First Substitute H.B. 64

Representative Jim Bird proposes the following substitute bill:

1 ERRORS AND OMISSIONS COVERAGE FOR
2 INSURANCE PRODUCERS
3 2010 GENERAL SESSION
4 STATE OF UTAH
5 Chief Sponsor: Jim Bird
6 Senate Sponsor: ____________
7
8 LONG TITLE
9 General Description:
10 This bill modifies the Insurance Code to require errors and omission coverage of certain
11 producers.
12 Highlighted Provisions:
13 This bill:
14 . requires errors and omissions coverage during the license term of a resident
15 individual producer;
16 . requires related information to be included in an application;
17 . authorizes the commissioner to make related administrative rules; and
18 . makes technical and conforming amendments.
19 Monies Appropriated in this Bill:
20 None
21 Other Special Clauses:
22 None
23 Utah Code Sections Affected:
24 AMENDS:
25 31A-23a-104, as last amended by Laws of Utah 2009, Chapter 349

26 31A-23a-105, as last amended by Laws of Utah 2009, Chapters 349 and 355
27 ENACTS:
28 31A-23a-203.5, Utah Code Annotated 1953
29
30 Be it enacted by the Legislature of the state of Utah:
31 Section 1. Section 31A-23a-104 is amended to read:
32 31A-23a-104. Application for individual license -- Application for agency license.
33 (1) This section applies to an initial or renewal license as a:
34 (a) producer;
35 (b) limited line producer;
36 (c) customer service representative;
37 (d) consultant;
38 (e) managing general agent; or
39 (f) reinsurance intermediary.
40 (2) (a) Subject to Subsection (2)(b), to obtain or renew an individual license, an
41 individual shall:
42 (i) file an application for an initial or renewal individual license [shall be: (i) made to]
43 with the commissioner on forms and in a manner the commissioner prescribes; and
44 (ii) [accompanied by] pay a license fee that is not refunded if the application:
45 (A) is denied; or
46 (B) if incomplete, is never completed by the applicant.
47 (b) An application described in this Subsection (2) shall provide:
48 (i) information about the applicant's identity;
49 (ii) the applicant's Social Security number;
50 (iii) the applicant's personal history, experience, education, and business record;
51 (iv) whether the applicant is 18 years of age or older;
52 (v) whether the applicant has committed an act that is a ground for denial, suspension,
53 or revocation as set forth in Section 31A-23a-105 or 31A-23a-111 ; [and]
54 (vi) whether the applicant for a resident individual producer license certifies
55 compliance with Section 31A-23a-203.5 ; and
56 [(vi)] (vii) any other information the commissioner reasonably requires.

57 (3) The commissioner may require a document reasonably necessary to verify the
58 information contained in an application filed under this section.
59 (4) An applicant's Social Security number contained in an application filed under this
60 section is a private record under Section 63G-2-302 .
61 (5) (a) Subject to Subsection (5)(b), to obtain or renew an agency license, a person
62 shall:
63 (i) file an application for an initial or renewal agency license [shall be: (i) made to]
64 with the commissioner on forms and in a manner the commissioner prescribes; and
65 (ii) [accompanied by] pay a license fee that is not refunded if the application:
66 (A) is denied; or
67 (B) if incomplete, is never completed by the applicant.
68 (b) An application described in Subsection (5)(a) shall provide:
69 (i) information about the applicant's identity;
70 (ii) the applicant's federal employer identification number;
71 (iii) the designated responsible licensed producer;
72 (iv) the identity of all owners, partners, officers, and directors;
73 (v) whether the applicant has committed an act that is a ground for denial, suspension,
74 or revocation as set forth in Section 31A-23a-105 or 31A-23a-111 ; and
75 (vi) any other information the commissioner reasonably requires.
76 Section 2. Section 31A-23a-105 is amended to read:
77 31A-23a-105. General requirements for individual and agency license issuance
78 and renewal.
79 (1) (a) The commissioner shall issue or renew a license to a person described in
80 Subsection (1)(b) to act as:
81 (i) a producer;
82 (ii) a limited line producer;
83 (iii) a customer service representative;
84 (iv) a consultant;
85 (v) a managing general agent; or
86 (vi) a reinsurance intermediary.
87 (b) The commissioner shall issue or renew a license under Subsection (1)(a) to a

