Text: SSB1206            Text: SSB1208


Senate Study Bill 1207

SENATE FILE BY (PROPOSED COMMITTEE ON COMMERCE BILL BY CO=CHAIRPERSONS BEHN AND WARNSTADT) Passed Senate, Date Passed House, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to various provisions administered by the 2 insurance division of the department of commerce concerning 3 premium tax refunds, the interstate insurance compact, insurer 4 insolvency proceedings, individual health insurance, the small 5 employer carrier reinsurance program, the Iowa comprehensive 6 health association, fire insurance policies, the Iowa 7 insurance guaranty association, the FAIR plan, motor vehicle 8 service contracts, investments by county and state mutual 9 associations, reciprocal or interinsurance contract premium 10 rates, and annuity contracts for cemetery and funeral 11 merchandise and funeral services, and making fees and 12 penalties applicable and providing effective and retroactive 13 applicability dates. 14 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 15 TLSB 3024SC 81 16 av/pj/5 PAG LIN 1 1 Section 1. Section 322.19, subsection 2, paragraph a, Code 1 2 2005, is amended to read as follows: 1 3 a. A motor vehicle service contract as defined in section 1 4 516E.1. 1 5 Sec. 2. Section 432.1, subsection 6, paragraph d, Code 1 6 2005, is amended to read as follows: 1 7 d. The sums prepaid by a company or association under this 1 8 subsection shall be allowed as credits against its premium tax 1 9 liability for the calendar year during which the payments are 1 10 made. If a prepayment made under this subsection exceeds the 1 11 annual premium tax liability, the excess shall be allowed as a 1 12 credit against subsequent prepayment or tax liabilities. The 1 13 commissioner of insurance shall authorize the department of 1 14 revenue to make a cash refund to an insurer, in lieu of a 1 15 credit against subsequent prepayment or tax liabilities, if 1 16 the insurer demonstrates the inability to recoup the funds 1 17 paid via a credit. The commissioner shall adopt rules 1 18 establishing eligibility criteria for such a refund and a 1 19 refund process. The commissioner may suspend or revoke the 1 20 license of a company or association that fails to make a 1 21 prepayment on or before the due date. 1 22 Sec. 3. Section 505A.1, Article II, section 8, Code 2005, 1 23 is amended to read as follows: 1 24 8. "Member" means the person chosen by a compacting state 1 25 as its representative to the commission, or the person's 1 26 designee. The commissioner of insurance shall be the 1 27 representative member of the compact for the state of Iowa. 1 28 Sec. 4. Section 507C.2, Code 2005, is amended by adding 1 29 the following new subsections: 1 30 NEW SUBSECTION. 01. "Affiliate" of or "affiliated" with a 1 31 specific person, means a person that directly or indirectly, 1 32 through one or more intermediaries, controls or is controlled 1 33 by, or is under common control with, the person specified. 1 34 NEW SUBSECTION. 2A. "Commodity contract" means any of the 1 35 following: 2 1 a. A contract for the purchase or sale of a commodity for 2 2 future delivery on, or subject to the rules of, a board of 2 3 trade designated as a contract market by the commodity futures 2 4 trading commission under the federal Commodity Exchange Act, 7 2 5 U.S.C. } 1 et seq., or a board of trade outside the United 2 6 States. 2 7 b. An agreement that is subject to regulation under 2 8 section 19 of the federal Commodity Exchange Act, 7 U.S.C. } 1 2 9 et seq., and that is commonly known to the commodities trade 2 10 as a margin account, margin contract, leverage account, or 2 11 leverage contract. 2 12 c. An agreement or transaction that is subject to 2 13 regulation under section 4c(b) of the federal Commodity 2 14 Exchange Act, 7 U.S.C. } 1 et seq., and that is commonly known 2 15 to the commodities trade as a commodity option. 2 16 NEW SUBSECTION. 2B. "Control" means the same as defined 2 17 in section 521A.1, subsection 3. 2 18 NEW SUBSECTION. 8A. "Forward contract" means a contract 2 19 for the purchase, sale, or transfer of a commodity, as defined 2 20 in section 1 of the federal Commodity Exchange Act, 7 U.S.C. } 2 21 1 et seq., or any similar good, article, service, right, or 2 22 interest that is presently or in the future becomes the 2 23 subject of dealing in the forward contract trade, or product 2 24 or byproduct thereof, with a maturity date more than two days 2 25 after the date the contract is entered into, including, but 2 26 not limited to, a repurchase transaction, reverse repurchase 2 27 transaction, consignment, lease, swap, hedge transaction, 2 28 deposit, loan, option, allocated transaction, unallocated 2 29 transaction, or a combination of them or option on any of 2 30 them. "Forward contract" does not include a commodity 2 31 contract. 2 32 NEW SUBSECTION. 12A. "Netting agreement" means an 2 33 agreement, including terms and conditions incorporated by 2 34 reference therein, including a master agreement, which master 2 35 agreement, together with all schedules, confirmations, 3 1 definitions, and addenda thereto and transactions under any 3 2 thereof, shall be treated as one netting agreement, that 3 3 documents one or more transactions between parties to the 3 4 agreement for or involving one or more qualified financial 3 5 contracts and that provides for the netting or liquidation of 3 6 qualified financial contracts or present or future payment 3 7 obligations or payment entitlements thereunder, including 3 8 liquidation or closeout values relating to such obligations or 3 9 entitlements among the parties to the netting agreement. 3 10 NEW SUBSECTION. 13A. "Qualified financial contract" means 3 11 a commodity contract, forward contract, repurchase agreement, 3 12 securities contract, swap agreement, and any similar agreement 3 13 that the commissioner determines by regulation, resolution, or 3 14 order to be a qualified financial contract for the purposes of 3 15 this chapter. 3 16 NEW SUBSECTION. 15A. "Repurchase agreement" means an 3 17 agreement, including related terms, that provides for the 3 18 transfer of certificates of deposit, eligible bankers' 3 19 acceptances, or securities that are direct obligations of, or 3 20 that are fully guaranteed as to principal and interest by, the 3 21 United States or an agency of the United States against the 3 22 transfer of funds by the transferee of the certificates of 3 23 deposit, eligible bankers' acceptances or securities, with a 3 24 simultaneous agreement by the transferee to transfer to the 3 25 transferor certificates of deposit, eligible bankers' 3 26 acceptances, or securities as described above, at a date 3 27 certain not later than one year after the transfers or on 3 28 demand against the transfer of funds. For the purposes of 3 29 this definition, the items that may be subject to a repurchase 3 30 agreement include, but are not limited to, mortgage=related 3 31 securities, a mortgage loan, and an interest in a mortgage 3 32 loan, but shall not include any participation in a commercial 3 33 mortgage loan, unless the commissioner determines by rule, 3 34 resolution, or order to include the participation within the 3 35 meaning of the term. Repurchase agreement also applies to a 4 1 reverse repurchase agreement. 4 2 NEW SUBSECTION. 16A. "Securities contract" means a 4 3 contract for the purchase, sale, or loan of a security, 4 4 including an option for the repurchase or sale of a security, 4 5 certificate of deposit, or group or index of securities, 4 6 including an interest therein or based on the value thereof, 4 7 or an option entered into on a national securities exchange 4 8 relating to foreign currencies, or the guarantee of a 4 9 settlement of cash or securities by or to a securities 4 10 clearing agency. For the purposes of this definition, the 4 11 term "security" includes a mortgage loan, mortgage=related 4 12 securities, and an interest in any mortgage loan or mortgage= 4 13 related security. 4 14 NEW SUBSECTION. 18A. "Swap agreement" means an agreement, 4 15 including the terms and conditions incorporated by reference 4 16 in an agreement, that is a rate swap agreement, basis swap, 4 17 commodity swap, forward rate agreement, interest rate future, 4 18 interest rate option, forward foreign exchange agreement, spot 4 19 foreign exchange agreement, rate cap agreement, rate floor 4 20 agreement, rate collar agreement, currency swap agreement, 4 21 cross=currency rate swap agreement, currency future, or 4 22 currency option or any other similar agreement, and includes 4 23 any combination of agreements and an option to enter into an 4 24 agreement. 4 25 Sec. 5. NEW SECTION. 507C.28A QUALIFIED FINANCIAL 4 26 CONTRACTS. 4 27 1. Notwithstanding any other provision of this chapter to 4 28 the contrary, including any other provision of this chapter 4 29 permitting the modification of contracts, or other law of a 4 30 state, a person shall not be stayed or prohibited from 4 31 exercising any of the following: 4 32 a. A contractual right to terminate, liquidate, or close 4 33 out any netting agreement or qualified financial contract with 4 34 an insurer because of any of the following: 4 35 (1) The insolvency, financial condition, or default of the 5 1 insurer at any time, provided that the right is enforceable 5 2 under applicable law other than this chapter. 5 3 (2) The commencement of a formal delinquency proceeding 5 4 under this chapter. 5 5 b. Any right under a pledge, security, collateral, or 5 6 guarantee agreement or any other similar security arrangement 5 7 or credit support document relating to a netting agreement or 5 8 qualified financial contract. 5 9 c. Subject to any provision of section 507C.30, subsection 5 10 2, any right to set off or net out any termination value, 5 11 payment amount, or other transfer obligation arising under or 5 12 in connection with a netting agreement or qualified financial 5 13 contract where the counterparty or its guarantor is organized 5 14 under the laws of the United States or a state or foreign 5 15 jurisdiction approved by the securities valuation office or 5 16 the national association of insurance commissioners as 5 17 eligible for netting. 