House File 749 - Introduced



                                       HOUSE FILE       
                                       BY  COMMITTEE ON COMMERCE,
                                           REGULATION AND LABOR

                                       (SUCCESSOR TO HSB 211)


    Passed House, Date               Passed Senate,  Date             
    Vote:  Ayes        Nays           Vote:  Ayes        Nays         
                 Approved                            

                                      A BILL FOR

  1 An Act relating to various provisions administered by the
  2    insurance division of the department of commerce concerning
  3    premium tax refunds, the interstate insurance compact, insurer
  4    insolvency proceedings, individual health insurance, the small
  5    employer carrier reinsurance program, insurance applications,
  6    the Iowa comprehensive health association, fire insurance
  7    policies, the Iowa insurance guaranty association, the FAIR
  8    plan, motor vehicle service contracts, investments by county
  9    and state mutual associations, reciprocal or interinsurance
 10    contract premium rates, unauthorized activity of insurance
 11    producers, and annuity contracts for cemetery and funeral
 12    merchandise and funeral services, and making fees and
 13    penalties applicable and providing effective and retroactive
 14    applicability dates.
 15 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
 16 TLSB 1155HV 81
 17 av/pj/5

PAG LIN



  1  1    Section 1.  Section 322.19, subsection 2, paragraph a, Code
  1  2 2005, is amended to read as follows:
  1  3    a.  A motor vehicle service contract as defined in section
  1  4 516E.1.
  1  5    Sec. 2.  Section 432.1, subsection 6, paragraph d, Code
  1  6 2005, is amended to read as follows:
  1  7    d.  The sums prepaid by a company or association under this
  1  8 subsection shall be allowed as credits against its premium tax
  1  9 liability for the calendar year during which the payments are
  1 10 made.  If a prepayment made under this subsection exceeds the
  1 11 annual premium tax liability, the excess shall be allowed as a
  1 12 credit against subsequent prepayment or tax liabilities.  The
  1 13 commissioner of insurance shall authorize the department of
  1 14 revenue to make a cash refund to an insurer, in lieu of a
  1 15 credit against subsequent prepayment or tax liabilities, if
  1 16 the insurer demonstrates the inability to recoup the funds
  1 17 paid via a credit.  The commissioner shall adopt rules
  1 18 establishing eligibility criteria for such a refund and a
  1 19 refund process.  The commissioner may suspend or revoke the
  1 20 license of a company or association that fails to make a
  1 21 prepayment on or before the due date.
  1 22    Sec. 3.  Section 505A.1, Article II, section 8, Code 2005,
  1 23 is amended to read as follows:
  1 24    8.  "Member" means the person chosen by a compacting state
  1 25 as its representative to the commission, or the person's
  1 26 designee.  The commissioner of insurance shall be the
  1 27 representative member of the compact for the state of Iowa.
  1 28    Sec. 4.  Section 507C.2, Code 2005, is amended by adding
  1 29 the following new subsections:
  1 30    NEW SUBSECTION.  01.  "Affiliate" of or "affiliated" with a
  1 31 specific person, means a person that directly or indirectly,
  1 32 through one or more intermediaries, controls or is controlled
  1 33 by, or is under common control with, the person specified.
  1 34    NEW SUBSECTION.  2A.  "Commodity contract" means any of the
  1 35 following:
  2  1    a.  A contract for the purchase or sale of a commodity for
  2  2 future delivery on, or subject to the rules of, a board of
  2  3 trade designated as a contract market by the commodity futures
  2  4 trading commission under the federal Commodity Exchange Act, 7
  2  5 U.S.C. } 1 et seq., or a board of trade outside the United
  2  6 States.
  2  7    b.  An agreement that is subject to regulation under
  2  8 section 19 of the federal Commodity Exchange Act, 7 U.S.C. } 1
  2  9 et seq., and that is commonly known to the commodities trade
  2 10 as a margin account, margin contract, leverage account, or
  2 11 leverage contract.
  2 12    c.  An agreement or transaction that is subject to
  2 13 regulation under section 4c(b) of the federal Commodity
  2 14 Exchange Act, 7 U.S.C. } 1 et seq., and that is commonly known
  2 15 to the commodities trade as a commodity option.
  2 16    NEW SUBSECTION.  2B.  "Control" means the same as defined
  2 17 in section 521A.1, subsection 3.
  2 18    NEW SUBSECTION.  8A.  "Forward contract" means a contract
  2 19 for the purchase, sale, or transfer of a commodity, as defined
  2 20 in section 1 of the federal Commodity Exchange Act, 7 U.S.C. }
  2 21 1 et seq., or any similar good, article, service, right, or
  2 22 interest that is presently or in the future becomes the
  2 23 subject of dealing in the forward contract trade, or product
  2 24 or byproduct thereof, with a maturity date more than two days
  2 25 after the date the contract is entered into, including, but
  2 26 not limited to, a repurchase transaction, reverse repurchase
  2 27 transaction, consignment, lease, swap, hedge transaction,
  2 28 deposit, loan, option, allocated transaction, unallocated
  2 29 transaction, or a combination of them or option on any of
  2 30 them.  "Forward contract" does not include a commodity
  2 31 contract.
  2 32    NEW SUBSECTION.  12A.  "Netting agreement" means an
  2 33 agreement, including terms and conditions incorporated by
  2 34 reference therein, including a master agreement, which master
  2 35 agreement, together with all schedules, confirmations,
  3  1 definitions, and addenda thereto and transactions under any
  3  2 thereof, shall be treated as one netting agreement, that
  3  3 documents one or more transactions between parties to the
  3  4 agreement for or involving one or more qualified financial
  3  5 contracts and that provides for the netting or liquidation of
  3  6 qualified financial contracts or present or future payment
  3  7 obligations or payment entitlements thereunder, including
  3  8 liquidation or closeout values relating to such obligations or
  3  9 entitlements among the parties to the netting agreement.
  3 10    NEW SUBSECTION.  13A.  "Qualified financial contract" means
  3 11 a commodity contract, forward contract, repurchase agreement,
  3 12 securities contract, swap agreement, and any similar agreement
  3 13 that the commissioner determines by regulation, resolution, or
  3 14 order to be a qualified financial contract for the purposes of
  3 15 this chapter.
  3 16    NEW SUBSECTION.  15A.  "Repurchase agreement" means an
  3 17 agreement, including related terms, that provides for the
  3 18 transfer of certificates of deposit, eligible bankers'
  3 19 acceptances, or securities that are direct obligations of, or
  3 20 that are fully guaranteed as to principal and interest by, the
  3 21 United States or an agency of the United States against the
  3 22 transfer of funds by the transferee of the certificates of
  3 23 deposit, eligible bankers' acceptances or securities, with a
  3 24 simultaneous agreement by the transferee to transfer to the
  3 25 transferor certificates of deposit, eligible bankers'
  3 26 acceptances, or securities as described above, at a date
  3 27 certain not later than one year after the transfers or on
  3 28 demand against the transfer of funds.  For the purposes of
  3 29 this definition, the items that may be subject to a repurchase
  3 30 agreement include, but are not limited to, mortgage=related
  3 31 securities, a mortgage loan, and an interest in a mortgage
  3 32 loan, but shall not include any participation in a commercial
  3 33 mortgage loan, unless the commissioner determines by rule,
  3 34 resolution, or order to include the participation within the
  3 35 meaning of the term.  Repurchase agreement also applies to a
  4  1 reverse repurchase agreement.
  4  2    NEW SUBSECTION.  16A.  "Securities contract" means a
  4  3 contract for the purchase, sale, or loan of a security,
  4  4 including an option for the repurchase or sale of a security,
  4  5 certificate of deposit, or group or index of securities,
  4  6 including an interest therein or based on the value thereof,
  4  7 or an option entered into on a national securities exchange
  4  8 relating to foreign currencies, or the guarantee of a
  4  9 settlement of cash or securities by or to a securities
  4 10 clearing agency.  For the purposes of this definition, the
  4 11 term "security" includes a mortgage loan, mortgage=related
  4 12 securities, and an interest in any mortgage loan or mortgage=
  4 13 related security.
  4 14    NEW SUBSECTION.  18A.  "Swap agreement" means an agreement,
  4 15 including the terms and conditions incorporated by reference
  4 16 in an agreement, that is a rate swap agreement, basis swap,
  4 17 commodity swap, forward rate agreement, interest rate future,
  4 18 interest rate option, forward foreign exchange agreement, spot
  4 19 foreign exchange agreement, rate cap agreement, rate floor
  4 20 agreement, rate collar agreement, currency swap agreement,
  4 21 cross=currency rate swap agreement, currency future, or
  4 22 currency option or any other similar agreement, and includes
  4 23 any combination of agreements and an option to enter into an
  4 24 agreement.
  4 25    Sec. 5.  NEW SECTION.  507C.28A  QUALIFIED FINANCIAL
  4 26 CONTRACTS.
  4 27    1.  Notwithstanding any other provision of this chapter to
  4 28 the contrary, including any other provision of this chapter
  4 29 permitting the modification of contracts, or other law of a
  4 30 state, a person shall not be stayed or prohibited from
  4 31 exercising any of the following:
  4 32    a.  A contractual right to terminate, liquidate, or close
  4 33 out any netting agreement or qualified financial contract with
  4 34 an insurer because of any of the following:
  4 35    (1)  The insolvency, financial condition, or default of the
  5  1 insurer at any time, provided that the right is enforceable
  5  2 under applicable law other than this chapter.
  5  3    (2)  The commencement of a formal delinquency proceeding
  5  4 under this chapter.
  5  5    b.  Any right under a pledge, security, collateral, or
  5  6 guarantee agreement or any other similar security arrangement
  5  7 or credit support document relating to a netting agreement or
  5  8 qualified financial contract.
  5  9    c.  Subject to any provision of section 507C.30, subsection
  5 10 2, any right to set off or net out any termination value,
  5 11 payment amount, or other transfer obligation arising under or
  5 12 in connection with a netting agreement or qualified financial
  5 13 contract where the counterparty or its guarantor is organized
  5 14 under the laws of the United States or a state or foreign
  5 15 jurisdiction approved by the securities valuation office or
  5 16 the national association of insurance commissioners as
  5 17 eligible for netting.