88 person who, as to the license type and line of authority classification applied for under Section
89 31A-23a-106 :
90 (i) satisfies the application requirements under Section 31A-23a-104 ;
91 (ii) satisfies the character requirements under Section 31A-23a-107 ;
92 (iii) satisfies any applicable continuing education requirements under Section
93 31A-23a-202 ;
94 (iv) satisfies any applicable examination requirements under Section 31A-23a-108 ;
95 (v) satisfies any applicable training period requirements under Section 31A-23a-203 ;
96 (vi) certifies that any applicable errors or omissions coverage requirements under
97 Section 31A-23a-203.5 will be complied with and remain in force during the period for which
98 the license is issued or renewed;
99 [(vi)] (vii) has not committed an act that is a ground for denial, suspension, or
100 revocation as provided in Section 31A-23a-111 ;
101 [(vii)] (viii) if a nonresident:
102 (A) complies with Section 31A-23a-109 ; and
103 (B) holds an active similar license in that person's state of residence;
104 [(viii)] (ix) if an applicant for a title insurance producer license, satisfies the
105 requirements of Sections 31A-23a-203 and 31A-23a-204 ;
106 [(ix)] (x) if an applicant for a license to act as a life settlement provider or life
107 settlement producer, satisfies the requirements of Section 31A-23a-117 ; and
108 [(x)] (xi) pays the applicable fees under Section 31A-3-103 .
109 (2) (a) This Subsection (2) applies to the following persons:
110 (i) an applicant for a pending:
111 (A) individual or agency producer license;
112 (B) limited line producer license;
113 (C) customer service representative license;
114 (D) consultant license;
115 (E) managing general agent license; or
116 (F) reinsurance intermediary license; or
117 (ii) a licensed:
118 (A) individual or agency producer;

119 (B) limited line producer;
120 (C) customer service representative;
121 (D) consultant;
122 (E) managing general agent; or
123 (F) reinsurance intermediary.
124 (b) A person described in Subsection (2)(a) shall report to the commissioner:
125 (i) an administrative action taken against the person:
126 (A) in another jurisdiction; or
127 (B) by another regulatory agency in this state; and
128 (ii) a criminal prosecution taken against the person in any jurisdiction.
129 (c) The report required by Subsection (2)(b) shall:
130 (i) be filed:
131 (A) at the time the person files the application for an individual or agency license; and
132 (B) for an action or prosecution that occurs on or after the day on which the person
133 files the application:
134 (I) for an administrative action, within 30 days of the final disposition of the
135 administrative action; or
136 (II) for a criminal prosecution, within 30 days of the initial appearance before a court;
137 and
138 (ii) include a copy of the complaint or other relevant legal documents related to the
139 action or prosecution described in Subsection (2)(b).
140 (3) (a) The department may require a person applying for a license or for consent to
141 engage in the business of insurance to submit to a criminal background check as a condition of
142 receiving a license or consent.
143 (b) A person, if required to submit to a criminal background check under Subsection
144 (3)(a), shall:
145 (i) submit a fingerprint card in a form acceptable to the department; and
146 (ii) consent to a fingerprint background check by:
147 (A) the Utah Bureau of Criminal Identification; and
148 (B) the Federal Bureau of Investigation.
149 (c) For a person who submits a fingerprint card and consents to a fingerprint

