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S.B. 225

             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 insurance or combination of policies purchased to satisfy
             15      the owner's or operator's security requirement may specifically exclude from
             16      coverage a person who is a resident of the named insured's household or a person
             17      who usually or customarily operates the motor vehicle;
             18          .    provides that the named driver exclusion is only effective if:
             19              .    each person excluded from coverage satisfies the owner's or operator's             
             20      security requirement independently of the named insured;
             21              .    the named insured and the person excluded from coverage each provide written
             22      consent to the exclusion; and
             23              .    the insurer includes the name of each person excluded from coverage in the
             24      evidence of insurance provided to an additional insured or loss payee;
             25          .    provides that the named driver exclusion requirement to obtain owner's or operator's
             26      security does not apply if the excluded person's license has been denied, suspended,
             27      revoked, or disqualified;


             28          .    provides that if the driver license of a person excluded from coverage has been
             29      denied, suspended, revoked, or disqualified and the person excluded from coverage
             30      subsequently operates a motor vehicle, the exclusion shall:
             31              .    exclude all liability coverage and all physical damage coverage without regard
             32      to the comparative fault of the excluded driver;
             33              .    proportionately reduce any benefits otherwise payable to the person excluded
             34      from coverage and by any named insured for certain motor vehicle insurance
             35      benefits payable to the extent the person excluded from coverage was
             36      comparatively at fault; and
             37              .    if the person excluded from coverage is 50% or more at fault in causing the
             38      accident, bar both the excluded driver and any named insured from recovering
             39      any benefits under certain motor vehicle insurance coverage;
             40          .    provides that the named driver exclusion does not apply when the person excluded
             41      from coverage is a non-driving passenger in a motor vehicle or a pedestrian; and
             42          .    makes technical changes.
             43      Monies Appropriated in this Bill:
             44          None
             45      Other Special Clauses:
             46          This bill provides an effective date.
             47      Utah Code Sections Affected:
             48      AMENDS:
             49          31A-22-303, as last amended by Laws of Utah 2008, Chapters 3 and 314
             50      ENACTS:
             51          31A-22-302.5, Utah Code Annotated 1953
             52     
             53      Be it enacted by the Legislature of the state of Utah:
             54          Section 1. Section 31A-22-302.5 is enacted to read:
             55          31A-22-302.5. Named driver exclusions.
             56          (1) A policy of insurance or combination of policies purchased to satisfy the owner's or
             57      operator's security requirement under Section 41-12a-301 may specifically exclude from
             58      coverage:


             59          (a) a person who is a resident of the named insured's household, including a person
             60      who usually makes the person's home in the same household but temporarily lives elsewhere;
             61      or
             62          (b) a person who usually or customarily operates the motor vehicle.
             63          (2) The named driver exclusion under Subsection (1) is effective only if:
             64          (a) at the time of the proposed exclusion, each person excluded from coverage satisfies
             65      the owner's or operator's security requirement under Section 41-12a-301 , independently of the
             66      named insured's proof of owner's or operator's security;
             67          (b) any named insured and the person excluded from coverage each provide written
             68      consent to the exclusion; and
             69          (c) the insurer includes the name of each person excluded from coverage in the
             70      evidence of insurance provided to an additional insured or loss payee.
             71          (3) The provisions of Subsection (2)(a) do not apply to the named driver exclusion of
             72      the person excluded from coverage if the person's driver license has been denied, suspended,
             73      revoked, or disqualified.
             74          (4) The named driver exclusion shall remain effective until removed by the insurer.
             75          (5) If the driver license of a person excluded from coverage under Subsection (1) has
             76      been denied, suspended, revoked, or disqualified and the person excluded from coverage
             77      subsequently operates a motor vehicle, the exclusion shall:
             78          (a) exclude all liability coverage and all physical damage coverage without regard to
             79      the comparative fault of the excluded driver;
             80          (b) proportionately reduce any benefits otherwise payable to the person excluded from
             81      coverage and to any named insured under Subsection (2)(b) for benefits payable under
             82      uninsured motorist coverage, underinsured motorist coverage, personal injury protection
             83      coverage, and first party medical coverage to the extent the person excluded from coverage was
             84      comparatively at fault; and
             85          (c) if the person excluded from coverage is 50% or more at fault in causing the
             86      accident, bar both the excluded driver and any named insured under Subsection (2)(b) from
             87      recovering any benefits under any coverage listed under Subsection (5)(b).
             88          (6) The named driver exclusion under Subsection (1) does not apply when the person
             89      excluded from coverage is:


