2001 Summary of Legislation BUSINESS, BANKING AND INSURANCE Published by the Iowa General Assembly -- Legislative Service Bureau

BUSINESS, BANKING AND INSURANCE

SENATE FILE 102 - Charitable Gift Annuities (full text of act)

   BY COMMITTEE ON COMMERCE. This Act regulates charitable gift annuities. A charitable gift annuity is a transfer of property by a donor to a charitable organization in return for an annuity payable over one or two lives.

   Specifically, the Act provides for a qualified charitable gift annuity, which is issued by a charitable organization and further defined in the federal Internal Revenue Code. The Act provides that a charitable organization must have a minimum value of either $300,000 or five times the face amount of the total outstanding annuities in unrestricted cash, cash equivalents, or publicly traded securities.

   The Act provides that the issuance of a qualified charitable gift annuity does not constitute engaging in the business of insurance in this state. The Act provides that this exception also applies to qualified charitable gift annuities issued before July 1, 2001, the effective date of the Act.

   The Act provides that an agreement for a qualified charitable gift annuity executed by a charitable organization and a donor must be in writing. The annuity agreement must include a notice to donors stating that a qualified charitable gift annuity is not insurance under the laws of this state and is not subject to regulation by the Insurance Commissioner or protected by an insurance guaranty fund or association.

   The Act provides that a charitable organization that issues a qualified charitable gift annuity must file a notice with the commissioner stating information regarding the organization and its status as a charitable organization.

   Failure to comply with the new Code chapter’s requirements does not prevent a charitable gift annuity from constituting a qualified charitable gift annuity. The Insurance Commissioner may send a letter to the organization demanding compliance with the Code chapter requirements or establish and impose civil penalties of not more than $1,000 for each qualified charitable gift annuity issued until the charitable organization complies with the requirements.

   The Act provides that the Insurance Commissioner may determine that the issuance of an annuity does not comply with the Code chapter’s requirements, and that the entity issuing the annuity is subject to the penalties of Code Chapters 507A (Iowa Unauthorized Insurers Act) and 507B (Insurance Trade Practices). Issuance of a qualified charitable gift annuity does not constitute a violation of Code Chapter 507B, regulating unfair or deceptive practices in the insurance industry.

SENATE FILE 169 - Real Estate Transactions by Attorney in Fact -- Regulation -- Multiple Similar Transactions (full text of act)

   BY COMMITTEE ON COMMERCE. This Act provides that a person acting as attorney in fact under a duly executed and acknowledged power of attorney from an owner for purposes of authorizing the final consummation and execution of any contract for the sale, leasing or exchange of real estate on behalf of the owner is subject to the requirements of the Code chapter that provides for the licensure and regulation of real estate brokers and salespersons if the person, in the regular course of a business operated in the nature of a property management or brokerage business, makes repeated and successive transactions of a like character for compensation. Currently, a person acting as attorney in fact under a duly executed and acknowledged power of attorney from an owner for purposes of authorizing the final consummation and execution of any contract for the sale, leasing or exchange of real estate is exempt from those requirements.

SENATE FILE 258 - Tobacco Settlement Authority -- Extension of Time (full text of act)

   BY COMMITTEE ON JUDICIARY. This Act provides for the extension of the existence of the Tobacco Settlement Authority Act, Code Chapter 12E, until December 31, 2001. The Act takes effect March 1, 2001.

   However, S.F. 532 repeals the section amended in this Act that extends the existence of the authority to December 31, 2001, eliminating the provision that would end the existence of the authority on a certain date.

SENATE FILE 276 - Licensure of Insurance Producers -- Deregulation of Legal Expense Insurance (full text of act)

   BY COMMITTEE ON COMMERCE. This Act creates new Code Chapter 522B, relating to the licensing of persons acting as insurance producers, and makes certain changes to other statutes that relate to insurance producers and agents.

   New Code Section 522B.1 provides definitions for the new chapter, including “business entity,” “commissioner,” “home state,” “insurance,” “insurance consultant,” “insurance producer,” “insurer,” “license,” “limited lines insurance,” “limited lines producer,” “negotiate,” “person,” “producer database,” “sell,” “solicit,” “terminate,” “uniform application,” and “uniform business entity application.”

   The Act creates new Code Section 522B.2, which prohibits a person from selling, soliciting or negotiating insurance in this state for any line of insurance unless the person is licensed as an insurance producer. Also required to be licensed are persons who offer to the public for a fee or commission any advice, counsel or service with respect to the benefits, advantages or disadvantages promised under a policy of insurance.

   New Code Section 522B.3 states that nothing in the chapter should be construed to require an insurer to obtain an insurance producer license, and provides a list of persons who are exempt from the licensure requirements.

   New Code Section 522B.4 provides that an applicant for an insurance producer license must pass a written examination, unless previously licensed in another jurisdiction, as provided in new Code Section 522B.8. The Commissioner of Insurance is authorized to adopt rules related to development and conduct of the examination, and may make arrangements for administering examinations and collecting fees. A person applying for the examination shall remit a nonrefundable fee and must reapply for the examination if the person fails to appear, pass or remit all required fees and forms.

   New Code Section 522B.5 provides that a person applying for a resident insurance producer license must be at least 18, not have committed any act that is a ground for denial, suspension or revocation as set forth in new Code Section 522B.11, pay a $50 license fee, pass the examinations for the lines for which the person has applied, and have the requisite character and competence to receive a license as an insurance producer. A business entity may also obtain an insurance producer license by completing an application, paying the appropriate fees, and designating a licensed producer as responsible for the entity’s compliance with state insurance laws and rules.

   New Code Section 522B.6 provides that a license that is valid for three years and, so long as it is not suspended or revoked, remains in effect as long as all required fees are paid and continuing education requirements are met. Special provisions apply for late renewals and renewals affected by military service. The licensee must inform the commissioner of a change of address within 30 days or be subject to penalty. The commissioner may contract with a nongovernmental entity to perform ministerial functions related to the licensing procedures.

