Bill Text: AZ HB2044 | 2021 | Fifty-fifth Legislature 1st Regular | Engrossed
Bill Title: Insurance; omnibus.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2021-02-01 - House Committee of the Whole action: Do Pass Amended [HB2044 Detail]
Download: Arizona-2021-HB2044-Engrossed.html
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House Engrossed insurance; omnibus. |
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State of Arizona House of Representatives Fifty-fifth Legislature First Regular Session 2021
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HOUSE BILL 2044 |
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AN ACT
amending sections 20-117, 20-151, 20-239, 20-283, 20-321, 20-321.01, 20-367.01, 20-611, 20-614, 20-630, 20-631, 20-636, 20-637, 20-676, 20-694, 20-1095, 20-1095.02, 20-1095.06 and 20-1676, Arizona Revised Statutes; relating to insurance.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 20-117, Arizona Revised Statutes, is amended to read:
20-117. Definitions
In this title, unless the context otherwise requires:
1. "Deliver" means to cause to be provided, sent or handed over to the intended recipient.
1. 2. "Health care services organization" has the same meaning prescribed in section 20-1051.
2. 3. "Private passenger motor vehicle" means any vehicle that is rated or insured under a family automobile policy, standard automobile policy, personal automobile policy or similar private passenger automobile policy written for personal use, including use by an insured of a motor vehicle in the course of the insured's volunteer work for a tax-exempt organization as described in section 501(c)(3) of the internal revenue code, as opposed to a motor vehicle rated or insured under a commercial automobile policy.
3. 4. "Send", "sending" or "sent" means to deliver by United States mail, personal delivery or fax or by electronic means consistent with the requirements of section 20-239.
4. 5. "Volunteer work" means work performed without compensation other than reimbursement of actual expenses incurred, or disbursement of meals or other incidental benefits.
Sec. 2. Section 20-151, Arizona Revised Statutes, is amended to read:
20-151. Issuance of orders and notices by director
A. Orders and notices of the director shall are not be effective unless the orders and notices are in writing and signed by him the director or by his the director's authority.
B. Every order of the director shall state its effective date and shall concisely state:
1. Its intent or purpose.
2. The grounds on which the order is based.
3. The provisions of this title pursuant to which action is so taken or proposed to be taken, but failure to so designate any provision shall not deprive the director of the right to rely thereon on the provision.
C. An order or notice may be given by delivery to the person to be ordered or notified or by mailing it The department may send orders and notices in accordance with section 20-117, paragraph 4. If the department sends an order or notice by mail, the department shall send the order or notice, postage prepaid, addressed to him at his to the recipient's principal place of business as last of record in the director's office.
Sec. 3. Section 20-239, Arizona Revised Statutes, is amended to read:
20-239. Electronic communications and records; applicability; definitions
A. Any notice to a party or any other document that is required under this title in an insurance transaction or that is to serve as evidence of insurance coverage may be delivered, stored and presented by electronic means if it meets the requirements of title 44, chapter 26, article 1. If an insurer uploads a document or notice to a portal or secure website, the insurer shall send a separate notice to the party that specifies that the document or notice has been uploaded and that includes a description of the document or notice that has been uploaded.
B. An insurer may deliver a notice or document by electronic means to a party pursuant to this section if the party electronically consents, or confirms consent electronically in advance, to that method of electronic delivery and has not withdrawn consent. An insurer shall obtain distinct advanced electronic consent from the named insured for delivery of any notice under section 20-1632. A named insured that effectuates insurance transactions by electronic means shall be deemed to have consented to receive notices and documents by electronic means in accordance with this section unless the named insured opts out of electronic delivery and elects delivery by hard copy.
C. An oral communication or a recording of an oral communication does not qualify as consent for the purposes of this section.
D. Notwithstanding subsection A of this section, an insurer sending a notice pursuant to section 20-1632, subsection A, for a period of five years after the date of the notice, shall maintain in its files verification that the notice was sent by electronic means with a United States postal service electronic postmark or another email delivery service that provides electronic postmarks substantially similar to a United States postal service electronic postmark. The verification must contain sufficient information from which the department may determine that the notice was properly sent.
E. An insurer providing notice to an insured pursuant to section 20-1632 by electronic means shall also send that notice to the named insured by United States postal service certified mail, certificate of mailing or first class mail using intelligent mail barcode or another similar tracking method used or approved by the United States postal service pursuant to section 20-1632 if either of the following applies:
1. The notice being electronically delivered is rejected for delivery or returned to the insurer.
2. The insurer becomes aware that the email address provided by the party is no longer valid.
F. Delivery of a notice or document pursuant to this section is equivalent to any delivery method required or allowed under this title, including delivery by the United States postal service by first class mail, postage prepaid, certified mail, certificate of mailing or first class mail using intelligent mail barcode or another similar tracking method used or approved by the United States postal service.
G. After the party gives consent elects to receive notices and documents by electronic means, if a change in the hardware or software requirements needed to access or retain a notice or document delivered by electronic means creates a material risk that the party will not be able to access or retain a subsequent notice or document to which the consent applies, the insurer must inform the party of:
1. The revised hardware and software requirements for access to and retention of a notice or document delivered by electronic means.
2. The party's right to withdraw consent without the imposition of any fee, condition or consequence.
H. This section does not affect the requirements related to content or timing of any notice or document required under this title.
I. If a provision of this title expressly requires verification or acknowledgment of receipt of a notice or document, the notice or document may be delivered by electronic means only if the method used provides for verification or acknowledgment of receipt.
J. The legal effectiveness, validity or enforceability of any insurance contract or policy executed by a party may not be denied solely because the insurer failed to obtain electronic consent or confirmation of consent.
K. A party's withdrawal of consent:
1. Does not affect the legal effectiveness, validity or enforceability of a notice or document delivered by electronic means to the party before the withdrawal of consent is effective.
2. Is effective within seven days after the insurer receives the withdrawal.
L. If an insurer fails to comply with subsection G of this section, the party may treat that failure as a withdrawal of consent for the purposes of this section.
