SENATE FILE _____

BY  (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON DANDEKAR)

A BILL FOR

An Act relating to automobile or motor vehicle insurance coverage of liability arising from uninsured, underinsured, or hit-and-run motorists.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

   Section 1.  Section 516A.1, Code 2011, is amended to read as follows:
   516A.1  Coverage included in every liability policy —— rejection by insured.
   1.  No An automobile liability or motor vehicle liability insurance policy insuring against liability for bodily injury or death arising out of the ownership, maintenance, or use of a motor vehicle shall not be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state, unless coverage is provided in such policy or supplemental thereto, for the protection of persons insured under such policy who are legally entitled to recover damages from the owner or operator of an uninsured motor vehicle or a hit-and-run motor vehicle or an underinsured motor vehicle because of bodily injury, sickness, or disease, including death resulting therefrom, caused by accident and arising out of the ownership, maintenance, or use of such uninsured or underinsured motor vehicle, or arising out of physical contact of with, or reasonable avoidance of physical contact with, such hit-and-run motor vehicle with the person insured or with a motor vehicle which the person insured is occupying at the time of the accident. Both the uninsured motor vehicle or hit-and-run motor vehicle coverage, and the underinsured motor vehicle coverage shall include limits for bodily injury or death at least equal to those stated in section 321A.1, subsection 11 the limits of liability for the bodily injury portion of the insurance policy. The form and provisions of such coverage shall be examined and approved by the commissioner of insurance.
   2.  However, the The named insured may reject all of such the coverage required in subsection 1, or reject the uninsured motor vehicle (hit-and-run motor vehicle) coverage, or reject the underinsured motor vehicle coverage, by written rejections signed by the named insured. If rejection is made on a form or document furnished by an insurance company or insurance producer, it the rejection shall be on a separate sheet of paper which contains only the rejection and information directly related to it the rejection, including an explanation of the coverage being rejected and the amount of the premium associated with the coverage being rejected. Such coverage need not be provided in or supplemental to a renewal policy if the named insured has rejected the coverage in connection with a policy previously issued to the named insured by the same insurer.
   Sec. 2.  Section 516A.2, Code 2011, is amended to read as follows:
   516A.2  Construction —— minimum coverage —— stacking step-down provisions.
   1.  Except with respect to a policy containing both underinsured motor vehicle coverage and uninsured or hit-and-run motor vehicle coverage, nothing Nothing contained in this chapter shall be construed as requiring forms of coverage provided pursuant hereto, whether alone or in combination with similar coverage afforded under other automobile liability or motor vehicle liability policies, to afford limits in excess of those that would be afforded had the insured thereunder been involved in an accident with a motorist who was insured under a policy of liability insurance with the minimum limits for bodily injury or death prescribed in subsection 11 of section 321A.1. Such forms of coverage may include terms, exclusions, limitations, conditions, and offsets which are designed to avoid duplication of insurance or other benefits duplicate payment of damages.
   To the extent that Hernandez v. Farmers Insurance Company, 460 N.W.2d 842 (Iowa 1990), provided for interpolicy stacking of uninsured or underinsured coverages in contravention of specific contract or policy language, the general assembly declares such decision abrogated and declares that the enforcement of the antistacking provisions contained in a motor vehicle insurance policy does not frustrate the protection given to an insured under section 516A.1.
   2.  Pursuant to chapter 17A, the commissioner of insurance shall, by January 1, 1992, adopt rules to assure the availability, within the state, of motor vehicle insurance policies, riders, endorsements, or other similar forms of coverage, the terms of which shall provide for the stacking of uninsured and underinsured coverages with any similar coverage which may be available to an insured.
   3.  It is the intent of the general assembly that when more than one motor vehicle insurance policy is purchased by or on behalf of an injured insured and which provides uninsured, underinsured, or hit-and-run motor vehicle coverage to an insured injured in an accident, the injured insured is entitled to recover up to an amount equal to the highest single limit for uninsured, underinsured, or hit-and-run motor vehicle coverage under any one of the above described motor vehicle insurance policies insuring the injured person which amount shall be paid by the insurers according to any priority of coverage provisions contained in the policies insuring the injured person.
   2.  A policy to which this chapter applies shall not include exclusions or step-down provisions that eliminate or reduce uninsured or underinsured coverage for a person who would otherwise be covered under the policy, for the reason that the person is injured by, or while occupying a vehicle being operated by, another person insured under the policy.
   Sec. 3.  Section 516A.4, Code 2011, is amended to read as follows:
   516A.4  Insurer making payment —— reimbursement —— settlement —— substitute tender —— good faith.
