First Substitute S.B. 14

This document includes Senate 3rd Reading Floor Amendments incorporated into the bill on Thu, Jan 29, 2004 at 11:13 AM by smaeser. -->

Senator Gregory S. Bell proposes the following substitute bill:

1 INSURANCE CODE EXEMPTION
2 2004 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: Gregory S. Bell
5
6 LONG TITLE
7 General Description:
8 This bill exempts specified activities from the insurance code.
9 Highlighted Provisions:
10 This bill:
11 . provides an exemption from the insurance code for death, accident, health, and
12 disability benefits provided by an Internal Revenue Code Section 501(c)(3)
13 organization to its volunteers under specified circumstances; and
14 . makes technical corrections.
15 Monies Appropriated in this Bill:
16 None
17 Other Special Clauses:
18 None
19 Utah Code Sections Affected:
20 AMENDS:
21 31A-1-103, as last amended by Chapters 71 and 308, Laws of Utah 2002
22
23 Be it enacted by the Legislature of the state of Utah:
24 Section 1. Section 31A-1-103 is amended to read:
25 31A-1-103. Scope and applicability of title.

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Senate 3rd Reading Amendments 1-29-2004 sm/cjd 26

(1) This title does not apply to:
27 (a) a retainer contract made by an attorney-at-law:
28 (i) with an individual client; and
29 (ii) under which fees are based on estimates of the nature and amount of services to be
30 provided to the specific client;
31 (b) a contract similar to a contract described in Subsection (1)(a) made with a group of
32 clients involved in the same or closely related legal matters;
33 (c) an arrangement for providing benefits that do not exceed a limited amount of
34 consultations, advice on simple legal matters, either alone or in combination with referral
35 services, or the promise of fee discounts for handling other legal matters;
36 (d) limited legal assistance on an informal basis involving neither an express
37 contractual obligation nor reasonable expectations, in the context of an employment,
38 membership, educational, or similar relationship; [or]
39 (e) legal assistance by employee organizations to their members in matters relating to
40 employment[.]; or
41 (f) death, accident, health, or disability benefits provided to a person by an organization
42 or its affiliate if:
43 (i) the organization is tax exempt under Section 501(c)(3) of the Internal Revenue
44 Code and has had its principal place of business in Utah for at least five years;
45 (ii) the person is not an employee of the organization; and
46 (iii) (A) S SUBSTANTIALLY ALL s the person's S [ sole function ] TIME s in the organization
46a is S [ to provide ] SPENT PROVIDING s voluntary services:
47 (I) in furtherance of the organization's purposes;
48 (II) for a designated period of time; and
49 (III) for which no compensation, other than expenses, is paid; or
50 (B) the time since the service under Subsection (1)(f)(iii)(A) was completed is no more
51 than 18 months.
52 (2) (a) This title restricts otherwise legitimate business activity.
53 (b) What this title does not prohibit is permitted unless contrary to other provisions of
54 Utah law.
55 (3) Except as otherwise expressly provided, this title does not apply to:
56 (a) those activities of an insurer where state jurisdiction is preempted by Section 514 of

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- 3 - 57 the federal Employee Retirement Income Security Act of 1974, as amended;
58 (b) ocean marine insurance;
59 (c) death [and], accident [and], health, or disability benefits provided by an
60 organization if the organization:
61 (i) has as its principal purpose to achieve charitable, educational, social, or religious
62 objectives rather than to provide death [and], accident [and], health, or disability benefits;
63 (ii) does not incur a legal obligation to pay a specified amount; and
64 (iii) does not create reasonable expectations of receiving a specified amount on the part
65 of an insured person;
66 (d) other business specified in rules adopted by the commissioner on a finding that:
67 (i) the transaction of the business in this state does not require regulation for the
68 protection of the interests of the residents of this state; or
69 (ii) it would be impracticable to require compliance with this title;
70 (e) except as provided in Subsection (4), a transaction independently procured through
71 negotiations under Section 31A-15-104 ;
72 (f) self-insurance;
73 (g) reinsurance;
74 (h) subject to Subsection (5), employee and labor union group or blanket insurance
75 covering risks in this state if:
76 (i) the policyholder exists primarily for purposes other than to procure insurance;
77 (ii) the policyholder:
78 (A) is not a resident of this state;
79 (B) is not a domestic corporation; or
80 (C) does not have its principal office in this state;
81 (iii) no more than 25% of the certificate holders or insureds are residents of this state;
82 (iv) on request of the commissioner, the insurer files with the department a copy of the
83 policy and a copy of each form or certificate; and
84 (v) (A) the insurer agrees to pay premium taxes on the Utah portion of its business, as
85 if it were authorized to do business in this state; and
86 (B) the insurer provides the commissioner with the security the commissioner
87 considers necessary for the payment of premium taxes under Title 59, Chapter 9, Taxation of