  5 18    2.  Upon termination of a netting agreement, the net or
  5 19 settlement amount, if any, owed by a nondefaulting party to an
  5 20 insurer against which an application or petition has been
  5 21 filed under this chapter shall be transferred to or on the
  5 22 order of the receiver for the insurer, even if the insurer is
  5 23 the defaulting party, notwithstanding any provision in the
  5 24 netting agreement that may provide that the nondefaulting
  5 25 party is not required to pay any net or settlement amount due
  5 26 to the defaulting party upon termination.  Any limited two=
  5 27 way payment provision in a netting agreement with an insurer
  5 28 that has defaulted shall be deemed to be a full two=way
  5 29 payment provision as against the defaulting insurer.  Any such
  5 30 amount shall, except to the extent it is subject to one or
  5 31 more secondary liens or encumbrances, be a general asset of
  5 32 the insurer.
  5 33    3.  In making any transfer of a netting agreement or
  5 34 qualified financial contract of an insurer subject to a
  5 35 proceeding under this chapter, the receiver shall do either of
  6  1 the following:
  6  2    a.  Transfer to one party, other than an insurer subject to
  6  3 a proceeding under this chapter, all netting agreements and
  6  4 qualified financial contracts between a counterparty or any
  6  5 affiliate of the counterparty and the insurer that is the
  6  6 subject of the proceeding, including all of the following:
  6  7    (1)  All rights and obligations of each party under each
  6  8 such netting agreement and qualified financial contract.
  6  9    (2)  All property, including any guarantees or credit
  6 10 support documents, securing any claims of each party under
  6 11 each such netting agreement and qualified financial contract.
  6 12    b.  Transfer none of the netting agreements, qualified
  6 13 financial contracts, rights, obligations, or property referred
  6 14 to in paragraph "a" with respect to the counterparty and any
  6 15 affiliate of the counterparty.
  6 16    4.  If a receiver for an insurer makes a transfer of one or
  6 17 more netting agreements or qualified financial contracts, the
  6 18 receiver shall use the receiver's best efforts to notify any
  6 19 person who is a party to the netting agreements or qualified
  6 20 financial contracts of the transfer by noon of the receiver's
  6 21 local time on the business day following the transfer.  For
  6 22 purposes of this subsection, "business day" means a day other
  6 23 than a Saturday, Sunday, or any day on which either the New
  6 24 York stock exchange or the federal reserve bank of New York is
  6 25 closed.
  6 26    5.  Notwithstanding any other provision of this chapter to
  6 27 the contrary, a receiver shall not avoid a transfer of money
  6 28 or other property arising under or in connection with a
  6 29 netting agreement or qualified financial contract, or any
  6 30 pledge security, collateral, or guarantee agreement or any
  6 31 other similar security arrangement or credit support document
  6 32 relating to a netting agreement or qualified financial
  6 33 contract, that is made before the commencement of a formal
  6 34 delinquency proceeding under this chapter.  However, a
  6 35 transfer may be avoided under section 507C.28 if the transfer
  7  1 was made with actual intent to hinder, delay, or defraud the
  7  2 insurer, a receiver appointed for the insurer, or existing or
  7  3 future creditors.
  7  4    6.  In exercising any of its powers under this chapter to
  7  5 disaffirm or repudiate a netting agreement or qualified
  7  6 financial contract, the receiver must take action with respect
  7  7 to each netting agreement or qualified financial contract and
  7  8 all transactions entered into in connection therewith, in its
  7  9 entirety.  Notwithstanding any other provision of this chapter
  7 10 to the contrary, any claim of a counterparty against the
  7 11 estate arising from the receiver's disaffirmance or
  7 12 repudiation of a netting agreement or qualified financial
  7 13 contract that has not been previously affirmed in the
  7 14 liquidation or in the immediately preceding rehabilitation
  7 15 case shall be determined and shall be allowed or disallowed as
  7 16 if the claim had arisen before the date of the filing of the
  7 17 petition for liquidation or, if a rehabilitation proceeding is
  7 18 converted to a liquidation proceeding, as if the claim had
  7 19 arisen before the date of filing the petition for
  7 20 rehabilitation.  The amount of the claim shall be the actual
  7 21 direct compensatory damages determined as of the date of the
  7 22 disaffirmance or repudiation of the netting agreement or
  7 23 qualified financial contract.  The term "actual direct
  7 24 compensatory damages" does not include punitive or exemplary
  7 25 damages, damages for lost profit or lost opportunity, or
  7 26 damages for pain and suffering, but does include normal and
  7 27 reasonable costs of cover or other reasonable measures of
  7 28 damages utilized in the derivatives market for the contract
  7 29 and agreement claims.
  7 30    7.  The term "contractual right" as used in this section
  7 31 includes any right, whether or not evidenced in writing,
  7 32 arising under statutory or common law, a rule or bylaw of a
  7 33 national securities exchange, national securities clearing
  7 34 organization or securities clearing agency, a rule or bylaw,
  7 35 or a resolution of the governing body of a contract market or
  8  1 its clearing organization, or under law merchant.
  8  2    8.  This section shall not apply to persons who are
  8  3 affiliates of the insurer that is the subject of the
  8  4 proceeding.
  8  5    9.  All rights of a counterparty under this chapter shall
  8  6 apply to netting agreements and qualified financial contracts
  8  7 entered into on behalf of the general account or separate
  8  8 accounts, provided that the assets of each separate account
  8  9 are available only to counterparties to netting agreements and
  8 10 qualified financial contracts entered into on behalf of that
  8 11 separate account.
  8 12    Sec. 6.  Section 507C.30, subsection 2, paragraph a,
  8 13 subparagraphs (4) and (5), Code 2005, are amended to read as
  8 14 follows:
  8 15    (4)  The obligation of the person is owed to the affiliate
  8 16 of the insurer, or any other entity or association other than
  8 17 the insurer.
  8 18    (4)  (5)  The obligation of the person is to pay an
  8 19 assessment levied against the members or subscribers of the
  8 20 insurer, or is to pay a balance upon a subscription to the
  8 21 capital stock of the insurer, or is in any other way in the
  8 22 nature of a capital contribution.
  8 23    (5)  (6)  The obligation of the person is to pay earned
  8 24 premiums to the insurer.
  8 25    Sec. 7.  Section 509.3, subsection 1, Code 2005, is amended
  8 26 to read as follows:
  8 27    1.  The policy shall have a provision that a copy of the
  8 28 application, if any, of the policyholder shall be attached to
  8 29 the policy when furnished to the policyholder within thirty
  8 30 days after the policy is issued, that all statements made by
  8 31 the policyholder or by the persons insured shall be deemed
  8 32 representations and not warranties, and that no statement made
  8 33 by any person insured shall be used in any contest unless a
  8 34 copy of the instrument containing the statement is or has been
  8 35 furnished to such person.
  9  1    Sec. 8.  Section 513B.12, Code 2005, is amended by adding
  9  2 the following new subsection:
  9  3    NEW SUBSECTION.  6.  During the period of time that the
  9  4 operation of the small employer carrier reinsurance program is
  9  5 suspended pursuant to section 513B.13, subsection 14, a small
  9  6 employer carrier is not required to make an application to
  9  7 become a risk=assuming carrier pursuant to this section.
  9  8    Sec. 9.  Section 513B.13, subsection 3, Code 2005, is
  9  9 amended by adding the following new paragraph:
  9 10    NEW PARAGRAPH.  e.  During the period of time that the
  9 11 program is suspended pursuant to subsection 14, the size of
  9 12 the board may be reduced with the approval of the
  9 13 commissioner.
  9 14    Sec. 10.  Section 513B.17, subsection 4, Code 2005, is
  9 15 amended by striking the subsection.
  9 16    Sec. 11.  Section 513C.6, Code 2005, is amended by adding
  9 17 the following new subsection:
  9 18    NEW SUBSECTION.  7.  An individual who has coverage as a
  9 19 dependent under a basic or standard health benefit plan may,
  9 20 when that individual is no longer a dependent under such
  9 21 coverage, elect to continue coverage under the basic or
  9 22 standard health benefit plan if the individual so elects
  9 23 immediately upon termination of the coverage under which the
  9 24 individual was covered as a dependent.
  9 25    Sec. 12.  Section 514A.5, subsection 1, Code 2005, is
  9 26 amended to read as follows:
  9 27    1.  The insured shall not be bound by any statement made in
  9 28 an application for a policy unless a copy of such application
  9 29 is attached to or endorsed on the policy when issued as a part
  9 30 thereof or is furnished to the policyholder within thirty days
  9 31 after the policy is issued.  If any such policy delivered or
  9 32 issued for delivery to any person in this state shall be
  9 33 reinstated or renewed, and the insured or the beneficiary or
  9 34 assignee of such policy shall make written request to the
  9 35 insurer for a copy of the application, if any, for such
 10  1 reinstatement or renewal, the insurer shall within fifteen
 10  2 days after the receipt of such request at its home office or
 10  3 any branch office of the insurer, deliver or mail to the
 10  4 person making such request, a copy of such application.  If
 10  5 such copy shall not be so delivered or mailed, the insurer
 10  6 shall be precluded from introducing such application as
 10  7 evidence in any action or proceeding based upon or involving
 10  8 such policy or its reinstatement or renewal.
 10  9    Sec. 13.  Section 514B.13, unnumbered paragraph 2, Code
 10 10 2005, is amended to read as follows:
 10 11    Health maintenance organizations providing services
 10 12 exclusively on a group contract basis may limit the open
 10 13 enrollment provided for in this section to all members of the
 10 14 group covered by the contract, including those members of the
 10 15 group who previously waived coverage.
 10 16    Sec. 14.  Section 514E.2, subsection 1, paragraph a, Code
 10 17 2005, is amended to read as follows:
 10 18    a.  All carriers and all organized delivery systems
 10 19 licensed by the director of public health providing health
 10 20 insurance or health care services in Iowa, whether on an
 10 21 individual or group basis, and all other insurers designated
 10 22 by the association's board of directors and approved by the
 10 23 commissioner shall be members of the association.
 10 24    Sec. 15.  Section 514E.2, subsection 5, paragraph l, Code
 10 25 2005, is amended to read as follows:
 10 26    l.  Develop a method of advising applicants of the
 10 27 availability of other coverages outside the association, and
 10 28 shall promulgate a list of health conditions the existence of
 10 29 which would make an applicant eligible without demonstrating a
 10 30 rejection of coverage by one carrier.