5 18 2. Upon termination of a netting agreement, the net or 5 19 settlement amount, if any, owed by a nondefaulting party to an 5 20 insurer against which an application or petition has been 5 21 filed under this chapter shall be transferred to or on the 5 22 order of the receiver for the insurer, even if the insurer is 5 23 the defaulting party, notwithstanding any provision in the 5 24 netting agreement that may provide that the nondefaulting 5 25 party is not required to pay any net or settlement amount due 5 26 to the defaulting party upon termination. Any limited two= 5 27 way payment provision in a netting agreement with an insurer 5 28 that has defaulted shall be deemed to be a full two=way 5 29 payment provision as against the defaulting insurer. Any such 5 30 amount shall, except to the extent it is subject to one or 5 31 more secondary liens or encumbrances, be a general asset of 5 32 the insurer. 5 33 3. In making any transfer of a netting agreement or 5 34 qualified financial contract of an insurer subject to a 5 35 proceeding under this chapter, the receiver shall do either of 6 1 the following: 6 2 a. Transfer to one party, other than an insurer subject to 6 3 a proceeding under this chapter, all netting agreements and 6 4 qualified financial contracts between a counterparty or any 6 5 affiliate of the counterparty and the insurer that is the 6 6 subject of the proceeding, including all of the following: 6 7 (1) All rights and obligations of each party under each 6 8 such netting agreement and qualified financial contract. 6 9 (2) All property, including any guarantees or credit 6 10 support documents, securing any claims of each party under 6 11 each such netting agreement and qualified financial contract. 6 12 b. Transfer none of the netting agreements, qualified 6 13 financial contracts, rights, obligations, or property referred 6 14 to in paragraph "a" with respect to the counterparty and any 6 15 affiliate of the counterparty. 6 16 4. If a receiver for an insurer makes a transfer of one or 6 17 more netting agreements or qualified financial contracts, the 6 18 receiver shall use the receiver's best efforts to notify any 6 19 person who is a party to the netting agreements or qualified 6 20 financial contracts of the transfer by noon of the receiver's 6 21 local time on the business day following the transfer. For 6 22 purposes of this subsection, "business day" means a day other 6 23 than a Saturday, Sunday, or any day on which either the New 6 24 York stock exchange or the federal reserve bank of New York is 6 25 closed. 6 26 5. Notwithstanding any other provision of this chapter to 6 27 the contrary, a receiver shall not avoid a transfer of money 6 28 or other property arising under or in connection with a 6 29 netting agreement or qualified financial contract, or any 6 30 pledge security, collateral, or guarantee agreement or any 6 31 other similar security arrangement or credit support document 6 32 relating to a netting agreement or qualified financial 6 33 contract, that is made before the commencement of a formal 6 34 delinquency proceeding under this chapter. However, a 6 35 transfer may be avoided under section 507C.28 if the transfer 7 1 was made with actual intent to hinder, delay, or defraud the 7 2 insurer, a receiver appointed for the insurer, or existing or 7 3 future creditors. 7 4 6. In exercising any of its powers under this chapter to 7 5 disaffirm or repudiate a netting agreement or qualified 7 6 financial contract, the receiver must take action with respect 7 7 to each netting agreement or qualified financial contract and 7 8 all transactions entered into in connection therewith, in its 7 9 entirety. Notwithstanding any other provision of this chapter 7 10 to the contrary, any claim of a counterparty against the 7 11 estate arising from the receiver's disaffirmance or 7 12 repudiation of a netting agreement or qualified financial 7 13 contract that has not been previously affirmed in the 7 14 liquidation or in the immediately preceding rehabilitation 7 15 case shall be determined and shall be allowed or disallowed as 7 16 if the claim had arisen before the date of the filing of the 7 17 petition for liquidation or, if a rehabilitation proceeding is 7 18 converted to a liquidation proceeding, as if the claim had 7 19 arisen before the date of filing the petition for 7 20 rehabilitation. The amount of the claim shall be the actual 7 21 direct compensatory damages determined as of the date of the 7 22 disaffirmance or repudiation of the netting agreement or 7 23 qualified financial contract. The term "actual direct 7 24 compensatory damages" does not include punitive or exemplary 7 25 damages, damages for lost profit or lost opportunity, or 7 26 damages for pain and suffering, but does include normal and 7 27 reasonable costs of cover or other reasonable measures of 7 28 damages utilized in the derivatives market for the contract 7 29 and agreement claims. 7 30 7. The term "contractual right" as used in this section 7 31 includes any right, whether or not evidenced in writing, 7 32 arising under statutory or common law, a rule or bylaw of a 7 33 national securities exchange, national securities clearing 7 34 organization or securities clearing agency, a rule or bylaw, 7 35 or a resolution of the governing body of a contract market or 8 1 its clearing organization, or under law merchant. 8 2 8. This section shall not apply to persons who are 8 3 affiliates of the insurer that is the subject of the 8 4 proceeding. 8 5 9. All rights of a counterparty under this chapter shall 8 6 apply to netting agreements and qualified financial contracts 8 7 entered into on behalf of the general account or separate 8 8 accounts, provided that the assets of each separate account 8 9 are available only to counterparties to netting agreements and 8 10 qualified financial contracts entered into on behalf of that 8 11 separate account. 8 12 Sec. 6. Section 507C.30, subsection 2, paragraph a, 8 13 subparagraphs (4) and (5), Code 2005, are amended to read as 8 14 follows: 8 15 (4) The obligation of the person is owed to the affiliate 8 16 of the insurer, or any other entity or association other than 8 17 the insurer. 8 18 (4) (5) The obligation of the person is to pay an 8 19 assessment levied against the members or subscribers of the 8 20 insurer, or is to pay a balance upon a subscription to the 8 21 capital stock of the insurer, or is in any other way in the 8 22 nature of a capital contribution. 8 23 (5) (6) The obligation of the person is to pay earned 8 24 premiums to the insurer. 8 25 Sec. 7. Section 513B.12, Code 2005, is amended by adding 8 26 the following new subsection: 8 27 NEW SUBSECTION. 6. During the period of time that the 8 28 operation of the small employer carrier reinsurance program is 8 29 suspended pursuant to section 513B.13, subsection 14, a small 8 30 employer carrier is not required to make an application to 8 31 become a risk=assuming carrier pursuant to this section. 8 32 Sec. 8. Section 513B.13, subsection 3, Code 2005, is 8 33 amended by adding the following new paragraph: 8 34 NEW PARAGRAPH. e. During the period of time that the 8 35 program is suspended pursuant to subsection 14, the size of 9 1 the board may be reduced with the approval of the 9 2 commissioner. 9 3 Sec. 9. Section 513B.17, subsection 4, Code 2005, is 9 4 amended by striking the subsection. 9 5 Sec. 10. Section 513C.6, Code 2005, is amended by adding 9 6 the following new subsection: 9 7 NEW SUBSECTION. 7. An individual who has coverage as a 9 8 dependent under a basic or standard health benefit plan may, 9 9 when that individual is no longer a dependent under such 9 10 coverage, elect to continue coverage under the basic or 9 11 standard health benefit plan if the individual so elects 9 12 immediately upon termination of the coverage under which the 9 13 individual was covered as a dependent. 9 14 Sec. 11. Section 514B.13, unnumbered paragraph 2, Code 9 15 2005, is amended to read as follows: 9 16 Health maintenance organizations providing services 9 17 exclusively on a group contract basis may limit the open 9 18 enrollment provided for in this section to all members of the 9 19 group covered by the contract, including those members of the 9 20 group who previously waived coverage. 9 21 Sec. 12. Section 514E.2, subsection 1, paragraph a, Code 9 22 2005, is amended to read as follows: 9 23 a. All carriers and all organized delivery systems 9 24 licensed by the director of public health providing health 9 25 insurance or health care services in Iowa, whether on an 9 26 individual or group basis, and all other insurers designated 9 27 by the association's board of directors and approved by the 9 28 commissioner shall be members of the association. 9 29 Sec. 13. Section 514E.2, subsection 5, paragraph l, Code 9 30 2005, is amended to read as follows: 9 31 l. Develop a method of advising applicants of the 9 32 availability of other coverages outside the association, and 9 33 shall promulgate a list of health conditions the existence of 9 34 which would make an applicant eligible without demonstrating a 9 35 rejection of coverage by one carrier. 10 1 Sec. 14. Section 514E.2, subsection 7, Code 2005, is 10 2 amended by adding the following new unnumbered paragraph: 10 3 NEW UNNUMBERED PARAGRAPH. For purposes of this subsection, 10 4 "total health insurance premiums" and "payments for subscriber 10 5 contracts" include, without limitation, premiums or other 10 6 amounts paid to or received by a member for individual and 10 7 group health plan care coverage provided under any chapter of 10 8 the Code or Acts, and "paid losses" includes, without 10 9 limitation, claims paid by a member operating on a self=funded 10 10 basis for individual and group health plan care coverage 10 11 provided under any chapter of the Code or Acts. For purposes 10 12 of calculating and conducting the assessment, the association 10 13 shall have the express authority to require members to report 10 14 on an annual basis each member's total health insurance 10 15 premiums and payments for subscriber contracts and paid 10 16 losses. A member is liable for its share of the assessment 10 17 calculated in accordance with this section regardless of 10 18 whether it participates in the individual insurance market. 