   An insurance producer may qualify for a license in one or more of the following lines of authority: (1) life, including endowments, annuities, accident, and death benefits; (2) accident and health or sickness insurance, including bodily injury, accidental death, and disability; (3) property; (4) casualty, including death, injury, disability, or damage to property; (5) variable life and variable annuity products; (6) personal lines property and casualty insurance sold to individuals and families primarily for noncommercial purposes; (7) excess and surplus lines insurance provided by certain nonadmitted insurers; (8) credit insurance, including credit life, disability, property, unemployment, mortgage life, mortgage guarantee, mortgage disability, and guaranteed automobile protection insurance; and (9) any other line of insurance permitted under state law or by rule.

   New Code Section 522B.7 relates to licensing for nonresidents. A nonresident producer license is issued if the person is licensed in good standing in the person’s home state, has submitted the request and paid the fees for licensure, has submitted the application submitted in the person’s home state or a uniform application, and the person’s home state awards nonresident licenses on the same basis. Notwithstanding any other provision of the chapter, a person licensed as a limited lines producer in the person’s home state shall receive a nonresident limited lines insurance producer license granting the same scope of authority as in the home state, upon application and payment of fees as previously described.

   New Code Section 522B.8 provides that an individual who was previously licensed for the same lines of authority in another state shall not be required to complete an examination if the person is currently licensed in the other state or if the request for licensure is within 90 days of cancellation and the applicant was in good standing. Application to become a resident licensee in this state must be made within 90 days of establishing legal residency.

   New Code Section 522B.9 requires an insurance producer doing business under any name other than the insurance producer’s legal name to notify the commissioner prior to using the assumed name.

   New Code Section 522B.10 allows the commissioner to issue a temporary insurance producer license for up to 180 days without an examination, if necessary, in certain cases specified in the Code section. The commissioner may by order limit the authority of a temporary licensee as necessary to protect insureds and the public, and may require the temporary licensee to have a sponsor who assumes responsibility for all acts of the temporary licensee. The commissioner may also revoke a temporary license if the public interest or that of insureds is endangered.

   New Code Section 522B.11 addresses denial, nonrenewal and revocation of licenses. The commissioner may place on probation, suspend, revoke, or refuse to issue or renew a license or may levy a civil penalty for one or more of the following: (1) providing incorrect, misleading, incomplete, or materially untrue information in the license application; (2) violating any insurance laws, or any regulation, subpoena or order of the commissioner of this or another state; (3) obtaining or attempting to obtain a license through misrepresentation or fraud; (4) improperly withholding, misappropriating or converting any moneys or properties received in the course of doing insurance business; (5) intentionally misrepresenting the terms of an actual or proposed insurance contract or application for insurance; (6) having been convicted of a felony; (7) having admitted or been found to have committed any unfair insurance trade practice or fraud; (8) using fraudulent, coercive or dishonest practices, or demonstrating incompetence, untrustworthiness, or financial irresponsibility in the conduct of business in this state or elsewhere; (9) having an insurance producer license or its equivalent denied, suspended or revoked in any other state, province, district, or territory; (10) forging another’s name to an application for insurance or to any document related to an insurance transaction; (11) improperly using notes or any other reference material to complete an examination for an insurance license; (12) knowingly accepting insurance business from an individual who is not licensed; (13) failing to comply with an administrative or court order imposing a child support obligation; (14) failing to comply with an administrative or court order related to repayment of loans to the College Student Aid Commission; (15) failing to pay state income tax or comply with any administrative or court order directing payment of state income tax; and (16) failing or refusing to cooperate in an investigation by the commissioner.

   The commissioner shall notify a person in writing of the reason for the nonrenewal of the license or denial of the application. The licensee or applicant may request a hearing. The license of a business entity may be suspended, revoked or refused if the commissioner finds, after hearing, that an individual licensee’s violation was known or should have been known and was not reported to the commissioner, and corrective action was not taken. A person may also be subject to civil penalty.

   New Code Section 522B.12 addresses commissions, and provides that an insurer or producer shall not pay a commission or other consideration for selling insurance if a person is required to be licensed and is not licensed. A person is prohibited from accepting a commission for selling insurance if the person is required to be licensed and is not licensed. Renewal commissions can be paid if the person was licensed at the time of the sale. An insurer or producer may assign a commission to an insurance agency or to a person who does not sell insurance, unless the payment would violate Code Chapter 507B, “Insurance Trade Practices,” or Code Section 515.130, relating to prohibited rebates.

   New Code Section 522B.13 requires that an insurance producer who acts as an agent of an insurer must be appointed by that insurer. A business entity is not required to be appointed. The appointing insurer must file a notice of appointment within 30 days from the date of the agency contract, and shall pay an appointment fee and renewal appointment fees for each insurance producer appointed.

   New Code Section 522B.14 requires an insurer that terminates the appointment relationship with an insurance producer to notify the commissioner within 30 days of the effective date of the termination. The insurer may be obligated to report certain other information known about the producer to the commissioner. The insurance producer may file written comments concerning the substance of the insurer’s notification, which shall become part of the commissioner’s record. The Act provides that a civil cause of action shall not arise against the regulatory and enforcement agencies in the absence of actual malice as a result of any statement of information provided pursuant to this Code section. An insurer or producer that fails to report as required, or is found to have reported with actual malice by a court, may have its license or certificate of authority revoked after notice and hearing, or may be fined.

   Documents and other information in the possession of the Insurance Division of the Department of Commerce are considered confidential records not subject to subpoena or civil discovery, and the commissioner and other persons who received the documents and other information are not required to testify in any civil action. The commissioner may share documents and other information with other state and federal regulatory agencies, law enforcement authorities, and the National Association of Insurance Commissioners, provided that confidentiality is maintained. Waiver shall not occur as a result of any disclosure.

   New Code Section 522B.15 addresses reciprocity requirements for license applicants holding licenses in another state, including when continuing education requirements are considered satisfied.

   New Code Section 522B.16 requires an insurance producer to report to the commissioner any administrative action taken against the producer in another jurisdiction or by another governmental agency within 30 days of the final disposition, and to report any criminal prosecution within 30 days of the initial pretrial hearing date, including any complaint filed and any other relevant legal documents.

   New Code Section 522B.17 provides that an insurer or producer who, after hearing, is found to have violated Code Chapter 522B may be assessed a civil penalty pursuant to Code Chapter 507B. A person who sells insurance without proper licensing is subject to penalty according to the provisions of Code Chapter 507A, which provides for cease and desist orders and civil penalties for violations of those orders.