 10 31    Sec. 16.  Section 514E.2, subsection 7, Code 2005, is
 10 32 amended by adding the following new unnumbered paragraph:
 10 33    NEW UNNUMBERED PARAGRAPH.  For purposes of this subsection,
 10 34 "total health insurance premiums" and "payments for subscriber
 10 35 contracts" include, without limitation, premiums or other
 11  1 amounts paid to or received by a member for individual and
 11  2 group health plan care coverage provided under any chapter of
 11  3 the Code or Acts, and "paid losses" includes, without
 11  4 limitation, claims paid by a member operating on a self=funded
 11  5 basis for individual and group health plan care coverage
 11  6 provided under any chapter of the Code or Acts.  For purposes
 11  7 of calculating and conducting the assessment, the association
 11  8 shall have the express authority to require members to report
 11  9 on an annual basis each member's total health insurance
 11 10 premiums and payments for subscriber contracts and paid
 11 11 losses.  A member is liable for its share of the assessment
 11 12 calculated in accordance with this section regardless of
 11 13 whether it participates in the individual insurance market.
 11 14    Sec. 17.  Section 514E.7, subsection 1, Code 2005, is
 11 15 amended by adding the following new paragraphs:
 11 16    NEW PARAGRAPH.  d.  That the individual has a health
 11 17 condition that is established by the association's board of
 11 18 directors, with the approval of the commissioner, to be
 11 19 eligible for plan coverage.
 11 20    NEW PARAGRAPH.  e.  That the individual has coverage under
 11 21 a basic or standard health benefit plan under chapter 513C.
 11 22    Sec. 18.  Section 514E.8, subsection 1, Code 2005, is
 11 23 amended to read as follows:
 11 24    1.  An association policy shall contain provisions under
 11 25 which the association is obligated to renew the coverage for
 11 26 an individual until the day the individual becomes eligible
 11 27 for Medicare coverage based on age, provided that any
 11 28 individual who is covered by an association policy and is
 11 29 eligible for Medicare coverage based on age prior to January
 11 30 1, 2005, may continue to renew the coverage under the
 11 31 association policy.
 11 32    Sec. 19.  Section 515.138, sixth subsection, paragraph
 11 33 entitled concealment == fraud, Code 2005, is amended to read
 11 34 as follows:
 11 35    CONCEALMENT == FRAUD.  This entire policy shall be void if,
 12  1 whether before or after a loss, the an insured has willfully
 12  2 concealed or misrepresented any material fact or circumstance
 12  3 concerning this insurance or the subject thereof, or the
 12  4 interest of the an insured therein, or in case of any fraud or
 12  5 false swearing by the an insured relating thereto.
 12  6    Sec. 20.  Section 515.138, sixth subsection, paragraph
 12  7 entitled perils not included, Code 2005, is amended to read as
 12  8 follows:
 12  9    PERILS NOT INCLUDED.  This company shall not be liable for
 12 10 loss by fire or other perils insured against in this policy
 12 11 caused, directly or indirectly, by:  (a) Enemy attack by armed
 12 12 forces, including action taken by military, naval or air
 12 13 forces in resisting an actual or an immediately impending
 12 14 enemy attack; (b) invasion; (c) insurrection; (d) rebellion;
 12 15 (e) revolution; (f) civil war; (g) usurped power; (h) order of
 12 16 any civil authority except acts of destruction at the time of
 12 17 and for the purpose of preventing the spread of fire, provided
 12 18 that such fire did not originate from any of the perils
 12 19 excluded by this policy; (i) neglect of the an insured to use
 12 20 all reasonable means to save and preserve the property at and
 12 21 after a loss, or when the property is endangered by fire in
 12 22 neighboring premises; (j) nor shall this company be liable for
 12 23 loss by theft.
 12 24    Sec. 21.  Section 515.138, sixth subsection, paragraph
 12 25 entitled conditions suspending or restricting insurance, Code
 12 26 2005, is amended to read as follows:
 12 27    CONDITIONS SUSPENDING OR RESTRICTING INSURANCE.  Unless
 12 28 otherwise provided in writing added hereto this company shall
 12 29 not be liable for loss occurring under any of the following
 12 30 circumstances:
 12 31    a.  While the hazard is created or increased by any means
 12 32 within the control or knowledge of the an insured; or.
 12 33    b.  While a described building, whether intended for
 12 34 occupancy by owner or tenant, is vacant or unoccupied beyond a
 12 35 period of sixty consecutive days; or.
 13  1    c.  As a result of explosion or riot, unless fire ensue,
 13  2 and in that event for loss by fire only.
 13  3    Sec. 22.  Section 515B.2, subsection 4, paragraph b,
 13  4 subparagraph (7), Code 2005, is amended to read as follows:
 13  5    (7)  That would otherwise be a covered claim, but is an
 13  6 obligation to or on behalf of a person who has a net worth, on
 13  7 the date of the occurrence giving rise to the claim, greater
 13  8 than that allowed by the guarantee fund law of the state of
 13  9 residence of the claimant, and which state has denied coverage
 13 10 to that claimant on that basis.
 13 11    Sec. 23.  Section 515B.17, Code 2005, is amended to read as
 13 12 follows:
 13 13    515B.17  TIMELY FILING OF CLAIMS.
 13 14    Notwithstanding any other provision of this chapter, a
 13 15 covered claim shall not include any claim filed with the
 13 16 association after twenty=four months from the date of the
 13 17 order of liquidation or after the final date set by the court
 13 18 for the filing of claims against the insolvent insurer or its
 13 19 receiver, whichever occurs first.
 13 20    Sec. 24.  Section 515F.36, subsection 2, Code 2005, is
 13 21 amended to read as follows:
 13 22    2.  The committee shall consist of seven members, one of
 13 23 whom.
 13 24    a.  Five of the members shall be elected by to the
 13 25 committee, with one member from each of the following:
 13 26    a.  (1)  American insurance association.
 13 27    b.  (2)  Alliance of American insurers Property casualty
 13 28 insurers association of America.
 13 29    c.  National association of independent insurers.
 13 30    d.  (3)  Iowa insurance institute.
 13 31    e.  (4)  Mutual insurance association of Iowa.
 13 32    f.  (5)  Independent insurance agents of Iowa.
 13 33    g.  b.  All other insurers Two of the members shall be
 13 34 elected to the committee by other insurer members of the plan.
 13 35    Sec. 25.  Section 516E.1, Code 2005, is amended to read as
 14  1 follows:
 14  2    516E.1  DEFINITIONS.
 14  3    For the purposes of this chapter:
 14  4    1.  "Administrator" means the deputy administrator
 14  5 appointed pursuant to section 502.601.
 14  6    1.  2.  "Commissioner" means the commissioner of insurance
 14  7 as provided in section 505.1 or the deputy administrator
 14  8 appointed under section 502.601.
 14  9    3.  "Maintenance agreement" means a contract of limited
 14 10 duration that provides for scheduled maintenance only.
 14 11    2.  4.  "Mechanical breakdown insurance" means a policy,
 14 12 contract, or agreement that undertakes to perform or provide
 14 13 repair or replacement service, or indemnification for that
 14 14 service, for the operational or structural failure of a motor
 14 15 vehicle due to a defect in materials or skill of work or
 14 16 normal wear and tear, and that is issued by an insurance
 14 17 company authorized to do business in this state.
 14 18    3.  5.  "Motor vehicle" means any self=propelled vehicle
 14 19 subject to registration under chapter 321.
 14 20    4.  "Motor vehicle service contract" or "service contract"
 14 21 means a contract or agreement given for consideration over and
 14 22 above the lease or purchase price of a new or used motor
 14 23 vehicle having a gross vehicle weight rating of less than
 14 24 sixteen thousand pounds that undertakes to perform or provide
 14 25 repair or replacement service, or indemnification for that
 14 26 service, for the operational or structural failure of a motor
 14 27 vehicle due to a defect in materials or skill of work or
 14 28 normal wear and tear, but does not include mechanical
 14 29 breakdown insurance or maintenance agreements providing
 14 30 scheduled repair and maintenance services for leased vehicles.
 14 31    5.  6.  "Motor vehicle service contract provider" or
 14 32 "provider" "Provider" means a person who issues, makes,
 14 33 provides, sells, or offers to sell a motor vehicle service
 14 34 contract.
 14 35    6.  "Motor vehicle service contract reimbursement insurance
 15  1 policy" or "reimbursement insurance policy" means a policy of
 15  2 insurance providing coverage for all obligations and
 15  3 liabilities incurred by a motor vehicle service contract
 15  4 provider under the terms of motor vehicle service contracts
 15  5 issued by the provider.
 15  6    7.  "Record" means information stored or preserved in any
 15  7 medium, including in an electronic or paper format.  A record
 15  8 includes but is not limited to documents, books, publications,
 15  9 accounts, correspondence, memoranda, agreements, computer
 15 10 files, film, microfilm, photographs, and audio or visual
 15 11 tapes.
 15 12    8.  "Reimbursement insurance policy" means a policy of
 15 13 insurance issued to a service company and pursuant to which
 15 14 the insurer agrees, for the benefit of the service contract
 15 15 holders, to discharge all of the obligations and liabilities
 15 16 of the service company under the terms of service contracts
 15 17 issued by the service company in the event of nonperformance
 15 18 by the service company.  For the purposes of this definition,
 15 19 "all obligations and liabilities" include, but are not limited
 15 20 to, failure of the service company to perform under the
 15 21 service contract and the return of the unearned service
 15 22 company fee in the event of the service company's
 15 23 unwillingness or inability to reimburse the unearned service
 15 24 company fee in the event of termination of a service contract.
 15 25    9.  "Service company" means a person who issues and is
 15 26 obligated to perform, or arrange for the performance of,
 15 27 services pursuant to a service contract.
 15 28    10.  "Service contract" means a contract or agreement given
 15 29 for consideration over and above the lease or purchase price
 15 30 of a new or used motor vehicle having a gross vehicle weight
 15 31 rating of less than sixteen thousand pounds, that undertakes
 15 32 to perform or provide repair or replacement service, or
 15 33 indemnification for that service, for the operation or
 15 34 structural failure of a motor vehicle due to a defect in
 15 35 materials or skill of work or normal wear and tear, but does
 16  1 not include mechanical breakdown insurance or maintenance
 16  2 agreements.
 16  3    8.  11.  "Service contract holder" means a person who
 16  4 purchases a motor vehicle service contract.
 16  5    12.  "Third=party administrator" means a person who
 16  6 contracts with a service company to be responsible for the
 16  7 administration of the service company's service contracts,
 16  8 including processing and adjudicating claims pursuant to a
 16  9 service contract.
 16 10    Sec. 26.  Section 516E.2, Code 2005, is amended to read as
 16 11 follows:
 16 12    516E.2  INSURANCE REQUIRED REQUIREMENTS FOR DOING BUSINESS.
 16 13    1.  A motor vehicle service contract shall not be issued,
 16 14 sold, or offered for sale in this state unless the provider of
 16 15 the service contract is insured under a motor vehicle service
 16 16 contract reimbursement insurance policy issued by an insurer
 16 17 authorized to do business in this state. service company does
 16 18 all of the following:
 16 19    a.  Provides a receipt for the purchase of the service
 16 20 contract to the service contract holder.