M. This section does not apply to a notice or document delivered by an insurer in an electronic format before July 24, 2014 to a party who, before that date, has consented to receive a notice or document in an electronic format as otherwise provided by law.
N. If a party's consent to receive certain notices or documents in an electronic format is on file with an insurer before July 24, 2014 and the insurer intends to deliver additional notices or documents to that party in an electronic format pursuant to this section, before delivering the additional notices or documents electronically the insurer must notify the party of both of the following:
1. The notices or documents that may be delivered by electronic means under this section that were not previously delivered electronically.
2. The party's right to withdraw consent to have notices or documents delivered by electronic means.
O. An insurer may not charge a fee to a party who does not consent to receive notices or documents by electronic means and who chooses to receive the notices or documents in hard copy.
P. This section applies only to property, casualty, disability, marine and transportation, surety, prepaid legal, prepaid dental, title, identity theft, workers' compensation and life insurance policies and annuities that are subject to this title, including policies and contracts issued by health care services organizations and hospital, medical, dental and optometric service corporations.
Q. This section does not modify, limit or supersede the electronic signatures in global and national commerce act (P.L. 106-229; 15 United States Code sections 7001 through 7031).
R. For the purposes of this section:
1. "Delivered by electronic means" includes either:
(a) The delivery to an email address at which a party has consented to receive notices or documents.
(b) The posting on an electronic network or site accessible via the internet or a mobile application, computer, mobile device, tablet or other electronic device, together with a separate notice of the posting that includes a description of the document or notice that has been posted and that is provided by email to the email address at which the party has consented to receive notice or by any other delivery method that has been consented to by the party.
2. "Party" means a recipient of any notice or document as part of an insurance transaction, including an applicant, an insured or a policyholder.
Sec. 4. Section 20-283, Arizona Revised Statutes, is amended to read:
20-283. Exceptions to insurance producer licensing
A. An insurer is not required to obtain an insurance producer license. In this section, insurer does not include an insurer's officers, directors, employees, subsidiaries or affiliates.
B. The following persons are not required to obtain a license as an insurance producer:
1. An officer, director or employee of an insurer or of an insurance producer, if the officer, director or employee does not receive any commission on policies written or sold to insurer risks residing, located or to be performed in this state and either:
(a) The activities of the officer, director or employee are executive, administrative, managerial, clerical or a combination of these and are only indirectly related to the sale, solicitation or negotiation of insurance.
(b) The functions of the officer, director or employee relate to underwriting, loss control, inspection or the processing, adjusting, investigating or settling of a claim on a contract of insurance.
(c) The officer, director or employee either:
(i) Acts as a special agent or agency supervisor assisting insurance producers and engages in activities that are limited to providing technical advice and assistance to licensed insurance producers and that do not include the sale, solicitation or negotiation of insurance.
(ii) Responds to requests from existing policyholders to transact matters after effectuation of the policy and arising out of the policy and does not engage in negotiation or solicitation, other than to confer with the policyholders regarding the policyholders' requests.
2. A person who does not receive any commission, but who secures and provides information for the purpose of either:
(a) Group life insurance, group annuities, group or blanket accident and health or sickness insurance.
(b) Enrolling individuals under plans, issuing certificates under plans or otherwise assisting in administering plans or performing administrative services related to mass-marketed property and casualty insurance.
3. An employer or association or its officers, directors or employees or the trustees of an employee trust plan, to the extent that the employer or association or officers, directors, employees or trustees are engaged in the administration or operation of a program of employee benefits for the employer's or association's own employees or the employees of its subsidiaries or affiliates and the program involves the use of insurance issued by an insurer, if the employer or association or officers, directors, employees or trustees are not directly or indirectly compensated in any manner by the company that issues the contracts.
4. Employees of insurers or organizations employed by insurers who engage in the inspection, rating or classification of risks or the supervision of the training of insurance producers and who are not individually engaged in the sale, solicitation or negotiation of insurance.
5. A person whose activities in this state are limited to advertising without the intent to solicit insurance in this state through communications in printed publications or other forms of electronic mass media whose distribution is not limited to residents of the state, if the person does not sell, solicit or negotiate insurance that would insure risks residing, located or to be performed in this state.
6. A person who is not a resident of this state and who sells, solicits or negotiates a contract of insurance for commercial property and casualty risks to an insured with risks that are located in more than one state insured under that contract, if that person is otherwise licensed as an insurance producer to sell, solicit or negotiate that insurance in the state where the insured maintains its principal place of business and the contract of insurance insures risks located in that state.
7. A salaried full-time employee who counsels or advises the employee's employer regarding the insurance interests of the employer or its subsidiaries or business affiliates, if the employee does not sell or solicit insurance or receive a commission.
8. A person whose activities in this state are limited to providing a website or other electronic platform for insurers or insurance producers to sell insurance.
9. A person that processes payments or charges for insurance premiums if the person does not sell, solicit or negotiate insurance.
Sec. 5. Section 20-321, Arizona Revised Statutes, is amended to read:
20-321. Definitions
In this article, unless the context otherwise requires:
1. "Adjuster":
(a) Means any person who for compensation, fee or commission either:
(i) Adjusts, investigates or negotiates settlement of claims arising under property and casualty insurance contracts on behalf of either the insurer or the insured.
(ii) Holds oneself out to perform a service listed in item (i) of this subdivision.
(b) Does not include:
(i) A licensed attorney-at-law who is qualified to practice law in this state.
(ii) A salaried employee of an insurer or of a managing general agent. For the purposes of this item, "salaried employee" means an employee whose compensation is not contingent on the outcome of a claim determination.
(iii) A licensed insurance producer who adjusts or assists in adjustment of losses arising under policies procured through the insurance producer.
(iv) An employee of a political subdivision who adjusts or assists in the adjustment of losses arising under policies covering the political subdivision or persons indemnified by the political subdivision.
(v) An independent contractor retained by a licensed adjuster or a person listed in items (i), (ii), (iii) and (iv) of this subdivision for the sole purpose of providing technical assistance in connection with a claim. Independent contractors may include photographers, estimators, engineers, private detectives or handwriting experts.
