S.B. 225 Enrolled

1

MOTOR VEHICLE INSURANCE - NAMED
2 DRIVER EXCLUSION
3 2010 GENERAL SESSION
4 STATE OF UTAH
5 Chief Sponsor: Lyle W. Hillyard
6 House Sponsor: Jack R. Draxler
7
8 LONG TITLE
9 General Description:
10 This bill modifies the Insurance Code by amending provisions relating to named driver
11 exclusions for motor vehicle insurance coverage.
12 Highlighted Provisions:
13 This bill:
14 . provides that a policy of personal lines insurance or combination of personal lines
15 policies purchased to satisfy the owner's or operator's security requirement may
16 specifically exclude from coverage a person who is a resident of the named
17 insured's household or a person who usually or customarily operates the motor
18 vehicle;
19 . provides that the named driver exclusion is only effective if:
20 . each person excluded from coverage satisfies the owner's or operator's
21 security requirement independently of the named insured;
22 . the named insured and the person excluded from coverage each provide written
23 consent to the exclusion; and
24 . the insurer includes the name of each person excluded from coverage in the
25 evidence of insurance provided to an additional insured or loss payee;
26 . provides that the named driver exclusion requirement to obtain owner's or
27 operator's security does not apply if the excluded person's license has been denied,
28 suspended, or revoked;
29 . provides that if the driver license of a person excluded from coverage has been

30 denied, suspended, revoked, or disqualified and the person excluded from coverage
31 subsequently operates a motor vehicle, the exclusion shall:
32 . exclude all liability coverage and all physical damage coverage without regard
33 to the comparative fault of the excluded driver;
34 . proportionately reduce any benefits otherwise payable to the person excluded
35 from coverage and by any named insured for certain motor vehicle insurance
36 benefits payable to the extent the person excluded from coverage was
37 comparatively at fault; and
38 . if the person excluded from coverage is 50% or more at fault in causing the
39 accident, bar both the excluded driver and any named insured from recovering
40 any benefits under certain motor vehicle insurance coverage;
41 . provides that the named driver exclusion does not apply when the person excluded
42 from coverage is a non-driving passenger in a motor vehicle or a pedestrian; and
43 . makes technical changes.
44 Monies Appropriated in this Bill:
45 None
46 Other Special Clauses:
47 This bill provides an effective date.
48 Utah Code Sections Affected:
49 AMENDS:
50 31A-22-303, as last amended by Laws of Utah 2008, Chapters 3 and 314
51 ENACTS:
52 31A-22-302.5, Utah Code Annotated 1953
53
54 Be it enacted by the Legislature of the state of Utah:
55 Section 1. Section 31A-22-302.5 is enacted to read:
56 31A-22-302.5. Named driver exclusions.
57 (1) A policy of personal lines insurance or combination of personal lines policies

58 purchased to satisfy the owner's or operator's security requirement under Section 41-12a-301
59 may specifically exclude from coverage:
60 (a) a person who is a resident of the named insured's household, including a person
61 who usually makes the person's home in the same household but temporarily lives elsewhere;
62 or
63 (b) a person who usually or customarily operates the motor vehicle.
64 (2) The named driver exclusion under Subsection (1) is effective only if:
65 (a) at the time of the proposed exclusion, each person excluded from coverage satisfies
66 the owner's or operator's security requirement under Section 41-12a-301 , independently of the
67 named insured's proof of owner's or operator's security;
68 (b) any named insured and the person excluded from coverage each provide written
69 consent to the exclusion; and
70 (c) the insurer includes the name of each person excluded from coverage in the
71 evidence of insurance provided to an additional insured or loss payee.
72 (3) The provisions of Subsection (2)(a) do not apply to the named driver exclusion of
73 the person excluded from coverage if the person's driver license has been denied, suspended,
74 or revoked.
75 (4) The named driver exclusion shall remain effective until removed by the insurer.
76 (5) If the driver license of a person excluded from coverage under Subsection (1) has
77 been denied, suspended, revoked, or disqualified and the person excluded from coverage
78 subsequently operates a motor vehicle, the exclusion shall:
79 (a) exclude all liability coverage and all physical damage coverage without regard to
80 the comparative fault of the excluded driver;
81 (b) proportionately reduce any benefits otherwise payable to the person excluded from
82 coverage and to any named insured under Subsection (2)(b) for benefits payable under
83 uninsured motorist coverage, underinsured motorist coverage, personal injury protection
84 coverage, and first party medical coverage to the extent the person excluded from coverage
85 was comparatively at fault; and