 16 21    b.  Provides a copy of the service contract to the service
 16 22 contract holder within a reasonable period of time after the
 16 23 date of purchase of the service contract.
 16 24    2.  The issuer of a reimbursement insurance policy shall
 16 25 not cancel a reimbursement insurance policy unless a written
 16 26 notice has been received by the commissioner and by each
 16 27 applicable provider, including automobile dealers and third=
 16 28 party administrators.  The notice shall fix the date of
 16 29 cancellation at a date no earlier than ten days after receipt
 16 30 of the notice by the commissioner and by the applicable
 16 31 provider.  The notice may be made in person or by mail and a
 16 32 post office department receipt of certified or registered
 16 33 mailing shall be deemed proof of receipt of the notice.  A
 16 34 service company shall not issue a service contract or arrange
 16 35 to perform services pursuant to a service contract unless the
 17  1 service company is registered with the commissioner.  A
 17  2 service company shall file a registration with the
 17  3 commissioner annually, on a form prescribed by the
 17  4 commissioner, accompanied by a registration fee in the amount
 17  5 of five hundred dollars.
 17  6    3.  In order to assure the faithful performance of a
 17  7 service company's obligations to its service contract holders,
 17  8 each service company shall do all of the following:
 17  9    a.  Insure all service contracts under a reimbursement
 17 10 insurance policy issued by an insurer authorized to transact
 17 11 insurance in this state.
 17 12    b.  Maintain a funded reserve account for the service
 17 13 company's obligations under its service contracts issued and
 17 14 outstanding in this state.  The reserves shall not be less
 17 15 than forty percent of gross consideration received, less
 17 16 claims paid, on the sale of the service contracts for all in=
 17 17 force service contracts.  The reserve account shall be subject
 17 18 to examination and review by the commissioner.
 17 19    c.  File a certificate of deposit issued by a financial
 17 20 institution in the name of the commissioner, as trustee, with
 17 21 terms and conditions approved by the commissioner as to
 17 22 issuer, form, and contents, as a financial security deposit,
 17 23 having a value of not less than five percent of the gross
 17 24 consideration received by the service company in Iowa on the
 17 25 sale of service contracts for all service contracts issued and
 17 26 in force, but not less than the amount of twenty=five thousand
 17 27 dollars.
 17 28    4.  The commissioner may issue an order denying,
 17 29 suspending, or revoking any registration if the commissioner
 17 30 finds that the order is in the public interest and finds any
 17 31 of the following:
 17 32    a.  The registration is incomplete in any material respect
 17 33 or contains any statement which, in light of the circumstances
 17 34 under which the registration was made, is determined by the
 17 35 commissioner to be false or misleading with respect to any
 18  1 material fact.
 18  2    b.  A provision of this chapter or a rule, order, or
 18  3 condition lawfully imposed under this chapter, has been
 18  4 willfully violated in connection with the sale of service
 18  5 contracts by any of the following persons:
 18  6    (1)  The person filing the registration, but only if the
 18  7 person filing the registration is directly or indirectly
 18  8 controlled by or acting for the service company.
 18  9    (2)  The service company, any partner, officer, or director
 18 10 of the service company or any person occupying a similar
 18 11 status or performing similar functions for the service
 18 12 company, or any person directly or indirectly controlling or
 18 13 controlled by the service company.
 18 14    c.  The service company has not filed a document or
 18 15 information required under this chapter.
 18 16    d.  The service company's literature or advertising is
 18 17 misleading, incorrect, incomplete, or deceptive.
 18 18    e.  The service company has failed to pay the proper filing
 18 19 fee.  However, the commissioner shall vacate an order issued
 18 20 pursuant to this paragraph when the proper fee has been paid.
 18 21    f.  The service company does not have the minimum net
 18 22 worth, as determined in accordance with generally accepted
 18 23 accounting principles, required under this chapter.
 18 24    The commissioner may vacate or modify an order issued under
 18 25 this subsection if the commissioner finds that the conditions
 18 26 which prompted the entry of the order have changed or that it
 18 27 is otherwise in the public interest to do so.
 18 28    Sec. 27.  Section 516E.3, Code 2005, is amended to read as
 18 29 follows:
 18 30    516E.3  FILING AND FEE REQUIREMENTS.
 18 31    1.  SERVICE COMPANIES.
 18 32    a.  A motor vehicle service contract shall not be issued,
 18 33 sold, or offered for sale in this state unless a true and
 18 34 correct copy of the service contract, and the provider's
 18 35 service company's reimbursement insurance policy have been
 19  1 filed with the commissioner by the service company.
 19  2    2.  b.  In addition to any other required filings, an
 19  3 accurate copy of the service contract and the provider's
 19  4 reimbursement insurance policy, the A service company shall
 19  5 file a consent to service of process on the commissioner, and
 19  6 such other information as the commissioner requires shall be
 19  7 filed annually with the commissioner no later than the first
 19  8 day of August.  If the first day of August falls on a weekend
 19  9 or a holiday, the date for filing shall be the next business
 19 10 day.  In addition to the annual filing, the provider service
 19 11 company shall promptly file copies of any amended documents if
 19 12 material amendments have been made in the materials on file
 19 13 with the commissioner.  If an annual filing is made after the
 19 14 first of August and sales have occurred during the period when
 19 15 the provider service company was in noncompliance with this
 19 16 section, the commissioner shall assess an additional filing
 19 17 fee that is two times the amount normally required for an
 19 18 annual filing.  A fee shall not be charged for interim filings
 19 19 made to keep the materials filed with the division current and
 19 20 accurate.  The annual filing shall be accompanied by a filing
 19 21 fee determined by the commissioner which shall be sufficient
 19 22 to defray the costs of administering this chapter.
 19 23    3.  a.  c.  A motor vehicle service contract provider
 19 24 service company shall promptly file the following information
 19 25 with the insurance commissioner:
 19 26    (1)  A change in the name or ownership of the provider
 19 27 service company.
 19 28    (2)  The termination of the provider's service company's
 19 29 business.
 19 30    b.  (3)  The provider service company is not required to
 19 31 submit a fee as part of this filing.
 19 32    2.  PROVIDERS.
 19 33    a.  A service contract shall not be sold or offered for
 19 34 sale in this state unless a true and correct copy of the
 19 35 service contract has been filed with the commissioner by the
 20  1 provider.
 20  2    b.  A provider shall file a consent to service of process
 20  3 on the commissioner and such other information as the
 20  4 commissioner requires annually with the commissioner no later
 20  5 than August 1.  If August 1 falls on a weekend or a holiday,
 20  6 the date for filing shall be the next business day.  In
 20  7 addition to the annual filing, the provider shall promptly
 20  8 file copies of any amended documents if material amendments
 20  9 have been made in the materials on file with the commissioner.
 20 10 If an annual filing is made after August 1 and sales have
 20 11 occurred during the period when the provider was in
 20 12 noncompliance with this section, the commissioner shall assess
 20 13 an additional filing fee that is two times the amount normally
 20 14 required for an annual filing.  A fee shall not be charged for
 20 15 interim filings made to keep the materials filed with the
 20 16 division current and accurate.  The annual filing shall be
 20 17 accompanied by a filing fee in the amount of one hundred
 20 18 dollars.
 20 19    c.  A provider shall promptly file the following
 20 20 information with the commissioner:
 20 21    (1)  A change in the name or ownership of the provider.
 20 22    (2)  The termination of the provider's business.
 20 23    (3)  A provider is not required to submit a fee as part of
 20 24 this filing.
 20 25    Sec. 28.  Section 516E.4, Code 2005, is amended by striking
 20 26 the section and inserting in lieu thereof the following:
 20 27    516E.4  REIMBURSEMENT INSURANCE POLICY REQUIREMENTS.
 20 28    1.  REQUIRED DISCLOSURES.  A reimbursement insurance policy
 20 29 insuring a service contract issued, sold, or offered for sale
 20 30 in this state shall conspicuously state that, upon failure of
 20 31 the service company to perform under the contract, including
 20 32 but not limited to a failure to return the unearned
 20 33 consideration paid for a service contract in excess of the
 20 34 premium, the insurer that issued the policy shall pay on
 20 35 behalf of the service company any amount that is owed to the
 21  1 service contract holder by the service company to satisfy the
 21  2 service company's obligations under a service contract issued
 21  3 or sold by the service company.
 21  4    2.  TERMINATION.  As applicable, an insurer that issued a
 21  5 reimbursement insurance policy shall not terminate the policy
 21  6 unless a written notice has been received by the commissioner
 21  7 and by each applicable provider, service company, or third=
 21  8 party administrator.  The notice shall fix the date of
 21  9 termination at a date no earlier than ten days after receipt
 21 10 of the notice by the commissioner and by the applicable
 21 11 provider, service company, or third=party administrator.  The
 21 12 notice may be delivered in person or sent by mail, and a
 21 13 restricted certified mail return receipt shall be deemed proof
 21 14 of receipt of notice.  The termination of a reimbursement
 21 15 insurance policy shall not reduce the issuer's responsibility
 21 16 for a service contract issued by a service company prior to
 21 17 the date of termination.
 21 18    3.  INDEMNIFICATION OR SUBROGATION.  This section does not
 21 19 prevent or limit the right of an insurer that issued a
 21 20 reimbursement insurance policy to seek indemnification from or
 21 21 subrogation against a service company if the insurer pays or
 21 22 is obligated to pay a service contract holder sums that the
 21 23 service company was obligated to pay pursuant to the
 21 24 provisions of a service contract or pursuant to a contractual
 21 25 agreement.
 21 26    Sec. 29.  Section 516E.5, Code 2005, is amended to read as
 21 27 follows:
 21 28    516E.5  DISCLOSURE TO SERVICE CONTRACT HOLDERS == CONTRACT
 21 29 PROVISIONS.
 21 30    1.  A motor vehicle service contract shall not be issued,
 21 31 sold, or offered for sale in this state unless the contract
 21 32 conspicuously states that the obligations of the provider
 21 33 service company to the service contract holder are guaranteed
 21 34 under the service contract a reimbursement insurance policy,
 21 35 and unless the including a statement in substantially the
 22  1 following form:  "Obligations of the service company under
 22  2 this service contract are guaranteed under a reimbursement
 22  3 insurance policy.  If the service company fails to pay or
 22  4 provide service on a claim within sixty days after proof of
 22  5 loss has been filed with the service company, the service
 22  6 contract holder is entitled to make a claim directly against
 22  7 the reimbursement insurance policy."  A claim against a
 22  8 reimbursement insurance policy shall also include a claim for
 22  9 return of the unearned consideration paid for the service
 22 10 contract in excess of the premium paid.  A service contract
 22 11 shall conspicuously states state the name and address of the
 22 12 issuer of the reimbursement insurance policy for that service
 22 13 contract.