   1.  In the event of payment to any person under the coverage required by this chapter and subject to the terms and conditions of such coverage, the insurer making such payment shall, to the extent thereof, be entitled to the proceeds of any settlement or judgment resulting from the exercise of any rights of recovery of such person against any person or organization legally responsible for the bodily injury for which such payment is made, including the proceeds recoverable from the assets of the insolvent insurer, to the extent that the proceeds of the resulting settlement or judgment, when combined with such payment made by the insurer, exceed such person’s damages. The person to whom said payment is made under the insolvency protection required by this chapter shall to the extent thereof, be deemed to have waived any right to proceed to enforce such a judgment against the assets of the judgment debtor who was insured by the insolvent insurer whose insolvency resulted in said payment being made, other than assets recovered or recoverable by such judgment debtor from such insolvent insurer.
   2.  An insurer providing coverage under this chapter shall, within thirty days after receipt of a written request for permission to settle with any person or organization legally responsible for bodily injury for which coverage is provided under this chapter, either give consent to the settlement or tender substitute payment of the settlement amount. Failure of the insurer to give such consent or to tender substitute payment shall constitute the insurer’s consent to the settlement and shall bar the insurer from claiming that the settlement prejudiced the insurer’s rights under the policy or this section.
   3.  An insurer that pursues, through subrogation or assignment, a claim against any person or organization legally responsible for bodily injury for which the insurer has made payments under this chapter, shall include in such claim all damages of the subrogor or assignor of the claim, and shall tender to the subrogor or assignor any amounts to which the subrogor or assignor would have been entitled under subsection 1 if the subrogor or assignor had directly pursued the claim.
   4.  An insurer shall act in good faith in response to a claim for benefits under coverage required by this chapter. An insurer who fails to act in good faith in response to such a claim for benefits shall be liable to the person owed such benefits for all damages caused by such failure, including interest, reasonable attorney fees and expenses, and punitive damages if the required showing is made pursuant to chapter 668A. For the purposes of this subsection,“good faith” means an informed judgment based on honesty and diligence, supported by evidence that the insurer knew or should have known at the time the insurer made a decision on the claim. The insurer shall have the burden of proving that it acted in good faith.
EXPLANATION
   This bill relates to automobile or motor vehicle insurance coverage of liability arising from uninsured, underinsured, or hit-and-run motorists.
   Code section 516A.1 is amended to require coverage for damages arising out of reasonable avoidance of physical contact with a hit-and-run motor vehicle. Coverage for uninsured, underinsured, and hit-and-run motor vehicle liability must equal the limits of liability for the bodily injury portion of the insurance policy instead of the statutory amounts required for proof of financial responsibility in Code section 321A.1(11). A form furnished by the insurance company allowing an insured to reject any or all of the required coverage must include an explanation of the coverage being rejected and the amount of premium associated with the coverage being rejected.
   Code section 516A.2(1) is amended to provide that such coverage may include provisions that are designed to avoid duplicate payment of damages. The remainder of Code sections 516A.2(1) and 516A.2(2) relating to stacking of uninsured and underinsured coverages, and Code section 516A.2(3) relating to coverage under multiple motor vehicle insurance policies of one insured, are stricken. Code section 516A.2 is amended to prohibit exclusions or step-down provisions in motor vehicle insurance policies that eliminate or reduce uninsured or underinsured coverage for a person who would otherwise be covered under the policy, because the person is injured by, or while in a vehicle being operated by, another person insured under the policy.
   Code section 516A.4(1) is amended to provide that an insurer who has made payments under a policy to an injured party is entitled to proceeds of a resulting settlement or judgment against the person responsible for those damages only to the extent that the proceeds combined with payment made by the insurer exceed the injured party’s damages.
   Code section 516A.4(2) provides that an insurer has 30 days after receipt of a request for permission to settle against the responsible party, to either consent to the settlement or to tender substitute payment of the settlement amount, or such failure will constitute consent and bar the insurer from claiming prejudice as a result of the settlement.
   Code section 516A.4(3) provides that when an insurer pursues a claim, through subrogation or assignment, against the party responsible for bodily injury for which the insurer has made payments, the insurer shall include the damages of the subrogor or assignor and tender the amount to the assignor or subrogor that the person would have been entitled to if that person had pursued the claim directly.
   Code section 516A.4(4) requires an insurer to act in good faith in response to a claim for uninsured, underinsured, or hit-and-run benefits under Code chapter 516A and provides that an insurer that does not act in good faith is liable to the person owed such benefits for all damages caused by that failure, including interest, reasonable attorney fees and expenses, and punitive damages upon the showing required under Code chapter 668A. For the purposes of this provision, "good faith" means an informed judgment based on honesty and diligence, supported by evidence that the insurer knew or should have known at the time the insurer made a decision on the claim. The insurer has the burden of proving that it acted in good faith.