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8 LONG TITLE
9 General Description:
10 This bill modifies the Insurance Code to address issues related to cancellation or
11 nonrenewal of insurance.
12 Highlighted Provisions:
13 This bill:
14 ▸ amends the provision related to renewal of certain insurance policies;
15 ▸ clarifies how deadlines are measured; and
16 ▸ makes technical changes.
17 Money Appropriated in this Bill:
18 None
19 Other Special Clauses:
20 None
21 Utah Code Sections Affected:
22 AMENDS:
23 31A-21-303, as last amended by Laws of Utah 2010, Chapter 190
24
25 Be it enacted by the Legislature of the state of Utah:
26 Section 1. Section 31A-21-303 is amended to read:
27 31A-21-303. Cancellation, issuance, renewal.
28 (1) (a) Except as otherwise provided in this section, other statutes, or by rule under
29 Subsection (1)(c), this section applies to all policies of insurance:
30 (i) except for:
31 (A) life insurance;
32 (B) accident and health insurance; and
33 (C) annuities; and
34 (ii) if the policies of insurance are issued on forms that are subject to filing under
35 Subsection 31A-21-201(1).
36 (b) A policy may provide terms more favorable to insureds than this section requires.
37 (c) The commissioner may by rule totally or partially exempt from this section classes
38 of insurance policies in which the insureds do not need protection against arbitrary or
39 unannounced termination.
40 (d) The rights provided by this section are in addition to and do not prejudice any other
41 rights the insureds may have at common law or under other statutes.
42 (2) (a) As used in this Subsection (2), "grounds" means:
43 (i) material misrepresentation;
44 (ii) substantial change in the risk assumed, unless the insurer should reasonably have
45 foreseen the change or contemplated the risk when entering into the contract;
46 (iii) substantial breaches of contractual duties, conditions, or warranties;
47 (iv) attainment of the age specified as the terminal age for coverage, in which case the
48 insurer may cancel by notice under Subsection (2)(c), accompanied by a tender of proportional
49 return of premium; or
50 (v) in the case of motor vehicle insurance, revocation or suspension of the driver's
51 license of:
52 (A) the named insured; or
53 (B) any other person who customarily drives the motor vehicle.
54 (b) (i) Except as provided in Subsection (2)(e) or unless the conditions of Subsection
55 (2)(b)(ii) are met, an insurance policy may not be canceled by the insurer before the earlier of:
56 (A) the expiration of the agreed term; or
57 (B) one year from the effective date of the policy or renewal.
58 (ii) Notwithstanding Subsection (2)(b)(i), an insurance policy may be canceled by the
59 insurer for:
60 (A) nonpayment of a premium when due; or
61 (B) on grounds defined in Subsection (2)(a).
62 (c) (i) The cancellation provided by Subsection (2)(b), except cancellation for
63 nonpayment of premium, is effective no sooner than 30 days after the delivery or first-class
64 mailing of a written notice to the policyholder.
65 (ii) Cancellation for nonpayment of premium is effective no sooner than 10 days after
66 delivery or first class mailing of a written notice to the policyholder.
67 (d) (i) Notice of cancellation for nonpayment of premium shall include a statement of
68 the reason for cancellation.
69 (ii) Subsection (7) applies to the notice required for grounds of cancellation other than
70 nonpayment of premium.
71 (e) (i) Subsections (2)(a) through (d) do not apply to any insurance contract that has not
72 been previously renewed if the contract has been in effect less than 60 days when the written
73 notice of cancellation is mailed or delivered.
74 (ii) A cancellation under this Subsection (2)(e) may not be effective until at least 10
75 days after the delivery to the insured of a written notice of cancellation.
76 (iii) If the notice required by this Subsection (2)(e) is sent by first-class mail, postage
77 prepaid, to the insured at the insured's last-known address, delivery is considered accomplished
78 after the passing, since the mailing date, of the mailing time specified in the Utah Rules of
79 Civil Procedure.
80 (iv) A policy cancellation subject to this Subsection (2)(e) is not subject to the
81 procedures described in Subsection (7).