10 19 Sec. 15. Section 514E.7, subsection 1, Code 2005, is 10 20 amended by adding the following new paragraphs: 10 21 NEW PARAGRAPH. d. That the individual has a health 10 22 condition that is established by the association's board of 10 23 directors, with the approval of the commissioner, to be 10 24 eligible for plan coverage. 10 25 NEW PARAGRAPH. e. That the individual has coverage under 10 26 a basic or standard health benefit plan under chapter 513C. 10 27 Sec. 16. Section 514E.8, subsection 1, Code 2005, is 10 28 amended to read as follows: 10 29 1. An association policy shall contain provisions under 10 30 which the association is obligated to renew the coverage for 10 31 an individual until the day the individual becomes eligible 10 32 for Medicare coverage based on age, provided that any 10 33 individual who is covered by an association policy and is 10 34 eligible for Medicare coverage based on age prior to January 10 35 1, 2005, may continue to renew the coverage under the 11 1 association policy. 11 2 Sec. 17. Section 515.138, sixth subsection, paragraph 11 3 entitled perils not included, Code 2005, is amended to read as 11 4 follows: 11 5 PERILS NOT INCLUDED. This company shall not be liable for 11 6 loss by fire or other perils insured against in this policy 11 7 caused, directly or indirectly, by: (a) Enemy attack by armed 11 8 forces, including action taken by military, naval or air 11 9 forces in resisting an actual or an immediately impending 11 10 enemy attack; (b) invasion; (c) insurrection; (d) rebellion; 11 11 (e) revolution; (f) civil war; (g) usurped power; (h) order of 11 12 any civil authority except acts of destruction at the time of 11 13 and for the purpose of preventing the spread of fire, provided 11 14 that such fire did not originate from any of the perils 11 15 excluded by this policy; (i) neglect of the an insured to use 11 16 all reasonable means to save and preserve the property at and 11 17 after a loss, or when the property is endangered by fire in 11 18 neighboring premises; (j) nor shall this company be liable for 11 19 loss by theft. 11 20 Sec. 18. Section 515.138, sixth subsection, paragraph 11 21 entitled concealment == fraud, Code 2005, is amended to read 11 22 as follows: 11 23 CONCEALMENT == FRAUD. This entire policy shall be void if, 11 24 whether before or after a loss, the an insured has willfully 11 25 concealed or misrepresented any material fact or circumstance 11 26 concerning this insurance or the subject thereof, or the 11 27 interest of the an insured therein, or in case of any fraud or 11 28 false swearing by the an insured relating thereto. 11 29 Sec. 19. Section 515.138, sixth subsection, paragraph 11 30 entitled conditions suspending or restricting insurance, Code 11 31 2005, is amended to read as follows: 11 32 CONDITIONS SUSPENDING OR RESTRICTING INSURANCE. Unless 11 33 otherwise provided in writing added hereto this company shall 11 34 not be liable for loss occurring under any of the following 11 35 circumstances: 12 1 a. While the hazard is created or increased by any means 12 2 within the control or knowledge of the an insured; or. 12 3 b. While a described building, whether intended for 12 4 occupancy by owner or tenant, is vacant or unoccupied beyond a 12 5 period of sixty consecutive days; or. 12 6 c. As a result of explosion or riot, unless fire ensue, 12 7 and in that event for loss by fire only. 12 8 Sec. 20. Section 515B.2, subsection 4, paragraph b, 12 9 subparagraph (7), Code 2005, is amended to read as follows: 12 10 (7) That would otherwise be a covered claim, but is an 12 11 obligation to or on behalf of a person who has a net worth, on 12 12 the date of the occurrence giving rise to the claim, greater 12 13 than that allowed by the guarantee fund law of the state of 12 14 residence of the claimant, and which state has denied coverage 12 15 to that claimant on that basis. 12 16 Sec. 21. Section 515B.17, Code 2005, is amended to read as 12 17 follows: 12 18 515B.17 TIMELY FILING OF CLAIMS. 12 19 Notwithstanding any other provision of this chapter, a 12 20 covered claim shall not include any claim filed with the 12 21 association after twenty=four months from the date of the 12 22 order of liquidation or after the final date set by the court 12 23 for the filing of claims against the insolvent insurer or its 12 24 receiver, whichever occurs first. 12 25 Sec. 22. Section 515F.36, subsection 2, Code 2005, is 12 26 amended to read as follows: 12 27 2. The committee shall consist of seven members, one of 12 28 whom. 12 29 a. Five of the members shall be elected by to the 12 30 committee, with one member from each of the following: 12 31 a. (1) American insurance association. 12 32 b. (2) Alliance of American insurers Property casualty 12 33 insurers association of America. 12 34 c. National association of independent insurers. 12 35 d. (3) Iowa insurance institute. 13 1 e. (4) Mutual insurance association of Iowa. 13 2 f. (5) Independent insurance agents of Iowa. 13 3 g. b. All other insurers Two of the members shall be 13 4 elected to the committee by other insurer members of the plan. 13 5 Sec. 23. Section 516E.1, Code 2005, is amended to read as 13 6 follows: 13 7 516E.1 DEFINITIONS. 13 8 For the purposes of this chapter: 13 9 1. "Administrator" means the deputy administrator 13 10 appointed pursuant to section 502.601. 13 11 1. 2. "Commissioner" means the commissioner of insurance 13 12 as provided in section 505.1 or the deputy administrator 13 13 appointed under section 502.601. 13 14 3. "Maintenance agreement" means a contract of limited 13 15 duration that provides for scheduled maintenance only. 13 16 2. 4. "Mechanical breakdown insurance" means a policy, 13 17 contract, or agreement that undertakes to perform or provide 13 18 repair or replacement service, or indemnification for that 13 19 service, for the operational or structural failure of a motor 13 20 vehicle due to a defect in materials or skill of work or 13 21 normal wear and tear, and that is issued by an insurance 13 22 company authorized to do business in this state. 13 23 3. 5. "Motor vehicle" means any self=propelled vehicle 13 24 subject to registration under chapter 321. 13 25 4. "Motor vehicle service contract" or "service contract" 13 26 means a contract or agreement given for consideration over and 13 27 above the lease or purchase price of a new or used motor 13 28 vehicle having a gross vehicle weight rating of less than 13 29 sixteen thousand pounds that undertakes to perform or provide 13 30 repair or replacement service, or indemnification for that 13 31 service, for the operational or structural failure of a motor 13 32 vehicle due to a defect in materials or skill of work or 13 33 normal wear and tear, but does not include mechanical 13 34 breakdown insurance or maintenance agreements providing 13 35 scheduled repair and maintenance services for leased vehicles. 14 1 5. 6. "Motor vehicle service contract provider" or 14 2 "provider" "Provider" means a person who issues, makes, 14 3 provides, sells, or offers to sell a motor vehicle service 14 4 contract. 14 5 6. "Motor vehicle service contract reimbursement insurance 14 6 policy" or "reimbursement insurance policy" means a policy of 14 7 insurance providing coverage for all obligations and 14 8 liabilities incurred by a motor vehicle service contract 14 9 provider under the terms of motor vehicle service contracts 14 10 issued by the provider. 14 11 7. "Record" means information stored or preserved in any 14 12 medium, including in an electronic or paper format. A record 14 13 includes but is not limited to documents, books, publications, 14 14 accounts, correspondence, memoranda, agreements, computer 14 15 files, film, microfilm, photographs, and audio or visual 14 16 tapes. 14 17 8. "Reimbursement insurance policy" means a policy of 14 18 insurance issued to a service company and pursuant to which 14 19 the insurer agrees, for the benefit of the service contract 14 20 holders, to discharge all of the obligations and liabilities 14 21 of the service company under the terms of service contracts 14 22 issued by the service company in the event of nonperformance 14 23 by the service company. For the purposes of this definition, 14 24 "all obligations and liabilities" include, but are not limited 14 25 to, failure of the service company to perform under the 14 26 service contract and the return of the unearned service 14 27 company fee in the event of the service company's 14 28 unwillingness or inability to reimburse the unearned service 14 29 company fee in the event of termination of a service contract. 14 30 9. "Service company" means a person who issues and is 14 31 obligated to perform, or arrange for the performance of, 14 32 services pursuant to a service contract. 14 33 10. "Service contract" means a contract or agreement given 14 34 for consideration over and above the lease or purchase price 14 35 of a new or used motor vehicle having a gross vehicle weight 15 1 rating of less than sixteen thousand pounds, that undertakes 15 2 to perform or provide repair or replacement service, or 15 3 indemnification for that service, for the operation or 15 4 structural failure of a motor vehicle due to a defect in 15 5 materials or skill of work or normal wear and tear, but does 15 6 not include mechanical breakdown insurance or maintenance 15 7 agreements. 15 8 8. 11. "Service contract holder" means a person who 15 9 purchases a motor vehicle service contract. 15 10 12. "Third=party administrator" means a person who 15 11 contracts with a service company to be responsible for the 15 12 administration of the service company's service contracts, 15 13 including processing and adjudicating claims pursuant to a 15 14 service contract. 15 15 Sec. 24. Section 516E.2, Code 2005, is amended to read as 15 16 follows: 15 17 516E.2 INSURANCE REQUIRED REQUIREMENTS FOR DOING BUSINESS. 15 18 1. A motor vehicle service contract shall not be issued, 15 19 sold, or offered for sale in this state unless the provider of 15 20 the service contract is insured under a motor vehicle service 15 21 contract reimbursement insurance policy issued by an insurer 15 22 authorized to do business in this state. service company does 15 23 all of the following: 15 24 a. Provides a receipt for the purchase of the service 15 25 contract to the service contract holder. 15 26 b. Provides a copy of the service contract to the service 15 27 contract holder within a reasonable period of time after the 15 28 date of purchase of the service contract. 