2002 Legislation
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SENATE BILL NO. 1402 – MV service contracts/Insurance Dept

SENATE BILL NO. 1402

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S1402.......................................by COMMERCE AND HUMAN RESOURCES
MOTOR VEHICLE SERVICE CONTRACTS - Amends and repeals existing law to remove
duties and responsibilities of the director of the Department of Insurance
for the review of examinations, receipt of notice of policy cancellations,
and other recordkeeping requirements involving motor vehicle service
contract providers.
                                                                        
02/08    Senate intro - 1st rdg - to printing
02/11    Rpt prt - to Com/HuRes
02/15    Rpt out - rec d/p - to 2nd rdg
02/18    2nd rdg - to 3rd rdg
02/21    3rd rdg - PASSED - 17-10-8
      AYES -- Andreason, Boatright, Branch(Bartlett), Bunderson,
      Burtenshaw, Cameron, Darrington, Davis, Hill, King-Barrutia, Little,
      Lodge, Risch(Risch), Schroeder, Sims, Sorensen, Thorne
      NAYS -- Brandt, Dunklin, Geddes, Hawkins, Ingram, Noh, Richardson,
      Stegner, Stennett, Wheeler
      Absent and excused -- Deide, Frasure, Goedde, Ipsen, Keough, Marley,
      Sandy, Williams
    Floor Sponsor - Sims
    Title apvd - to House
02/22    House intro - 1st rdg - to Bus
03/08    Rpt out - rec d/p - to 2nd rdg
03/11    2nd rdg - to 3rd rdg
    Rls susp - PASSED - 60-1-9
      AYES -- Aikele, Barraclough, Bedke, Bell, Block, Bolz, Bradford,
      Bruneel, Callister, Campbell, Clark, Collins, Crow, Cuddy, Deal,
      Denney, Ellis, Ellsworth, Eskridge, Field(13), Field(20), Gagner,
      Gould, Hadley, Hammond, Henbest, Higgins, Hornbeck, Jaquet, Jones,
      Kellogg, Kendell, Kunz, Lake, Loertscher, Martinez, McKague, Meyer,
      Montgomery, Mortensen, Moyle, Pearce, Pischner, Pomeroy, Raybould,
      Ridinger, Roberts, Robison, Sali, Schaefer, Shepherd, Smith(33),
      Smylie, Stevenson, Stone, Tilman, Trail, Wheeler, Young, Mr. Speaker
      NAYS -- Barrett
      Absent and excused -- Bieter, Black, Boe, Harwood, Langford, Mader,
      Sellman, Smith(23), Wood
    Floor Sponsor - Tilman
    Title apvd - to Senate
03/12    To enrol
03/13    Rpt enrol - Pres signed
    Sp signed
03/14    To Governor
03/26    Governor signed
         Session Law Chapter 299
         Effective: 07/01/02

Bill Text


                                                                        
                                                                        
  ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
 Fifty-sixth Legislature                  Second Regular Session - 2002
                                                                        
                                                                        
                                       IN THE SENATE
                                                                        
                                    SENATE BILL NO. 1402
                                                                        
                         BY COMMERCE AND HUMAN RESOURCES COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO MOTOR VEHICLE SERVICE CONTRACTS; AMENDING SECTION  49-2803,  IDAHO
  3        CODE,  TO REMOVE THE DIRECTOR OF THE DEPARTMENT OF INSURANCE FROM THE LIST
  4        OF PERSONS WHO ARE REQUIRED TO RECEIVE ADVANCE NOTICE OF CANCELLATION OF A
  5        SERVICE CONTRACT LIABILITY INSURANCE  POLICY;  AMENDING  SECTION  49-2807,
  6        IDAHO  CODE,  TO DELETE THE REQUIREMENT FOR REVIEW OF CERTAIN EXAMINATIONS
  7        BY THE DIRECTOR OF THE DEPARTMENT OF INSURANCE; REPEALING SECTION 49-2808,
  8        IDAHO CODE; AND AMENDING SECTION 49-2809, IDAHO CODE, TO PROVIDE THAT PER-
  9        SONS MARKETING, SELLING OR OFFERING TO SELL  MOTOR  VEHICLE  SERVICE  CON-
 10        TRACTS FOR MOTOR VEHICLE SERVICE CONTRACT PROVIDERS AND MOTOR VEHICLE SER-
 11        VICE  CONTRACT  PROVIDERS  ARE  EXEMPT  FROM THE LICENSING REQUIREMENTS OF
 12        CHAPTER 10, TITLE 41, IDAHO CODE.
                                                                        
 13    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
 14        SECTION 1.  That Section 49-2803, Idaho Code, be, and the same  is  hereby
 15    amended to read as follows:
                                                                        