(vi) An individual who collects claim information from or furnishes claim information to insureds or claimants and who conducts data entry, including entering data into an automated claims adjudication system, if not more than twenty-five persons, as described in this item, are under the supervision of a single licensed adjuster or licensed producer.
(vii) A licensed insurance producer who supervises or adjusts claims pursuant to item (vi) of this subdivision.
(viii) Registered third-party administrators and their employees who are engaged in administering accident and health or life insurance claims.
(ix) An employee of a third-party administrator or self-insured employer individual who adjusts, investigates or negotiates settlement of only workers' compensation claims.
2. "Automated claims adjudication system" means a preprogrammed computer system that is designed for the collection, data entry, calculation and final resolution of portable consumer electronic products insurance claims and that:
(a) May be used only by a licensed adjuster, a licensed producer or supervised individuals operating pursuant to this paragraph.
(b) Must comply with all claims payment requirements under this title and be certified as compliant by a licensed adjuster.
3. "Portable consumer electronic products" means electronic devices and related accessories that are portable in nature.
Sec. 6. Section 20-321.01, Arizona Revised Statutes, is amended to read:
20-321.01. Licensing of adjusters; qualifications; exemption
A. A person shall not act as or claim to be an adjuster unless the person is licensed under this article.
B. To obtain a license as an adjuster a person shall apply to the director for the license and use the forms prescribed and provided by the director. The director shall issue the license to qualified persons on payment of the license fee prescribed in section 20-167.
C. To be licensed as an adjuster the applicant shall meet all of the following qualifications:
1. Be a person who is at least eighteen years of age.
2. Be a resident of this state or a resident of another state that allows residents of this state to act as adjusters in the other state.
3. Take and pass an examination that is given by or under the supervision of the director and that reasonably tests the applicant's knowledge of insurance and legal responsibilities as an adjuster and otherwise comply with section 20-321.02. Notwithstanding subsection D of this section, the requirements under this paragraph and paragraph 2 of this subsection are waived if the applicant holds a current claims certificate issued by a national or state-based claims association with a certification program that is approved by the director and that consists of at least forty hours of preexamination coursework, a proctored examination of sufficient length to adequately determine the competency of the applicant and at least twenty-four hours of continuing education required for certification renewals on a biennial basis.
D. An adjuster who is licensed or allowed to act as an adjuster in the state of the adjuster's domicile is not required to be licensed pursuant to this section or meet the qualifications prescribed in this section if the adjuster is sent to this state on behalf of an insurer for the purpose of investigating or making adjustment of a particular loss under an insurance policy or a series of losses resulting from a catastrophe common to all those losses.
E. To determine license eligibility, the director may require fingerprints of applicants and the submission of the fee and the fingerprints as required by section 20-285, paragraph 2.
F. The director may contract with nongovernmental entities to perform any ministerial functions, including collection of fees and data related to licensing, that the director deems appropriate.
G. A resident of Canada may apply for a license that grants the applicant the authority only to adjust portable electronics insurance claims in this state if the person has obtained an adjuster license in another state that allows that person to adjust portable electronics insurance claims in that state. A Canadian resident who qualifies for licensure as an adjuster under this subsection is not subject to section 25-320, subsection P.
H. An applicant who resides in a state that does not issue licenses to adjusters and who is otherwise allowed to adjust portable electronics insurance claims in the applicant's resident state may apply for a license that grants the applicant the authority only to adjust portable electronics insurance claims in this state.
Sec. 7. Section 20-367.01, Arizona Revised Statutes, is amended to read:
20-367.01. Appeals procedure
A. Within a reasonable time after receiving a written request and on payment of a reasonable fee, every rating organization and insurer shall give to any insured affected by a rate that is made or applied by the organization or insurer, or to the insured's authorized representative, all pertinent information related to the rate.
B. If a person is aggrieved by the application of a rating system, the person may send a written request to the workers' compensation appeals board established by section 20-367 to review the manner in which the rating system has been applied to the insurance afforded the aggrieved person. The aggrieved person or that person's representative may present the grievance before the board. A representative of the rating organization whose rating system is the subject of the appeal shall attend any hearing before the board pursuant to this section to explain that application of the rating system to the aggrieved person.
C. If the board does not act on the aggrieved person's request for review within thirty days after receiving the request, the aggrieved person may proceed as if the board had rejected the request for review.
D. The appellant shall pay the cost to record the board's proceedings.
E. The board shall send mail a written notice of its decision to the aggrieved person. Within thirty days after the date the board sends mails the written notice of its decision, the aggrieved person may appeal the action to the director. After a hearing held on at least ten days' written notice to the person and the rating organization or insurer, the director shall affirm, modify or reverse the board's decision. The person appealing the board's decision shall pay the costs of the transcript and record of the appeal to the director.
Sec. 8. Section 20-611, Arizona Revised Statutes, is amended to read:
20-611. Definitions
For the purpose of In this article, unless the context otherwise requires:
1. "Ancillary state" means any state other than a domiciliary state.
2. "Commodity exchange act" means the federal commodity exchange act (7 United States Code chapter 1).
3. "Court" means, unless the context otherwise requires, the judge of the superior court assigned to the delinquency proceeding.
4. "Delinquency proceeding" means any proceeding commenced against an insurer pursuant to this article for the purpose of liquidating, rehabilitating, reorganizing or conserving such insurer.
5. "Domiciliary state" means the state in which an insurer is incorporated or organized, or in the case of an insurer incorporated or organized in a foreign country, the state in which such insurer, having become authorized to do business in such state, has, at the commencement of delinquency proceedings, the largest amount of its assets held in trust and assets held on deposit for the benefit of its policyholders or policyholders and creditors in the United States, and any such insurer is deemed to be domiciled in such state.
6. "Federal home loan bank" means an institution that is established under the federal home loan bank act (12 United States Code sections 1421 through 1449) or its successor statute.
6. 7. "Foreign country" means territory not in any state.