15 29 2. The issuer of a reimbursement insurance policy shall 15 30 not cancel a reimbursement insurance policy unless a written 15 31 notice has been received by the commissioner and by each 15 32 applicable provider, including automobile dealers and third= 15 33 party administrators. The notice shall fix the date of 15 34 cancellation at a date no earlier than ten days after receipt 15 35 of the notice by the commissioner and by the applicable 16 1 provider. The notice may be made in person or by mail and a 16 2 post office department receipt of certified or registered 16 3 mailing shall be deemed proof of receipt of the notice. A 16 4 service company shall not issue a service contract or arrange 16 5 to perform services pursuant to a service contract unless the 16 6 service company is registered with the commissioner. A 16 7 service company shall file a registration with the 16 8 commissioner annually, on a form prescribed by the 16 9 commissioner, accompanied by a registration fee in the amount 16 10 of five hundred dollars. 16 11 3. In order to assure the faithful performance of a 16 12 service company's obligations to its service contract holders, 16 13 each service company shall do all of the following: 16 14 a. Insure all service contracts under a reimbursement 16 15 insurance policy issued by an insurer authorized to transact 16 16 insurance in this state. 16 17 b. Maintain a funded reserve account for the service 16 18 company's obligations under its service contracts issued and 16 19 outstanding in this state. The reserves shall not be less 16 20 than forty percent of gross consideration received, less 16 21 claims paid, on the sale of the service contracts for all in= 16 22 force service contracts. The reserve account shall be subject 16 23 to examination and review by the commissioner. 16 24 c. File a certificate of deposit issued by a financial 16 25 institution in the name of the commissioner, as trustee, with 16 26 terms and conditions approved by the commissioner as to 16 27 issuer, form, and contents, as a financial security deposit, 16 28 having a value of not less than five percent of the gross 16 29 consideration received by the service company in Iowa on the 16 30 sale of service contracts for all service contracts issued and 16 31 in force, but not less than the amount of twenty=five thousand 16 32 dollars. 16 33 4. The commissioner may issue an order denying, 16 34 suspending, or revoking any registration if the commissioner 16 35 finds that the order is in the public interest and finds any 17 1 of the following: 17 2 a. The registration is incomplete in any material respect 17 3 or contains any statement which, in light of the circumstances 17 4 under which the registration was made, is determined by the 17 5 commissioner to be false or misleading with respect to any 17 6 material fact. 17 7 b. A provision of this chapter or a rule, order, or 17 8 condition lawfully imposed under this chapter, has been 17 9 willfully violated in connection with the sale of service 17 10 contracts by any of the following persons: 17 11 (1) The person filing the registration, but only if the 17 12 person filing the registration is directly or indirectly 17 13 controlled by or acting for the service company. 17 14 (2) The service company, any partner, officer, or director 17 15 of the service company or any person occupying a similar 17 16 status or performing similar functions for the service 17 17 company, or any person directly or indirectly controlling or 17 18 controlled by the service company. 17 19 c. The service company has not filed a document or 17 20 information required under this chapter. 17 21 d. The service company's literature or advertising is 17 22 misleading, incorrect, incomplete, or deceptive. 17 23 e. The service company has failed to pay the proper filing 17 24 fee. However, the commissioner shall vacate an order issued 17 25 pursuant to this paragraph when the proper fee has been paid. 17 26 f. The service company does not have the minimum net 17 27 worth, as determined in accordance with generally accepted 17 28 accounting principles, required under this chapter. 17 29 The commissioner may vacate or modify an order issued under 17 30 this subsection if the commissioner finds that the conditions 17 31 which prompted the entry of the order have changed or that it 17 32 is otherwise in the public interest to do so. 17 33 Sec. 25. Section 516E.3, Code 2005, is amended to read as 17 34 follows: 17 35 516E.3 FILING AND FEE REQUIREMENTS. 18 1 1. SERVICE COMPANIES. 18 2 a. A motor vehicle service contract shall not be issued, 18 3 sold, or offered for sale in this state unless a true and 18 4 correct copy of the service contract, and the provider's 18 5 service company's reimbursement insurance policy have been 18 6 filed with the commissioner by the service company. 18 7 2. b. In addition to any other required filings, an 18 8 accurate copy of the service contract and the provider's 18 9 reimbursement insurance policy, the A service company shall 18 10 file a consent to service of process on the commissioner, and 18 11 such other information as the commissioner requires shall be 18 12 filed annually with the commissioner no later than the first 18 13 day of August. If the first day of August falls on a weekend 18 14 or a holiday, the date for filing shall be the next business 18 15 day. In addition to the annual filing, the provider service 18 16 company shall promptly file copies of any amended documents if 18 17 material amendments have been made in the materials on file 18 18 with the commissioner. If an annual filing is made after the 18 19 first of August and sales have occurred during the period when 18 20 the provider service company was in noncompliance with this 18 21 section, the commissioner shall assess an additional filing 18 22 fee that is two times the amount normally required for an 18 23 annual filing. A fee shall not be charged for interim filings 18 24 made to keep the materials filed with the division current and 18 25 accurate. The annual filing shall be accompanied by a filing 18 26 fee determined by the commissioner which shall be sufficient 18 27 to defray the costs of administering this chapter. 18 28 3. a. c. A motor vehicle service contract provider 18 29 service company shall promptly file the following information 18 30 with the insurance commissioner: 18 31 (1) A change in the name or ownership of the provider 18 32 service company. 18 33 (2) The termination of the provider's service company's 18 34 business. 18 35 b. (3) The provider service company is not required to 19 1 submit a fee as part of this filing. 19 2 2. PROVIDERS. 19 3 a. A service contract shall not be sold or offered for 19 4 sale in this state unless a true and correct copy of the 19 5 service contract has been filed with the commissioner by the 19 6 provider. 19 7 b. A provider shall file a consent to service of process 19 8 on the commissioner and such other information as the 19 9 commissioner requires annually with the commissioner no later 19 10 than August 1. If August 1 falls on a weekend or a holiday, 19 11 the date for filing shall be the next business day. In 19 12 addition to the annual filing, the provider shall promptly 19 13 file copies of any amended documents if material amendments 19 14 have been made in the materials on file with the commissioner. 19 15 If an annual filing is made after August 1 and sales have 19 16 occurred during the period when the provider was in 19 17 noncompliance with this section, the commissioner shall assess 19 18 an additional filing fee that is two times the amount normally 19 19 required for an annual filing. A fee shall not be charged for 19 20 interim filings made to keep the materials filed with the 19 21 division current and accurate. The annual filing shall be 19 22 accompanied by a filing fee in the amount of one hundred 19 23 dollars. 19 24 c. A provider shall promptly file the following 19 25 information with the commissioner: 19 26 (1) A change in the name or ownership of the provider. 19 27 (2) The termination of the provider's business. 19 28 (3) A provider is not required to submit a fee as part of 19 29 this filing. 19 30 Sec. 26. Section 516E.4, Code 2005, is amended by striking 19 31 the section and inserting in lieu thereof the following: 19 32 516E.4 REIMBURSEMENT INSURANCE POLICY REQUIREMENTS. 19 33 1. REQUIRED DISCLOSURES. A reimbursement insurance policy 19 34 insuring a service contract issued, sold, or offered for sale 19 35 in this state shall conspicuously state that, upon failure of 20 1 the service company to perform under the contract, including 20 2 but not limited to a failure to return the unearned 20 3 consideration paid for a service contract in excess of the 20 4 premium, the insurer that issued the policy shall pay on 20 5 behalf of the service company any amount that is owed to the 20 6 service contract holder by the service company to satisfy the 20 7 service company's obligations under a service contract issued 20 8 or sold by the service company. 20 9 2. TERMINATION. As applicable, an insurer that issued a 20 10 reimbursement insurance policy shall not terminate the policy 20 11 unless a written notice has been received by the commissioner 20 12 and by each applicable provider, service company, or third= 20 13 party administrator. The notice shall fix the date of 20 14 termination at a date no earlier than ten days after receipt 20 15 of the notice by the commissioner and by the applicable 20 16 provider, service company, or third=party administrator. The 20 17 notice may be delivered in person or sent by mail, and a 20 18 restricted certified mail return receipt shall be deemed proof 20 19 of receipt of notice. The termination of a reimbursement 20 20 insurance policy shall not reduce the issuer's responsibility 20 21 for a service contract issued by a service company prior to 20 22 the date of termination. 20 23 3. INDEMNIFICATION OR SUBROGATION. This section does not 20 24 prevent or limit the right of an insurer that issued a 20 25 reimbursement insurance policy to seek indemnification from or 20 26 subrogation against a service company if the insurer pays or 20 27 is obligated to pay a service contract holder sums that the 20 28 service company was obligated to pay pursuant to the 20 29 provisions of a service contract or pursuant to a contractual 20 30 agreement. 