   New Code Section 522B.18 provides that the commissioner may adopt rules as necessary to carry out the purposes of the chapter.

   The Act repeals Code Chapter 522, relating to the licensing of agents, and Code Chapter 523F, relating to legal expense insurance.

   The Act takes effect January 1, 2002.

SENATE FILE 452 - Uniform Prescription Drug Information Cards (full text of act)

   BY COMMITTEE ON COMMERCE. This Act requires the issuance of a uniform prescription drug card or technology by providers of third-party payment or prepayment of prescription drug expenses. The Commissioner of Insurance is directed to adopt rules for the uniform prescription drug information card or other technology applicable to those entities subject to regulation by the commissioner, and the Director of Public Health is to adopt rules for the uniform prescription drug information card or other technology applicable to organized delivery systems. The Act specifies the content and the format of the card. The uniform card or other technology is to be issued upon enrollment and reissued upon any change in the insured’s coverage that impacts data on the card or other technology. The Act directs the commissioner to review the National Council for Prescription Drug Programs Implementation Guide or successor document on an ongoing basis to determine changes and further directs the commissioner to modify or adopt rules determined appropriate.

   The Act provides that the card or other technology may be used for any health insurance or health benefits coverage and that a provider need not issue a separate card or other technology for prescription drug benefits if the card or other technology can accommodate the information necessary to process claims.

   The Act specifies exemptions to the requirements of the Act. The Act applies to a health insurance or health benefits policy or contract issued and delivered, amended or renewed on or after July 1, 2003. The Act directs the commissioner to enforce the Act.

SENATE FILE 473 - Industries, Transactions, and Persons Regulated by Commissioner of Insurance (full text of act)

   BY COMMITTEE ON COMMERCE. This Act relates to industries under the jurisdiction of the Commissioner of Insurance, including the regulation of securities and of funeral merchandise and funeral services.

   SECURITIES REGULATION. The Act amends a number of provisions in Code Chapter 502 regulating the sale of securities, including the following:

• Code Section 502.102, by amending a number of definitions, including the term “agent,” by creating a condition for an exception to the term based on a person’s failure to receive remuneration paid for solicitation. The Act amends the definition of “security” by providing that the term includes investment or ownership interest described in the section regardless of whether it is evidenced by a written instrument.
• Code Section 502.203, by creating additional exceptions from requirements for the registration of securities and filing prospectus or sales literature, based on securities that are exempt from registration under the federal Securities Act of 1933.
• Code Section 502.207A, by eliminating provisions allowing the commissioner to issue a stop order for small issuers under certain conditions.
• Code Section 502.302, by providing that that a person required to be licensed under the chapter (e.g., a broker-dealer, investment advisor, or agent) who obtains an initial or renewal license with an organization designated by the commissioner must pay any reasonable costs charged by the designee for processing the filings. The Act also amends provisions establishing fees, including by decreasing the filing fee for investment advisers.
• Code Section 502.304, by providing that a disciplinary order or action may be taken against a registrant or a person representing the registrant for a violation of the law of a foreign jurisdiction governing the business of insurance in the same manner as the business of securities or banking.
• Code Section 502.304, by adding to the list of grounds for the denial, revocation, suspension, and withdrawal of registration to include a cease and desist order issued by the federal Securities and Exchange Commission or another state. The Act increases the maximum civil penalties for violations of the section and increases the penalty ceiling that applies to a single proceeding.
• Code Section 502.603, by rewriting provisions requiring a person to attend and testify or produce evidence in an administrative proceeding notwithstanding a claim based on self-incrimination in a criminal proceeding.
• Code Section 502.604, by providing for the imposition of a civil penalty upon a person who is in violation of a provision in the chapter, a rule adopted, or an order issued under the chapter.
• Code Section 502.605, by eliminating a requisite element of knowledge by a person who willfully violates a provision of the chapter punishable as a felony. The Act also provides that a defendant has the burden of going forward in a criminal proceeding to prove a claim based on an exemption, exception, exclusion under a definition, or a preemption.

   The Act creates a new Code Section 502.604B, authorizing the Securities Bureau to cooperate with law enforcement agencies, including agencies conducting criminal investigations.

   The Act repeals Code Section 502.207B, a section that requires the Director of Revenue and Finance and the commissioner to file reports with the General Assembly regarding the expedited filing by registration system.

   FUNERAL MERCHANDISE AND FUNERAL SERVICES REGULATION. The Acts repeals Code Chapter 523A, relating to funeral services and merchandise, and Code Chapter 523E, relating to cemetery merchandise, and combines the subject matter of those chapters in new Code Chapter 523A. The Act also substantially amends the provisions.

   Subchapter 1 provides introductory provisions. Code Sections 523A.101 and 523A.102 provide the chapter’s short title and definitions, including key terms such as “beneficiary,” “burial account,” “cemetery merchandise,” “credit sale,” “delivery,” “funeral merchandise,” “funeral services,” “nonguaranteed,” “provider,” “purchase agreement,” “purchase price,” “purchaser,” “seller,” and “total purchase price.” A purchase agreement is an agreement to furnish cemetery merchandise, funeral merchandise, or funeral services when performance or delivery may be more than 120 days following payment on the account.

   Subchapter 2 provides for the establishment of trusts, deposit, and investment requirements. Code Sections 523A.201 through 523A.205 provide for the establishment of a trust fund; conditions for administering the fund and for the payment of refunds to purchasers in the event that a seller ceases doing business; require scheduled payments in the fund; provide for the management of the fund by a financial institution; provide reporting requirements for an establishment that advertises or sells cemetery merchandise, funeral merchandise, or funeral services and reporting requirements for financial institutions serving as a trustee; and authorize the commissioner to conduct audits of establishments and inspect relevant records.

   Subchapter 3 provides for the disbursement of burial account funds, burial trust funds, and insurance or annuity proceeds. Code Sections 523A.301 through 523A.303 provide relevant definitions for the subchapter; require the identification of a provider of cemetery or funeral merchandise and funeral services; and provide for the disbursement of moneys from an irrevocable burial trust fund or from the proceeds of an insurance policy or annuity made payable to a seller or provider.