 22 14    2.  A motor vehicle service contract shall be written in
 22 15 clear, understandable language and the entire contract shall
 22 16 be printed or typed in easy=to=read type, size, and style, and
 22 17 shall not be issued, sold, or offered for sale in this state
 22 18 unless the contract does all of the following:
 22 19    a.  Clearly and conspicuously states the name and address
 22 20 of the service company, describes the service company's
 22 21 obligations to perform services or to arrange for the
 22 22 performance of services under the service contract, and states
 22 23 that the obligations of the provider service company to the
 22 24 service contract holder are guaranteed under a service
 22 25 contract reimbursement insurance policy.
 22 26    b.  Clearly and conspicuously states the name and address
 22 27 of the issuer of the reimbursement insurance policy.
 22 28    c.  Identifies the motor vehicle service contract provider,
 22 29 the seller of the motor vehicle company obligated to perform
 22 30 the service under the service contract, any third=party
 22 31 administrator, and the service contract holder to the extent
 22 32 that the name and address of the service contract holder has
 22 33 been furnished by the service contract holder.
 22 34    d.  Sets forth the total purchase price of the service
 22 35 contract and the terms under which the purchase price of the
 23  1 service contract is to be paid.
 23  2    e.  Sets forth the procedure for making a claim, including
 23  3 a telephone number.
 23  4    f.  Clearly and conspicuously states the dates that
 23  5 coverage starts and ends and the existence, terms, and
 23  6 conditions of a deductible amount, if any.
 23  7    g.  Specifies the merchandise or services, or both, to be
 23  8 provided and clearly states any and all limitations,
 23  9 exceptions, or exclusions.
 23 10    h.  Sets forth the conditions on which substitution of
 23 11 services will be allowed.
 23 12    i.  Sets forth all of the obligations and duties of the
 23 13 service contract holder, including but not limited to the duty
 23 14 to protect against any further damage to the motor vehicle,
 23 15 and the obligation to notify the provider service company in
 23 16 advance of any repair, if any.
 23 17    j.  Sets forth any and all terms, restrictions, or
 23 18 conditions governing transferability of the service contract,
 23 19 if any.
 23 20    k.  Describes or references any and all applicable
 23 21 provisions of the Iowa consumer credit code, chapter 537.
 23 22    l.  States the name and address of the commissioner.
 23 23    m.  Sets forth any and all conditions on which the service
 23 24 contract may be canceled, the terms and conditions for the
 23 25 refund of any portion of the purchase price, the identity of
 23 26 the person primarily liable to provide any refund, and the
 23 27 identity of any other person liable to provide any portion of
 23 28 the refund.  If the service contract holder cancels the
 23 29 service contract, the service company shall mail a written
 23 30 notice of termination to the service contract holder within
 23 31 fifteen days of the date of the termination.
 23 32    n.  Permits the service contract holder to cancel and
 23 33 return the service contract within at least twenty days of the
 23 34 date of mailing the service contract to the service contract
 23 35 holder or within at least ten days after delivery of the
 24  1 service contract if the service contract is delivered at the
 24  2 time of sale of the service contract, or within a longer
 24  3 period of time as permitted under the service contract.  If no
 24  4 claim has been made under the service contract prior to its
 24  5 return, the service contract is void and the full purchase
 24  6 price of the service contract shall be refunded to the service
 24  7 contract holder.  A ten percent penalty shall be added each
 24  8 month to a refund that is not paid to a service contract
 24  9 holder within thirty days of the return of the service
 24 10 contract to the service company.  The applicable time period
 24 11 for cancellation of a service contract shall apply only to the
 24 12 original service contract holder that purchased the service
 24 13 contract.
 24 14    3.  A complete copy of the terms of the motor vehicle
 24 15 service contract shall be delivered to the prospective service
 24 16 contract holder at or before the time that the prospective
 24 17 service contract holder makes application for the service
 24 18 contract.  If there is no separate application procedure, then
 24 19 a complete copy of the motor vehicle service contract shall be
 24 20 delivered to the service contract holder at or before the time
 24 21 the service contract holder becomes bound under the contract.
 24 22    Sec. 30.  Section 516E.6, Code 2005, is amended to read as
 24 23 follows:
 24 24    516E.6  COMMISSIONER MAY PROHIBIT CERTAIN SALES ==
 24 25 INJUNCTION.
 24 26    The commissioner shall issue an order instructing the a
 24 27 provider, service company, or third=party administrator to
 24 28 cease and desist from selling or offering for sale motor
 24 29 vehicle service contracts if the commissioner determines that
 24 30 the provider, service company, or third=party administrator
 24 31 has failed to comply with a provision of this chapter.  Upon
 24 32 the failure of a motor vehicle provider, service contract
 24 33 provider company, or third=party administrator to obey a cease
 24 34 and desist order issued by the commissioner, the commissioner
 24 35 may give notice in writing of the failure to the attorney
 25  1 general, who shall immediately commence an action against the
 25  2 provider, service company, or third=party administrator to
 25  3 enjoin the provider, service company, or third=party
 25  4 administrator from selling or offering for sale motor vehicle
 25  5 service contracts until the provider, service company, or
 25  6 third=party administrator complies with the provisions of this
 25  7 chapter and the district court may issue the injunction.
 25  8    Sec. 31.  Section 516E.7, Code 2005, is amended to read as
 25  9 follows:
 25 10    516E.7  RULES.
 25 11    The commissioner may adopt rules as provided in chapter 17A
 25 12 to administer and enforce the provisions of this chapter and
 25 13 to establish minimum standards for disclosure of motor vehicle
 25 14 service contract coverage limitations and exclusions.
 25 15    Sec. 32.  Section 516E.8, Code 2005, is amended to read as
 25 16 follows:
 25 17    516E.8  EXEMPTION.
 25 18    This chapter does not apply to a motor vehicle service
 25 19 contract issued by the manufacturer or importer of the motor
 25 20 vehicle covered by the service contract or to any third party
 25 21 acting in an administrative capacity on the manufacturer's
 25 22 behalf in connection with that service contract.
 25 23    Sec. 33.  Section 516E.9, Code 2005, is amended to read as
 25 24 follows:
 25 25    516E.9  MISREPRESENTATIONS OF STATE APPROVAL.
 25 26    A motor vehicle service contract provider company shall not
 25 27 represent or imply in any manner that the provider service
 25 28 company has been sponsored, recommended, or approved or that
 25 29 the provider's service company's abilities or qualifications
 25 30 have in any respect been passed upon by the state of Iowa,
 25 31 including the commissioner, the insurance division, or the
 25 32 division's securities bureau.
 25 33    Sec. 34.  Section 516E.10, Code 2005, is amended to read as
 25 34 follows:
 25 35    516E.10  PROHIBITED ACTS == UNFAIR OR DECEPTIVE TRADE
 26  1 PRACTICES.
 26  2    1.  MISREPRESENTATIONS, FALSE ADVERTISING, AND UNFAIR
 26  3 PRACTICES.
 26  4    a.  Unless licensed as an insurance company, a motor
 26  5 vehicle service contract provider company shall not use in its
 26  6 name, contracts, or literature, the words "insurance",
 26  7 "casualty", "surety", "mutual", or any other words descriptive
 26  8 of the insurance, casualty, or surety business or deceptively
 26  9 similar to the name or description of any insurance or surety
 26 10 corporation, or any other motor vehicle service contract
 26 11 provider company.
 26 12    b.  A motor vehicle service contract provider company shall
 26 13 not, without the written consent of the purchaser, knowingly
 26 14 charge a purchaser for duplication of coverage or duties
 26 15 required by state or federal law, a warranty expressly issued
 26 16 by a manufacturer or seller of a product, or an implied
 26 17 warranty enforceable against the lessor, seller, or
 26 18 manufacturer of a product.
 26 19    c.  A motor vehicle provider, service contract provider
 26 20 company, or third=party administrator shall not make, permit,
 26 21 or cause a false or misleading statement, either oral or
 26 22 written, in connection with the sale, offer to sell, or
 26 23 advertisement of a motor vehicle service contract.
 26 24    d.  A motor vehicle provider, service contract provider
 26 25 company, or third=party administrator shall not permit or
 26 26 cause the omission of a material statement in connection with
 26 27 the sale, offer to sell, or advertisement of a motor vehicle
 26 28 service contract, which under the circumstances should have
 26 29 been made in order to make the statement not misleading.
 26 30    e.  A motor vehicle provider, service contract provider
 26 31 company, or third=party administrator shall not make, permit,
 26 32 or cause to be made a false or misleading statement, either
 26 33 oral or written, about the benefits or services available
 26 34 under the motor vehicle service contract.
 26 35    f.  A motor vehicle provider, service contract provider
 27  1 company, or third=party administrator shall not make, permit,
 27  2 or cause to be made a statement of practice which has the
 27  3 effect of creating or maintaining a fraud.
 27  4    g.  A motor vehicle provider, service contract provider
 27  5 company, or third=party administrator shall not make, publish,
 27  6 disseminate, circulate, or place before the public, or cause,
 27  7 directly or indirectly, to be made, published, disseminated,
 27  8 circulated, or placed before the public in a newspaper,
 27  9 magazine, or other publication, or in the form of a notice,
 27 10 circular, pamphlet, letter, or poster, or over a radio or
 27 11 television station, or in any other way, an advertisement,
 27 12 announcement, or statement containing an assertion,
 27 13 representation, or statement with respect to the motor vehicle
 27 14 service contract industry or with respect to a motor vehicle
 27 15 provider, service contract provider company, or third=party
 27 16 administrator which is untrue, deceptive, or misleading.  It
 27 17 is deceptive or misleading to use any combination of words,
 27 18 symbols, or physical materials which by their content,
 27 19 phraseology, shape, color, or other characteristics are so
 27 20 similar to a combination of words, symbols, or physical
 27 21 materials used by a manufacturer or of such a nature that the
 27 22 use would tend to mislead a person into believing that the
 27 23 solicitation is in some manner connected with the
 27 24 manufacturer, unless actually authorized or issued by the
 27 25 manufacturer.
 27 26    h.  A bank, savings and loan association, credit union,
 27 27 insurance company, or other lending institution shall not
 27 28 require the purchase of a motor vehicle service contract as a
 27 29 condition of a loan.