82 (3) A policy may be issued for a term longer than one year or for an indefinite term if
83 the policy includes a clause providing for cancellation by the insurer by giving notice as
84 provided in Subsection (4)(b)(i) 30 days prior to any anniversary date.
85 (4) (a) Subject to Subsections (2), (3), and (4)(b), a policyholder has a right to have the
86 policy renewed:
87 (i) on the terms then being applied by the insurer to similar risks; and
88 (ii) (A) for an additional period of time equivalent to the expiring term if the agreed
89 term is one year or less; or
90 (B) for one year if the agreed term is longer than one year.
91 (b) Except as provided in Subsections (4)(c) and (5), the right to renewal under
92 Subsection (4)(a) is extinguished if:
93 (i) at least 30 days [
94 intention not to renew the policy beyond the agreed expiration or anniversary date is delivered
95 or sent by first-class mail by the insurer to the policyholder at the policyholder's last-known
96 address;
97 (ii) not more than 45 nor less than 14 days [
98 premium, the insurer delivers or sends by first-class mail a notice to the policyholder at the
99 policyholder's last-known address, clearly stating:
100 (A) the renewal premium;
101 (B) how the renewal premium may be paid, including the due date for payment of the
102 renewal premium; [
103 (C) that failure to pay the renewal premium [
104 policyholder's right to renewal; and
105 (D) that the extinguishment of the right to renew for nonpayment of premium is
106 effective no sooner than 10 days after delivery or first class mailing of a written notice to the
107 policyholder that the policyholder has failed to pay the premium when due;
108 (iii) the policyholder has:
109 (A) accepted replacement coverage; or
110 (B) requested or agreed to nonrenewal; or
111 (iv) the policy is expressly designated as nonrenewable.
112 (c) Unless the conditions of Subsection (4)(b)(iii) or (iv) apply, an insurer may not fail
113 to renew an insurance policy as a result of a telephone call or other inquiry that:
114 (i) references a policy coverage; and
115 (ii) does not result in the insured requesting payment of a claim.
116 (d) Failure to renew under this Subsection (4) is subject to Subsection (5).
117 (5) Notwithstanding Subsection (4), an insurer may not fail to renew the following
118 personal lines insurance policies solely on the basis of:
119 (a) in the case of a motor vehicle insurance policy:
120 (i) a claim from the insured that:
121 (A) results from an accident in which:
122 (I) the insured is not at fault; and
123 (II) the driver of the motor vehicle that is covered by the motor vehicle insurance
124 policy is 21 years of age or older; and
125 (B) is the only claim meeting the condition of Subsection (5)(a)(i)(A) within a
126 36-month period;
127 (ii) a single traffic violation by an insured that:
128 (A) is a violation of a speed limit under Title 41, Chapter 6a, Traffic Code;
129 (B) is not in excess of 10 miles per hour over the speed limit;
130 (C) is not a traffic violation under:
131 (I) Section 41-6a-601;
132 (II) Section 41-6a-604; or
133 (III) Section 41-6a-605;
134 (D) is not a violation by an insured driver who is younger than 21 years of age; and
135 (E) is the only violation meeting the conditions of Subsections (5)(a)(ii)(A) through
136 (D) within a 36-month period; or
137 (iii) a claim for damage that:
138 (A) results solely from:
139 (I) wind;
140 (II) hail;
141 (III) lightning; or
142 (IV) an earthquake;
143 (B) is not preventable by the exercise of reasonable care; and
144 (C) is the only claim meeting the conditions of Subsections (5)(a)(iii)(A) and (B)
145 within a 36-month period; and
146 (b) in the case of a homeowner's insurance policy, a claim by the insured that is for
147 damage that:
148 (i) results solely from:
149 (A) wind;
150 (B) hail; or
151 (C) lightning;
152 (ii) is not preventable by the exercise of reasonable care; and
153 (iii) is the only claim meeting the conditions of Subsections (5)(b)(i) and (ii) within a
154 36-month period.