   Subchapter 4 provides for trusting alternatives. Code Sections 523A.401 through 523A.405 provide for purchase agreements financed by insurance proceeds, annuity proceeds, or certificates of deposit; provide for merchandise delivered to a purchaser or warehoused; provide that trust requirements do not apply to payments for outer burial containers made of polystyrene or polypropylene or cemetery merchandise delivered to a purchaser or stored in an independent third-party storage facility; provide that lawn crypts may be delivered in lieu of trusting; place a number of conditions upon the delivery of cemetery and funeral merchandise to a purchaser or to be warehoused; and provide that a seller may file a surety bond with the commissioner in lieu of complying with the trusting requirements, subject to a number of conditions necessary to ensure the integrity of the security.

   Subchapter 5 provides permit requirements for sellers of cemetery or funeral merchandise or funeral services. Code Sections 523A.501 through 523A.503 provide permit requirements for persons regulated by the chapter such as establishments or persons advertising or selling cemetery or funeral merchandise or funeral services, including procedures for application and approval or denial by the commissioner; and authorize the commissioner to deny a permit application or to suspend or revoke a permit issued under the chapter based on a number of grounds, including a fraudulent act, the violation of state or federal law, insolvency, or the avoidance of trusting requirements.

   Subchapter 6 provides for purchase agreement requirements. Code Sections 523A.601 and 523A.602 provide stylistic requirements for purchase agreements (e.g., that they be written in a clear understandable language and using a certain font and type size); require that purchase agreements contain major terms and conditions; and grant purchaser rights of recision, cancellation and refund.

   Subchapter 7 provides for fraudulent practices. Code Sections 523A.701 though 523A.703 prohibit making false or misleading statements under the chapter; prohibit a seller from representing that the commissioner has approved the seller; and list a number of grounds constituting a fraudulent practice, including violations of the chapter.

   Subchapter 8 provides for the administration and enforcement of the chapter by the commissioner. Code Sections 523A.801 through 523A.812 provide general enforcement authority to the commissioner; provide for the scope of the chapter, which covers any advertisement, sale, promotion, or offer made to furnish upon the future death of a person identified in a purchase agreement, cemetery or funeral merchandise, or funeral services; authorize the commissioner to make public or private investigations; require a person regulated under the chapter to cooperate with the commissioner and keep business records; authorize the commissioner to compel compliance, including by obtaining subpoenas, provide for mediation of disputes involving purchase agreements, issue cease and desist orders, and bring actions in the district court in order to obtain injunctive relief; authorize a court to award injunctive relief, order the revocation or suspension of a permit, and order the production of records; provide that a violation of the chapter is a fraudulent practice; authorize the commissioner to cooperate with governmental law enforcement agencies; authorize the commissioner to adopt rules and issue orders; require a person regulated under the chapter to file relevant documents with the commissioner; authorize the commissioner or Attorney General to apply to the district court to establish a receivership for a seller’s business; authorize the commissioner to create an Insurance Division Regulatory Fund in order to pay for administration of the chapter; and provide for the revocation or suspension of a license issued by the Board of Mortuary Science Examiners.

   Subchapter 9 provides for liquidation procedures. Code Sections 523A.901 and 523A.902 provide grounds for liquidation; provide for the appointment of the commissioner as liquidator and provide for the commissioner’s powers and duties; provide limitations on liability, require the listing of the failed business’s assets, prohibit the fraudulent transfer of assets and provide for voidable preferences and liens; require the filing and verification of claims; provide for the priority of distribution and for the distribution of assets; provide for the termination of proceedings; and require the auditing of the liquidator’s books.

   EFFECTIVE DATE -- REGULATION OF INSURANCE COMPANIES. The Act amends S.F. 500, as passed by the General Assembly, relating to insurance, by addressing the operation and regulation of insurance companies, mutual insurance associations, the Iowa Insurance Guaranty Association, and other insurance or risk-assuming entities. The Act amends Code Section 507B.4, providing for unfair methods of competition and unfair or deceptive acts or practices, by amending provisions requiring a good faith effort to effectuate prompt, fair and equitable settlements of claims. The Act makes the provision effective January 1, 2002.

SENATE FILE 500 - Insurance Regulation (full text of act)

   BY COMMITTEE ON COMMERCE. This Act makes changes to various insurance-related provisions throughout the Code.

   The Act amends Code Section 87.11 to provide that a political subdivision, including a city, county, community college, or school corporation, that is self-insured for workers’ compensation is not required to submit a plan or program to the Commissioner of Insurance for review and approval. Current Code language requires employers to furnish certain proof of solvency and ability to pay to be exempted from workers’ compensation insurance requirements.

   Effective January 1, 2002, the Act repeals Code Section 432.12, regarding the premium tax credit for employer-sponsored health plan premium credit.

   The Act deletes the requirement in Code Section 505.11 for the commissioner to certify to the Department of Revenue and Finance the amount of credit to be applied on future taxes due from a company that has overpaid amounts due to the state, and to notify the company of the amount. Current Code language gives the commissioner the power to refund the overpayment or apply it to current or future amounts due.

   The Act amends Code Section 507.10 regarding the filing by the examiner of a verified written report of examination by deleting the words “under oath.”

   The Act deletes a provision in Code Section 507A.4 relating to unauthorized insurers, which exempts from that Code chapter any life insurance company organized and operated for the purpose of aiding educational or scientific institutions organized and operated without profit to any private shareholder or individual by issuing insurance and annuity contracts. This provision takes effect January 1, 2002.

   The Act amends an unfair claim settlement practice in Code Section 507B.4 to include expressly a reference to another Code subsection on the payment of interest added by this Act, and adds an additional unfair claim settlement practice relating to the audit of health care claims. The Act adds an unfair practice relating to the payment of interest on health insurance claims an insurer fails to timely accept. This provision takes effect January 1, 2002.

   The Act adds new Code Section 507B.4A, specifying a person’s duty to respond timely to inquiries from the commissioner and a health insurer’s duty to accept and pay or deny a clean claim, as defined by the new Code section. These provisions, and Code sections amended to refer to this new Code section, take effect January 1, 2002.