 16        49-2803.  SERVICE  CONTRACT  REIMBURSEMENT POLICY REQUIREMENTS. (1) Manda-
 17    tory insurance.
 18        (a)  No motor vehicle service contract shall be issued, sold,  or  offered
 19        for  sale in this state unless the motor vehicle service contract provider
 20        is insured under a service contract liability policy issued by an  insurer
 21        admitted  to  do business in this state. The policy shall provide that the
 22        insurer will pay to, or on behalf of, the motor vehicle  service  contract
 23        provider  all  sums  which  the motor vehicle service contract provider is
 24        legally obligated to pay according to the motor vehicle  service  contract
 25        provider's  contractual  obligations  under the motor vehicle service con-
 26        tracts issued or sold by the motor vehicle service contract provider.
 27        (b)  All service contract liability policies insuring motor  vehicle  ser-
 28        vice  contracts  issued,  sold or offered for sale in this state must con-
 29        spicuously state that, upon failure of the motor vehicle service  contract
 30        provider to perform under the contract, the issuer of the policy shall pay
 31        on behalf of the provider any sums which the provider is legally obligated
 32        to  perform, according to the provider's contractual obligations under the
 33        motor vehicle service contracts issued or sold by the provider.
 34        (2)  Reserves. The reserve to be maintained on service contract  liability
 35    policies issued:
 36        (a)  Covering  new  vehicles shall be one which generates an unearned pre-
 37        mium reserve not less than the unearned premium reserve which is generated
 38        by applying the "reverse sum of the digits" earnings method to each policy
 39        issued;
 40        (b)  Covering used vehicles shall be  a  reserve  of  not  less  than  the
 41        unearned  premium  reserve  which  is  generated by the "straight line" or
 42        "prorated" earnings method; or
 43        (c)  Shall be by such other methods as are certified annually by a  compe-
                                                                        
                                           2
                                                                        
  1        tent actuary who is a member of the American society of actuaries.
  2        (3)  Premiums. Premiums are defined as those funds paid by or on behalf of
  3    the  motor vehicle service contract provider to the liability insurance policy
  4    issuer for such risks covered under such liability insurance policy. Such pre-
  5    miums or the method of developing such premiums shall be filed with the direc-
  6    tor of the department of insurance for approval.
  7        (4)  Cancellation of service  contract  liability  insurance  policy.  The
  8    issuer  of a service contract liability policy may not cancel the policy until
  9    a thirty (30) days'  advance notice of cancellation has been mailed or  deliv-
 10    ered  to the director of the department of insurance and to each motor vehicle
 11    service contract provider. The cancellation of a  service  contract  liability
 12    policy shall not reduce the insurer's responsibility for motor vehicle service
 13    contracts issued by motor vehicle service contract providers prior to the date
 14    of the cancellation.
                                                                        
 15        SECTION  2.  That  Section 49-2807, Idaho Code, be, and the same is hereby
 16    amended to read as follows:
                                                                        
 17        49-2807.  RECORDKEEPING REQUIREMENTS. All motor vehicle  service  contract
 18    providers  shall keep accurate accounts, books and records concerning transac-
 19    tions regulated under the provisions of this act. A motor vehicle service con-
 20    tract provider's accounts, books and records shall include:
 21        (1)  Copies of all motor vehicle service contracts issued;
 22        (2)  The name and address of each motor vehicle service  contract  holder;
 23    and
 24        (3)  Claim files.
 25        All motor vehicle service contract providers shall retain all records per-
 26    taining  to  each motor vehicle service contract holder for at least three (3)
 27    years after the specified period of coverage has  expired.  It  shall  be  the
 28    responsibility of the insurer issuing the liability policy to make an examina-
 29    tion  at least every two (2) years of each motor vehicle service contract pro-
 30    vider which they insure to assure that each provider is in compliance with the
 31    recordkeeping requirements. Copies of these examinations shall be  subject  to
 32    review by the director of the department of insurance.
                                                                        
 33        SECTION  3.  That  Section 49-2808, Idaho Code, be, and the same is hereby
 34    repealed.
                                                                        
 35        SECTION 4.  That Section 49-2809, Idaho Code, be, and the same  is  hereby
 36    amended to read as follows:
                                                                        
 37        49-2809.  LICENSING.  Persons marketing, selling or offering to sell motor
 38    vehicle service contracts for motor vehicle  service  contract  providers  and
 39    motor  vehicle service contract providers that comply with this act are exempt
 40    from the licensing requirements of chapter 10, title  41,  Idaho  Code.  Motor
 41    vehicle  service contracts issued by the motor vehicle manufacturer, importer,
 42    distributor, or by a wholly owned affiliate of the motor vehicle  manufacturer
 43    which  is  not  an insurance company, shall not be subject to regulation under
 44    title 41, Idaho Code.

Statement of Purpose / Fiscal Impact


                    STATEMENT OF PURPOSE

                         RS 11897

	Relating to automobile service contracts, this legislation 
removes a requirement for certain filings with the Department of 
Insurance. In 1993, the Legislature adopted the Idaho Motor Vehicle 
Service Contract Act to clarify the law regarding the application 
of the Idaho Insurance Code to motor vehicle service contracts. The 
1993 law contained certain filing requirements with the Department 
of Insurance, but provided that the Department of Insurance did not 
regulate vehicle service contracts. In 2000, the Legislature enacted 
Section 41-ll4A, Idaho Code, which exempts service contracts from 
regulation under the Insurance Code. This legislation removes the 
filing requirements and eliminates the inconsistency between the 
Insurance Code and the motor vehicle statutes. As a result, all 
service contracts will be treated in the same manner under Section 
41-114A of the Idaho Code.



                       FISCAL IMPACT

	There is no significant fiscal impact on the State of Idaho 
or local government. Although there will be a reduction of work and 
the associated costs in the Department of Insurance, the savings 
will be minimal. Because the Department is funded solely through 
dedicated funs (fees), there will be no impact on the General Fund.



Contact
Name:	Senator Kathy Sims
Phone:	332-1335


STATEMENT OF PURPOSE/FISCAL NOTE		S 1402