86 (c) if the person excluded from coverage is 50% or more at fault in causing the
87 accident, bar both the excluded driver and any named insured under Subsection (2)(b) from
88 recovering any benefits under any coverage listed under Subsection (5)(b).
89 (6) The named driver exclusion under Subsection (1) does not apply when the person
90 excluded from coverage is:
91 (a) a non-driving passenger in a motor vehicle; or
92 (b) a pedestrian.
93 Section 2. Section 31A-22-303 is amended to read:
94 31A-22-303. Motor vehicle liability coverage.
95 (1) (a) In addition to complying with the requirements of Chapter 21, Insurance
96 Contracts in General, and Chapter 22, Part 2, Liability Insurance in General, a policy of motor
97 vehicle liability coverage under Subsection 31A-22-302 (1)(a) shall:
98 (i) name the motor vehicle owner or operator in whose name the policy was purchased,
99 state that named insured's address, the coverage afforded, the premium charged, the policy
100 period, and the limits of liability;
101 (ii) (A) if it is an owner's policy, designate by appropriate reference all the motor
102 vehicles on which coverage is granted, insure the person named in the policy, insure any other
103 person using any named motor vehicle with the express or implied permission of the named
104 insured, and, except as provided in [Subsection (7)] Section 31A-22-302.5 , insure any person
105 included in Subsection (1)(a)(iii) against loss from the liability imposed by law for damages
106 arising out of the ownership, maintenance, or use of these motor vehicles within the United
107 States and Canada, subject to limits exclusive of interest and costs, for each motor vehicle, in
108 amounts not less than the minimum limits specified under Section 31A-22-304 ; or
109 (B) if it is an operator's policy, insure the person named as insured against loss from
110 the liability imposed upon him by law for damages arising out of the insured's use of any
111 motor vehicle not owned by him, within the same territorial limits and with the same limits of
112 liability as in an owner's policy under Subsection (1)(a)(ii)(A);
113 (iii) except as provided in [Subsection (7)] Section 31A-22-302.5 , insure persons

114 related to the named insured by blood, marriage, adoption, or guardianship who are residents
115 of the named insured's household, including those who usually make their home in the same
116 household but temporarily live elsewhere, to the same extent as the named insured;
117 (iv) where a claim is brought by the named insured or a person described in
118 Subsection (1)(a)(iii), the available coverage of the policy may not be reduced or
119 stepped-down because:
120 (A) a permissive user driving a covered motor vehicle is at fault in causing an
121 accident; or
122 (B) the named insured or any of the persons described in this Subsection (1)(a)(iii)
123 driving a covered motor vehicle is at fault in causing an accident; and
124 (v) cover damages or injury resulting from a covered driver of a motor vehicle who is
125 stricken by an unforeseeable paralysis, seizure, or other unconscious condition and who is not
126 reasonably aware that paralysis, seizure, or other unconscious condition is about to occur to
127 the extent that a person of ordinary prudence would not attempt to continue driving.
128 (b) The driver's liability under Subsection (1)(a)(v) is limited to the insurance
129 coverage.
130 (c) (i) "Guardianship" under Subsection (1)(a)(iii) includes the relationship between a
131 foster parent and a minor who is in the legal custody of the Division of Child and Family
132 Services if:
133 (A) the minor resides in a foster home, as defined in Section 62A-2-101 , with a foster
134 parent who is the named insured; and
135 (B) the foster parent has signed to be jointly and severally liable for compensatory
136 damages caused by the minor's operation of a motor vehicle in accordance with Section
137 53-3-211 .
138 (ii) "Guardianship" as defined under this Subsection (1)(c) ceases to exist when a
139 minor described in Subsection (1)(c)(i)(A) is no longer a resident of the named insured's
140 household.
141 (2) (a) A policy containing motor vehicle liability coverage under Subsection

142 31A-22-302 (1)(a) may:
143 (i) provide for the prorating of the insurance under that policy with other valid and
144 collectible insurance;
145 (ii) grant any lawful coverage in addition to the required motor vehicle liability
146 coverage;
147 (iii) if the policy is issued to a person other than a motor vehicle business, limit the
148 coverage afforded to a motor vehicle business or its officers, agents, or employees to the
149 minimum limits under Section 31A-22-304 , and to those instances when there is no other
150 valid and collectible insurance with at least those limits, whether the other insurance is
151 primary, excess, or contingent; and
152 (iv) if issued to a motor vehicle business, restrict coverage afforded to anyone other
153 than the motor vehicle business or its officers, agents, or employees to the minimum limits
154 under Section 31A-22-304 , and to those instances when there is no other valid and collectible
155 insurance with at least those limits, whether the other insurance is primary, excess, or
156 contingent.
157 (b) (i) The liability insurance coverage of a permissive user of a motor vehicle owned
158 by a motor vehicle business shall be primary coverage.
159 (ii) The liability insurance coverage of a motor vehicle business shall be secondary to
160 the liability insurance coverage of a permissive user as specified under Subsection (2)(b)(i).
161 (3) Motor vehicle liability coverage need not insure any liability:
162 (a) under any workers' compensation law under Title 34A, Utah Labor Code;
163 (b) resulting from bodily injury to or death of an employee of the named insured, other
164 than a domestic employee, while engaged in the employment of the insured, or while engaged
165 in the operation, maintenance, or repair of a designated vehicle; or
166 (c) resulting from damage to property owned by, rented to, bailed to, or transported by
167 the insured.
168 (4) An insurance carrier providing motor vehicle liability coverage has the right to
169 settle any claim covered by the policy, and if the settlement is made in good faith, the amount