   The Act strikes paragraphs in Code Section 513B.4 related to certain outdated restrictions on premiums, and strikes a subsection pertaining to premium rates variances for certain plans. The Act deletes the requirement in Code Section 513B.10 for a carrier or organized delivery system to offer health insurance coverage that constitutes a basic health benefit plan and a standard health benefit plan. The Act strikes a paragraph from Code Section 513B.13 dealing with initial appointments to the board for the Small Employer Carrier Reinsurance Program. The Act repeals Code Section 513B.14, regarding basic and standard health benefit plan standards; Code Sections 513B.16 and 513B.18, applicability provisions relating to basic and standard health benefit plans; Code Section 513B.17A, regarding adoption of rules relating to restoration of small group health coverage; and Code Sections 513B.31 through 513B.43, relating to basic benefit coverage for small groups. Changes to Code Chapter 513B take effect January 1, 2002.

   The Act modifies the language used in Code Section 514E.1 for the definition of “health insurance coverage.”

   The Act adds new Code Section 514J.3A, which requires notice of the availability of the internal appeal mechanism to be provided when a claim is denied, and notice of the external review process when a coverage decision is made. The Act amends terms used in Code Section 514J.5 relating to certification of a request for external review, and adds a paragraph relating to written notification of reasons for certification. The Act strikes existing Code Section 514J.7, relating to criteria for the external review process, and inserts a new criteria section that reorganizes certain current provisions and contains a more detailed process. The Act adds new Code Section 514J.15 to provide that a carrier who fails to comply with the provisions of Code Chapter 514J relating to the external review process, or related administrative rules, is subject to penalties provided under Code Chapter 507B relating to insurance trade practices.

   The Act amends Code Section 515.35, to permit investments of up to 5 percent of the admitted assets of an insurance company other than a life insurance company, instead of 2 percent. The Act amends Code Section 515.51 to provide that all policies or contracts of insurance except surety bonds may be entered into with or without the seal of the company. The Act repeals Code Section 515.122, relating to required components of advertising by agents for insurance other than life insurance.

   The Act adds residual value as a type of insurance coverage excluded from the scope of Code Chapter 515B, titled “Insurance Guaranty Association.” The Act amends Code Section 515B.5 to specify that the Iowa Insurance Guaranty Association is not obligated to pay an amount in excess of the policy limitations of the insolvent insurer, regardless of whether the claim is based in contract or tort. The Act strikes current Code Section 515B.16, regarding actions against the Insurance Guaranty Association, and inserts revised language, including a provision that specifies that the Polk County District Court has exclusive jurisdiction and venue of such actions.

   The Act creates new Code Section 515F.4A to provide a standard for judging the reasonableness of premiums charged to benefits provided under a credit personal property insurance policy. This provision takes effect January 1, 2002.

   The Act amends Code Sections 518.23 and 518A.29 by deleting references to certified or registered mail, and specifying that a certificate of mailing constitutes proof of receipt of cancellation or nonrenewal of policies by a county mutual insurance association or a state mutual insurance association, respectively.

SENATE FILE 532 - Tobacco Settlement Program -- Miscellaneous Changes (full text of act)

   BY COMMITTEE ON APPROPRIATIONS. This Act provides for securitization of funding from the Tobacco Master Settlement Agreement. The Act amends Code Chapter 12E, relating to the Tobacco Settlement Authority, to provide for implementation of the program plan submitted by the Tobacco Settlement Authority to the Legislative Council and the Executive Council to provide a secure and stable source of funding for the purposes designated in Code Section 12.65, which establishes the Tobacco Settlement Endowment Fund, which is renamed by the Act as the Healthy Iowans Tobacco Trust. The Act directs the authority to sell tax-exempt bonds in specified amounts to be used for capital projects, certain debt service, and payment of attorney fees related to the Tobacco Master Settlement Agreement. The Act also authorizes the authority to issue taxable bonds or tax-exempt bonds to provide additional proceeds to be used for the purposes specified in Code Section 12.65.

   The Act provides that the state reserves the right to alter, amend, repeal, or otherwise change the structure, organization, programs, or activities of the authority, except that no law is to be enacted that impairs any obligation made under a sales agreement or contract which would contravene constitutional provisions.

   The Act amends the section of Code Chapter 12E relating to the Tobacco Settlement Trust Fund to provide for two separate accounts within the fund. The net proceeds of the tax-exempt bonds are to be deposited in the Tax-Exempt Bond Proceeds Restricted Capital Funds Account to be used to fund capital projects, certain debt service, and payment of attorney fees related to the Tobacco Master Settlement Agreement. The net proceeds of any taxable bonds or tax-exempt bonds issued to provide funds for the purposes specified in Code Section 12.65, any portion of the state’s share which is not sold to the authority, and any other moneys appropriated by the state for deposit in the account are to be deposited in the Endowment for Iowa’s Health Account.

   The Act provides for a transfer of $55 million from the Endowment for Iowa’s Health Account to the Healthy Iowans Tobacco Trust for FY 2001-2002. For the fiscal year beginning July 1, 2002, and annually thereafter, a transfer of $55 million plus an inflationary factor of 1.5 percent of the amount transferred in the previous year is required to be transferred from the Endowment for Iowa’s Health Account to the Healthy Iowans Tobacco Trust.

   Moneys transferred from the Endowment for Iowa’s Health Account and appropriated or transferred from any other source are to be deposited in the Healthy Iowans Tobacco Trust to be used in accordance with appropriations made from the Healthy Iowans Tobacco Trust for purposes related to health care, substance abuse treatment and enforcement, tobacco use prevention and control, and other purposes related to the needs of children, adults and families in the state. The Act eliminates the Savings Account for Healthy Iowans within the trust.

   The Act provides that until the sale of the portion of the state’s share is effective, the state’s share is to be deposited in the Healthy Iowans Tobacco Trust. Upon the effective date of the sale, the state’s share is to be transferred or deposited in accordance with the sales agreement and Code Chapter 12E.

   The Act takes effect May 29, 2001.

HOUSE FILE 222 - Bank Offices and Branches (full text of act)

   BY COMMITTEE ON COMMERCE AND REGULATION. This Act allows banks in Iowa to establish additional bank offices in two phases.

   The first phase provides that, notwithstanding other restrictions in Code Chapter 524 to the contrary and subject to approval by the superintendent, a state bank can establish up to three bank offices at any location in Iowa in addition to the bank offices that can be established pursuant to Code Chapter 524. A branch of an out-of-state national or state bank is also permitted to establish up to three bank offices at any location in Iowa in addition to the bank offices that may be established under Code Chapter 524, provided that no more than a total of three such bank offices may be established by all branches, collectively, of an out-of-state bank.

