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Second Substitute S.B. 48

Representative Curtis Oda proposes the following substitute bill:





Sponsor: Patrice M. Arent

             7      LONG TITLE
             8      General Description:
             9          This bill modifies the Insurance Code governing termination or nonrenewal of
             10      insurance policies by insurers.
             11      Highlighted Provisions:
             12          This bill:
             13          .    clarifies references to motor vehicle insurance;
             14          .    prohibits cancellation or nonrenewal of certain insurance policies based solely upon:
             15              .    a claim from an accident that is not the insured's fault for motor vehicle
             16      insurance subject to certain conditions;
             17              .    a single speeding ticket not in excess of ten miles per hour over the speed limit
             18      for motor vehicle insurance subject to certain conditions; or
             19              .    a claim due to damage from specified natural causes subject to certain
             20      conditions; and
             21          .    makes technical changes.
             22      Monies Appropriated in this Bill:
             23          None
             24      Other Special Clauses:
             25          None

             26      Utah Code Sections Affected:
             27      AMENDS:
             28          31A-21-303, as last amended by Chapter 266, Laws of Utah 2004
             30      Be it enacted by the Legislature of the state of Utah:
             31          Section 1. Section 31A-21-303 is amended to read:
             32           31A-21-303. Termination of insurance policies by insurers.
             33          (1) (a) Except as otherwise provided in this section, [in] other statutes, or by rule under
             34      Subsection (1)(c), this section applies to all policies of insurance [other than]:
             35          (i) except for:
             36          (A) life[,] insurance;
             37          (B) accident and health insurance[,]; and
             38          (C) annuities[,]; and
             39          (ii) if the policies of insurance are issued on forms that are subject to filing and
             40      approval under Subsection 31A-21-201 (1).
             41          (b) A policy may provide terms more favorable to insureds than this section requires.
             42          (c) The commissioner may by rule totally or partially exempt from this section classes
             43      of insurance policies in which the insureds do not need protection against arbitrary or
             44      unannounced termination.
             45          (d) The rights provided by this section are in addition to and do not prejudice any other
             46      rights the insureds may have at common law or under other statutes.
             47          (2) (a) As used in this Subsection (2), "grounds" means:
             48          (i) material misrepresentation;
             49          (ii) substantial change in the risk assumed, unless the insurer should reasonably have
             50      foreseen the change or contemplated the risk when entering into the contract;
             51          (iii) substantial breaches of contractual duties, conditions, or warranties;
             52          (iv) attainment of the age specified as the terminal age for coverage, in which case the
             53      insurer may cancel by notice under Subsection (2)(c), accompanied by a tender of proportional
             54      return of premium; or
             55          (v) in the case of [automobile] motor vehicle insurance, revocation or suspension of the
             56      driver's license of:

             57          (A) the named insured; or
             58          (B) any other person who customarily drives the [car] motor vehicle.
             59          (b) (i) Except as provided in Subsection (2)(e) or unless the conditions of Subsection
             60      (2)(b)(ii) are met, an insurance policy may not be canceled by the insurer before the earlier of:
             61          (A) the expiration of the agreed term; or
             62          (B) one year from the effective date of the policy or renewal.
             63          (ii) Notwithstanding Subsection (2)(b)(i), an insurance policy may be canceled by the
             64      insurer for:
             65          (A) nonpayment of a premium when due; or
             66          (B) on grounds defined in Subsection (2)(a).
             67          (c) (i) The cancellation provided by Subsection (2)(b), except cancellation for
             68      nonpayment of premium, is effective no sooner than 30 days after the delivery or first-class
             69      mailing of a written notice to the policyholder.
             70          (ii) Cancellation for nonpayment of premium is effective no sooner than ten days after
             71      delivery or first class mailing of a written notice to the policyholder.
             72          (d) (i) Notice of cancellation for nonpayment of premium shall include a statement of
             73      the reason for cancellation.
             74          (ii) Subsection [(6)] (7) applies to the notice required for grounds of cancellation other
             75      than nonpayment of premium.
             76          (e) (i) Subsections (2)(a) through (d) do not apply to any insurance contract that has not
             77      been previously renewed if the contract has been in effect less than 60 days when the written
             78      notice of cancellation is mailed or delivered.
             79          (ii) A cancellation under this Subsection (2)(e) may not be effective until at least ten
             80      days after the delivery to the insured of a written notice of cancellation.
             81          (iii) If the notice required by this Subsection (2)(e) is sent by first-class mail, postage
             82      prepaid, to the insured at the insured's last-known address, delivery is considered accomplished
             83      after the passing, since the mailing date, of the mailing time specified in the Utah Rules of
             84      Civil Procedure.
             85          (iv) A policy cancellation subject to this Subsection (2)(e) is not subject to the
             86      procedures described in Subsection [(6)] (7).
             87          (f) Cancellation under this Subsection (2) is subject to Subsection (5).