20 31 Sec. 27. Section 516E.5, Code 2005, is amended to read as 20 32 follows: 20 33 516E.5 DISCLOSURE TO SERVICE CONTRACT HOLDERS == CONTRACT 20 34 PROVISIONS. 20 35 1. A motor vehicle service contract shall not be issued, 21 1 sold, or offered for sale in this state unless the contract 21 2 conspicuously states that the obligations of the provider 21 3 service company to the service contract holder are guaranteed 21 4 under the service contract a reimbursement insurance policy, 21 5 and unless the including a statement in substantially the 21 6 following form: "Obligations of the service company under 21 7 this service contract are guaranteed under a reimbursement 21 8 insurance policy. If the service company fails to pay or 21 9 provide service on a claim within sixty days after proof of 21 10 loss has been filed with the service company, the service 21 11 contract holder is entitled to make a claim directly against 21 12 the reimbursement insurance policy." A claim against a 21 13 reimbursement insurance policy shall also include a claim for 21 14 return of the unearned consideration paid for the service 21 15 contract in excess of the premium paid. A service contract 21 16 shall conspicuously states state the name and address of the 21 17 issuer of the reimbursement insurance policy for that service 21 18 contract. 21 19 2. A motor vehicle service contract shall be written in 21 20 clear, understandable language and the entire contract shall 21 21 be printed or typed in easy=to=read type, size, and style, and 21 22 shall not be issued, sold, or offered for sale in this state 21 23 unless the contract does all of the following: 21 24 a. Clearly and conspicuously states the name and address 21 25 of the service company, describes the service company's 21 26 obligations to perform services or to arrange for the 21 27 performance of services under the service contract, and states 21 28 that the obligations of the provider service company to the 21 29 service contract holder are guaranteed under a service 21 30 contract reimbursement insurance policy. 21 31 b. Clearly and conspicuously states the name and address 21 32 of the issuer of the reimbursement insurance policy. 21 33 c. Identifies the motor vehicle service contract provider, 21 34 the seller of the motor vehicle company obligated to perform 21 35 the service under the service contract, any third=party 22 1 administrator, and the service contract holder to the extent 22 2 that the name and address of the service contract holder has 22 3 been furnished by the service contract holder. 22 4 d. Sets forth the total purchase price of the service 22 5 contract and the terms under which the purchase price of the 22 6 service contract is to be paid. 22 7 e. Sets forth the procedure for making a claim, including 22 8 a telephone number. 22 9 f. Clearly and conspicuously states the dates that 22 10 coverage starts and ends and the existence, terms, and 22 11 conditions of a deductible amount, if any. 22 12 g. Specifies the merchandise or services, or both, to be 22 13 provided and clearly states any and all limitations, 22 14 exceptions, or exclusions. 22 15 h. Sets forth the conditions on which substitution of 22 16 services will be allowed. 22 17 i. Sets forth all of the obligations and duties of the 22 18 service contract holder, including but not limited to the duty 22 19 to protect against any further damage to the motor vehicle, 22 20 and the obligation to notify the provider service company in 22 21 advance of any repair, if any. 22 22 j. Sets forth any and all terms, restrictions, or 22 23 conditions governing transferability of the service contract, 22 24 if any. 22 25 k. Describes or references any and all applicable 22 26 provisions of the Iowa consumer credit code, chapter 537. 22 27 l. States the name and address of the commissioner. 22 28 m. Sets forth any and all conditions on which the service 22 29 contract may be canceled, the terms and conditions for the 22 30 refund of any portion of the purchase price, the identity of 22 31 the person primarily liable to provide any refund, and the 22 32 identity of any other person liable to provide any portion of 22 33 the refund. If the service contract holder cancels the 22 34 service contract, the service company shall mail a written 22 35 notice of termination to the service contract holder within 23 1 fifteen days of the date of the termination. 23 2 n. Permits the service contract holder to cancel and 23 3 return the service contract within at least twenty days of the 23 4 date of mailing the service contract to the service contract 23 5 holder or within at least ten days after delivery of the 23 6 service contract if the service contract is delivered at the 23 7 time of sale of the service contract, or within a longer 23 8 period of time as permitted under the service contract. If no 23 9 claim has been made under the service contract prior to its 23 10 return, the service contract is void and the full purchase 23 11 price of the service contract shall be refunded to the service 23 12 contract holder. A ten percent penalty shall be added each 23 13 month to a refund that is not paid to a service contract 23 14 holder within thirty days of the return of the service 23 15 contract to the service company. The applicable time period 23 16 for cancellation of a service contract shall apply only to the 23 17 original service contract holder that purchased the service 23 18 contract. 23 19 3. A complete copy of the terms of the motor vehicle 23 20 service contract shall be delivered to the prospective service 23 21 contract holder at or before the time that the prospective 23 22 service contract holder makes application for the service 23 23 contract. If there is no separate application procedure, then 23 24 a complete copy of the motor vehicle service contract shall be 23 25 delivered to the service contract holder at or before the time 23 26 the service contract holder becomes bound under the contract. 23 27 Sec. 28. Section 516E.6, Code 2005, is amended to read as 23 28 follows: 23 29 516E.6 COMMISSIONER MAY PROHIBIT CERTAIN SALES == 23 30 INJUNCTION. 23 31 The commissioner shall issue an order instructing the a 23 32 provider, service company, or third=party administrator to 23 33 cease and desist from selling or offering for sale motor 23 34 vehicle service contracts if the commissioner determines that 23 35 the provider, service company, or third=party administrator 24 1 has failed to comply with a provision of this chapter. Upon 24 2 the failure of a motor vehicle provider, service contract 24 3 provider company, or third=party administrator to obey a cease 24 4 and desist order issued by the commissioner, the commissioner 24 5 may give notice in writing of the failure to the attorney 24 6 general, who shall immediately commence an action against the 24 7 provider, service company, or third=party administrator to 24 8 enjoin the provider, service company, or third=party 24 9 administrator from selling or offering for sale motor vehicle 24 10 service contracts until the provider, service company, or 24 11 third=party administrator complies with the provisions of this 24 12 chapter and the district court may issue the injunction. 24 13 Sec. 29. Section 516E.7, Code 2005, is amended to read as 24 14 follows: 24 15 516E.7 RULES. 24 16 The commissioner may adopt rules as provided in chapter 17A 24 17 to administer and enforce the provisions of this chapter and 24 18 to establish minimum standards for disclosure of motor vehicle 24 19 service contract coverage limitations and exclusions. 24 20 Sec. 30. Section 516E.8, Code 2005, is amended to read as 24 21 follows: 24 22 516E.8 EXEMPTION. 24 23 This chapter does not apply to a motor vehicle service 24 24 contract issued by the manufacturer or importer of the motor 24 25 vehicle covered by the service contract or to any third party 24 26 acting in an administrative capacity on the manufacturer's 24 27 behalf in connection with that service contract. 24 28 Sec. 31. Section 516E.9, Code 2005, is amended to read as 24 29 follows: 24 30 516E.9 MISREPRESENTATIONS OF STATE APPROVAL. 24 31 A motor vehicle service contract provider company shall not 24 32 represent or imply in any manner that the provider service 24 33 company has been sponsored, recommended, or approved or that 24 34 the provider's service company's abilities or qualifications 24 35 have in any respect been passed upon by the state of Iowa, 25 1 including the commissioner, the insurance division, or the 25 2 division's securities bureau. 25 3 Sec. 32. Section 516E.10, Code 2005, is amended to read as 25 4 follows: 25 5 516E.10 PROHIBITED ACTS == UNFAIR OR DECEPTIVE TRADE 25 6 PRACTICES. 25 7 1. MISREPRESENTATIONS, FALSE ADVERTISING, AND UNFAIR 25 8 PRACTICES. 25 9 a. Unless licensed as an insurance company, a motor 25 10 vehicle service contract provider company shall not use in its 25 11 name, contracts, or literature, the words "insurance", 25 12 "casualty", "surety", "mutual", or any other words descriptive 25 13 of the insurance, casualty, or surety business or deceptively 25 14 similar to the name or description of any insurance or surety 25 15 corporation, or any other motor vehicle service contract 25 16 provider company. 25 17 b. A motor vehicle service contract provider company shall 25 18 not, without the written consent of the purchaser, knowingly 25 19 charge a purchaser for duplication of coverage or duties 25 20 required by state or federal law, a warranty expressly issued 25 21 by a manufacturer or seller of a product, or an implied 25 22 warranty enforceable against the lessor, seller, or 25 23 manufacturer of a product. 25 24 c. A motor vehicle provider, service contract provider 25 25 company, or third=party administrator shall not make, permit, 25 26 or cause a false or misleading statement, either oral or 25 27 written, in connection with the sale, offer to sell, or 25 28 advertisement of a motor vehicle service contract. 25 29 d. A motor vehicle provider, service contract provider 25 30 company, or third=party administrator shall not permit or 25 31 cause the omission of a material statement in connection with 25 32 the sale, offer to sell, or advertisement of a motor vehicle 25 33 service contract, which under the circumstances should have 25 34 been made in order to make the statement not misleading. 