   In a related action, the Act provides that a bank that is converted to a principal place of business or to a bank office of a united community bank due to merger or consolidation after January 1, 2001, may establish the number of additional bank offices it would have been entitled to establish under Code Section 524.1202 prior to the merger or consolidation.

   The Act also divides Code Section 524.1205 into subsections and deletes an outdated reference restricting interstate merger transactions under 12 U.S.C. § 1831(u) prior to June 1, 1997.

   The second phase of the Act takes effect on July 1, 2004. At that time, Code Section 524.1201 is amended to provide that a state bank may establish any number of bank offices at any location in the state, subject to the approval and regulation of the superintendent. In a related action, Code Sections 524.1202 and 524.1213 (relating to united community bank offices) are repealed at that time. Code Section 534.214 is amended to delete a provision relating to the restrictions on the number of offices a bank may establish.

   The Act takes effect February 21, 2001.

HOUSE FILE 269 - Secured Consumer Loans for Motor Vehicles -- Balloon Payments (full text of act)

   BY COMMITTEE ON COMMERCE AND REGULATION. This Act amends the Iowa Consumer Credit Code to exclude consumer loans secured by a certificate of title in a motor vehicle from the right to refinance the balloon payment without penalty and at terms no less favorable than the original loan transaction.

HOUSE FILE 286 - Cooperative Associations -- Members, Nonmembers, and Memberships -- Fictitious Names (full text of act)

   BY COMMITTEE ON COMMERCE AND REGULATION. This Act amends a number of provisions in Code Chapter 499 providing for business associations (referred to as “associations”), including cooperative associations, organized under the chapter. The Act amends the following sections:

• Code Section 499.3, which provides for dealing with nonmembers. The Act eliminates a provision limiting the amount of business that an association may do with a nonmember, but provides that the association may elect to limit its business dealings with nonmembers.
• Code Section 499.4, which provides for the use of the term “cooperative.” The Act provides that the chapter does not control the use of fictitious names, but requires a cooperative association to file a copy of the resolution adopting the fictitious name with the Secretary of State. The language is based on similar provisions governing names for partnerships (Code Section 487.102), corporations (Code section 490.401), limited liability companies (Code Section 490A.401), and nonprofit corporations (Code Section 504A.6).
• Code Section 499.14, which provides for membership in nonstock associations. The Act provides that a cooperative association is not required to charge an issuing price for such memberships.
• Code Section 499.16, which provides for subscriptions for common stock or membership in a cooperative association and subscribers’ rights. The Act provides that an association is not required to charge for common stock or membership.

   The Act takes effect March 14, 2001.

HOUSE FILE 325 - Regulation of Multiple Employer Welfare Arrangements (full text of act)

   BY COMMITTEE ON COMMERCE AND REGULATION. This Act relates to regulation of multiple employer welfare arrangements (MEWAs) by the Commissioner of Insurance.

   The Act repeals the sunset repeal date of July 1, 2001, thereby making regulation of MEWAs no longer subject to sunset.

   The Act also amends Code Section 507A.4, subsection 10, which provides that MEWAs are excluded from consideration as an unauthorized insurer in the state if the conditions of the subsection are met. The subsection is amended to provide that one condition is that the arrangement has been in existence and provided health insurance specifically in Iowa for at least five years prior to July 1, 1997, rather than the previous requirement of providing the health insurance anywhere for at least five years prior to July 1, 1997.

   In addition, a new paragraph is added to the subsection to provide that a MEWA meeting the conditions in the subsection will not be considered to be an insurance company or association under Code Section 432.1, a member of the Iowa Individual Health Benefit Reinsurance Association under Code Section 513C.10, or a member insurer of the Iowa Life and Health Insurance Guaranty Association under Code Section 508C.5, subsection 8.

   MEWAs registered with the commissioner must annually file with the commissioner a copy of the report filed by the MEWA with the U.S. Department of Labor pursuant to 29 C.F.R. § 2520.101-2. In addition, until July 1, 2002, the MEWA is also required to file an annual report detailing certain information regarding the MEWA’s operation. Until July 1, 2002, both reports must be compiled by the Insurance Division of the Department of Commerce and filed annually with the General Assembly, including computations of premium tax and reinsurance association assessments that would have been applicable if the MEWAs were insurance companies.

   The Act also requests the Legislative Council to authorize an interim study committee to review the current status of the health insurance market in Iowa with regard to MEWAs.

   The Act takes effect March 14, 2001.

HOUSE FILE 549 - Agricultural Liens (full text of act)

   BY COMMITTEE ON AGRICULTURE. In 2000, the General Assembly enacted H.F. 2513 (2000 Iowa Acts, Chapter 1149) adopting revised Article 9 of the Uniform Commercial Code (Code Chapter 554) as proposed by the American Law Institute and the National Conference of Commissioners on Uniform State Laws, and conforming amendments to a number of articles within the chapter as well as other chapters providing for security interests and liens.

   With limited exceptions, new Article 9 governs the creation, priority and enforcement of creditor’s consensual liens, which are defined as security interests in personal property and fixtures. Revised Article 9, like its predecessor, provides generally for the effectiveness of security agreements and the rights and duties of creditors (i.e., secured parties), including parties having possession and control of collateral. Much of revised Article 9 provides for perfecting a security interest, usually accomplished by filing a financing statement. The article provides for the contents of financing statements and the location where such financing statements must be filed (e.g., with the Secretary of State). In perfecting a security interest, a debtor is generally assured rights in the collateral superior to a security interest perfected later in time.

   Prior to the revision of Article 9, liens created in statutes outside Code Chapter 554 were not affected by its provisions. These liens include types of agricultural liens such as those created in Code Chapters 579A and 579B. Under Code Chapter 579A, the lien is created at the time cattle arrive at a feedlot, and must be preserved by filing a lien statement with the Secretary of State within 20 days. Under Code Chapter 579B, the lien is created at the time livestock arrive at a contract operation or the time that a crop is planted, and must be preserved by filing a lien statement with the Secretary of State. Revised Article 9 provides filing requirements for perfecting agricultural liens and therefore may control issues relating to priority of conflicting security interests and liens.

