Bill Text: CA AB125 | 2011-2012 | Regular Session | Chaptered
Bill Title: Insurance: guaranteed asset protection.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2011-05-10 - Chaptered by Secretary of State - Chapter 24, Statutes of 2011. [AB125 Detail]
Download: California-2011-AB125-Chaptered.html
BILL NUMBER: AB 125 CHAPTERED
BILL TEXT
CHAPTER 24
FILED WITH SECRETARY OF STATE MAY 10, 2011
APPROVED BY GOVERNOR MAY 9, 2011
PASSED THE SENATE APRIL 25, 2011
PASSED THE ASSEMBLY MARCH 10, 2011
AMENDED IN ASSEMBLY MARCH 7, 2011
AMENDED IN ASSEMBLY FEBRUARY 22, 2011
INTRODUCED BY Committee on Insurance
JANUARY 10, 2011
An act to amend Sections 1758.96 and 1758.992 of the Insurance
Code, relating to insurance, and declaring the urgency thereof, to
take effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 125, Committee on Insurance. Insurance: guaranteed asset
protection.
Existing law defines guaranteed automobile protection (GAP)
insurance as insurance in which a person agrees to indemnify a
vehicle purchaser or lessee for any of the difference between the
actual cash value of the insured's vehicle at the time of an
unrecovered theft or total loss and the amount owed on the vehicle
pursuant to the terms of a loan, lease agreement, or installment
sales contract used to purchase or lease the vehicle.
This bill would rename GAP insurance as guaranteed asset
protection insurance and would define GAP insurance to also cover the
difference between money received from the purchaser's or lessee's
automobile insurer and some or all of the amount owed on the vehicle
at the time of the unrecovered theft or total loss.
Existing law provides that the following is not GAP insurance and
does not require an insurance license to sell: (1) a promise
contained in a conditional sales contract for the sale of a vehicle
by a licensed motor vehicle dealer or a promise contained in a lease
agreement for the lease of a vehicle by a licensed motor vehicle
dealer or leasing company to waive all or a portion of the difference
between the actual cash value of the insured's vehicle at the time
of an unrecovered theft or total loss and the amount owed on the
vehicle pursuant to the terms of a loan, lease agreement, or
installment sales contract used to purchase or lease the vehicle; and
(2) a promise by a lender, as part of a debt obligation, to purchase
or lease a vehicle in which the lender agrees to waive all or a
portion of the difference between the actual cash value of the
insured's vehicle at the time of an unrecovered theft or total loss
and the amount owed on the vehicle pursuant to the terms of a loan,
lease agreement, or installment sales contract used to purchase or
lease the vehicle.
This bill would expand the contractual agreements exempt from the
definition of GAP insurance, and from requiring an insurance license
to sell, to include the amount owed on the vehicle at the time of an
unrecovered theft or total loss, after credit for money received from
the purchaser's or lessee's automobile insurer or from a 3rd-party
liability insurer, and that the promise may also include a promise to
waive some or all of the amount of the purchaser's or lessee's
deductible.
Existing law requires that the above contractual coverage may not
include a promise to pay money to a vehicle purchaser or lessee in
addition to waiving the difference between the actual cash value and
the amount owed.
This bill would additionally prohibit coverage resulting in a
credit balance in favor of the purchaser or lessee.
The bill would also make conforming and related changes.
This bill would declare that it is to take effect immediately as
an urgency statute.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1758.96 of the Insurance Code is amended to
read:
1758.96. A person licensed pursuant to this article may act as a
credit insurance agent for an authorized insurer only with respect to
the kinds of insurance specified in this section sold in connection
with and incidental to a loan or other extension of credit other than
a loan in excess of sixty thousand dollars ($60,000) relating to or
secured by real property where the repayment period does not exceed
10 years. The sale of credit insurance products as specified in this
section in excess of sixty thousand dollars ($60,000) relating to or
secured by real property where any compensation, fee, or commission
is paid dependent on the placement of credit insurance, requires a
license to act as an insurance agent or life agent pursuant to
Section 1621 or 1622.
(a) Credit life insurance.
(b) Credit disability insurance.
(c) Credit involuntary unemployment insurance or credit
loss-of-income insurance.
(d) Credit property insurance.
(e) Guaranteed asset protection (GAP) insurance.
(f) Any other form of insurance declared by the commissioner to be
subject to this section pursuant to subdivision (d) of Section
1758.992.
SEC. 2. Section 1758.992 of the Insurance Code is amended to read:
1758.992. As used in this article, the following definitions have
the following meanings:
(a) "Enrollment" means the process of soliciting or accepting
enrollments or applications from a debtor under a credit insurance
policy, which includes informing the debtor of the availability of
coverage, calculating the insurance charge, preparing and delivering
the certificate of insurance or notice of proposed insurance,
answering questions regarding the coverage, or otherwise assisting
the debtor in making an informed decision whether or not to elect to
purchase credit insurance.
(b) "Creditor" means a lender of money or a vendor or lessor of
goods, services, property, rights, or privileges, for which payment
is arranged through a credit transaction, or any successor to the
right, title, or interest of that lender, vendor, or lessor, and any
affiliate, associate, subsidiary, subcontractor, director, officer,
or employee of any of them or any other person in any way associated
with any of them.
(c) "Credit insurance agent license" means an agent license issued
to an individual or organization for the enrollment and sale of
credit insurance.