7. 8. "General assets" means all property, real, personal or otherwise, not specifically mortgaged, pledged, deposited or otherwise encumbered for the security or benefit of specified persons or a limited class or classes of persons, and as to such specifically encumbered property the term includes all such property or its proceeds in excess of the amount necessary to discharge the amount or amounts secured thereby. Assets held in trust and assets held on deposit for the security or benefit of all policyholders or all policyholders and creditors in the United States shall be deemed general assets.
8. 9. "Impairment" or "insolvency" means that the capital of a stock insurer or limited capital stock insurer, or the surplus of a mutual or reciprocal insurer, shall be is deemed to be impaired and the insurer shall be is deemed to be insolvent, when such the insurer is not possessed of assets at least equal to all liabilities and required reserves together with its total issued and outstanding capital stock if a stock insurer, or the minimum surplus if a mutual or reciprocal insurer, required by this title to be maintained for the kind or kinds of insurance it is then authorized to transact.
9. 10. "Insurer" means any person, firm, corporation, association or aggregation of persons doing an insurance business and subject to the insurance supervisory authority of, or to liquidation, rehabilitation, reorganization or conservation by the director or the equivalent insurance supervisory official of another state.
11. "Insurer member" means an insurer that is a member of a federal home loan bank.
10. 12. "Netting agreement" means:
(a) A contract or an agreement including a master agreement that documents one or more transactions between the parties to the agreement for or involving one or more qualified financial contracts and that provides for the netting, liquidation, setoff, termination, acceleration or close out under or in connection with one or more qualified financial contracts or present or future payment or delivery obligations or payment or delivery entitlements thereunder, including liquidation or close-out values relating to such the obligations or entitlements, among the parties to the netting agreement. A master agreement, together with all schedules, confirmations, definitions and addenda thereto and transactions under any thereof, shall be treated as one netting agreement.
(b) Any master agreement or bridge agreement for one or more master agreements described in subdivision (a) of this paragraph.
(c) Any security agreement or arrangement or other credit enhancement or guarantee or reimbursement obligation related to any contract or agreement described in subdivision (a) or (b) of this paragraph. Any contract or agreement described in subdivision (a) or (b) of this paragraph relating to agreements or transactions that are not qualified financial contracts are deemed to be a netting agreement only with respect to those agreements or transactions that are qualified financial contracts.
11. 13. "Preferred claim" means any claim with respect to which the law of the state or of the United States accords priority of payments from the general assets of the insurer.
12. 14. "Qualified financial contract" means any commodity contract, forward contract, repurchase agreement, securities contract, and swap agreement and any similar agreement that the director determines by rule or order to be a qualified financial contract for the purposes of this article. For the purposes of this paragraph:
(a) "Commodity contract" means:
(i) A contract for the purchase or sale of a commodity for future delivery on, or subject to the rules of, a board of trade or contract market under the commodity exchange act or a board of trade outside the United States.
(ii) An agreement that is subject to regulation under section 19 of the commodity exchange act and that is commonly known to the commodities trade as a margin account, margin contract, leverage account or leverage contract.
(iii) An agreement or transaction that is subject to regulation under section 6c(b) of the commodity exchange act and that is commonly known to the commodities trade as a commodity option.
(iv) Any combination of the agreements or transactions referred to in this paragraph.
(v) Any option to enter into an agreement or transaction referred to in this paragraph.
(b) "Forward contract", "repurchase agreement", "securities contract" and "swap agreement" have the same meanings prescribed in the federal deposit insurance act, 12 United States Code section 1821(e)(8)(D), as amended.
13. 15. "Receiver" means the director as receiver, liquidator, rehabilitator or conservator as the context may require.
14. 16. "Reciprocal state" means any state other than this state in which in substance and effect the provisions of the uniform insurers liquidation act, as defined in section 20-631, are in force, including the provisions requiring that the director of insurance or equivalent insurance supervisory official be the receiver of a delinquent insurer.
15. 17. "Secured claim" means any claim secured by mortgage, trust deed, pledge, deposit as security, escrow or otherwise, including federal, state or local tax liens that are perfected before the commencement of a delinquency proceeding but not including a special deposit claim or claims against general assets. The term also includes claims that more than four months prior to before the commencement of delinquency proceedings in the state of the insurer's domicile have become liens on specific assets by reason of judicial process.
16. 18. "Special deposit claim" means any claim secured by a deposit made pursuant to statute for the security or benefit of a limited class or classes of persons, but not including any general assets.
17. 19. "State" means any state of the United States, the District of Columbia and the territories and possessions of the United States.
Sec. 9. Section 20-614, Arizona Revised Statutes, is amended to read:
20-614. Injunctions
A. Upon On application by the director for an order to show cause, or at any time thereafter, the court may without notice issue an injunction restraining the insurer, its officers, directors, stockholders, members, subscribers and agents and all other persons from the transaction of its business or the waste or disposition of its property until further order of the court.
B. The court may at any time during a proceeding under this article issue such other injunctions or orders as is deemed necessary to prevent any of the following:
1. Interference with the receiver or the proceeding.
2. The waste of the assets of the insurer.
3. The commencement or prosecution of any actions.
4. The obtaining of preferences, judgments, attachments or other liens.
5. The making of any levy against the insurer or against its assets or any part of its assets.
C. An injunction issued pursuant to subsection A or B of this section does not operate to enjoin or prohibit any right to cause the netting, liquidation, setoff, termination, acceleration or close out of obligations or enforcement of any security agreement or arrangement or other credit enhancement or guarantee or reimbursement obligation under or in connection with any netting agreement or qualified financial contract as provided in section 20-637.
D. The court may also prescribe exclusive conditions and procedures for access to information from the receiver including procedures for the inspection or copying of the records of the insurer or receiver. The court may not place conditions on a reinsurer's contract rights to access to claim files other than the payment of reasonable charges for locating and copying the records.
E. Notwithstanding any other provision of law, no a bond shall be is not required of the director or receiver as a prerequisite for the issuance of any injunction or restraining order pursuant to this section or for the filing of any appeal or other action for which a bond may be required.