   This Act amends both Code Chapters 579A and 579B by eliminating requirements for filing that are inconsistent with the requirements contained in revised Article 9. The Act expressly states that the two types of liens are agricultural liens, replaces references to lien statements with financing statements, and provides for their super priority status over other security interests and liens with the exception of veterinarian liens to the extent that these liens also have been perfected as agricultural liens under revised Article 9.

   The Act provides that where a production contract provides for continuous arrival of livestock at a contract operation under Code Chapter 579B, the contract producer must file a financing statement within 180 days from the date of arrival. The Act provides for the priority of competing liens perfected as required under revised Article 9, or effective but not perfected under the article by following the first-in-time rule adopted under the Uniform Commercial Code.

HOUSE FILE 569 - Proposed Uniform Computer Information Transactions Act -- Effect -- Intent (full text of act)

   BY COMMITTEE ON COMMERCE AND REGULATION. This Act amends certain provisions of a 2000 Act that relate to the Uniform Computer Information Transactions Act proposed by the National Conference of Commissioners on Uniform State Laws. It amends the effective date, from July 1, 2001, to July 1, 2002, for the repeal of a provision, relating to a choice of law clause in a computer information agreement, contained in the Iowa Uniform Electronic Transactions Act.

   The Act also amends the 2000 Iowa Acts to provide that it is the intent of the General Assembly to consider the proposed Uniform Computer Information Transactions Act in the 2002 Regular Legislative Session, rather than in the 2001 Regular Legislative Session.

HOUSE FILE 733 - Health Insurance and Health Insurance Associations -- Miscellaneous Changes (full text of act)

   BY COMMITTEE ON WAYS AND MEANS. This Act amends sections of Code Chapters 513B, 513C and 514E, dealing with the Iowa Individual Health Benefit Reinsurance Association, the Iowa Comprehensive Health Insurance Association, and adjustment in coverage of basic and standard health benefit plans.

   The Act amends Code Sections 513B.14 and 513C.8 to require the Insurance Commissioner to adjust the health plan standards at least every three years to reflect the current state of the applicable market.

   The Act amends Code Section 513C.10 to provide that for policies written after January 1, 2002, rates for the basic and standard coverages shall be no lower than the maximum rate allowable by law. In addition, the Iowa Individual Health Benefit Reinsurance Association may increase cost sharing provisions with the approval of the commissioner.

   The Act amends Code Section 514E.2 to make the Iowa Comprehensive Health Insurance Association responsible for administering the Iowa Individual Health Benefit Reinsurance Association pursuant to all of the terms and conditions contained in Code Chapter 513C, and amends current provisions in Code Section 513C.10 in accord with this change in location in the Code.

   The Act also amends Code Section 514E.2 regarding the composition of the board of directors of the Iowa Individual Health Benefit Reinsurance Association, resulting in a merger of the boards of the Iowa Comprehensive Health Insurance Association and the Iowa Individual Health Benefit Reinsurance Association. The Act adjusts the total number of members of the merged board. The Act adds as member representatives the two largest domestic carriers of the individual health insurance in the state as of the calendar year ending December 31, 2000, measured by an earned premium standard, and representatives of the three largest carriers of health insurance in the state, measured by an earned premium standard, excluding Medicare supplement coverage premiums, that are not otherwise represented. These are the same groups deleted under Code Section 513C.10 as the board of directors for the Iowa Individual Health Benefit Reinsurance Association.

RELATED LEGISLATION

SENATE FILE 98 -- Unemployment Compensation -- Natural Disasters (Complete summary under LABOR & EMPLOYMENT.)

   This Act provides that an employer shall be relieved of charges for unemployment benefits paid to an individual due to a major natural disaster declared by the President of the United States. The proposed relief of charges applies to a contributory employer but not to an employer who is required or has elected to reimburse the Unemployment Compensation Fund. The Act takes effect May 25, 2001, and applies retroactively to January 1, 2001.

SENATE FILE 168 -- City Cable Television Franchises (Complete summary under LOCAL GOVERNMENT.)

   This Act provides that if a city grants more than one cable television franchise, the terms and conditions shall not give undue preference or advantage to the new franchisee and the new franchisee shall be granted the same territory as the existing franchisee and a reasonable amount of time to build the new system throughout the territory.

SENATE FILE 185 -- Factory-Built Structures -- Manufactured Home Installer Certification (Complete summary under STATE GOVERNMENT.)

   This Act modifies the definition of a factory-built structure to specifically include a mobile home, manufactured home, or a modular home and provides for the certification of manufactured home installers pursuant to rules of the State Building Code Commissioner. The commissioner may establish a fee for certification of installers.

SENATE FILE 337 -- Transfer of Structured Settlement Payment Rights -- Tort and Workers’ Compensation Claims (Complete summary under CIVIL LAW, PROCEDURE & COURT ADMINISTRATION.)

   This Act provides requirements and procedures for the transfer of structured settlement payment rights for tort and workers’ compensation claims.

SENATE FILE 384 -- Credit Union Division Employee Compensation (Complete summary under STATE GOVERNMENT.)

   This Act provides that employees of the Credit Union Division of the Department of Commerce who are appointed by the Superintendent of Credit Unions to examine accounts shall be paid according to a pay plan that is substantially equivalent to that paid by the National Credit Union Administration and other federal supervisory agencies in this area in the United States.

SENATE FILE 516 -- Allocation of Income of S Corporation -- VETOED BY THE GOVERNOR (Complete summary under TAXATION.)

   This bill would have increased to 100 percent the amount of an S corporation distribution received by a shareholder, which is used to pay federal income tax, and is not allocable to Iowa. However, the bill would have taken effect only if Iowa’s income tax receipts for FY 2001-2002, as estimated by the Revenue Estimating Conference, increase by $7.9 million or more. This increase in Iowa’s income tax receipts must be due to the enactment of federal income tax legislation.

SENATE FILE 521 -- Capital Gain Deduction for Sales of Capital Stock -- VETOED BY THE GOVERNOR (Complete summary under TAXATION.)

   This bill would have provided a deduction under the individual income tax of 50 percent (25 percent for the 2001 tax year) of the capital gain from the sale or exchange of capital stock of a corporation acquired by the taxpayer on account of employment with the corporation. The bill would have applied retroactively to January 1, 2001, for tax years beginning on or after that date.