150 background check under Subsection (3)(b), the department may request:
151 (i) criminal background information maintained pursuant to Title 53, Chapter 10, Part
152 2, Bureau of Criminal Identification, from the Bureau of Criminal Identification; and
153 (ii) complete Federal Bureau of Investigation criminal background checks through the
154 national criminal history system.
155 (d) Information obtained by the department from the review of criminal history records
156 received under this Subsection (3) shall be used by the department for the purposes of:
157 (i) determining if a person satisfies the character requirements under Section
158 31A-23a-107 for issuance or renewal of a license;
159 (ii) determining if a person has failed to maintain the character requirements under
160 Section 31A-23a-107 ; and
161 (iii) preventing a person who violates the federal Violent Crime Control and Law
162 Enforcement Act of 1994, 18 U.S.C. Secs. 1033 and 1034, from engaging in the business of
163 insurance in the state.
164 (e) If the department requests the criminal background information, the department
165 shall:
166 (i) pay to the Department of Public Safety the costs incurred by the Department of
167 Public Safety in providing the department criminal background information under Subsection
168 (3)(c)(i);
169 (ii) pay to the Federal Bureau of Investigation the costs incurred by the Federal Bureau
170 of Investigation in providing the department criminal background information under
171 Subsection (3)(c)(ii); and
172 (iii) charge the person applying for a license or for consent to engage in the business of
173 insurance a fee equal to the aggregate of Subsections (3)(e)(i) and (ii).
174 (4) To become a resident licensee in accordance with Section 31A-23a-104 and this
175 section, a person licensed as one of the following in another state who moves to this state shall
176 apply within 90 days of establishing legal residence in this state:
177 (a) insurance producer;
178 (b) limited line producer;
179 (c) customer service representative;
180 (d) consultant;

181 (e) managing general agent; or
182 (f) reinsurance intermediary.
183 (5) (a) The commissioner may deny a license application for a license listed in
184 Subsection (5)(b) if the person applying for the license, as to the license type and line of
185 authority classification applied for under Section 31A-23a-106 :
186 (i) fails to satisfy the requirements as set forth in this section; or
187 (ii) commits an act that is grounds for denial, suspension, or revocation as set forth in
188 Section 31A-23a-111 .
189 (b) This Subsection (5) applies to the following licenses:
190 (i) producer;
191 (ii) limited line producer;
192 (iii) customer service representative;
193 (iv) consultant;
194 (v) managing general agent; or
195 (vi) reinsurance intermediary.
196 (6) Notwithstanding the other provisions of this section, the commissioner may:
197 (a) issue a license to an applicant for a license for a title insurance line of authority only
198 with the concurrence of the Title and Escrow Commission; and
199 (b) renew a license for a title insurance line of authority only with the concurrence of
200 the Title and Escrow Commission.
201 Section 3. Section 31A-23a-203.5 is enacted to read:
202 31A-23a-203.5. Errors and omissions coverage requirements.
203 (1) In accordance with this section, a resident individual producer shall ensure that the
204 producer is covered:
205 (a) for the legal liability of the producer as the result of an erroneous act or failure to
206 act in the producer's capacity as a producer; and
207 (b) at all times during the term of the producer's license.
208 (2) The coverage required by Subsection (1) shall consist of:
209 (a) a policy naming the producer;
210 (b) a policy naming the agency that designates the producer in accordance with this
211 chapter; or

212 (c) a written agreement by an insurer or group of affiliated insurers, on behalf of a
213 producer who is or will become an exclusive agent of the insurer or group of affiliated insurers,
214 under which the insurer or group of affiliated insurers agrees to assume responsibility, to the
215 benefit of an aggrieved person, for legal liability of the producer as the result of an erroneous
216 act or failure to act in the producer's capacity as a producer for the insurer or group of affiliated
217 insurers.
218 (3) The commissioner may, by rule made in accordance with Title 63G, Chapter 3,
219 Utah Administrative Rulemaking Act, provide for:
220 (a) the terms and conditions of the coverage required under Subsection (1); and
221 (b) if the coverage required by Subsection (1) is terminated during a producer's license
222 term, requirements to:
223 (i) provide notice; and
224 (ii) replace the coverage.