S.B. 52 Enrolled

INSURANCE AMENDMENTS - LOSS
HISTORIES AND INQUIRIES
2004 GENERAL SESSION
STATE OF UTAH
Sponsor: Thomas V. Hatch

LONG TITLE
General Description:
This bill modifies the Insurance Code to address use of loss histories and inquiries for
insurance purposes.
Highlighted Provisions:
This bill:
. prohibits the use of certain losses in making adverse eligibility or rate decisions;
. prohibits use of inquiries for certain insurance purposes; and
. makes technical changes.
Monies Appropriated in this Bill:
None
Other Special Clauses:
None
Utah Code Sections Affected:
AMENDS:
31A-19a-212, as last amended by Chapter 252, Laws of Utah 2003
31A-21-303, as last amended by Chapter 116, Laws of Utah 2001
ENACTS:
31A-22-1308, Utah Code Annotated 1953

Be it enacted by the Legislature of the state of Utah:
Section 1. Section 31A-19a-212 is amended to read:
31A-19a-212. Premium increases prohibited for certain claims or inquiries.

(1) Each rate, rating schedule, and rating manual filed with the commissioner for
[insurance covering a vehicle or the operation of a vehicle] personal lines insurance may not
permit a premium increase due to:
(a) a telephone call or other inquiry that does not result in the insured requesting the
payment of a claim; or
(b) a claim under a policy of insurance covering a motor vehicle or the operation of a
motor vehicle resulting from any incident, including acts of vandalism, in which the person named
in the policy or any other person using the insured motor vehicle with the express or implied
permission of the named insured is not at fault.
(2) Subsection (1) prohibits a premium increase when:
(a) a policy is issued; or
(b) a policy is renewed.
(3) This section is an exception to Section 31A-19a-201 .
Section 2. Section 31A-21-303 is amended to read:
31A-21-303. Termination of insurance policies by insurers.
(1) (a) Except as otherwise provided in this section, in other statutes, or by rule under
Subsection (1)(c), this section applies to all policies of insurance other than life [and], accident
and health insurance, and annuities, if the policies of insurance are issued on forms that are subject
to filing and approval under Subsection 31A-21-201 (1).
(b) A policy may provide terms more favorable to insureds than this section requires.
(c) The commissioner may by rule totally or partially exempt from this section classes of
insurance policies in which the insureds do not need protection against arbitrary or unannounced
termination.
(d) The rights provided by this section are in addition to and do not prejudice any other
rights the insureds may have at common law or under other statutes.
(2) (a) As used in this Subsection (2), "grounds" means:
(i) material misrepresentation;
(ii) substantial change in the risk assumed, unless the insurer should reasonably have

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foreseen the change or contemplated the risk when entering into the contract;
(iii) substantial breaches of contractual duties, conditions, or warranties;
(iv) attainment of the age specified as the terminal age for coverage, in which case the
insurer may cancel by notice under Subsection (2)(c), accompanied by a tender of proportional
return of premium; or
(v) in the case of automobile insurance, revocation or suspension of the driver's license of:
(A) the named insured; or
(B) any other person who customarily drives the car.
(b) (i) Except as provided in Subsection (2)(e) or unless the conditions of Subsection
(2)(b)(ii) are met, an insurance policy may not be canceled by the insurer before the earlier of:
(A) the expiration of the agreed term; or
(B) one year from the effective date of the policy or renewal.
(ii) Notwithstanding Subsection (2)(b)(i), an insurance policy may be canceled by the
insurer for:
(A) nonpayment of a premium when due; or
(B) on grounds defined in Subsection (2)(a).
(c) (i) The cancellation provided by Subsection (2)(b), except cancellation for nonpayment
of premium, is effective no sooner than 30 days after the delivery or first-class mailing of a written
notice to the policyholder.
(ii) Cancellation for nonpayment of premium is effective no sooner than ten days after
delivery or first class mailing of a written notice to the policyholder.
(d) (i) Notice of cancellation for nonpayment of premium shall include a statement of the
reason for cancellation.
(ii) Subsection (6) applies to the notice required for grounds of cancellation other than
nonpayment of premium.
(e) (i) Subsections (2)(a) through (d) do not apply to any insurance contract that has not
been previously renewed if the contract has been in effect less than 60 days when the written
notice of cancellation is mailed or delivered.