F. Notwithstanding any other provision of this chapter, a federal home loan bank may not be stayed, enjoined or prohibited from exercising or enforcing any right or cause of action against collateral pledged by an insurer member under any federal home loan bank security agreement or any pledge, security, collateral or guarantee agreement or other similar arrangement or credit enhancement relating to a security agreement to which that federal home loan bank is a party.
Sec. 10. Section 20-630, Arizona Revised Statutes, is amended to read:
20-630. Attachment and garnishment of assets
A. During the pendency of delinquency proceedings in this or any reciprocal state, no an action or proceeding in the nature of an attachment, garnishment or execution shall may not be commenced or maintained in the courts of this state against the delinquent insurer or its assets. Any lien obtained by any such action or proceeding within four months prior to before the commencement of any such delinquency proceeding or at any time thereafter shall be is void as against any rights arising in the delinquency proceeding.
B. Notwithstanding any other provision of this chapter, a federal home loan bank may not be stayed, enjoined or prohibited from exercising or enforcing any right or cause of action against collateral pledged by an insurer member under any federal home loan bank security agreement or any pledge, security, collateral or guarantee agreement or other similar arrangement or credit enhancement relating to a security agreement to which that federal home loan bank is a party.
Sec. 11. Section 20-631, Arizona Revised Statutes, is amended to read:
20-631. Uniform insurers liquidation act
A. Section 20-611, paragraphs 1, 4, through 5, 7, 8, 9, 10, 11, 13, through 15, 16, 17, 18 and 19 and sections 20-613, 20-614, 20-624, 20-625, 20-626, 20-627, 20-628, 20-629 and 20-630 are and may be cited as the uniform insurers liquidation act.
B. The uniform insurers liquidation act shall be so interpreted and construed as to effectuate its general purpose to make uniform the law of those states that enact it. To the extent that its provisions when applicable conflict with other provisions of this article the provisions of such act shall control.
Sec. 12. Section 20-636, Arizona Revised Statutes, is amended to read:
20-636. Voidable transfers
A. Any transfer of, or lien upon on, the property of an insurer which that is made or created within four months prior to before the granting of an order to show cause under this article with the intent of giving to any creditor or of enabling such creditor to obtain a greater percentage of his the creditor's debt than any other creditor of the same class, and which that is accepted by such creditor having reasonable cause to believe that such preference will occur, shall be voidable.
B. Every director, officer, employee, stockholder, member and subscriber and any other person acting on behalf of the insurer who is concerned in any such act or deed and every person receiving thereby any property of the insurer or the benefit thereof shall be personally liable therefor and shall be bound to account to the receiver.
C. The receiver in any proceeding under this article may avoid any transfer of or lien upon on the property of an insurer which that any creditor, stockholder, subscriber or member of such the insurer might have avoided and may recover the property so transferred unless such the person was a bona fide holder for value prior to before the date of the granting of an order to show cause under this article. Such property or its value may be recovered from anyone who has received it except a bona fide holder for value as specified in this article.
D. Notwithstanding any other provision of this chapter, a receiver, rehabilitator, liquidator or conservator may not void any transfer of, or any obligation to transfer, money or other property arising under or in connection with any federal home loan bank security agreement with an insurer member, or any pledge, security, collateral or guarantee agreement or any other similar arrangement or credit enhancement relating to a federal home loan bank security agreement with an insurer member unless the transfer was made with actual intent to hinder, delay or defraud either existing or future creditors.
Sec. 13. Section 20-637, Arizona Revised Statutes, is amended to read:
20-637. Qualified financial contracts; definition
A. Notwithstanding any other provision of this article, a person shall not be enjoined or prohibited from exercising:
1. A contractual right to cause the termination, liquidation, acceleration or close out of obligations under or in connection with any netting agreement or qualified financial contract with an insurer because of either:
(a) The insolvency, financial condition or default of the insurer at any time if the right is enforceable under applicable law other than this article.
(b) The commencement of a formal delinquency proceeding under this article.
2. Any right under a pledge, security, collateral, reimbursement or guarantee agreement or arrangement or any other similar security agreement or arrangement or other credit enhancement relating to one or more netting agreements or qualified financial contracts.
3. Subject to section 20-638, subsection B, any right to offset or net out any termination value, payment amount or other transfer obligation arising under or in connection with one or more qualified financial contracts where the counterparty or its guarantor is organized under the laws of the United States or a state or a foreign jurisdiction approved by the securities valuation office of the national association of insurance commissioners as eligible for netting.
B. If a counterparty to a master netting agreement or a qualified financial contract with an insurer subject to a proceeding under this article terminates, liquidates, closes out or accelerates the agreement or contract, damages shall be measured as of the date or dates of termination, liquidation, close out or acceleration. The amount of a claim for damages shall be actual direct compensatory damages calculated pursuant to subsection H of this section.
C. On termination of a netting agreement or qualified financial contract, the net or settlement amount owed by a nondefaulting party to an insurer against which a proceeding under this article has been commenced shall be transferred to or on the order of the receiver for the insurer, even if the insurer is the defaulting party, notwithstanding any walkaway clause in the netting agreement or qualified financial contract. Any limited two-way payment or first method provision in a netting agreement or qualified financial contract with an insurer that has defaulted shall be deemed to be a full two-way payment or second method provision as against the defaulting insurer. Any such property or amount shall be a general asset of the insurer, except to the extent it is subject to one or more secondary liens or encumbrances or rights of netting or offset. For the purposes of this subsection, "walkaway clause" means a provision in a netting agreement or a qualified financial contract that, after calculation of a value of a party's position or an amount due to or from one of the parties in accordance with its terms on termination, liquidation or acceleration of the netting agreement or qualified financial contract, either does not create a payment obligation of a party or extinguishes a payment obligation of a party in whole or in part solely because of the party's status as a nondefaulting party.