 27 30    2.  DEFAMATION.  A motor vehicle provider, service contract
 27 31 provider company, or third=party administrator shall not make,
 27 32 publish, disseminate, or circulate, directly or indirectly, or
 27 33 aid, abet, or encourage the making, publishing, disseminating,
 27 34 or circulating of an oral or written statement or a pamphlet,
 27 35 circular, article, or literature which is false or maliciously
 28  1 critical of or derogatory to the financial condition of a
 28  2 person, and which is calculated to injure the person.
 28  3    3.  BOYCOTT, COERCION, AND INTIMIDATION.  A motor vehicle
 28  4 provider, service contract provider shall not enter into an
 28  5 company, or third=party administrator agreement to commit, or
 28  6 by a concerted action commit, an act of boycott, coercion, or
 28  7 intimidation resulting in or tending to result in unreasonable
 28  8 restraint of, or monopoly in, the service contract industry.
 28  9    4.  FALSE STATEMENTS.  A motor vehicle provider, service
 28 10 contract provider company, or third=party administrator shall
 28 11 not knowingly file with a supervisory or other public
 28 12 official, or knowingly make, publish, disseminate, circulate,
 28 13 or deliver to a person, or place before the public, or
 28 14 knowingly cause directly or indirectly to be made, published,
 28 15 disseminated, circulated, delivered to a person, or placed
 28 16 before the public, a false material statement of fact as to
 28 17 the financial condition of a person.
 28 18    5.  FALSE ENTRIES.  A motor vehicle provider, service
 28 19 contract provider company, or third=party administrator shall
 28 20 not knowingly make a false entry of a material fact in a book,
 28 21 report, or statement of a person or knowingly fail to make a
 28 22 true entry of a material fact pertaining to the business of
 28 23 the person in a book, report, or statement of the person.
 28 24    6.  USED OR REBUILT PARTS.  A motor vehicle service
 28 25 contract provider company shall not repair a motor vehicle
 28 26 covered by a motor vehicle service contract with any of the
 28 27 following:
 28 28    a.  Used parts, unless the provider service company
 28 29 receives prior written authorization by the vehicle owner.
 28 30    b.  Rebuilt parts, unless the parts are rebuilt according
 28 31 to national standards recognized by the insurance division.
 28 32    7.  MARKETING.  A provider, service company, or third=party
 28 33 administrator shall not market, advertise, offer to sell, or
 28 34 sell a service contract by using personal information obtained
 28 35 in violation of the federal Driver's Privacy Protection Act,
 29  1 18 U.S.C. } 2721 et seq.
 29  2    7.  8.  VIOLATIONS OF SECTION 714.16.
 29  3    a.  A violation of this chapter or rules adopted by the
 29  4 commissioner pursuant to this chapter is an unfair practice as
 29  5 defined in section 714.16.
 29  6    b.  An enforcement agreement between the commissioner and a
 29  7 motor vehicle provider, service contract provider company, or
 29  8 third=party administrator does not bar the attorney general
 29  9 from bringing an action against the provider, service company,
 29 10 or third=party administrator under section 714.16 as to
 29 11 allegations that a violation of this chapter constitutes a
 29 12 violation of section 714.16.
 29 13    Sec. 35.  Section 516E.11, Code 2005, is amended to read as
 29 14 follows:
 29 15    516E.11  RECORDS == EXPLANATION OF REASONS FOR DENIAL OF
 29 16 CLAIMS.
 29 17    1.  A motor vehicle provider, service contract provider
 29 18 company, or third=party administrator shall keep accurate
 29 19 records concerning transactions regulated under this chapter.
 29 20    a.  A motor vehicle service contract provider's records
 29 21 Records of a provider, service company, or third=party
 29 22 administrator shall include all of the following:
 29 23    (1)  Copies of all service contracts each type of service
 29 24 contract issued or sold.
 29 25    (2)  The name and address of each service contract holder.
 29 26    (3)  The Claim files which shall contain, at a minimum, the
 29 27 dates, amounts, and descriptions of all receipts, claims, and
 29 28 expenditures related to service contracts.
 29 29    (4)  Copies of all materials relating to claims which have
 29 30 been denied.
 29 31    b.  A motor vehicle provider, service contract provider
 29 32 company, or third=party administrator shall retain all
 29 33 required records pertaining to a service contract holder for
 29 34 at least two years after the specified period of coverage has
 29 35 expired.  A provider, service company, or third=party
 30  1 administrator discontinuing business in this state shall
 30  2 maintain its records until the provider, service company, or
 30  3 third=party administrator furnishes the commissioner
 30  4 satisfactory proof that the provider, service company, or
 30  5 third=party administrator has discharged all obligations to
 30  6 contract holders in this state.
 30  7    c.  Motor vehicle service contract providers Providers,
 30  8 service companies, or third=party administrators shall make
 30  9 all records concerning transactions regulated under the
 30 10 chapter available to the commissioner for the purpose of
 30 11 examination.
 30 12    d.  A provider, service company, or third=party
 30 13 administrator may keep all records required under this chapter
 30 14 in an electronic form.  If an administrator maintains records
 30 15 in a form other than a printed copy, the records shall be
 30 16 accessible from a computer terminal available to the
 30 17 commissioner and shall be capable of duplication to a legible
 30 18 printed copy.
 30 19    2.  A motor vehicle service contract provider, service
 30 20 company, or third=party administrator shall promptly deliver a
 30 21 written explanation to the service contract holder, describing
 30 22 the reasons for denying a claim or for the offer of a
 30 23 compromise settlement, based on all relevant facts or legal
 30 24 requirements and referring to applicable provisions of the
 30 25 service contract.
 30 26    3.  A provider, service company, or third=party
 30 27 administrator shall keep accurate records concerning
 30 28 transactions regulated under this chapter, including a list of
 30 29 the locations where service contracts are marketed, sold,
 30 30 offered for sale, or performed.
 30 31    Sec. 36.  Section 516E.12, Code 2005, is amended to read as
 30 32 follows:
 30 33    516E.12  SERVICE OF PROCESS.
 30 34    The commissioner shall be the agent for service of process
 30 35 upon a motor vehicle provider, service contract provider
 31  1 company, or third=party administrator and an issuer of a
 31  2 reimbursement insurance policy.
 31  3    Sec. 37.  Section 516E.13, subsection 4, unnumbered
 31  4 paragraph 1, Code 2005, is amended to read as follows:
 31  5    Upon the commissioner's determination that a provider,
 31  6 service company, or third=party administrator has engaged, is
 31  7 engaging, or is about to engage in any act or practice
 31  8 constituting a violation of this chapter or a rule adopted
 31  9 pursuant to this chapter, the commissioner may issue a summary
 31 10 order directing the person to cease and desist from engaging
 31 11 in the act or practice resulting in the violation or to take
 31 12 other affirmative action as in the judgment of the
 31 13 commissioner is necessary to comply with the requirements of
 31 14 this chapter.
 31 15    Sec. 38.  Section 516E.14, Code 2005, is amended to read as
 31 16 follows:
 31 17    516E.14  AUDITS.
 31 18    The commissioner may examine or cause to be examined the
 31 19 records of a motor vehicle provider, service contract provider
 31 20 company, or third=party administrator for the purpose of
 31 21 verifying compliance with this chapter.  The commissioner may
 31 22 require, by a subpoena, the attendance of the provider,
 31 23 service company, or third=party administrator, or the
 31 24 provider's a representative thereof, and any other witness
 31 25 whom the commissioner deems necessary or expedient, and the
 31 26 production of records relating in any manner to compliance
 31 27 with this chapter if a provider, service company, third=party
 31 28 administrator, or witness fails or refuses to produce the
 31 29 documents for examination when requested by the commissioner.
 31 30    Sec. 39.  Section 516E.15, subsection 1, paragraph b, Code
 31 31 2005, is amended to read as follows:
 31 32    b.  A motor vehicle provider, service contract provider who
 31 33 company, or third=party administrator that fails to file
 31 34 documents and information with the commissioner as required
 31 35 pursuant to section 516E.3 may be subject to a civil penalty.
 32  1 The amount of the civil penalty shall not be more than four
 32  2 hundred dollars plus two dollars for each motor vehicle
 32  3 service contract that the person executed prior to satisfying
 32  4 the filing requirement.  However, a person who fails to file
 32  5 information regarding a change in the provider's name or the
 32  6 termination of the provider's business of a provider, service
 32  7 company, or third=party administrator as required pursuant to
 32  8 section 516E.3 is subject to a civil penalty of not more than
 32  9 five hundred dollars.
 32 10    Sec. 40.  Section 516E.15, subsection 2, Code 2005, is
 32 11 amended to read as follows:
 32 12    2.  If the commissioner believes that grounds exist for the
 32 13 criminal prosecution of a motor vehicle provider, service
 32 14 contract provider company, or third=party administrator for
 32 15 violating this chapter or any other law of this state, the
 32 16 commissioner may forward to the attorney general or the county
 32 17 attorney the grounds for the belief, including all evidence in
 32 18 the commissioner's possession for action deemed appropriate by
 32 19 the attorney general or county attorney.  At the request of
 32 20 the attorney general, the county attorney shall appear and
 32 21 prosecute the action when brought in the county served by the
 32 22 county attorney.
 32 23    Sec. 41.  NEW SECTION.  516E.16  COURT ACTION FOR FAILURE
 32 24 TO COOPERATE.
 32 25    1.  If a person fails or refuses to file a statement or
 32 26 report or to produce any books, accounts, papers,
 32 27 correspondence, memoranda, purchase agreements, files, or
 32 28 other documents or records, or to obey a subpoena issued by
 32 29 the commissioner, the commissioner may refer the matter to the
 32 30 attorney general, who may apply to a district court to enforce
 32 31 compliance.  The court may order any of the following:
 32 32    a.  Injunctive relief restricting or prohibiting the offer
 32 33 or sale of service contracts.
 32 34    b.  Production of documents or records including but not
 32 35 limited to books, accounts, papers, correspondence, memoranda,
 33  1 purchase agreements, files, or other documents or records.
 33  2    c.  Such other relief as may be appropriate.
 33  3    2.  A court order issued pursuant to subsection 1 is
 33  4 effective until the person who is subject to the order files
 33  5 the statement or report, produces the documents requested, or
 33  6 obeys the subpoena.
 33  7    Sec. 42.  NEW SECTION.  516E.17  NET WORTH REQUIREMENT.