25 35 e. A motor vehicle provider, service contract provider 26 1 company, or third=party administrator shall not make, permit, 26 2 or cause to be made a false or misleading statement, either 26 3 oral or written, about the benefits or services available 26 4 under the motor vehicle service contract. 26 5 f. A motor vehicle provider, service contract provider 26 6 company, or third=party administrator shall not make, permit, 26 7 or cause to be made a statement of practice which has the 26 8 effect of creating or maintaining a fraud. 26 9 g. A motor vehicle provider, service contract provider 26 10 company, or third=party administrator shall not make, publish, 26 11 disseminate, circulate, or place before the public, or cause, 26 12 directly or indirectly, to be made, published, disseminated, 26 13 circulated, or placed before the public in a newspaper, 26 14 magazine, or other publication, or in the form of a notice, 26 15 circular, pamphlet, letter, or poster, or over a radio or 26 16 television station, or in any other way, an advertisement, 26 17 announcement, or statement containing an assertion, 26 18 representation, or statement with respect to the motor vehicle 26 19 service contract industry or with respect to a motor vehicle 26 20 provider, service contract provider company, or third=party 26 21 administrator which is untrue, deceptive, or misleading. It 26 22 is deceptive or misleading to use any combination of words, 26 23 symbols, or physical materials which by their content, 26 24 phraseology, shape, color, or other characteristics are so 26 25 similar to a combination of words, symbols, or physical 26 26 materials used by a manufacturer or of such a nature that the 26 27 use would tend to mislead a person into believing that the 26 28 solicitation is in some manner connected with the 26 29 manufacturer, unless actually authorized or issued by the 26 30 manufacturer. 26 31 h. A bank, savings and loan association, credit union, 26 32 insurance company, or other lending institution shall not 26 33 require the purchase of a motor vehicle service contract as a 26 34 condition of a loan. 26 35 2. DEFAMATION. A motor vehicle provider, service contract 27 1 provider company, or third=party administrator shall not make, 27 2 publish, disseminate, or circulate, directly or indirectly, or 27 3 aid, abet, or encourage the making, publishing, disseminating, 27 4 or circulating of an oral or written statement or a pamphlet, 27 5 circular, article, or literature which is false or maliciously 27 6 critical of or derogatory to the financial condition of a 27 7 person, and which is calculated to injure the person. 27 8 3. BOYCOTT, COERCION, AND INTIMIDATION. A motor vehicle 27 9 provider, service contract provider shall not enter into an 27 10 company, or third=party administrator agreement to commit, or 27 11 by a concerted action commit, an act of boycott, coercion, or 27 12 intimidation resulting in or tending to result in unreasonable 27 13 restraint of, or monopoly in, the service contract industry. 27 14 4. FALSE STATEMENTS. A motor vehicle provider, service 27 15 contract provider company, or third=party administrator shall 27 16 not knowingly file with a supervisory or other public 27 17 official, or knowingly make, publish, disseminate, circulate, 27 18 or deliver to a person, or place before the public, or 27 19 knowingly cause directly or indirectly to be made, published, 27 20 disseminated, circulated, delivered to a person, or placed 27 21 before the public, a false material statement of fact as to 27 22 the financial condition of a person. 27 23 5. FALSE ENTRIES. A motor vehicle provider, service 27 24 contract provider company, or third=party administrator shall 27 25 not knowingly make a false entry of a material fact in a book, 27 26 report, or statement of a person or knowingly fail to make a 27 27 true entry of a material fact pertaining to the business of 27 28 the person in a book, report, or statement of the person. 27 29 6. USED OR REBUILT PARTS. A motor vehicle service 27 30 contract provider company shall not repair a motor vehicle 27 31 covered by a motor vehicle service contract with any of the 27 32 following: 27 33 a. Used parts, unless the provider service company 27 34 receives prior written authorization by the vehicle owner. 27 35 b. Rebuilt parts, unless the parts are rebuilt according 28 1 to national standards recognized by the insurance division. 28 2 7. MARKETING. A provider, service company, or third=party 28 3 administrator shall not market, advertise, offer to sell, or 28 4 sell a service contract by using personal information obtained 28 5 in violation of the federal Driver's Privacy Protection Act, 28 6 18 U.S.C. } 2721 et seq. 28 7 7. 8. VIOLATIONS OF SECTION 714.16. 28 8 a. A violation of this chapter or rules adopted by the 28 9 commissioner pursuant to this chapter is an unfair practice as 28 10 defined in section 714.16. 28 11 b. An enforcement agreement between the commissioner and a 28 12 motor vehicle provider, service contract provider company, or 28 13 third=party administrator does not bar the attorney general 28 14 from bringing an action against the provider, service company, 28 15 or third=party administrator under section 714.16 as to 28 16 allegations that a violation of this chapter constitutes a 28 17 violation of section 714.16. 28 18 Sec. 33. Section 516E.11, Code 2005, is amended to read as 28 19 follows: 28 20 516E.11 RECORDS == EXPLANATION OF REASONS FOR DENIAL OF 28 21 CLAIMS. 28 22 1. A motor vehicle provider, service contract provider 28 23 company, or third=party administrator shall keep accurate 28 24 records concerning transactions regulated under this chapter. 28 25 a. A motor vehicle service contract provider's records 28 26 Records of a provider, service company, or third=party 28 27 administrator shall include all of the following: 28 28 (1) Copies of all service contracts each type of service 28 29 contract issued or sold. 28 30 (2) The name and address of each service contract holder. 28 31 (3) The Claim files which shall contain, at a minimum, the 28 32 dates, amounts, and descriptions of all receipts, claims, and 28 33 expenditures related to service contracts. 28 34 (4) Copies of all materials relating to claims which have 28 35 been denied. 29 1 b. A motor vehicle provider, service contract provider 29 2 company, or third=party administrator shall retain all 29 3 required records pertaining to a service contract holder for 29 4 at least two years after the specified period of coverage has 29 5 expired. A provider, service company, or third=party 29 6 administrator discontinuing business in this state shall 29 7 maintain its records until the provider, service company, or 29 8 third=party administrator furnishes the commissioner 29 9 satisfactory proof that the provider, service company, or 29 10 third=party administrator has discharged all obligations to 29 11 contract holders in this state. 29 12 c. Motor vehicle service contract providers Providers, 29 13 service companies, or third=party administrators shall make 29 14 all records concerning transactions regulated under the 29 15 chapter available to the commissioner for the purpose of 29 16 examination. 29 17 d. A provider, service company, or third=party 29 18 administrator may keep all records required under this chapter 29 19 in an electronic form. If an administrator maintains records 29 20 in a form other than a printed copy, the records shall be 29 21 accessible from a computer terminal available to the 29 22 commissioner and shall be capable of duplication to a legible 29 23 printed copy. 29 24 2. A motor vehicle service contract provider, service 29 25 company, or third=party administrator shall promptly deliver a 29 26 written explanation to the service contract holder, describing 29 27 the reasons for denying a claim or for the offer of a 29 28 compromise settlement, based on all relevant facts or legal 29 29 requirements and referring to applicable provisions of the 29 30 service contract. 29 31 3. A provider, service company, or third=party 29 32 administrator shall keep accurate records concerning 29 33 transactions regulated under this chapter, including a list of 29 34 the locations where service contracts are marketed, sold, 29 35 offered for sale, or performed. 30 1 Sec. 34. Section 516E.12, Code 2005, is amended to read as 30 2 follows: 30 3 516E.12 SERVICE OF PROCESS. 30 4 The commissioner shall be the agent for service of process 30 5 upon a motor vehicle provider, service contract provider 30 6 company, or third=party administrator and an issuer of a 30 7 reimbursement insurance policy. 30 8 Sec. 35. Section 516E.13, subsection 4, unnumbered 30 9 paragraph 1, Code 2005, is amended to read as follows: 30 10 Upon the commissioner's determination that a provider, 30 11 service company, or third=party administrator has engaged, is 30 12 engaging, or is about to engage in any act or practice 30 13 constituting a violation of this chapter or a rule adopted 30 14 pursuant to this chapter, the commissioner may issue a summary 30 15 order directing the person to cease and desist from engaging 30 16 in the act or practice resulting in the violation or to take 30 17 other affirmative action as in the judgment of the 30 18 commissioner is necessary to comply with the requirements of 30 19 this chapter. 30 20 Sec. 36. Section 516E.14, Code 2005, is amended to read as 30 21 follows: 30 22 516E.14 AUDITS. 30 23 The commissioner may examine or cause to be examined the 30 24 records of a motor vehicle provider, service contract provider 30 25 company, or third=party administrator for the purpose of 30 26 verifying compliance with this chapter. The commissioner may 30 27 require, by a subpoena, the attendance of the provider, 30 28 service company, or third=party administrator, or the 30 29 provider's a representative thereof, and any other witness 30 30 whom the commissioner deems necessary or expedient, and the 30 31 production of records relating in any manner to compliance 30 32 with this chapter if a provider, service company, third=party 30 33 administrator, or witness fails or refuses to produce the 30 34 documents for examination when requested by the commissioner. 