health insurance" means insurance on a debtor to provide
263 indemnity for payments coming due on a specific loan or other credit transaction while the
264 debtor is disabled.
265 (35) (a) "Credit insurance" means insurance offered in connection with an extension of
266 credit that is limited to partially or wholly extinguishing that credit obligation.
267 (b) "Credit insurance" includes:
268 (i) credit accident and health insurance;
269 (ii) credit life insurance;
270 (iii) credit property insurance;
271 (iv) credit unemployment insurance;
272 (v) guaranteed automobile protection insurance;
273 (vi) involuntary unemployment insurance;
274 (vii) mortgage accident and health insurance;
275 (viii) mortgage guaranty insurance; and

276 (ix) mortgage life insurance.
277 (36) "Credit life insurance" means insurance on the life of a debtor in connection with
278 an extension of credit that pays a person if the debtor dies.
279 (37) "Credit property insurance" means insurance:
280 (a) offered in connection with an extension of credit; and
281 (b) that protects the property until the debt is paid.
282 (38) "Credit unemployment insurance" means insurance:
283 (a) offered in connection with an extension of credit; and
284 (b) that provides indemnity if the debtor is unemployed for payments coming due on a:
285 (i) specific loan; or
286 (ii) credit transaction.
287 (39) "Creditor" means a person, including an insured, having [any] a claim, whether:
288 (a) matured;
289 (b) unmatured;
290 (c) liquidated;
291 (d) unliquidated;
292 (e) secured;
293 (f) unsecured;
294 (g) absolute;
295 (h) fixed; or
296 (i) contingent.
297 (40) (a) "Customer service representative" means a person that provides an insurance
298 [services] service and insurance product information:
299 (i) for the customer service representative's:
300 (A) producer; or
301 (B) consultant employer; and
302 (ii) to the customer service representative's employer's:
303 (A) customer;
304 (B) client; or
305 (C) organization.
306 (b) A customer service representative may only operate within the scope of authority of

307 the customer service representative's producer or consultant employer.
308 (41) "Deadline" means the final date or time:
309 (a) imposed by:
310 (i) statute;
311 (ii) rule; or
312 (iii) order; and
313 (b) by which a required filing or payment must be received by the department.
314 (42) "Deemer clause" means a provision under this title under which upon the
315 occurrence of a condition precedent, the commissioner is [deemed] considered to have taken a
316 specific action. If the statute so provides, [the] a condition precedent may be the
317 commissioner's failure to take a specific action.
318 (43) "Degree of relationship" means the number of steps between two persons
319 determined by counting the generations separating one person from a common ancestor and
320 then counting the generations to the other person.
321 (44) "Department" means the Insurance Department.
322 (45) "Director" means a member of the board of directors of a corporation.
323 (46) "Disability" means a physiological or psychological condition that partially or
324 totally limits an individual's ability to:
325 (a) perform the duties of:
326 (i) that individual's occupation; or
327 (ii) any occupation for which the individual is reasonably suited by education, training,
328 or experience; or
329 (b) perform two or more of the following basic activities of daily living:
330 (i) eating;
331 (ii) toileting;
332 (iii) transferring;
333 (iv) bathing; or
334 (v) dressing.
335 (47) "Disability income insurance" is defined in Subsection [(75)] (76).
336 (48) "Domestic insurer" means an insurer organized under the laws of this state.
337 (49) "Domiciliary state" means the state in which an insurer:

338 (a) is incorporated;
339 (b) is organized; or
340 (c) in the case of an alien insurer, enters into the United States.
341 (50) (a) "Eligible employee" means:
342 (i) an employee who:
343 (A) works on a full-time basis; and
344 (B) has a normal work week of 30 or more hours; [or]
345 [(ii) a person described in Subsection (50) (b).]
346 [(b) "Eligible employee" includes, if the individual is included under a health benefit
347 plan of a small employer:]
348 [(i)] (ii) a sole proprietor;
349 [(ii)] (iii) a partner in a partnership; or
350 [(iii)] (iv) an independent contractor.
351 [(c)] (b) "Eligible employee" does not include[, unless eligible under Subsection
352 (50)(b): (i)] an individual who works on a temporary or substitute basis for a small employer[;].
353 [(ii) an employer's spouse; or]
354 [(iii) a dependent of an employer.]
355 (51) "Employee" means [any] an individual employed by an employer.
356 (52) "Employee benefits" means one or more benefits or services provided to:
357 (a) [employees] an employee; or
358 (b) [dependents of employees] a dependent of an employee.
359 (53) (a) "Employee welfare fund" means a fund:
360 (i) established or maintained, whether directly or through [trustees] a trustee, by:
361 (A) one or more employers;
362 (B) one or more labor organizations; or
363 (C) a combination of employers and labor organizations; and
364 (ii) that provides employee benefits paid or contracted to be paid, other than income
365 from investments of the fund[,]:
366 (A) by or on behalf of an employer doing business in this state; or
367 (B) for the benefit of [any] a person employed in this state.
368 (b) "Employee welfare fund" includes a plan funded or subsidized by a user [fees] fee

369 or tax revenues.
370 (54) "Endorsement" means a written agreement attached to a policy or certificate to
371 modify one or more of the provisions of the policy or certificate.
372 (55) "Enrollment date," with respect to a health benefit plan, means:
373 (a) the first day of coverage; or[,]
374 (b) if there is a waiting period, the first day of the waiting period.
375 (56) (a) "Escrow" means:
376 (i) a real estate settlement or real estate closing conducted by a third party pursuant to
377 the requirements of a written agreement between the parties in a real estate transaction; or
378 (ii) a settlement or closing involving:
379 (A) a mobile home;
380 (B) a grazing right;
381 (C) a water right; or
382 (D) other personal property authorized by the commissioner.
383 (b) "Escrow" includes the act of conducting a:
384 (i) real estate settlement; or
385 (ii) real estate closing.
386 (57) "Escrow agent" means:
387 (a) an insurance producer with:
388 (i) a title insurance line of authority; and
389 (ii) an escrow subline of authority; or
390 (b) a person defined as an escrow agent in Section 7-22-101 .
391 (58) (a) "Excludes" is not exhaustive and does not mean that [other things are] another
392 thing is not also excluded.
393 (b) The items listed in a list using the term "excludes" are representative examples for
394