 33  8    A service company that has issued or renewed in the
 33  9 aggregate one thousand or fewer service contracts during the
 33 10 preceding calendar year shall maintain a minimum net worth of
 33 11 forty thousand dollars.  The minimum net worth to be
 33 12 maintained shall be increased by an additional twenty thousand
 33 13 dollars for each additional five hundred contracts or fraction
 33 14 thereof issued or renewed, up to a maximum required net worth
 33 15 of four hundred thousand dollars.  At least twenty thousand
 33 16 dollars of net worth shall consist of paid=in capital.
 33 17    Sec. 43.  NEW SECTION.  516E.18  PUBLIC ACCESS TO RECORDS.
 33 18    1.  The administrator shall keep a register of all filings
 33 19 and orders which have been entered.  The register shall be
 33 20 open for public inspection.
 33 21    2.  Upon request and for a reasonable fee, the
 33 22 administrator shall furnish to any person copies of any
 33 23 register entry or any document which is a matter of public
 33 24 record and not confidential.  Copies shall be available during
 33 25 normal business hours and may be certified upon request.  In
 33 26 any administrative, civil, or criminal proceeding, a certified
 33 27 copy is prima facie evidence of the contents of the document
 33 28 certified.
 33 29    3.  Pursuant to chapter 22, the administrator may maintain
 33 30 the confidentiality of information obtained during an
 33 31 investigation or audit.
 33 32    Sec. 44.  NEW SECTION.  516E.19  ADMINISTRATION.
 33 33    1.  This chapter shall be administered by the commissioner.
 33 34 The deputy administrator appointed pursuant to section 502.601
 33 35 shall be the principal operations officer responsible to the
 34  1 commissioner for the routine administration of this chapter
 34  2 and management of the administrative staff.  In the absence of
 34  3 the commissioner, whether because of vacancy in the office, by
 34  4 reason of absence, physical disability, or other cause, the
 34  5 deputy administrator shall be the acting administrator and
 34  6 shall, for the time being, have and exercise the authority
 34  7 conferred upon the commissioner.  The commissioner may from
 34  8 time to time delegate to the deputy administrator any or all
 34  9 of the functions assigned to the commissioner in this chapter.
 34 10 The deputy administrator shall employ officers, attorneys,
 34 11 accountants, auditors, investigators, and other employees as
 34 12 shall be needed for the administration of this chapter.
 34 13    2.  Upon request, the commissioner may honor requests from
 34 14 interested persons for interpretive opinions.
 34 15    Sec. 45.  Section 518.14, subsection 4, paragraph a, Code
 34 16 2005, is amended to read as follows:
 34 17    a.  UNITED STATES GOVERNMENT OBLIGATIONS.  Obligations
 34 18 Bonds or other evidences of indebtedness issued, assumed, or
 34 19 guaranteed by the United States of America, or by an any
 34 20 agency or instrumentality of the United States of America,
 34 21 include investments in an open=end management investment
 34 22 company registered with the federal securities and exchange
 34 23 commission under the federal Investment Company Act of 1940,
 34 24 15 U.S.C. } 80(a) and operated in accordance with 17 C.F.R. }
 34 25 270.2a=7, the portfolio of which is limited to the United
 34 26 States obligations described in this paragraph, and which are
 34 27 included in the national association of insurance
 34 28 commissioners' securities valuation office's United States
 34 29 direct obligation = full faith and credit list.
 34 30    Sec. 46.  Section 518A.12, subsection 4, paragraph a, Code
 34 31 2005, is amended to read as follows:
 34 32    a.  UNITED STATES GOVERNMENT OBLIGATIONS.  Obligations
 34 33 Bonds or other evidences of indebtedness issued, assumed,  or
 34 34 guaranteed by the United States of America, or an by any
 34 35 agency or instrumentality of the United States of America,
 35  1 include investments in an open=end management investment
 35  2 company registered with the federal securities and exchange
 35  3 commission under the federal Investment Company Act of 1940,
 35  4 15 U.S.C. } 80(a) and operated in accordance with 17 C.F.R. }
 35  5 270.2a=7, the portfolio of which is limited to the United
 35  6 States obligations described in this paragraph, and which are
 35  7 included in the national association of insurance
 35  8 commissioners' securities valuation office's United States
 35  9 direct obligation = full faith and credit list.
 35 10    Sec. 47.  Section 520.19, Code 2005, is amended to read as
 35 11 follows:
 35 12    520.19  ANNUAL TAX == FEES.
 35 13    In lieu of all other taxes, licenses, charges, and fees
 35 14 whatsoever, such attorney shall annually pay to the
 35 15 commissioner the same fees as are paid by mutual companies
 35 16 transacting the same kind of business, and an annual tax of
 35 17 two percent, if a domestic reciprocal organization, and two
 35 18 percent, if a foreign reciprocal organization, based upon the
 35 19 applicable percentage stated in section 432.1, subsection 4,
 35 20 calculated upon the gross premiums or deposits collected from
 35 21 subscribers in this state during the preceding calendar year,
 35 22 after deducting therefrom returns, or cancellations, and all
 35 23 amounts returned to subscribers or credited to their accounts
 35 24 as savings, and the amount returned upon canceled policies and
 35 25 rejected applications covering property situated or on
 35 26 business done within this state.
 35 27    Sec. 48.  Section 522B.17, Code 2005, is amended to read as
 35 28 follows:
 35 29    522B.17  PENALTY.
 35 30    An insurer or insurance producer who, after hearing, is
 35 31 found to have violated this chapter may be ordered to cease
 35 32 and desist from engaging in the conduct resulting in the
 35 33 violation and may be assessed a civil penalty pursuant to
 35 34 chapter 507B.
 35 35    A person found who, after hearing, is found to have acted
 36  1 violated this chapter by acting as an agent of an insurer or
 36  2 otherwise selling, soliciting, or negotiating insurance in
 36  3 this state, or offering to the public advice, counsel, or
 36  4 services with regard to insurance, who is not properly
 36  5 licensed is subject to may be ordered to cease and desist from
 36  6 engaging in the conduct resulting in the violation and may be
 36  7 assessed a civil penalty according to the provisions of
 36  8 chapter 507A.
 36  9    If a person does not comply with an order issued pursuant
 36 10 to this section, the commissioner may petition a court of
 36 11 competent jurisdiction to enforce the order.  The court shall
 36 12 not require the commissioner to post a bond in an action or
 36 13 proceeding under this section.  If the court finds, after
 36 14 notice and opportunity for hearing, that the person is not in
 36 15 compliance with an order, the court may adjudge the person to
 36 16 be in civil contempt of the order.  The court may impose a
 36 17 civil penalty against the person for contempt in an amount not
 36 18 less than three thousand dollars but not greater than ten
 36 19 thousand dollars for each violation and may grant any other
 36 20 relief that the court determines is just and proper in the
 36 21 circumstances.
 36 22    Sec. 49.  NEW SECTION.  522B.17A  INJUNCTIVE RELIEF.
 36 23    An association with at least twenty=five insurance producer
 36 24 members may bring an action in district court to enjoin a
 36 25 person from selling, soliciting, or negotiating insurance in
 36 26 violation of section 522B.2.  If the court finds that the
 36 27 person is in violation of section 522B.2 and enjoins the
 36 28 person from selling, soliciting, or negotiating insurance in
 36 29 violation of that section, the court's findings of fact and
 36 30 law, and the judgment and decree, when final, shall be
 36 31 admissible in any proceeding initiated pursuant to section
 36 32 522B.17 by the commissioner against the person enjoined and
 36 33 the person enjoined shall be precluded from contesting in that
 36 34 proceeding the court's determination that the person sold,
 36 35 solicited, or negotiated insurance in violation of section
 37  1 522B.2.
 37  2    Sec. 50.  Section 523A.402, subsection 6, paragraph c, Code
 37  3 2005, is amended to read as follows:
 37  4    c.  The annuity shall not be contestable, or limit death
 37  5 benefits in the case of suicide, with respect to that portion
 37  6 of the face amount of the annuity which is required by
 37  7 paragraph "b".  The annuity shall not refer to physical
 37  8 examination, or otherwise operate as an exclusion, limitation,
 37  9 or condition other than requiring submission of proof of death
 37 10 or surrender of the annuity at the time the prepaid purchase
 37 11 agreement is funded, matures, or is canceled, as the case may
 37 12 be.
 37 13    Sec. 51.  EFFECTIVE AND RETROACTIVE APPLICABILITY DATES.
 37 14 This section and the sections of this Act amending sections
 37 15 513C.6 and 514E.2, and amending section 514E.7, subsection 1,
 37 16 by enacting paragraph "e", being deemed of immediate
 37 17 importance, take effect upon enactment.  The section of the
 37 18 Act amending section 513C.6 is retroactively applicable to
 37 19 January 1, 2005, and is applicable on and after that date.
 37 20 The sections of the Act amending section 514E.2 are
 37 21 retroactively applicable to July 1, 1986, and are applicable
 37 22 on and after that date.  The portion of the section of the Act
 37 23 amending section 514E.7, subsection 1, by enacting paragraph
 37 24 "e" is retroactively applicable to January 1, 2005, and is
 37 25 applicable on and after that date.
 37 26                           EXPLANATION
 37 27    This bill relates to various provisions administered by the
 37 28 insurance division of the department of commerce.
 37 29    Code section 432.1 provides for cash refunds of excess
 37 30 prepayments of premium tax to an insurance carrier when a
 37 31 premium tax credit will not allow recoupment of the funds
 37 32 paid.
 37 33    Code section 505A.1 is amended to provide that the
 37 34 commissioner of insurance shall be the state's representative
 37 35 for the interstate insurance product regulation compact.
 38  1    Code section 507C.2 is amended to include additional
 38  2 definitions, including definitions of certain derivative
 38  3 contracts that may be involved in insurer insolvency
 38  4 proceedings.
 38  5    New Code section 507C.28A is amended concerning rights that
 38  6 may be exercised under netting agreements or qualified
 38  7 financial contracts under certain circumstances.
 38  8    Code section 507C.30 is amended by adding a new
 38  9 subparagraph concerning the disallowance of certain setoffs
 38 10 during insolvency proceedings.
 38 11    Code section 509.3 is amended to provide that a group
 38 12 accident or health insurance policy shall have a provision
 38 13 notifying the policyholder that a copy of the insurance
 38 14 application will be furnished to the policyholder within 30
 38 15 days after the policy is issued.
 38 16    Code section 513B.12 is amended to exempt small employer
 38 17 carriers from electing risk=assuming status while the small
 38 18 employer carrier reinsurance program is suspended.
 38 19    Code section 513B.13 is amended to permit reduction of the
 38 20 size of the small employer carrier reinsurance program board
 38 21 while the program is suspended, with the approval of the
 38 22 commissioner of insurance.