             88          (3) A policy may be issued for a term longer than one year or for an indefinite term if
             89      the policy includes a clause providing for cancellation by the insurer by giving notice as
             90      provided in Subsection (4)(b)(i) 30 days prior to any anniversary date.
             91          (4) (a) Subject to Subsections (2), (3), and (4)(b), a policyholder has a right to have the
             92      policy renewed:
             93          (i) on the terms then being applied by the insurer to similar risks; and
             94          (ii) (A) for an additional period of time equivalent to the expiring term if the agreed
             95      term is one year or less; or
             96          (B) for one year if the agreed term is longer than one year.
             97          (b) Except as provided in [Subsection] Subsections (4)(c) and (5), the right to renewal
             98      under Subsection (4)(a) is extinguished if:
             99          (i) at least 30 days prior to the policy expiration or anniversary date a notice of
             100      intention not to renew the policy beyond the agreed expiration or anniversary date is delivered
             101      or sent by first-class mail by the insurer to the policyholder at the policyholder's last-known
             102      address;
             103          (ii) not more than 45 nor less than 14 days prior to the due date of the renewal
             104      premium, the insurer delivers or sends by first-class mail a notice to the policyholder at the
             105      policyholder's last-known address, clearly stating:
             106          (A) the renewal premium;
             107          (B) how the renewal premium may be paid; and
             108          (C) that failure to pay the renewal premium by the due date extinguishes the
             109      policyholder's right to renewal;
             110          (iii) the policyholder has:
             111          (A) accepted replacement coverage; or
             112          (B) requested or agreed to nonrenewal; or
             113          (iv) the policy is expressly designated as nonrenewable.
             114          (c) Unless the conditions of Subsection (4)(b)(iii) or (iv) apply, an insurer may not fail
             115      to renew an insurance policy as a result of a telephone call or other inquiry that:
             116          (i) references a policy coverage; and
             117          (ii) does not result in the insured requesting payment of a claim.
             118          (d) Failure to renew under this Subsection (4) is subject to Subsection (5).

             119          (5) Notwithstanding Subsections (2) and (4), an insurer may not cancel or fail to renew
             120      the following personal lines insurance policies solely on the basis of:
             121          (a) in the case of a motor vehicle insurance policy:
             122          (i) a claim from the insured that:
             123          (A) results from an accident in which:
             124          (I) the insured is not at fault; and
             125          (II) the driver of the motor vehicle that is covered by the motor vehicle insurance
             126      policy is 21 years of age or older; and
             127          (B) is the only claim meeting the condition of Subsection (5)(a)(i)(A) within a
             128      36-month period;
             129          (ii) a single traffic violation by an insured that:
             130          (A) is a violation of a speed limit under Title 41, Chapter 6a, Traffic Code;
             131          (B) is not in excess of ten miles per hour over the speed limit;
             132          (C) is not a traffic violation under:
             133          (I) Section 41-6a-601 ;
             134          (II) Section 41-6a-604 ; or
             135          (III) Section 41-6a-605 ;
             136          (D) is not a violation by an insured driver who is younger than 21 years of age; and
             137          (E) is the only violation meeting the conditions of Subsections (5)(a)(ii)(A) through
             138      (D) within a 36-month period; or
             139          (iii) a claim for damage that:
             140          (A) results solely from:
             141          (I) wind;
             142          (II) hail;
             143          (III) lightning; or
             144          (IV) an earthquake;
             145          (B) is not preventable by the exercise of reasonable care; and
             146          (C) is the only claim meeting the conditions of Subsections (5)(a)(iii)(A) and (B)
             147      within a 36-month period; and
             148          (b) in the case of a homeowner's insurance policy, a claim by the insured that is for
             149      damage that:

             150          (i) results solely from:
             151          (A) wind;
             152          (B) hail; or
             153          (C) lightning;
             154          (ii) is not preventable by the exercise of reasonable care; and
             155          (iii) is the only claim meeting the conditions of Subsections (5)(b)(i) and (ii) within a
             156      36-month period.
             157          [(5)] (6) (a) (i) Subject to Subsection [(5)] (6)(b), if the insurer offers or purports to
             158      renew the policy, but on less favorable terms or at higher rates, the new terms or rates take
             159      effect on the renewal date if the insurer delivered or sent by first-class mail to the policyholder
             160      notice of the new terms or rates at least 30 days prior to the expiration date of the prior policy.
             161          (ii) If the insurer did not give the prior notification described in Subsection [(5)]
             162      (6)(a)(i) to the policyholder, the new terms or rates do not take effect until 30 days after the
             163      notice is delivered or sent by first-class mail, in which case the policyholder may elect to cancel
             164      the renewal policy at any time during the 30-day period.
             165          (iii) Return premiums or additional premium charges shall be calculated
             166      proportionately on the basis that the old rates apply.
             167          (b) Subsection [(5)] (6)(a) does not apply if the only change in terms that is adverse to
             168      the policyholder is:
             169          (i) a rate increase generally applicable to the class of business to which the policy
             170      belongs;
             171          (ii) a rate increase resulting from a classification change based on the altered nature or
             172      extent of the risk insured against; or
             173          (iii) a policy form change made to make the form consistent with Utah law.
             174          [(6)] (7) (a) If a notice of cancellation or nonrenewal under Subsection (2)(c) does not
             175      state with reasonable precision the facts on which the insurer's decision is based, the insurer
             176      shall send by first-class mail or deliver that information within ten working days after receipt of
             177      a written request by the policyholder.
             178          (b) A notice under Subsection (2)(c) is not effective unless it contains information
             179      about the policyholder's right to make the request.
             180          [(7)] (8) If a risk-sharing plan under Section 31A-2-214 exists for the kind of coverage

             181      provided by the insurance being cancelled or nonrenewed, a notice of cancellation or
             182      nonrenewal required under Subsection (2)(c) or (4)(b)(i) may not be effective unless it contains
             183      instructions to the policyholder for applying for insurance through the available risk-sharing
             184      plan.
             185          [(8)] (9) There is no liability on the part of, and no cause of action against, any insurer,
             186      its authorized representatives, agents, employees, or any other person furnishing to the insurer
             187      information relating to the reasons for cancellation or nonrenewal or for any statement made or
             188      information given by them in complying or enabling the insurer to comply with this section
             189      unless actual malice is proved by clear and convincing evidence.
             190          [(9)] (10) This section does not alter any common law right of contract rescission for
             191      material misrepresentation.

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