D. In making any transfer of a netting agreement or qualified financial contract of an insurer subject to a proceeding under this article, the receiver shall either:
1. Transfer to one party, other than an insurer subject to a proceeding under this article, all netting agreements and qualified financial contracts between a counterparty or any affiliate of the counterparty and the insurer that is the subject of the proceeding including:
(a) All rights and obligations of each party under each netting agreement and qualified financial contract.
(b) All property, including any guarantees or other credit enhancement, securing any claims of each party under each netting agreement and qualified financial contract.
2. Transfer none of the netting agreements, qualified financial contracts, rights, obligations or property referred to in paragraph 1 of this subsection with respect to the counterparty and any affiliate of the counterparty.
E. If the receiver makes a transfer of one or more netting agreements or qualified financial contracts, the receiver shall use its best efforts to notify any person who is a party to the netting agreements or qualified financial contracts of the transfer by noon in the receiver's local time on the business day following the transfer. For the purposes of this subsection, "business day" means a day other than a Saturday, Sunday or other day on which either the New York stock exchange or the federal reserve bank of New York is closed.
F. Notwithstanding any other provision of this article, the receiver may not avoid a transfer of money or other property arising under or in connection with a netting agreement or qualified financial contract or any pledge, security, collateral or guarantee agreement or any other similar security arrangement or credit support document relating to a netting agreement or qualified financial contract that is made before the commencement of a delinquency proceeding under this article. However, a transfer may be avoided under section 20-636, subsection C if the transfer was made with actual intent to hinder, delay or defraud the insurer, a receiver appointed for the insurer or existing or future creditors.
G. In disaffirming or repudiating any netting agreement or qualified financial contract to which an insurer is a party, the receiver for the insurer shall either:
1. Disaffirm or repudiate all netting agreements and qualified financial contracts between a counterparty or any affiliate of the counterparty and the insurer that is the subject of the proceeding.
2. Disaffirm or repudiate none of the netting agreements and qualified financial contracts referred to in paragraph 1 of this subsection with respect to the person or any affiliate of the person.
H. Notwithstanding any other provision of this article, any claim of a counterparty against the estate arising from the receiver's disaffirmance or repudiation of a netting agreement or qualified financial contract that has not been previously affirmed in the proceeding under this article shall be determined and shall be allowed or disallowed as if the claim had arisen before the date of the commencement of a proceeding under this article. The amount of the claim shall be the actual direct compensatory damages determined as of the date of the disaffirmance or repudiation of the netting agreement or qualified financial contract. For the purposes of this subsection, "actual direct compensatory damages":
1. Does not include punitive or exemplary damages, damages for lost profit or lost opportunity or damages for pain and suffering.
2. Includes normal and reasonable costs of cover or other reasonable measures of damages used in the derivatives, securities or other market for the contract and agreement claims.
I. This section does not apply to persons who are affiliates of the insurer that is the subject of the proceeding.
J. All rights of counterparties under this article apply to netting agreements and qualified financial contracts entered into on behalf of the general account or separate accounts if the assets of each separate account are available only to counterparties to netting agreements and qualified financial contracts entered into on behalf of that separate account.
K. Notwithstanding any other provision of this chapter, a federal home loan bank may not be stayed, enjoined or prohibited from exercising or enforcing any right or cause of action against collateral pledged by an insurer member under any federal home loan bank security agreement or any pledge, security, collateral or guarantee agreement or other similar arrangement or credit enhancement relating to a security agreement to which that federal home loan bank is a party.
K. L. For the purposes of this section, "contractual right" includes:
1. Any right set forth:
(a) In a rule or bylaw of a derivatives clearing organization as defined in the commodity exchange act, a multilateral clearing organization as defined in the federal deposit insurance corporation improvement act of 1991 (12 United States Code section 4421), a national securities exchange, a national securities association, a securities clearing agency, a contract market designated under the commodity exchange act, a derivatives transaction execution facility registered under the commodity exchange act or a board of trade as defined in the commodity exchange act.
(b) In a resolution of the governing board of any entity described in subdivision (a) of this paragraph.
2. Any right, whether or not evidenced in writing, arising under statutory or common law, or under law merchant or by reason of normal business practice.
Sec. 14. Section 20-676, Arizona Revised Statutes, is amended to read:
20-676. Stay of proceedings
A. All proceedings in which the insolvent insurer or the insolvent insurer's insured is a party in any court of this state shall be stayed for six months from the date the insolvency is determined or an ancillary proceeding is instituted in this state, whichever is later, to permit proper defense by the fund of all pending causes of action as to any covered claim. At the request of any party and on a showing of good cause, the court may shorten or lengthen the stay prescribed in this section. This subsection does not apply to proceedings in which the insolvent insurer is a party to a proceeding before the industrial commission regarding an employee's entitlement to benefits under title 23, chapter 6, except that, on a showing of good cause, the industrial commission shall grant up to a ninety-day continuance of any scheduled hearing to allow the fund to assume the defense and investigate the claim.
B. On application of the fund, either on the fund's own behalf or on the insured's behalf, the court may set aside any judgment, order, decision, verdict, finding or award arising from the default of the insolvent insurer or the insurer's failure to defend the insured and the fund shall be permitted allowed to defend the claim on the merits.
C. Notwithstanding any other provision of this chapter, a federal home loan bank may not be stayed, enjoined or prohibited from exercising or enforcing any right or cause of action against collateral pledged by an insurer member under any federal home loan bank security agreement or any pledge, security, collateral or guarantee agreement or other similar arrangement or credit enhancement relating to a security agreement to which that federal home loan bank is a party.
Sec. 15. Section 20-694, Arizona Revised Statutes, is amended to read:
20-694. Stay of proceedings; reopening default judgments
A. All proceedings in which the impaired insurer or insolvent insurer or the impaired insurer's or insolvent insurer's insured is a party in any court in this state shall be stayed sixty days from the date an order of liquidation, rehabilitation or conservation is final to permit proper legal action by the board on any matters germane to its powers or duties. At the request of the board and on a showing of good cause, the court may lengthen the stay prescribed in this section. As to a judgment under any decision, order, verdict or finding based on default, the board may apply to have such judgment set aside by the same court that made such judgment and shall be permitted to defend against such suit on the merits.