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(ii) A cancellation under this Subsection (2)(e) may not be effective until at least ten days
after the delivery to the insured of a written notice of cancellation.
(iii) If the notice required by this Subsection (2)(e) is sent by first-class mail, postage
prepaid, to the insured at the insured's last-known address, delivery is considered accomplished
after the passing, since the mailing date, of the mailing time specified in the Utah Rules of Civil
Procedure.
(iv) A policy cancellation subject to this Subsection (2)(e) is not subject to the procedures
described in Subsection (6).
(3) A policy may be issued for a term longer than one year or for an indefinite term if the
policy includes a clause providing for cancellation by the insurer by giving notice as provided in
Subsection (4)(b)(i) 30 days prior to any anniversary date.
(4) (a) Subject to Subsections (2), (3), and (4)(b), a policyholder has a right to have the
policy renewed:
(i) on the terms then being applied by the insurer to similar risks; and
(ii) (A) for an additional period of time equivalent to the expiring term if the agreed term
is one year or less; or
(B) for one year if the agreed term is longer than one year.
(b) Except as provided in Subsection (4)(c), the right to renewal under Subsection (4)(a)
is extinguished if:
(i) at least 30 days prior to the policy expiration or anniversary date a notice of intention
not to renew the policy beyond the agreed expiration or anniversary date is delivered or sent by
first-class mail by the insurer to the policyholder at the policyholder's last-known address;
(ii) not more than 45 nor less than 14 days prior to the due date of the renewal premium,
the insurer delivers or sends by first-class mail a notice to the policyholder at the policyholder's
last-known address, clearly stating:
(A) the renewal premium;
(B) how [it] the renewal premium may be paid; and
(C) that failure to pay the renewal premium by the due date extinguishes the

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policyholder's right to renewal;
(iii) the policyholder has:
(A) accepted replacement coverage; or
(B) requested or agreed to nonrenewal; or
(iv) the policy is expressly designated as nonrenewable.
(c) Unless the conditions of Subsection (4)(b)(iii) or (iv) apply, an insurer may not fail to
renew an insurance policy as a result of a telephone call or other inquiry that:
(i) references a policy coverage; and
(ii) does not result in the insured requesting payment of a claim [being filed or paid].
(5) (a) (i) Subject to Subsection (5)(b), if the insurer offers or purports to renew the
policy, but on less favorable terms or at higher rates, the new terms or rates take effect on the
renewal date if the insurer delivered or sent by first-class mail to the policyholder notice of the
new terms or rates at least 30 days prior to the expiration date of the prior policy.
(ii) If the insurer did not give the prior notification described in Subsection (5)(a)(i) to the
policyholder, the new terms or rates do not take effect until 30 days after the notice is delivered or
sent by first-class mail, in which case the policyholder may elect to cancel the renewal policy at
any time during the 30-day period.
(iii) Return premiums or additional premium charges shall be calculated proportionately
on the basis that the old rates apply.
(b) Subsection (5)(a) does not apply if the only change in terms that is adverse to the
policyholder is:
(i) a rate increase generally applicable to the class of business to which the policy belongs;
(ii) a rate increase resulting from a classification change based on the altered nature or
extent of the risk insured against; or
(iii) a policy form change made to make the form consistent with Utah law.
(6) (a) If a notice of cancellation or nonrenewal under Subsection (2)(c) does not state
with reasonable precision the facts on which the insurer's decision is based, the insurer shall send
by first-class mail or deliver that information within ten working days after receipt of a written