170 of the settlement is deductible from the limits of liability specified under Section 31A-22-304 .
171 (5) A policy containing motor vehicle liability coverage imposes on the insurer the
172 duty to defend, in good faith, any person insured under the policy against any claim or suit
173 seeking damages which would be payable under the policy.
174 (6) (a) If a policy containing motor vehicle liability coverage provides an insurer with
175 the defense of lack of cooperation on the part of the insured, that defense is not effective
176 against a third person making a claim against the insurer, unless there was collusion between
177 the third person and the insured.
178 (b) If the defense of lack of cooperation is not effective against the claimant, after
179 payment, the insurer is subrogated to the injured person's claim against the insured to the
180 extent of the payment and is entitled to reimbursement by the insured after the injured third
181 person has been made whole with respect to the claim against the insured.
182 [(7) A policy of motor vehicle liability coverage under Subsection 31A-22-302 (1) may
183 specifically exclude from coverage a person who is a resident of the named insured's
184 household, including a person who usually makes his home in the same household but
185 temporarily lives elsewhere, if:]
186 [(a) at the time of the proposed exclusion, each person excluded from coverage
187 satisfies the owner's or operator's security requirement of Section 41-12a-301 , independently
188 of the named insured's proof of owner's or operator's security;]
189 [(b) the named insured and the person excluded from coverage each provide written
190 consent to the exclusion; and]
191 [(c) the insurer includes the name of each person excluded from coverage in the
192 evidence of insurance provided to an additional insured or loss payee.]
193 [(8)] (7) A policy of motor vehicle liability coverage may limit coverage to the policy
194 minimum limits under Section 31A-22-304 if the insured motor vehicle is operated by a
195 person who has consumed any alcohol or any illegal drug or illegal substance if the policy or a
196 specifically reduced premium was extended to the insured upon express written declaration
197 executed by the insured that the insured motor vehicle would not be so operated.

198 [(9)] (8) (a) When a claim is brought exclusively by a named insured or a person
199 described in Subsection (1)(a)(iii) and asserted exclusively against a named insured or an
200 individual described in Subsection (1)(a)(iii), the claimant may elect to resolve the claim:
201 (i) by submitting the claim to binding arbitration; or
202 (ii) through litigation.
203 (b) Once the claimant has elected to commence litigation under Subsection [(9)]
204 (8)(a)(ii), the claimant may not elect to resolve the claim through binding arbitration under
205 this section without the written consent of both parties and the defendant's liability insurer.
206 (c) (i) Unless otherwise agreed on in writing by the parties, a claim that is submitted to
207 binding arbitration under Subsection [(9)] (8)(a)(i) shall be resolved by a panel of three
208 arbitrators.
209 (ii) Unless otherwise agreed on in writing by the parties, each party shall select an
210 arbitrator. The arbitrators selected by the parties shall select a third arbitrator.
211 (d) Unless otherwise agreed on in writing by the parties, each party will pay the fees
212 and costs of the arbitrator that party selects. Both parties shall share equally the fees and costs
213 of the third arbitrator.
214 (e) Except as otherwise provided in this section, an arbitration procedure conducted
215 under this section shall be governed by Title 78B, Chapter 11, Utah Uniform Arbitration Act,
216 unless otherwise agreed on in writing by the parties.
217 (f) (i) Discovery shall be conducted in accordance with Rules 26b through 36, Utah
218 Rules of Civil Procedure.
219 (ii) All issues of discovery shall be resolved by the arbitration panel.
220 (g) A written decision of two of the three arbitrators shall constitute a final decision of
221 the arbitration panel.
222 (h) Prior to the rendering of the arbitration award:
223 (i) the existence of a liability insurance policy may be disclosed to the arbitration
224 panel; and
225 (ii) the amount of all applicable liability insurance policy limits may not be disclosed

226 to the arbitration panel.
227 (i) The amount of the arbitration award may not exceed the liability limits of all the
228 defendant's applicable liability insurance policies, including applicable liability umbrella
229 policies. If the initial arbitration award exceeds the liability limits of all applicable liability
230 insurance policies, the arbitration award shall be reduced to an amount equal to the liability
231 limits of all applicable liability insurance policies.
232 (j) The arbitration award is the final resolution of all claims between the parties unless
233 the award was procured by corruption, fraud, or other undue means.
234 (k) If the arbitration panel finds that the action was not brought, pursued, or defended
235 in good faith, the arbitration panel may award reasonable fees and costs against the party that
236 failed to bring, pursue, or defend the claim in good faith.
237 (l) Nothing in this section is intended to limit any claim under any other portion of an
238 applicable insurance policy.
239 [(10)] (9) An at-fault driver or an insurer issuing a policy of insurance under this part
240 that is covering an at-fault driver may not reduce compensation to an injured party based on
241 the injured party not being covered by a policy of insurance that provides personal injury
242 protection coverage under Sections 31A-22-306 through 31A-22-309 .
243 Section 3. Effective date.
244 This bill takes effect on July 1, 2010, and applies to all driver exclusions entered into
245 on or after that date.