30 35 Sec. 37. Section 516E.15, subsection 1, paragraph b, Code 31 1 2005, is amended to read as follows: 31 2 b. A motor vehicle provider, service contract provider who 31 3 company, or third=party administrator that fails to file 31 4 documents and information with the commissioner as required 31 5 pursuant to section 516E.3 may be subject to a civil penalty. 31 6 The amount of the civil penalty shall not be more than four 31 7 hundred dollars plus two dollars for each motor vehicle 31 8 service contract that the person executed prior to satisfying 31 9 the filing requirement. However, a person who fails to file 31 10 information regarding a change in the provider's name or the 31 11 termination of the provider's business of a provider, service 31 12 company, or third=party administrator as required pursuant to 31 13 section 516E.3 is subject to a civil penalty of not more than 31 14 five hundred dollars. 31 15 Sec. 38. Section 516E.15, subsection 2, Code 2005, is 31 16 amended to read as follows: 31 17 2. If the commissioner believes that grounds exist for the 31 18 criminal prosecution of a motor vehicle provider, service 31 19 contract provider company, or third=party administrator for 31 20 violating this chapter or any other law of this state, the 31 21 commissioner may forward to the attorney general or the county 31 22 attorney the grounds for the belief, including all evidence in 31 23 the commissioner's possession for action deemed appropriate by 31 24 the attorney general or county attorney. At the request of 31 25 the attorney general, the county attorney shall appear and 31 26 prosecute the action when brought in the county served by the 31 27 county attorney. 31 28 Sec. 39. NEW SECTION. 516E.16 COURT ACTION FOR FAILURE 31 29 TO COOPERATE. 31 30 1. If a person fails or refuses to file a statement or 31 31 report or to produce any books, accounts, papers, 31 32 correspondence, memoranda, purchase agreements, files, or 31 33 other documents or records, or to obey a subpoena issued by 31 34 the commissioner, the commissioner may refer the matter to the 31 35 attorney general, who may apply to a district court to enforce 32 1 compliance. The court may order any of the following: 32 2 a. Injunctive relief restricting or prohibiting the offer 32 3 or sale of service contracts. 32 4 b. Production of documents or records including but not 32 5 limited to books, accounts, papers, correspondence, memoranda, 32 6 purchase agreements, files, or other documents or records. 32 7 c. Such other relief as may be appropriate. 32 8 2. A court order issued pursuant to subsection 1 is 32 9 effective until the person who is subject to the order files 32 10 the statement or report, produces the documents requested, or 32 11 obeys the subpoena. 32 12 Sec. 40. NEW SECTION. 516E.17 NET WORTH REQUIREMENT. 32 13 A service company that has issued or renewed in the 32 14 aggregate one thousand or fewer service contracts during the 32 15 preceding calendar year shall maintain a minimum net worth of 32 16 forty thousand dollars. The minimum net worth to be 32 17 maintained shall be increased by an additional twenty thousand 32 18 dollars for each additional five hundred contracts or fraction 32 19 thereof issued or renewed, up to a maximum required net worth 32 20 of four hundred thousand dollars. At least twenty thousand 32 21 dollars of net worth shall consist of paid=in capital. 32 22 Sec. 41. NEW SECTION. 516E.18 PUBLIC ACCESS TO RECORDS. 32 23 1. The administrator shall keep a register of all filings 32 24 and orders which have been entered. The register shall be 32 25 open for public inspection. 32 26 2. Upon request and for a reasonable fee, the 32 27 administrator shall furnish to any person copies of any 32 28 register entry or any document which is a matter of public 32 29 record and not confidential. Copies shall be available during 32 30 normal business hours and may be certified upon request. In 32 31 any administrative, civil, or criminal proceeding, a certified 32 32 copy is prima facie evidence of the contents of the document 32 33 certified. 32 34 3. Pursuant to chapter 22, the administrator may maintain 32 35 the confidentiality of information obtained during an 33 1 investigation or audit. 33 2 Sec. 42. NEW SECTION. 516E.19 ADMINISTRATION. 33 3 1. This chapter shall be administered by the commissioner. 33 4 The deputy administrator appointed pursuant to section 502.601 33 5 shall be the principal operations officer responsible to the 33 6 commissioner for the routine administration of this chapter 33 7 and management of the administrative staff. In the absence of 33 8 the commissioner, whether because of vacancy in the office, by 33 9 reason of absence, physical disability, or other cause, the 33 10 deputy administrator shall be the acting administrator and 33 11 shall, for the time being, have and exercise the authority 33 12 conferred upon the commissioner. The commissioner may from 33 13 time to time delegate to the deputy administrator any or all 33 14 of the functions assigned to the commissioner in this chapter. 33 15 The deputy administrator shall employ officers, attorneys, 33 16 accountants, auditors, investigators, and other employees as 33 17 shall be needed for the administration of this chapter. 33 18 2. Upon request, the commissioner may honor requests from 33 19 interested persons for interpretive opinions. 33 20 Sec. 43. Section 518.14, subsection 4, paragraph a, Code 33 21 2005, is amended to read as follows: 33 22 a. UNITED STATES GOVERNMENT OBLIGATIONS. Obligations 33 23 Bonds or other evidences of indebtedness issued, assumed, or 33 24 guaranteed by the United States of America, or by an any 33 25 agency or instrumentality of the United States of America, 33 26 include investments in an open=end management investment 33 27 company registered with the federal securities and exchange 33 28 commission under the federal Investment Company Act of 1940, 33 29 15 U.S.C. } 80(a) and operated in accordance with 17 C.F.R. } 33 30 270.2a=7, the portfolio of which is limited to the United 33 31 States obligations described in this paragraph, and which are 33 32 included in the national association of insurance 33 33 commissioners' securities valuation office's United States 33 34 direct obligation = full faith and credit list. 33 35 Sec. 44. Section 518A.12, subsection 4, paragraph a, Code 34 1 2005, is amended to read as follows: 34 2 a. UNITED STATES GOVERNMENT OBLIGATIONS. Obligations 34 3 Bonds or other evidences of indebtedness issued, assumed, or 34 4 guaranteed by the United States of America, or an by any 34 5 agency or instrumentality of the United States of America, 34 6 include investments in an open=end management investment 34 7 company registered with the federal securities and exchange 34 8 commission under the federal Investment Company Act of 1940, 34 9 15 U.S.C. } 80(a) and operated in accordance with 17 C.F.R. } 34 10 270.2a=7, the portfolio of which is limited to the United 34 11 States obligations described in this paragraph, and which are 34 12 included in the national association of insurance 34 13 commissioners' securities valuation office's United States 34 14 direct obligation = full faith and credit list. 34 15 Sec. 45. Section 520.19, Code 2005, is amended to read as 34 16 follows: 34 17 520.19 ANNUAL TAX == FEES. 34 18 In lieu of all other taxes, licenses, charges, and fees 34 19 whatsoever, such attorney shall annually pay to the 34 20 commissioner the same fees as are paid by mutual companies 34 21 transacting the same kind of business, and an annual tax of 34 22 two percent, if a domestic reciprocal organization, and two 34 23 percent, if a foreign reciprocal organization, based upon the 34 24 applicable percentage stated in section 432.1, subsection 4, 34 25 calculated upon the gross premiums or deposits collected from 34 26 subscribers in this state during the preceding calendar year, 34 27 after deducting therefrom returns, or cancellations, and all 34 28 amounts returned to subscribers or credited to their accounts 34 29 as savings, and the amount returned upon canceled policies and 34 30 rejected applications covering property situated or on 34 31 business done within this state. 34 32 Sec. 46. Section 523A.402, subsection 6, paragraph c, Code 34 33 2005, is amended to read as follows: 34 34 c. The annuity shall not be contestable, or limit death 34 35 benefits in the case of suicide, with respect to that portion 35 1 of the face amount of the annuity which is required by 35 2 paragraph "b". The annuity shall not refer to physical 35 3 examination, or otherwise operate as an exclusion, limitation, 35 4 or condition other than requiring submission of proof of death 35 5 or surrender of the annuity at the time the prepaid purchase 35 6 agreement is funded, matures, or is canceled, as the case may 35 7 be. 35 8 Sec. 47. EFFECTIVE AND RETROACTIVE APPLICABILITY DATES. 35 9 This section and the sections of this Act amending sections 35 10 513C.6 and 514E.2, and amending section 514E.7, subsection 1, 35 11 by enacting paragraph "e", being deemed of immediate 35 12 importance, take effect upon enactment. The section of the 35 13 Act amending section 513C.6 is retroactively applicable to 35 14 January 1, 2005, and is applicable on and after that date. 35 15 The sections of the Act amending section 514E.2 are 35 16 retroactively applicable to July 1, 1986, and are applicable 35 17 on and after that date. The portion of the section of the Act 35 18 amending section 514E.7, subsection 1, by enacting paragraph 35 19 "e" is retroactively applicable to January 1, 2005, and is 35 20 applicable on and after that date. 35 21 EXPLANATION 35 22 This bill relates to various provisions administered by the 35 23 insurance division of the department of commerce. 35 24 Code section 432.1 provides for cash refunds of excess 35 25 prepayments of premium tax to an insurance carrier when a 35 26 premium tax credit will not allow recoupment of the funds 35 27 paid. 35 28 Code section 505A.1 is amended to provide that the 35 29 commissioner of insurance shall be the state's representative 35 30 for the interstate insurance product regulation compact. 