SENATE FILE 526 -- Unclaimed and Abandoned Property -- Business Association Property (Complete summary under STATE GOVERNMENT.)

   This Act makes a change in the state’s Disposition of Unclaimed Property Law to provide that “property” subject to the law does not include credits, advance payments, overpayments, refunds, or credit memoranda shown on the books of a business association with respect to another business association unless this type of property is held by a bank or financial institution.

HOUSE FILE 324 -- Transportation -- Miscellaneous Provisions (Complete summary under TRANSPORTATION.)

   This Act makes several changes relating to vehicle manufacturers, distributors, dealers, and franchisers.

HOUSE FILE 400 -- Real Estate Appraiser Regulation (Complete summary under STATE GOVERNMENT.)

   This Act makes changes relating to the regulation of real estate appraisers, including changing the definition of the term “appraisal report” to include any communication of an appraisal, and to provide that the real estate appraiser certificate is to bear the signature or facsimile signature of the member or members of the Real Estate Appraiser Examining Board who are designated by the board to sign the certificate.

HOUSE FILE 469 -- Termination of Agricultural Equipment Dealership Agreements -- Repurchases Required of Supplier (Complete summary under AGRICULTURE.)

   This Act requires a supplier of agricultural equipment who has an agricultural equipment dealership agreement with a dealer of agricultural equipment to repurchase certain unencumbered items from the dealer upon termination of the agreement by cancellation or nonrenewal.

HOUSE FILE 564 -- Cooperative Associations -- Reversion of Disbursements (Complete summary under AGRICULTURE.)

   This Act creates an exception to requirements that property considered abandoned must be turned over to the Treasurer of State, by allowing a cooperative association to retain a dividend or other distribution that is considered abandoned for return to its owner or for forfeiture to the cooperative association according to procedures as provided in the Act.

HOUSE FILE 628 -- Grain Dealer Regulation -- Exceptions (Complete summary under AGRICULTURE.)

   This Act amends provisions regulating grain dealers by excluding limited liability companies producing renewable fuel from regulation.,

HOUSE FILE 635 -- Employee Compensation for Travel Time to and From Worksites (Complete summary under LABOR & EMPLOYMENT.)

   This Act provides that unless a collective bargaining agreement states otherwise, employees are not entitled to compensation for the time spent traveling to and from the worksite on transportation provided by the employer, when during that time no work is performed, the transportation is provided as a convenience for the employees, and the employees are not required by the employer to use that means of transportation.

HOUSE FILE 654 -- Property Exempt From Execution -- Retirement Plan Contributions, Earnings, and Increases in Value (Complete summary under CIVIL LAW, PROCEDURE & COURT ADMINISTRATION.)

   This Act relates to the amount of contributions to and accumulated increases in the value of certain retirement plans that are exempt from a debtor’s obligations.

HOUSE FILE 695 -- School-to-Career Program -- Miscellaneous Changes (Complete summary under EDUCATION.)

   This Act amends the School-to-Career Program.

HOUSE FILE 707 -- Income Taxation of Foreign Corporations -- Temporary Storage of Goods (Complete summary under TAXATION.)

   This Act provides that a foreign corporation is not required to file an income tax return if its only activity involves the storing of tangible personal property in Iowa for 60 consecutive days or less in a warehouse located in Iowa if such storage is its only activity and the stored property is not delivered or shipped so as to be included as part of the corporation’s gross sales within the state. The Act takes effect April 30, 2001, and applies retroactively to January 1, 2001, for tax years beginning on or after that date.

HOUSE FILE 714 -- Community Development Program -- Tax Credits -- VETOED BY THE GOVERNOR (Complete summary under TAXATION.)

   This bill would have established a Community Development Program, administered by the Department of Economic Development, to provide tax incentives to businesses that make contributions to projects in communities or neighborhoods that would benefit by these projects or make expenditures to provide child care benefits to their employees. The tax incentives would be in the form of tax credits of up to $100,000 to offset the tax liability under the individual and corporate income taxes, the financial institution franchise tax, the insurance gross premiums tax, and the credit union moneys and credits tax.

HOUSE FILE 715 -- Tax Administration and Related Matters (Complete summary under TAXATION.)

   This Act amends various provisions of state and local laws to do the following:

• Allow a business that is eligible to receive benefits under the New Jobs and Income Act to file a claim for refund of sales and use tax paid by the contractor under a building contract within one year of the project’s completion rather than the six months previously allowed.
• Specify that a seller of cigarettes who does not meet the definition of a retailer or wholesaler shall be considered a retailer for purposes of computing minimum price if the person is engaged in the business of selling cigarettes to a retailer or final consumer.
• Provide that for taxation as real property, fixtures used for cooking, refrigeration or freezing of value-added agricultural products or used in the processing of such products are not considered attached to real property. Because it is not considered attached, the fixture is not taxable as real property. This applies retroactively to January 1, 2000, for assessment years beginning on or after that date.

HOUSE FILE 732 -- Appropriations -- Human Services (Complete summary under APPROPRIATIONS.)

   This Act provides appropriations to the Department of Human Services and includes provisions related to human services and health care and support for low-income workers. The Act includes continuation of the previously established AIDS/HIV Health Insurance Premium Payment Program, maintenance of the State Children’s Health Insurance Program, and child care subsidies for working families.

HOUSE FILE 736 -- Tax Administration -- Additional Related Matters (Complete summary under TAXATION.)

   This Act imposes the state sales tax on the gross receipts from sales of bundled services contracts; imposes the sales tax on mobile telecommunication service; requires out-of-state providers to collect Iowa sales or use taxes on communication services provided to consumers within the state; amends the definition of “retailer maintaining a place of business in this state” under the state use tax to specify that it includes lessors of tangible personal property within its terms; adds limited liability companies to the list of businesses that are exempt from the use tax for the transfer of vehicles subject to registration between businesses where the purpose of the transfer is to continue the business or where such transfer is made by a corporation as part of its liquidation to its shareholders if the shareholders retransfer the vehicles to another business owned by them for the purpose of continuing the business of the corporation; reduces the period for assessing the environmental protection charge or for filing a claim for refund of an environmental protection charge paid from five to three years; and reduces the requirement that depositors of underground petroleum must keep records from a period of five years to a period of three years for purposes of the environmental protection charge.

© 1998 Cornell College and League of Women Voters of Iowa

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