S.B. 54

1

MOTOR VEHICLE DEALER PERFORMANCE
2 BOND AMENDMENTS
3 2007 GENERAL SESSION
4 STATE OF UTAH
5 Chief Sponsor: Dan R. Eastman
6 House Sponsor: Patrick Painter
7
8 LONG TITLE
9 General Description:
10 This bill modifies the Motor Vehicle Business Regulation Act by amending provisions
11 relating to motor vehicle dealer bond provisions.
12 Highlighted Provisions:
13 This bill:
14 . provides that a surety or principal may not make a payment on a surety bond until
15 six months have expired after the first claim on a bond was filed;
16 . provides that after six months after a claim on a bond has been filed, the surety or
17 principal shall assess the validity of all bond claims and submit a distribution
18 assessment to all bond claimants;
19 . provides that if the total verifiable bond claims do not exceed the bond amount, the
20 claimants shall receive the full amount of all valid bond claims;
21 . provides that if the total verifiable bond claims exceed the bond amount, the bond
22 proceeds shall be distributed pro rata to bond claimants of all valid bond claims;
23 . provides that if a distribution assessment is not unanimously approved by all bond
24 claimants, the surety or principal shall file an interpleader action in the state district
25 court where the defaulting dealer is licensed;
26 . provides that a surety or principal may not be awarded attorney fees that exceed
27 $2,500 for an interpleader action; and

28 . makes technical changes.
29 Monies Appropriated in this Bill:
30 None
31 Other Special Clauses:
32 None
33 Utah Code Sections Affected:
34 AMENDS:
35 41-3-205, as last amended by Chapter 90, Laws of Utah 2005
36
37 Be it enacted by the Legislature of the state of Utah:
38 Section 1. Section 41-3-205 is amended to read:
39 41-3-205. Licenses -- Bonds required -- Maximum liability -- Action against
40 surety -- Loss of bond.
41 (1) (a) Before a dealer's, special equipment dealer's, crusher's, or body shop's license is
42 issued, the applicant shall file with the administrator a corporate surety bond in the amount of:
43 (i) $50,000 until June 30, 2006, and $75,000 on or after July 1, 2006, for a motor
44 vehicle dealer's license;
45 (ii) $20,000 until June 30, 2006, and $75,000 on or after July 1, 2006, for a special
46 equipment dealer's license;
47 (iii) $10,000 for a motorcycle, off-highway vehicle, or small trailer dealer's or crusher's
48 license; or
49 (iv) $20,000 for a body shop's license.
50 (b) The corporate surety shall be licensed to do business within the state and have a
51 rating of at least B+ by the A.M. Best Company.
52 (c) The form of the bond:
53 (i) shall be approved by the attorney general;
54 (ii) shall be conditioned upon the applicant's conducting business as a dealer without:
55 (A) fraud;
56 (B) fraudulent representation; or
57 (C) violating Subsection 41-3-301 (1) which requires a dealer to submit or deliver a
58 certificate of title or manufacturer's certificate of origin; and

59 (iii) may be continuous in form.
60 (d) The total aggregate liability on the bond to all persons making claims, regardless of
61 the number of claimants or the number of years a bond remains in force, may not exceed the
62 amount of the bond.
63 (2) (a) A cause of action under Subsection (1) may not be maintained against a surety
64 unless:
65 (i) a claim is filed in writing with the administrator within one year after the cause of
66 action arose; and
67 (ii) the action is commenced within two years after the claim was filed with the
68 administrator.
69 (b) The surety or principal shall notify the administrator if a claim on the bond is
70 successfully prosecuted or settled against the surety or principal.
71 (3) (a) A surety or principal may not make a payment on a surety bond to any claimant
72 until six months have expired from the date when the first claim on the bond was filed with the
73 surety or principal in writing.
74 (b) After six months have expired following the filing of the first bond claim, the
75 surety or principal shall:
76 (i) assess the validity of all claims on the bond; and
77 (ii) submit a distribution assessment determined in accordance with Subsection (3)(c)
78 regarding the bond proceeds to the claimants of valid claims for approval.
79 (c) (i) If the total verifiable claims on the bond are less than the bond amount, then
80 each bond claimant shall be entitled to the full amount of a valid claim.
81 (ii) If the total verifiable claims exceed the bond amount, then the proceeds shall be
82 distributed pro rata to the bond claimants of valid claims.
83 (d) If the distribution assessment under Subsection (3)(b) is not unanimously approved
84 by the claimants of all valid claims on the bond, the principal or surety shall file an interpleader
85 action in the state district court where the defaulting dealer was licensed.
86 [(3)] (4) (a) A person making a claim on the bond shall be awarded attorneys' fees in
87 cases successfully prosecuted or settled against the surety or principal if the bond has not been
88 depleted.
89 (b) A surety or principal may not be awarded attorney fees that exceed $2,500 for an

90 interpleader action filed under Subsection (3)(d).
91 [(4)] (5) (a) (i) If a dealer, body shop, or crusher loses possession of the bond required
92 by this chapter, the dealer, body shop, or crusher license is automatically suspended.
93 (ii) All licenses, pocket cards, temporary permits, and special plates issued to the
94 licensee shall be immediately returned to the administrator.
95 (b) A dealer, body shop, or crusher may not continue to use or permit to be used
96 licenses, pocket cards, temporary permits, or special plates until the required bond is on file
97 with the administrator and the license has been reinstated.
98 [(5)] (6) A representative or consignee of a dealer is not required to file a bond if the
99 dealer for whom the representative or consignee acts fully complies with the provisions of this
100 chapter.




Legislative Review Note
as of 1-15-07 4:29 PM

Office of Legislative Research and General Counsel