H.B. 321

1

BOND LIMIT REQUIREMENTS FOR MOTOR VEHICLE
2 DEALERS
3 2012 GENERAL SESSION
4 STATE OF UTAH
5 Chief Sponsor: David G. Butterfield
6 Senate Sponsor: ____________
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's license bond requirements.
12 Highlighted Provisions:
13 This bill:
14 . on or after July 1, 2013, increases the amount of the corporate surety bond that an
15 applicant must file with the motor vehicle enforcement administrator before a motor
16 vehicle dealer's license is issued; and
17 . makes technical changes.
18 Money Appropriated in this Bill:
19 None
20 Other Special Clauses:
21 This bill takes effect on July 1, 2012.
22 Utah Code Sections Affected:
23 AMENDS:
24 41-3-205, as last amended by Laws of Utah 2010, Chapter 342
25
26 Be it enacted by the Legislature of the state of Utah:
27 Section 1. Section 41-3-205 is amended to read:

28 41-3-205. Licenses -- Bonds required -- Maximum liability -- Action against
29 surety -- Loss of bond.
30 (1) (a) Before a dealer's, special equipment dealer's, crusher's, or body shop's license is
31 issued, the applicant shall file with the administrator a corporate surety bond in the amount of:
32 (i) [$50,000 until June 30, 2006, and $75,000 on or after July 1, 2006] $75,000 until
33 June 30, 2013, and $200,000 on or after July 1, 2013, for a motor vehicle dealer's license;
34 (ii) [$20,000 until June 30, 2006, and] $75,000 [on or after July 1, 2006,] for a special
35 equipment dealer's license;
36 (iii) $10,000 for a motorcycle, off-highway vehicle, or small trailer dealer's or crusher's
37 license; or
38 (iv) $20,000 for a body shop's license.
39 (b) The corporate surety shall be licensed to do business within the state and have a
40 rating of at least B+ by the A.M. Best Company.
41 (c) The form of the bond:
42 (i) shall be approved by the attorney general;
43 (ii) shall be conditioned upon the applicant's conducting business as a dealer without:
44 (A) fraud;
45 (B) fraudulent representation;
46 (C) violating Subsection 41-3-301 (1) which requires a dealer to submit or deliver a
47 certificate of title or manufacturer's certificate of origin; or
48 (D) violating Subsection 41-3-402 (1) which requires payoff of liens on motor vehicles
49 traded in; and
50 (iii) may be continuous in form.
51 (d) The total aggregate liability on the bond to all persons making claims, regardless of
52 the number of claimants or the number of years a bond remains in force, may not exceed the
53 amount of the bond.
54 (2) (a) A cause of action under Subsection (1) may not be maintained against a surety
55 unless:
56 (i) a claim is filed in writing with the administrator within one year after the cause of
57 action arose; and
58 (ii) the action is commenced within two years after the claim was filed with the

59 administrator.
60 (b) The surety or principal shall notify the administrator if a claim on the bond is
61 successfully prosecuted or settled against the surety or principal.
62 (3) (a) A surety or principal may not make a payment on a surety bond to any claimant
63 until six months have expired from the date when the first claim on the bond was filed with the
64 surety or principal in writing.
65 (b) After six months have expired following the filing of the first bond claim, the
66 surety or principal shall:
67 (i) assess the validity of all claims on the bond; and
68 (ii) submit a distribution assessment determined in accordance with Subsection (3)(c)
69 regarding the bond proceeds to the claimants of valid claims for approval.
70 (c) (i) If the total verifiable claims on the bond are less than the bond amount, then
71 each bond claimant shall be entitled to the full amount of a valid claim.
72 (ii) If the total verifiable claims exceed the bond amount, then the proceeds shall be
73 distributed pro rata to the bond claimants of valid claims.
74 (d) If the distribution assessment under Subsection (3)(b) is not unanimously approved
75 by the claimants of all valid claims on the bond, the principal or surety shall file an interpleader
76 action in the state district court where the defaulting dealer was licensed.
77 (4) (a) A person making a claim on the bond shall be awarded attorney fees in cases
78 successfully prosecuted or settled against the surety or principal if the bond has not been
79 depleted.
80 (b) A surety or principal may not be awarded attorney fees that exceed $2,500 for an
81 interpleader action filed under Subsection (3)(d).
82 (5) (a) (i) If a dealer, body shop, or crusher loses possession of the bond required by
83 this chapter, the dealer, body shop, or crusher license is automatically suspended.
84 (ii) All licenses, pocket cards, temporary permits, and special plates issued to the
85 licensee shall be immediately returned to the administrator.
86 (b) A dealer, body shop, or crusher may not continue to use or permit to be used
87 licenses, pocket cards, temporary permits, or special plates until the required bond is on file
88 with the administrator and the license has been reinstated.
89 (6) A representative or consignee of a dealer is not required to file a bond if the dealer

90 for whom the representative or consignee acts fully complies with the provisions of this
91 chapter.
92 Section 2. Effective date.
93 This bill takes effect on July 1, 2012.




Legislative Review Note
as of 2-1-12 12:55 PM

Office of Legislative Research and General Counsel