155 (6) (a) (i) Subject to Subsection (6)(b), if the insurer offers or purports to renew the
156 policy, but on less favorable terms or at higher rates, the new terms or rates take effect on the
157 renewal date if the insurer delivered or sent by first-class mail to the policyholder notice of the
158 new terms or rates at least 30 days prior to the expiration date of the prior policy.
159 (ii) If the insurer did not give the prior notification described in Subsection (6)(a)(i) to
160 the policyholder, the new terms or rates do not take effect until 30 days after the notice is
161 delivered or sent by first-class mail, in which case the policyholder may elect to cancel the
162 renewal policy at any time during the 30-day period.
163 (iii) Return premiums or additional premium charges shall be calculated
164 proportionately on the basis that the old rates apply.
165 (b) Subsection (6)(a) does not apply if the only change in terms that is adverse to the
166 policyholder is:
167 (i) a rate increase generally applicable to the class of business to which the policy
168 belongs;
169 (ii) a rate increase resulting from a classification change based on the altered nature or
170 extent of the risk insured against; or
171 (iii) a policy form change made to make the form consistent with Utah law.
172 (7) (a) If a notice of cancellation or nonrenewal under Subsection (2)(c) does not state
173 with reasonable precision the facts on which the insurer's decision is based, the insurer shall
174 send by first-class mail or deliver that information within 10 working days after receipt of a
175 written request by the policyholder.
176 (b) A notice under Subsection (2)(c) is not effective unless it contains information
177 about the policyholder's right to make the request.
178 (8) (a) An insurer that gives a notice of nonrenewal or cancellation of insurance on a
179 motor vehicle insurance policy issued in accordance with the requirements of Chapter 22, Part
180 3, Motor Vehicle Insurance, for nonpayment of a premium shall provide notice of nonrenewal
181 or cancellation to a lienholder if the insurer has been provided the name and mailing address of
182 the lienholder.
183 (b) The notice described in Subsection (8)(a) shall be provided to the lienholder by first
184 class mail or, if agreed by the parties, any electronic means of communication.
185 (c) A lienholder shall provide a current physical address of notification or an electronic
186 address of notification to an insurer that is required to make a notification under Subsection
187 (8)(a).
188 (9) If a risk-sharing plan under Section 31A-2-214 exists for the kind of coverage
189 provided by the insurance being cancelled or nonrenewed, a notice of cancellation or
190 nonrenewal required under Subsection (2)(c) or (4)(b)(i) may not be effective unless it contains
191 instructions to the policyholder for applying for insurance through the available risk-sharing
192 plan.
193 (10) There is no liability on the part of, and no cause of action against, any insurer, its
194 authorized representatives, agents, employees, or any other person furnishing to the insurer
195 information relating to the reasons for cancellation or nonrenewal or for any statement made or
196 information given by them in complying or enabling the insurer to comply with this section
197 unless actual malice is proved by clear and convincing evidence.
198 (11) This section does not alter any common law right of contract rescission for
199 material misrepresentation.
200 (12) If a person is required to pay a premium in accordance with this section:
201 (a) the person may make the payment using:
202 (i) the United States Postal Service;
203 (ii) a delivery service the commissioner describes or designates by rule made in
204 accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act; or
205 (iii) electronic means; and
206 (b) the payment is considered to be made:
207 (i) for a payment that is mailed using the method described in Subsection (12)(a)(i), on
208 the date the payment is postmarked;
209 (ii) for a payment that is delivered using the method described in Subsection (12)(a)(ii),
210 on the date the delivery service records or marks the payment as having been received by the
211 delivery service; or
212 (iii) for a payment that is made using the method described in Subsection (12)(a)(iii),
213 on the date the payment is made electronically.
Legislative Review Note
as of 12-19-14 11:53 AM
Office of Legislative Research and General Counsel