B. Notwithstanding subsection A of this section or any other provision of this chapter, a receiver, rehabilitator, liquidator or conservator may not void any transfer of, or any obligation to transfer, money or other property arising under or in connection with any federal home loan bank security agreement with an insurer member, or any pledge, security, collateral or guarantee agreement or any other similar arrangement or credit enhancement relating to a federal home loan bank security agreement with an insurer member unless the transfer was made with actual intent to hinder, delay or defraud either existing or future creditors.
Sec. 16. Section 20-1095, Arizona Revised Statutes, is amended to read:
20-1095. Definitions
In this article, unless the context otherwise requires:
1. "Consumer":
(a) Means a buyer other than for purposes of resale of any consumer product, any person to whom the product is transferred during the duration of an implied or written warranty or service contract applicable to the product and any other person who is entitled by the terms of the warranty or service contract or under applicable federal or state law to enforce against the warrantor or service company the obligations of the warranty or service contract. Consumer also means the
(b) Includes a buyer, owner, lessor, lessee or seller of residential property.
2. "Consumer product" means any tangible personal property that is distributed in commerce, and that is normally used solely for personal, family or household purposes, including any such property intended to be attached to or installed in any real property without regard to whether it is so attached or installed, and that becomes part of the intended usefulness of real property or that is typically transferred with real property as an integral functioning utility appliance or system.
3. "Home warranty or home protection contract" means a service contract as defined in paragraph 7, subdivision (b), item (i) of this section.
4. "Mechanical reimbursement insurance" means an insurance policy issued to an obligor to either provide reimbursement to the obligor under the terms of the insured service contracts issued or sold by the obligor or, in the event of the obligor's nonperformance, to pay on behalf of the obligor all covered contractual obligations incurred by the obligor under the terms of the insured service contracts issued or sold by the obligor.
5. "Residential property" means a house, townhouse, condominium or other habitable structure that is used principally as a residence.
6. "Service company" or "obligor" means any person that is contractually obligated to the contract holder under the terms of the service contract. Service company does not include a service contract administration administrator or seller if the person is not contractually obligated to the contract holder under the terms of the service contract.
7. "Service contract":
(a) Means a written contract or agreement for a separately stated consideration for any duration to perform, in whole or in part, the repair, replacement or maintenance, of a consumer product or indemnification for repair, replacement or maintenance, for the operational or structural failure of a consumer product due to a defect in materials, workmanship, accidental damage from handling, a power surge or interruption or normal wear and tear, with or without additional provisions for incidental payment of indemnity under limited circumstances, including towing, rental and emergency road service, and road hazard protection or roof leak.
(b) Includes a contract or agreement that is sold for a separately stated consideration for any duration and that provides for any of the following:
(i) The service, maintenance or repair, including replacement, of all or any part of structural components, appliances, electrical, plumbing, heating, cooling or air conditioning systems of residential property or indemnification for the service, maintenance, repair or replacement.
(ii) The repair or replacement of tires or wheels on a motor vehicle damaged as a result of coming into contact with road hazards including potholes, rocks, wood debris, metal parts, glass, plastic, curbs or composite scraps.
(iii) The removal of dents, dings or creases on a motor vehicle that can be repaired using the process of paintless dent removal without affecting the existing paint finish and without replacing vehicle body panels, sanding, bonding or painting.
(iv) The replacement of a motor vehicle key or key fob in the event that if the key or key fob becomes inoperable or is lost or stolen.
(v) Other services or products approved by the director.
8. "Service contract administrator" means a person who is responsible for the administration of the service contracts or the service contracts plan or who is responsible for any submission required under this article.
9. "Warranty" means:
(a) Any written affirmation by a manufacturer or seller of fact or written promise made in connection with the sale of a consumer product that relates to the nature of the material or workmanship and affirms or promises that the material or workmanship is free of defects or will meet a specified level of performance over a specified period of time.
(b) Any undertaking by a manufacturer or seller in writing in connection with the sale of a consumer product to refund, repair, replace or take other remedial action with respect to such a product if the product fails to meet the specifications set forth in the undertaking, which written affirmation, promise or undertaking becomes part of the basis of the bargain for purposes other than resale of such product and if there is no separate identifiable charge to the consumer.
Sec. 17. Section 20-1095.02, Arizona Revised Statutes, is amended to read:
20-1095.02. Exemptions; definition
A. This article, except for section 20-1095.09, does not apply to the following:
1. Warranties issued by manufacturers, builders or sellers on the actual items, structures or improvements that they manufacture, build or sell.
2. Service contract programs if a motor vehicle manufacturer or motor vehicle dealer has financial responsibility for performance.
3. Warranties and service contracts issued by a corporation other than a manufacturer or seller in connection with consumer products that are distributed by the corporation if the issuing corporation:
(a) Is an affiliate of a consumer products manufacturer.
(b) By March 1 of each year submits to the director an independently audited A financial statement in which at least one officer of the issuing corporation attests and a certified public accountant certifies that the issuing corporation has and maintains a net worth in excess of one hundred million dollars $25,000,000. Any information, documents and copies that are obtained by or disclosed to the director or any other person pursuant to this subdivision are not available for public inspection, except that the director may use this information in any proceeding relating to this article.
4. A service company that issues a service contract to persons other than a consumer.
5. A service company that is in the business of selling or servicing any one of the following, if the service contract only covers the actual item the service company sells:
(a) Appliances or electronic equipment, or both.
(b) Residential heating, cooling or air conditioning systems.
(c) Mechanical equipment, other than motor vehicles or their components.
6. A service company only to the extent that it is in the business of selling or servicing directly, or through other retailers, cell phones and other electronic personal communications devices and accessories.
7. Any person licensed pursuant to title 32, chapter 10, or not required to be licensed because exempt pursuant to section 32-1121, subsection A, paragraph 13 whose service contract only covers the actual items, structures or improvements that the person installs, constructs or builds.
8. A maintenance agreement of limited duration that provides for scheduled maintenance only and does not include repair or replacement.