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request by the policyholder.
(b) A notice under Subsection (2)(c) is not effective unless it contains information about
the policyholder's right to make the request.
(7) If a risk-sharing plan under Section 31A-2-214 exists for the kind of coverage
provided by the insurance being cancelled or nonrenewed, a notice of cancellation or nonrenewal
required under Subsection (2)(c) or (4)(b)(i) may not be effective unless it contains instructions to
the policyholder for applying for insurance through the available risk-sharing plan.
(8) There is no liability on the part of, and no cause of action against, any insurer, its
authorized representatives, agents, employees, or any other person furnishing to the insurer
information relating to the reasons for cancellation or nonrenewal or for any statement made or
information given by them in complying or enabling the insurer to comply with this section unless
actual malice is proved by clear and convincing evidence.
(9) This section does not alter any common law right of contract rescission for material
misrepresentation.
Section 3. Section 31A-22-1308 is enacted to read:
31A-22-1308. Use of loss history by insurers.
(1) For purposes of this section:
(a) "Adverse eligibility or rate decision" means:
(i) declining insurance coverage;
(ii) terminating insurance coverage;
(iii) not renewing insurance coverage; or
(iv) the charging of a higher rate for insurance coverage.
(b) (i) "Loss reporting agency" means any person who regularly engages, in whole or in
part, in the business of assembling or collecting information for the primary purpose of providing
the information to insurers or insurance producers for insurance transactions including assembling
or collecting loss or claims information.
(ii) Notwithstanding Subsection (1)(b)(i), the following persons are not loss reporting
agents:

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(A) a governmental entity;
(B) an insurer;
(C) an insurance producer;
(D) an insurance consultant;
(E) a medical care institution or professional; or
(F) a peer review committee.
(iii) Notwithstanding Subsection (1)(b)(i), the following are not considered a report from
a loss reporting agency:
(A) a report specifically provided for fraud prevention; and
(B) that portion of a report that includes information related to consumer credit behavior.
(iv) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
department may define by rule what constitutes:
(A) a report specifically provided for fraud prevention; and
(B) information related to consumer credit behavior.
(c) (i) "Score" means a numerical value, categorization, or classification that is:
(A) derived from a statistical tool, modeling system, or method; and
(B) developed to predict the likelihood of future insurance claims.
(ii) A numerical value, categorization, or classification described in Subsection (1)(c)(i) is
a score if it is developed to predict the likelihood of future insurance claims regardless of whether
it is developed to predict other factors in addition to predicting future insurance claims.
(2) (a) An insurer may not make an adverse eligibility or rate decision related to personal
lines insurance in whole or in part on the basis of:
(i) a report by a loss reporting agency of a loss if the loss did not result in the insured
requesting the payment of a claim;
(ii) a telephone call or other inquiry by an insured of a loss if the loss did not result in the
insured requesting payment of a claim;
(iii) a loss that occurred when real property covered by the personal lines insurance was
owned by a person other than the:

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(A) insured; or
(B) person seeking insurance; or
(iv) a score if the score is determined in whole or in part on the basis of information
described in Subsection (2)(a)(i), (ii), or (iii).
(b) Notwithstanding Subsection (2)(a), an insurer may:
(i) use the information described in Subsection (2)(a)(iii) to require a review of the
condition of the premises; and
(ii) make an adverse eligibility or rate decision on the basis of the condition of the
premises.
(3) (a) If an insurer uses a score that is derived from information obtained from a loss
reporting agency or an insured, the insurer shall file with the department a certification that the
method used to derive the score complies with the provisions of Subsection (2)(a)(iv).
(b) the insurer shall file a certification required under Subsection (3)(a) within 30 days of
the day on which the score described in Subsection (3)(a) is first used by the insurer.
(c) The department shall classify a certification filed under this Subsection (3) as a
protected record under Subsection 63-2-304 (2) except that the insurer is not required to file the
information specified in Section 63-2-308 .
(d) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
commissioner shall make rules providing for the form and procedure of filing the certification
required by Subsection (3)(a).

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