(d) (1) "Credit insurance" includes credit life insurance, credit
disability insurance, credit involuntary unemployment insurance,
credit loss-of-income insurance, credit property insurance, or
guaranteed asset protection (GAP) insurance.
(2) Credit insurance also includes any other form of insurance
offered in connection with an extension of credit that is limited to
partially or wholly extinguishing that credit obligation that the
commissioner determines should be designated a form of credit
insurance.
(3) The commissioner may adopt, pursuant to Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code, reasonable rules and regulations necessary to
carry out this subdivision.
(e) (1) "Credit life insurance" means insurance on the life of a
debtor pursuant to or in connection with a specific loan or other
credit transaction, exclusive of any insurance procured at no expense
to the debtor. Insurance shall be deemed procured at no expense to
the debtor unless the cost of the credit transaction to the debtor
varies depending on whether or not the insurance is procured.
(2) "Credit disability insurance" means insurance on a debtor to
provide indemnity for payments becoming due on a specific loan or
other credit transaction while the debtor is disabled, as defined in
the policy, exclusive of any insurance procured at no expense to the
debtor. Insurance shall be deemed to have been procured at no expense
to the debtor unless the cost of the credit transaction to the
debtor varies depending on whether or not the insurance is procured.
(f) "Credit involuntary unemployment insurance" or "credit
loss-of-income insurance" means insurance issued to provide indemnity
for payments becoming due on a specific loan or other credit
transaction while the debtor is involuntarily unemployed, as defined
in the policy.
(g) "Credit property insurance" means insurance that provides
coverage (1) on personal property pledged or offered as collateral
for securing a personal or consumer loan, or (2) on personal property
purchased under an installment sales agreement or through a consumer
credit transaction, but does not include any insurance that provides
theft, collision, liability, property damage, or comprehensive
insurance coverage in any automobile or any other self-propelled
vehicle that is designed primarily for operation in the air or on the
highways, waterways, or sea, and its operating equipment, or that is
necessitated by reason of the liability imposed by law for damages
arising out of the ownership, operation, maintenance, or use of those
vehicles. However, that excluded insurance does include single
interest coverage on any of those vehicles that insures the interest
of the creditor in the same manner as collateral secures a loan.
(h) (1) "Guaranteed asset protection" (GAP) insurance means
insurance in which a person agrees to indemnify a vehicle purchaser
or lessee for some or all of the amount owed on the vehicle at the
time of an unrecovered theft or total loss, after credit for money
received from the purchaser's or lessee's physical damage insurer,
pursuant to the terms of a loan, lease agreement, or conditional
sales contract used to purchase or lease the vehicle. GAP insurance,
whether sold by a credit insurance agent or another type of licensee
authorized to sell GAP insurance, may also include a promise to pay
up to five thousand dollars ($5,000) to an insured, in addition to
the sum needed to indemnify the insured for the amount owed, to
purchase or lease another vehicle.
(2) GAP insurance does not include, and no insurance license of
any type under this code is required to offer, any of the following:
(A) A debt cancellation agreement contained in a conditional sales
contract for the sale of a vehicle by a licensed motor vehicle
dealer, or a debt cancellation agreement contained in a lease
agreement for the lease of a vehicle by a licensed motor vehicle
dealer or leasing company, to waive some or all of either of the
following:
(i) The difference between the actual cash value of the purchaser'
s or lessee's vehicle at the time of an unrecovered theft or total
loss and the amount owed on the vehicle pursuant to the terms of a
lease agreement or conditional sales contract used to purchase or
lease the vehicle.
(ii) The amount owed on the vehicle at the time of an unrecovered
theft or total loss, after credit for money received from the
purchaser's or lessee's physical damage insurer or from a third-party
liability insurer. Such a promise may also include a promise to
waive some or all of the amount of the purchaser's or lessee's
deductible.
(B) A promise by a lender as part of a debt obligation to purchase
or lease a vehicle in which the lender agrees to waive some or all
of either of the following:
(i) The difference between the actual cash value of the purchaser'
s or lessee's vehicle at the time of an unrecovered theft or total
loss and the amount owed on the vehicle pursuant to the terms of the
debt obligation used to purchase or lease the vehicle.
(ii) The amount owed on the vehicle at the time of an unrecovered
theft or total loss, after credit for money received from the
purchaser's or lessee's physical damage insurer or from a third-party
liability insurer. Such a promise may also include a promise to
waive some or all of the amount of the purchaser's or lessee's
deductible.
(C) Coverage under subparagraphs (A) and (B) may not result in a
credit balance in favor of the vehicle purchaser or lessee or include
a promise to pay money to a vehicle purchaser or lessee in addition
to waiving some or all of the amount owed, including some or all of
the amount of the purchaser's or lessee's deductible. For purposes of
this paragraph, a promise to pay money does not include, and a
dealer, creditor, or lender shall be allowed to offer, a discount or
credit to a purchaser or lessee as an incentive for purchasing,
leasing, or financing a replacement vehicle. However, the dealer,
creditor, or lender shall require the purchaser or lessee to use the
discount or credit on a purchase or lease from the dealer or lessor
that sold or leased the original vehicle to the purchaser or lessee,
or with the creditor or lender that financed the purchase or lease of
the original vehicle.
SEC. 3. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the Constitution and shall go into immediate
effect. The facts constituting the necessity are:
In order to clarify the legality of contracts and the benefits
available under those contracts currently being marketed, it is
necessary that this act take effect immediately.