35 31 Code section 507C.2 is amended to include additional 35 32 definitions, including definitions of certain derivative 35 33 contracts that may be involved in insurer insolvency 35 34 proceedings. 35 35 New Code section 507C.28A is amended concerning rights that 36 1 may be exercised under netting agreements or qualified 36 2 financial contracts under certain circumstances. 36 3 Code section 507C.30 is amended by adding a new 36 4 subparagraph concerning the disallowance of certain setoffs 36 5 during insolvency proceedings. 36 6 Code section 513B.12 is amended to exempt small employer 36 7 carriers from electing risk=assuming status while the small 36 8 employer carrier reinsurance program is suspended. 36 9 Code section 513B.13 is amended to permit reduction of the 36 10 size of the small employer carrier reinsurance program board 36 11 while the program is suspended, with the approval of the 36 12 commissioner of insurance. 36 13 Code section 513B.17 strikes language allowing expansion of 36 14 the small employer carrier reinsurance program to employer 36 15 groups employing 25 to 50 employees if the market is 36 16 constricted and not competitive, since state law already 36 17 includes employee groups of that size in the program. 36 18 Code section 513C.6 is amended to allow an individual who 36 19 has coverage as a dependent under a basic or standard health 36 20 benefit plan to elect to continue coverage under the plan when 36 21 the individual is no longer covered as a dependent under the 36 22 plan. The bill provides that this provision is effective upon 36 23 enactment and is retroactively applicable to January 1, 2005, 36 24 and applies on and after that date. 36 25 Code section 514B.13 is amended to allow a health 36 26 maintenance organization that provides services exclusively on 36 27 a group contract basis to limit the applicability of the open 36 28 enrollment period provided for in the section to members of 36 29 the group covered by the contract, including those members of 36 30 the group who previously waived coverage. 36 31 Code section 514E.2, subsection 1, is amended to provide 36 32 that all carriers and all organized delivery systems licensed 36 33 by the director of public health providing health insurance or 36 34 health care services on an individual or group basis are 36 35 members of the Iowa comprehensive health insurance 37 1 association. 37 2 Code section 514E.2, subsection 5, is amended to strike a 37 3 requirement that the Iowa comprehensive health insurance 37 4 association include a list of health conditions which would 37 5 make an applicant eligible without demonstrating a rejection 37 6 of coverage by one carrier. 37 7 Code section 514E.2, subsection 7, is amended to include 37 8 definitions of "total health insurance premiums" and "payments 37 9 for subscriber contracts" for the purpose of computing 37 10 assessments of members by the Iowa comprehensive health 37 11 insurance association. 37 12 The bill provides that all the amendments to Code section 37 13 514E.2 take effect upon enactment and are retroactively 37 14 applicable to July 1, 1986, and apply on and after that date. 37 15 Code section 514E.7 is amended to provide that an 37 16 individual is eligible for coverage under the Iowa 37 17 comprehensive health insurance association if the person has 37 18 certain health conditions established by the association's 37 19 board of directors with the approval of the commission. Code 37 20 section 514E.7 is also amended to provide eligibility for such 37 21 coverage if the individual has coverage under a basic or 37 22 standard health benefit plan under Code chapter 513C and this 37 23 provision is effective upon enactment and is retroactively 37 24 applicable to January 1, 2005, and applies on and after that 37 25 date. 37 26 Code section 514E.8, subsection 1, is amended to provide 37 27 that an individual who is covered by an association health 37 28 insurance policy and who is eligible for Medicare coverage 37 29 based on age prior to January 1, 2005, may continue to renew 37 30 the coverage under the association policy. 37 31 Code section 515.138 revises language about intentional 37 32 acts in standard fire policy language which are 37 33 noncompensable. 37 34 Code section 515B.2 is amended to change the date used when 37 35 calculating the net worth of a person for the purpose of 38 1 determining whether the person has a covered claim under the 38 2 Iowa insurance guaranty association. 38 3 Code section 515B.17 is amended to provide a date certain 38 4 when claims must be filed in order to be covered by the Iowa 38 5 insurance guaranty association. 38 6 Code section 515F.36 is amended to change the membership of 38 7 the governing board of the FAIR plan, the plan to assure fair 38 8 access to insurance requirements. 38 9 Code chapter 516E concerning service contracts for the 38 10 repair or placement of certain motor vehicles is extensively 38 11 revised. Code section 516E.1 concerning definitions is 38 12 amended to include the addition of definitions for an 38 13 "administrator", for a "third=party administrator", and for a 38 14 "service company", to redefine "provider" and to redefine 38 15 "reimbursement insurance policy" to specify that such a policy 38 16 is for the benefit of the service contract holders. 38 17 Code section 516E.2 is amended to specify the requirements 38 18 for a service company to issue, sell, or offer service 38 19 contracts in this state, including financial security 38 20 requirements to protect service contract holders in the form 38 21 of a funded reserve in the amount of 40 percent of gross 38 22 consideration received by the service company, and the filing 38 23 of a certificate of deposit with the commissioner in the 38 24 amount of not less than 5 percent of consideration received, 38 25 but not less than $25,000. Service companies are also 38 26 required to register with the commissioner of insurance and 38 27 pay a $500 registration fee. Grounds for denial, suspension, 38 28 or revocation of such registrations are also specified. 38 29 Code section 516E.3 is amended to provide that service 38 30 companies and providers, such as auto dealers and other 38 31 sellers, are required to file copies of service contracts with 38 32 the insurance commissioner, including copies of service 38 33 contracts offered for sale or sold, and a copy of the service 38 34 company's reimbursement insurance policy. A provider is 38 35 required to pay a $100 filing fee. Providers and service 39 1 companies are required to make additional filings concerning 39 2 name or ownership changes or cessation of business. 39 3 Code section 516E.4 is amended to require that 39 4 reimbursement insurance policies must include a statement that 39 5 the reimbursement insurer is obligated to pay the service 39 6 contract holder upon a failure of the service company to 39 7 perform, must include specified terms for termination of the 39 8 policy, and may include the right of an insurer to seek 39 9 indemnification or subrogation against a service company if 39 10 the insurer is required to pay a service contract holder 39 11 pursuant to the policy. 39 12 Code section 516E.5 is amended to require service contracts 39 13 to include information about the service company and the 39 14 service company's obligations under the service contract, a 39 15 statement that the obligations of the service company are 39 16 guaranteed under a reimbursement insurance policy and that the 39 17 service contract holder may file claims directly with the 39 18 insurer if the service company fails to perform under the 39 19 service contract. The Code section is also amended to require 39 20 identification of the third=party administrator and the 39 21 service company for the service contract, to require a written 39 22 termination notice of a service contract, and to allow a 39 23 cancellation period by a service contract holder after a 39 24 service contract has been purchased. 39 25 Code sections 516E.6, 516E.7, 516E.8, 516E.9, 516E.10, 39 26 516E.12, 516E.13, 516E.14, and 516E.15 are amended to apply to 39 27 service companies, providers, and third=party administrators. 39 28 Code section 516E.11 is amended to conform with changes in 39 29 definitions made in Code section 516E.1, to require providers, 39 30 service companies, and third=party administrators to comply 39 31 with recordkeeping requirements, to reduce recordkeeping 39 32 requirements as to individual service contracts, and to update 39 33 recordkeeping requirements to reflect modern technology. 39 34 Providers, service companies, and third=party administrators 39 35 are also required to keep a list of locations where service 40 1 contracts are marketed, sold, offered for sale, or performed. 40 2 New Code section 516E.16 allows the insurance commissioner 40 3 to pursue court action when a person does not respond to 40 4 insurance division orders and requests for information. 40 5 New Code section 516E.17 imposes a net worth requirement on 40 6 service companies, based on the number of service contracts 40 7 issued or renewed in a year, that utilizes the same formula 40 8 and amounts that are used for residential service contracts 40 9 under Code chapter 523C. 40 10 New Code section 516E.18 codifies an existing rule 40 11 concerning public access to the records of an administrator. 40 12 New Code section 516E.19 relates to the administration of 40 13 Code chapter 516E by the commissioner of insurance with the 40 14 assistance of the deputy administrator of insurance. 40 15 Code sections 518.14 and 518A.12 are amended to allow 40 16 county and state mutual associations to invest in United 40 17 States obligations that include open=end management investment 40 18 accounts. 40 19 Code section 520.19 is amended to provide that reciprocal 40 20 or interinsurance contracts are subject to the new premium tax 40 21 rate structure contained in Code section 432.1, subsection 4. 40 22 Code section 523A.402 is amended to correct an error in 40 23 language concerning annuity contracts for the purpose of 40 24 funding cemetery and funeral merchandise and funeral services. 40 25 The change will conform the language to changes made in 40 26 legislation contained in House File 2269, which was enacted in 40 27 2004. 40 28 LSB 3024SC 81 40 29 av:rj/pj/5
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