             90          (a) a non-driving passenger in a motor vehicle; or
             91          (b) a pedestrian.
             92          Section 2. Section 31A-22-303 is amended to read:
             93           31A-22-303. Motor vehicle liability coverage.
             94          (1) (a) In addition to complying with the requirements of Chapter 21, Insurance
             95      Contracts in General, and Chapter 22, Part 2, Liability Insurance in General, a policy of motor
             96      vehicle liability coverage under Subsection 31A-22-302 (1)(a) shall:
             97          (i) name the motor vehicle owner or operator in whose name the policy was purchased,
             98      state that named insured's address, the coverage afforded, the premium charged, the policy
             99      period, and the limits of liability;
             100          (ii) (A) if it is an owner's policy, designate by appropriate reference all the motor
             101      vehicles on which coverage is granted, insure the person named in the policy, insure any other
             102      person using any named motor vehicle with the express or implied permission of the named
             103      insured, and, except as provided in Subsection (7), insure any person included in Subsection
             104      (1)(a)(iii) against loss from the liability imposed by law for damages arising out of the
             105      ownership, maintenance, or use of these motor vehicles within the United States and Canada,
             106      subject to limits exclusive of interest and costs, for each motor vehicle, in amounts not less
             107      than the minimum limits specified under Section 31A-22-304 ; or
             108          (B) if it is an operator's policy, insure the person named as insured against loss from
             109      the liability imposed upon him by law for damages arising out of the insured's use of any motor
             110      vehicle not owned by him, within the same territorial limits and with the same limits of liability
             111      as in an owner's policy under Subsection (1)(a)(ii)(A);
             112          (iii) except as provided in Subsection (7), insure persons related to the named insured
             113      by blood, marriage, adoption, or guardianship who are residents of the named insured's
             114      household, including those who usually make their home in the same household but
             115      temporarily live elsewhere, to the same extent as the named insured;
             116          (iv) where a claim is brought by the named insured or a person described in Subsection
             117      (1)(a)(iii), the available coverage of the policy may not be reduced or stepped-down because:
             118          (A) a permissive user driving a covered motor vehicle is at fault in causing an accident;
             119      or
             120          (B) the named insured or any of the persons described in this Subsection (1)(a)(iii)


             121      driving a covered motor vehicle is at fault in causing an accident; and
             122          (v) cover damages or injury resulting from a covered driver of a motor vehicle who is
             123      stricken by an unforeseeable paralysis, seizure, or other unconscious condition and who is not
             124      reasonably aware that paralysis, seizure, or other unconscious condition is about to occur to the
             125      extent that a person of ordinary prudence would not attempt to continue driving.
             126          (b) The driver's liability under Subsection (1)(a)(v) is limited to the insurance
             127      coverage.
             128          (c) (i) "Guardianship" under Subsection (1)(a)(iii) includes the relationship between a
             129      foster parent and a minor who is in the legal custody of the Division of Child and Family
             130      Services if:
             131          (A) the minor resides in a foster home, as defined in Section 62A-2-101 , with a foster
             132      parent who is the named insured; and
             133          (B) the foster parent has signed to be jointly and severally liable for compensatory
             134      damages caused by the minor's operation of a motor vehicle in accordance with Section
             135      53-3-211 .
             136          (ii) "Guardianship" as defined under this Subsection (1)(c) ceases to exist when a
             137      minor described in Subsection (1)(c)(i)(A) is no longer a resident of the named insured's
             138      household.
             139          (2) (a) A policy containing motor vehicle liability coverage under Subsection
             140      31A-22-302 (1)(a) may:
             141          (i) provide for the prorating of the insurance under that policy with other valid and
             142      collectible insurance;
             143          (ii) grant any lawful coverage in addition to the required motor vehicle liability
             144      coverage;
             145          (iii) if the policy is issued to a person other than a motor vehicle business, limit the
             146      coverage afforded to a motor vehicle business or its officers, agents, or employees to the
             147      minimum limits under Section 31A-22-304 , and to those instances when there is no other valid
             148      and collectible insurance with at least those limits, whether the other insurance is primary,
             149      excess, or contingent; and
             150          (iv) if issued to a motor vehicle business, restrict coverage afforded to anyone other
             151      than the motor vehicle business or its officers, agents, or employees to the minimum limits


             152      under Section 31A-22-304 , and to those instances when there is no other valid and collectible
             153      insurance with at least those limits, whether the other insurance is primary, excess, or
             154      contingent.
             155          (b) (i) The liability insurance coverage of a permissive user of a motor vehicle owned
             156      by a motor vehicle business shall be primary coverage.
             157          (ii) The liability insurance coverage of a motor vehicle business shall be secondary to
             158      the liability insurance coverage of a permissive user as specified under Subsection (2)(b)(i).
             159          (3) Motor vehicle liability coverage need not insure any liability:
             160          (a) under any workers' compensation law under Title 34A, Utah Labor Code;
             161          (b) resulting from bodily injury to or death of an employee of the named insured, other
             162      than a domestic employee, while engaged in the employment of the insured, or while engaged
             163      in the operation, maintenance, or repair of a designated vehicle; or
             164          (c) resulting from damage to property owned by, rented to, bailed to, or transported by
             165      the insured.
             166          (4) An insurance carrier providing motor vehicle liability coverage has the right to
             167      settle any claim covered by the policy, and if the settlement is made in good faith, the amount
             168      of the settlement is deductible from the limits of liability specified under Section 31A-22-304 .
             169          (5) A policy containing motor vehicle liability coverage imposes on the insurer the
             170      duty to defend, in good faith, any person insured under the policy against any claim or suit
             171      seeking damages which would be payable under the policy.
             172          (6) (a) If a policy containing motor vehicle liability coverage provides an insurer with
             173      the defense of lack of cooperation on the part of the insured, that defense is not effective
             174      against a third person making a claim against the insurer, unless there was collusion between
             175      the third person and the insured.
             176          (b) If the defense of lack of cooperation is not effective against the claimant, after
             177      payment, the insurer is subrogated to the injured person's claim against the insured to the extent
             178      of the payment and is entitled to reimbursement by the insured after the injured third person has
             179      been made whole with respect to the claim against the insured.
             180          [(7) A policy of motor vehicle liability coverage under Subsection 31A-22-302 (1) may
             181      specifically exclude from coverage a person who is a resident of the named insured's
             182      household, including a person who usually makes his home in the same household but