B. The director may employ independent examiners pursuant to section 20-156 to review and analyze the financial statements that are submitted pursuant to subsection A, paragraph 3 of this section.
C. The types of agreements referred to in subsection A of this section are not insurance and are not required to comply with the insurance laws of this state unless a provision is made expressly applicable in this article.
D. For the purposes of this section, "affiliate" means a corporation that is owned or controlled by or is under common control with a manufacturer.
Sec. 18. Section 20-1095.06, Arizona Revised Statutes, is amended to read:
20-1095.06. Required service contract disclosures
A. Each service company holding a service company permit shall submit all service contract forms to the director for approval at least thirty days before the proposed effective date of the form. A form may not be used until it is approved by the director or has been on file with the director for more than thirty days.
B. The director may not approve a service contract if:
1. The service contract may be canceled or voided due to acts or omissions of the service company or its assignees or subcontractors for their failure to provide correct information or their failure to perform the services or repairs provided in a timely, competent and workmanlike manner.
2. Parts or components repaired or replaced under the service contract are excluded.
3. The service contract may be canceled or voided by the service company or its representatives for any of the following reasons:
(a) The service contract fails to state the extent to which preexisting conditions that were known or that reasonably should have been known by the service company or the person selling the service contract on the service company's behalf will or will not be covered.
(b) Prior use or unlawful acts relating to the product.
(c) (b) Misrepresentation by either the service company or the person selling the service contract on the service company's behalf.
C. Service contracts may not be issued, sold or offered for sale in this state unless the service company has provided both:
1. A receipt for or other written evidence of the purchase of the service contract to the contract holder.
2. A copy of the service contract to the service contract holder within a reasonable period of time from after the date of purchase.
D. Service contracts that are marketed, sold, offered for sale, issued, made, proposed to be made or administered in this state shall be written, printed or typed in clear, understandable language that is easy to read and shall disclose the following, as applicable:
1. Service contracts that are insured under a mechanical reimbursement insurance policy pursuant to section 20-1095.03, subsection A, paragraph 3, subdivision (b) shall state the name and address of the insurer and contain a statement in substantially the following form: "Obligations of the obligor under this service contract are insured under a mechanical service contract reimbursement insurance policy".
2. Service contracts that are not insured under a reimbursement insurance policy pursuant to section 20-1095.03, subsection A, paragraph 3, subdivision (b) shall contain a statement in substantially the following form: "Obligations of the obligor under this service contract are backed by the full faith and credit of the obligor".
3. Service contracts shall state the name and address of the obligor and shall identify an administrator if different from the obligor, the service contract seller and the service contract holder to the extent that the name of the service contract holder has been furnished by the service contract holder. The identities of these parties are not required to be preprinted on the service contract and may be added to the service contract at the time of sale.
4. Service contracts shall state the total purchase price of the service contract. The purchase price is not required to be preprinted on the service contract and may be negotiated at the time of sale with the service contract holder.
5. Service contracts shall state the existence of a deductible amount, if applicable.
6. Service contracts shall specify the merchandise and services to be provided and any limits, exceptions or exclusions. Exclusions from coverage shall be in bold-faced type. Service contracts may, but are not required to, cover damage resulting from rust, corrosion or damage caused by a noncovered part or system.
7. Service contracts covering automobiles motor vehicles shall state whether the use of nonoriginal manufacturers' parts is allowed.
8. Service contracts shall state any restrictions governing the transferability of the service contract, if applicable.
9. Service contracts shall state the terms, restrictions or conditions governing cancellation of the service contract before the termination or expiration date of the service contract by either the service company or the service contract holder. At a minimum, a service contract shall provide for a pro rata refund after deducting for benefits paid and administrative expenses associated with the cancellation. The administrative expenses may not exceed $75 OR ten percent of the gross amount paid by the service contract holder for purchase price of the service contract, whichever is less. Any administrative expense assessed may not exceed the amount of the refund due to the service contract holder.
10. Service contracts shall set forth all of the obligations and duties of the service contract holder, including the duty to protect against any further damage and any requirement to follow the owner's manual.
11. Service contracts shall disclose the material acts or omissions of the contract holder that cancel or void coverage, if any, and may include:
(a) Fraudulent or unlawful acts by the contract holder arising out of or relating to the service contract.
(b) The contract holder's use of a covered consumer product in a manner other than as intended by the manufacturer that is likely to increase the likelihood that the consumer product will be damaged or require repairs.
12. A service contract may not exclude preexisting conditions if such conditions were known or should reasonably have been known by the service company or the person selling the service contract on the service company's behalf.
12. Service contracts shall disclose whether the contracts cover or exclude preexisting conditions. A service contract may exclude preexisting conditions only if the conditions were either known or would have been known by visually inspecting, operating or testing the covered property.
E. Brochures and other advertising or marketing materials are not required to be filed with or approved by the director.
Sec. 19. Section 20-1676, Arizona Revised Statutes, is amended to read:
20-1676. Notice of nonrenewal
A. This article does not apply to the nonrenewal of insurance policies except as provided in subsection B of this section.
B. A nonrenewal of any policy of insurance to which this article applies is not effective unless the insurer sends a copy of the notice of nonrenewal to the insured's agent and to the named insured at least forty-five days before the end of the policy period of its intention not to renew the policy. The transfer of a policyholder between companies within the same insurance group or changes in deductibles, premium, amount of insurance or coverage are not refusals to renew.
C. Notice of nonrenewal is not required if either of the following occurs:
1. The insurer or a company within the same insurance group has offered to issue a renewal policy.
2. The named insured has obtained replacement coverage or has agreed in writing to obtain replacement coverage.
D. If an insurer provides the notice described in subsection B of this section and the insurer subsequently extends the policy for ninety days at the request of the policyholder, an additional notice of nonrenewal is not required with respect to the extension.
E. If the notice of nonrenewal is sent less than forty-five days before expiration, the coverage remains in effect until forty-five days after the notice is sent. Earned premium for any period of coverage that extends beyond the expiration date shall be considered pro rata based on the previous year's rate.