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- 4 - 88 Admitted Insurers;
89 (i) to the extent provided in Subsection (6):
90 (i) a manufacturer's or seller's warranty; and
91 (ii) a manufacturer's or seller's service contract; or
92 (j) except to the extent provided in Subsection (7), a public agency insurance mutual.
93 (4) A transaction described in Subsection (3)(e) is subject to taxation under Section
94 31A-3-301 .
95 (5) (a) After a hearing, the commissioner may order an insurer of certain group or
96 blanket contracts to transfer the Utah portion of the business otherwise exempted under
97 Subsection (3)(h) to an authorized insurer if the contracts have been written by an unauthorized
98 insurer.
99 (b) If the commissioner finds that the conditions required for the exemption of a group
100 or blanket insurer are not satisfied or that adequate protection to residents of this state is not
101 provided, the commissioner may require:
102 (i) the insurer to be authorized to do business in this state; or
103 (ii) that any of the insurer's transactions be subject to this title.
104 (6) (a) As used in Subsection (3)(i) and this Subsection (6):
105 (i) "manufacturer's or seller's service contract" means a service contract:
106 (A) made available by:
107 (I) a manufacturer of a product;
108 (II) a seller of a product; or
109 (III) an affiliate of a manufacturer or seller of a product;
110 (B) made available:
111 (I) on one or more specific products; or
112 (II) on products that are components of a system; and
113 (C) under which the person described in Subsection (6)(a)(i)(A) is liable for services to
114 be provided under the service contract including, if the manufacturer's or seller's service
115 contract designates, providing parts and labor;
116 (ii) "manufacturer's or seller's warranty" means the guaranty of:
117 (A) (I) the manufacturer of a product;
118 (II) a seller of a product; or

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- 5 - 119 (III) an affiliate of a manufacturer or seller of a product;
120 (B) (I) on one or more specific products; or
121 (II) on products that are components of a system; and
122 (C) under which the person described in Subsection (6)(a)(ii)(A) is liable for services
123 to be provided under the warranty, including, if the manufacturer's or seller's warranty
124 designates, providing parts and labor; and
125 (iii) "service contract" is as defined in Section 31A-6a-101 .
126 (b) A manufacturer's or seller's warranty may be designated as:
127 (i) a warranty;
128 (ii) a guaranty; or
129 (iii) a term similar to a term described in Subsection (6)(b)(i) or (ii).
130 (c) This title does not apply to:
131 (i) a manufacturer's or seller's warranty;
132 (ii) a manufacturer's or seller's service contract paid for with consideration that is in
133 addition to the consideration paid for the product itself; and
134 (iii) a service contract that is not a manufacturer's or seller's warranty or manufacturer's
135 or seller's service contract if:
136 (A) the service contract is paid for with consideration that is in addition to the
137 consideration paid for the product itself;
138 (B) the service contract is for the repair or maintenance of goods;
139 (C) the cost of the product is equal to an amount determined in accordance with
140 Subsection (6)(e); and
141 (D) the product is not a motor vehicle.
142 (d) This title does not apply to a manufacturer's or seller's warranty or service contract
143 paid for with consideration that is in addition to the consideration paid for the product itself
144 regardless of whether the manufacturer's or seller's warranty or service contract is sold:
145 (i) at the time of the purchase of the product; or
146 (ii) at a time other than the time of the purchase of the product.
147 (e) (i) For fiscal year 2001-02, the amount described in Subsection (6)(c)(iii)(C) shall
148 be equal to $3,700 or less.
149 (ii) For each fiscal year after fiscal year 2001-02, the commissioner shall annually

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- 6 - 150 determine whether the amount described in Subsection (6)(c)(iii)(C) should be adjusted in
151 accordance with changes in the Consumer Price Index published by the United States Bureau
152 of Labor Statistics selected by the commissioner by rule, between:
153 (A) the Consumer Price Index for the February immediately preceding the adjustment;
154 and
155 (B) the Consumer Price Index for February 2001.
156 (iii) If under Subsection (6)(e)(ii) the commissioner determines that an adjustment
157 should be made, the commissioner shall make the adjustment by rule.
158 (7) (a) For purposes of this Subsection (7), "public agency insurance mutual" means an
159 entity formed by two or more political subdivisions or public agencies of the state:
160 (i) under Title 11, Chapter 13, Interlocal Cooperation Act; and
161 (ii) for the purpose of providing for the political subdivisions or public agencies:
162 (A) subject to Subsection (7)(b), insurance coverage; or
163 (B) risk management.
164 (b) Notwithstanding Subsection (7)(a)(ii)(A), a public agency insurance mutual may
165 not provide health insurance unless the public agency insurance mutual provides the health
166 insurance using:
167 (i) a third party administrator licensed under Chapter 25, Third Party Administrators;
168 (ii) an admitted insurer; or
169 (iii) a program authorized by Title 49, Chapter 20, Public Employees' Benefit and
170 Insurance Program Act.
171 (c) Except for this Subsection (7), a public agency insurance mutual is exempt from
172 this title.
173 (d) A public agency insurance mutual is considered to be a governmental entity and
174 political subdivision of the state with all of the rights, privileges, and immunities of a
175 governmental entity or political subdivision of the state including all the rights and benefits of
176 Title 63, Chapter 30, Governmental Immunity Act.