             183      temporarily lives elsewhere, if:]
             184          [(a) at the time of the proposed exclusion, each person excluded from coverage
             185      satisfies the owner's or operator's security requirement of Section 41-12a-301 , independently of
             186      the named insured's proof of owner's or operator's security;]
             187          [(b) the named insured and the person excluded from coverage each provide written
             188      consent to the exclusion; and]
             189          [(c) the insurer includes the name of each person excluded from coverage in the
             190      evidence of insurance provided to an additional insured or loss payee.]
             191          [(8)] (7) A policy of motor vehicle liability coverage may limit coverage to the policy
             192      minimum limits under Section 31A-22-304 if the insured motor vehicle is operated by a person
             193      who has consumed any alcohol or any illegal drug or illegal substance if the policy or a
             194      specifically reduced premium was extended to the insured upon express written declaration
             195      executed by the insured that the insured motor vehicle would not be so operated.
             196          [(9)] (8) (a) When a claim is brought exclusively by a named insured or a person
             197      described in Subsection (1)(a)(iii) and asserted exclusively against a named insured or an
             198      individual described in Subsection (1)(a)(iii), the claimant may elect to resolve the claim:
             199          (i) by submitting the claim to binding arbitration; or
             200          (ii) through litigation.
             201          (b) Once the claimant has elected to commence litigation under Subsection [(9)]
             202      (8)(a)(ii), the claimant may not elect to resolve the claim through binding arbitration under this
             203      section without the written consent of both parties and the defendant's liability insurer.
             204          (c) (i) Unless otherwise agreed on in writing by the parties, a claim that is submitted to
             205      binding arbitration under Subsection [(9)] (8)(a)(i) shall be resolved by a panel of three
             206      arbitrators.
             207          (ii) Unless otherwise agreed on in writing by the parties, each party shall select an
             208      arbitrator. The arbitrators selected by the parties shall select a third arbitrator.
             209          (d) Unless otherwise agreed on in writing by the parties, each party will pay the fees
             210      and costs of the arbitrator that party selects. Both parties shall share equally the fees and costs
             211      of the third arbitrator.
             212          (e) Except as otherwise provided in this section, an arbitration procedure conducted
             213      under this section shall be governed by Title 78B, Chapter 11, Utah Uniform Arbitration Act,


             214      unless otherwise agreed on in writing by the parties.
             215          (f) (i) Discovery shall be conducted in accordance with Rules 26b through 36, Utah
             216      Rules of Civil Procedure.
             217          (ii) All issues of discovery shall be resolved by the arbitration panel.
             218          (g) A written decision of two of the three arbitrators shall constitute a final decision of
             219      the arbitration panel.
             220          (h) Prior to the rendering of the arbitration award:
             221          (i) the existence of a liability insurance policy may be disclosed to the arbitration
             222      panel; and
             223          (ii) the amount of all applicable liability insurance policy limits may not be disclosed to
             224      the arbitration panel.
             225          (i) The amount of the arbitration award may not exceed the liability limits of all the
             226      defendant's applicable liability insurance policies, including applicable liability umbrella
             227      policies. If the initial arbitration award exceeds the liability limits of all applicable liability
             228      insurance policies, the arbitration award shall be reduced to an amount equal to the liability
             229      limits of all applicable liability insurance policies.
             230          (j) The arbitration award is the final resolution of all claims between the parties unless
             231      the award was procured by corruption, fraud, or other undue means.
             232          (k) If the arbitration panel finds that the action was not brought, pursued, or defended
             233      in good faith, the arbitration panel may award reasonable fees and costs against the party that
             234      failed to bring, pursue, or defend the claim in good faith.
             235          (l) Nothing in this section is intended to limit any claim under any other portion of an
             236      applicable insurance policy.
             237          [(10)] (9) An at-fault driver or an insurer issuing a policy of insurance under this part
             238      that is covering an at-fault driver may not reduce compensation to an injured party based on the
             239      injured party not being covered by a policy of insurance that provides personal injury
             240      protection coverage under Sections 31A-22-306 through 31A-22-309 .
             241          Section 3. Effective date.
             242          This bill takes effect on July 1, 2010, and applies to all driver exclusions entered into
             243      on or after that date.





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    as of 2-11-10 5:24 PM


Office of Legislative Research and General Counsel


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