 38 23    Code section 513B.17 strikes language allowing expansion of
 38 24 the small employer carrier reinsurance program to employer
 38 25 groups employing 25 to 50 employees if the market is
 38 26 constricted and not competitive, since state law already
 38 27 includes employee groups of that size in the program.
 38 28    Code section 513C.6 is amended to allow an individual who
 38 29 has coverage as a dependent under a basic or standard health
 38 30 benefit plan to elect to continue coverage under the plan when
 38 31 the individual is no longer covered as a dependent under the
 38 32 plan.  The bill provides that this provision is effective upon
 38 33 enactment and is retroactively applicable to January 1, 2005,
 38 34 and applies on and after that date.
 38 35    Code section 514A.5 is amended to provide that a statement
 39  1 in an application for an individual accident or health
 39  2 insurance policy shall not bind the policyholder unless a copy
 39  3 of the application is furnished to the policyholder within 30
 39  4 days after the policy is issued.
 39  5    Code section 514B.13 is amended to allow a health
 39  6 maintenance organization that provides services exclusively on
 39  7 a group contract basis to limit the applicability of the open
 39  8 enrollment period provided for in the section to members of
 39  9 the group covered by the contract, including those members of
 39 10 the group who previously waived coverage.
 39 11    Code section 514E.2, subsection 1, is amended to provide
 39 12 that all carriers and all organized delivery systems licensed
 39 13 by the director of public health providing health insurance or
 39 14 health care services on an individual or group basis are
 39 15 members of the Iowa comprehensive health insurance
 39 16 association.
 39 17    Code section 514E.2, subsection 5, is amended to strike a
 39 18 requirement that the Iowa comprehensive health insurance
 39 19 association include a list of health conditions which would
 39 20 make an applicant eligible without demonstrating a rejection
 39 21 of coverage by one carrier.
 39 22    Code section 514E.2, subsection 7, is amended to include
 39 23 definitions of "total health insurance premiums" and "payments
 39 24 for subscriber contracts" for the purpose of computing
 39 25 assessments of members by the Iowa comprehensive health
 39 26 insurance association.
 39 27    The bill provides that all the amendments to Code section
 39 28 514E.2 take effect upon enactment and are retroactively
 39 29 applicable to July 1, 1986, and apply on and after that date.
 39 30    Code section 514E.7 is amended to provide that an
 39 31 individual is eligible for coverage under the Iowa
 39 32 comprehensive health insurance association if the person has
 39 33 certain health conditions established by the association's
 39 34 board of directors with the approval of the commission.  Code
 39 35 section 514E.7 is also amended to provide eligibility for such
 40  1 coverage if the individual has coverage under a basic or
 40  2 standard health benefit plan under Code chapter 513C and this
 40  3 provision is effective upon enactment and is retroactively
 40  4 applicable to January 1, 2005, and applies on and after that
 40  5 date.
 40  6    Code section 514E.8, subsection 1, is amended to provide
 40  7 that an individual who is covered by an association health
 40  8 insurance policy and who is eligible for Medicare coverage
 40  9 based on age prior to January 1, 2005, may continue to renew
 40 10 the coverage under the association policy.
 40 11    Code section 515.138 revises language about intentional
 40 12 acts in standard fire policy language which are
 40 13 noncompensable.
 40 14    Code section 515B.2 is amended to change the date used when
 40 15 calculating the net worth of a person for the purpose of
 40 16 determining whether the person has a covered claim under the
 40 17 Iowa insurance guaranty association.
 40 18    Code section 515B.17 is amended to provide a date certain
 40 19 when claims must be filed in order to be covered by the Iowa
 40 20 insurance guaranty association.
 40 21    Code section 515F.36 is amended to change the membership of
 40 22 the governing board of the FAIR plan, the plan to assure fair
 40 23 access to insurance requirements.
 40 24    Code chapter 516E concerning service contracts for the
 40 25 repair or placement of certain motor vehicles is extensively
 40 26 revised.  Code section 516E.1 concerning definitions is
 40 27 amended to include the addition of definitions for an
 40 28 "administrator", for a "third=party administrator", and for a
 40 29 "service company", to redefine "provider" and to redefine
 40 30 "reimbursement insurance policy" to specify that such a policy
 40 31 is for the benefit of the service contract holders.
 40 32    Code section 516E.2 is amended to specify the requirements
 40 33 for a service company to issue, sell, or offer service
 40 34 contracts in this state, including financial security
 40 35 requirements to protect service contract holders in the form
 41  1 of a funded reserve in the amount of 40 percent of gross
 41  2 consideration received by the service company, and the filing
 41  3 of a certificate of deposit with the commissioner in the
 41  4 amount of not less than 5 percent of consideration received,
 41  5 but not less than $25,000.  Service companies are also
 41  6 required to register with the commissioner of insurance and
 41  7 pay a $500 registration fee.  Grounds for denial, suspension,
 41  8 or revocation of such registrations are also specified.
 41  9    Code section 516E.3 is amended to provide that service
 41 10 companies and providers, such as auto dealers and other
 41 11 sellers, are required to file copies of service contracts with
 41 12 the insurance commissioner, including copies of service
 41 13 contracts offered for sale or sold, and a copy of the service
 41 14 company's reimbursement insurance policy.  A provider is
 41 15 required to pay a $100 filing fee.  Providers and service
 41 16 companies are required to make additional filings concerning
 41 17 name or ownership changes or cessation of business.
 41 18    Code section 516E.4 is amended to require that
 41 19 reimbursement insurance policies must include a statement that
 41 20 the reimbursement insurer is obligated to pay the service
 41 21 contract holder upon a failure of the service company to
 41 22 perform, must include specified terms for termination of the
 41 23 policy, and may include the right of an insurer to seek
 41 24 indemnification or subrogation against a service company if
 41 25 the insurer is required to pay a service contract holder
 41 26 pursuant to the policy.
 41 27    Code section 516E.5 is amended to require service contracts
 41 28 to include information about the service company and the
 41 29 service company's obligations under the service contract, a
 41 30 statement that the obligations of the service company are
 41 31 guaranteed under a reimbursement insurance policy and that the
 41 32 service contract holder may file claims directly with the
 41 33 insurer if the service company fails to perform under the
 41 34 service contract.  The Code section is also amended to require
 41 35 identification of the third=party administrator and the
 42  1 service company for the service contract, to require a written
 42  2 termination notice of a service contract, and to allow a
 42  3 cancellation period by a service contract holder after a
 42  4 service contract has been purchased.
 42  5    Code sections 516E.6, 516E.7, 516E.8, 516E.9, 516E.10,
 42  6 516E.12, 516E.13, 516E.14, and 516E.15 are amended to apply to
 42  7 service companies, providers, and third=party administrators.
 42  8    Code section 516E.11 is amended to conform with changes in
 42  9 definitions made in Code section 516E.1, to require providers,
 42 10 service companies, and third=party administrators to comply
 42 11 with recordkeeping requirements, to reduce recordkeeping
 42 12 requirements as to individual service contracts, and to update
 42 13 recordkeeping requirements to reflect modern technology.
 42 14 Providers, service companies, and third=party administrators
 42 15 are also required to keep a list of locations where service
 42 16 contracts are marketed, sold, offered for sale, or performed.
 42 17    New Code section 516E.16 allows the insurance commissioner
 42 18 to pursue court action when a person does not respond to
 42 19 insurance division orders and requests for information.
 42 20    New Code section 516E.17 imposes a net worth requirement on
 42 21 service companies, based on the number of service contracts
 42 22 issued or renewed in a year, that utilizes the same formula
 42 23 and amounts that are used for residential service contracts
 42 24 under Code chapter 523C.
 42 25    New Code section 516E.18 codifies an existing rule
 42 26 concerning public access to the records of an administrator.
 42 27    New Code section 516E.19 relates to the administration of
 42 28 Code chapter 516E by the commissioner of insurance with the
 42 29 assistance of the deputy administrator of insurance.
 42 30    Code sections 518.14 and 518A.12 are amended to allow
 42 31 county and state mutual associations to invest in United
 42 32 States obligations that include open=end management investment
 42 33 accounts.
 42 34    Code section 520.19 is amended to provide that reciprocal
 42 35 or interinsurance contracts are subject to the new premium tax
 43  1 rate structure contained in Code section 432.1, subsection 4.
 43  2    Code section 522B.17 is amended to provide that if an
 43  3 insurer or insurance producer is found to have violated Code
 43  4 chapter 522B, that person may be ordered to cease and desist
 43  5 from engaging in the illegal conduct and may be assessed a
 43  6 civil penalty pursuant to Code chapter 507B.  The section is
 43  7 also amended to provide that a person who violates Code
 43  8 chapter 522B by acting as an agent of an insurer or otherwise
 43  9 sells, solicits, or negotiates insurance in this state or
 43 10 offers advice or services regarding insurance and who is not
 43 11 properly licensed may be ordered to cease and desist from
 43 12 engaging in the illegal conduct and may be assessed a civil
 43 13 penalty pursuant to Code chapter 507B.
 43 14    Code section 522B.17 is also amended to allow the
 43 15 commissioner to enforce a cease and desist order by
 43 16 petitioning a court of competent jurisdiction.  The
 43 17 commissioner is not required to file a bond in such an action
 43 18 and if the court finds that the person is not in compliance
 43 19 with the cease and desist order, the court may find the person
 43 20 in civil contempt and may impose a civil penalty against the
 43 21 person in an amount not less than $3,000 and not more than
 43 22 $10,000 and grant any other relief that the court determines
 43 23 is appropriate under the circumstances.
 43 24    New Code section 522B.17A allows an association with at
 43 25 least 25 members to bring an action in district court for
 43 26 injunctive relief against a person who sells, solicits, or
 43 27 negotiates insurance in violation of Code section 522B.2.  The
 43 28 section provides that if the court finds that such a violation
 43 29 has occurred and enjoins the person from continuing to violate
 43 30 the chapter, the court's findings of law and fact, and the
 43 31 final judgment and decree of the court shall be admissible in
 43 32 any proceeding initiated against the person by the
 43 33 commissioner and the person enjoined is precluded from
 43 34 contesting the court's determination that a violation of Code
 43 35 section 522B.2 has occurred.
 44  1    Code section 523A.402 is amended to correct an error in
 44  2 language concerning annuity contracts for the purpose of
 44  3 funding cemetery and funeral merchandise and funeral services.
 44  4 The change will conform the language to changes made in
 44  5 legislation contained in House File 2269, which was enacted in
 44  6 2004.
 44  7 LSB 1155HV 81
 44  8 av:rj/pj/5