HSB 134 (LSB 1494YC (3) 85)

HOUSE FILE _____

BY  (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON COWNIE)

A BILL FOR

An Act regulating the sale of portable electronics insurance, including by requiring licensure, and providing for fees and penalties.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  522E.1  Definitions.
   As used in this chapter, unless the context otherwise requires:
   1.  “Commissioner” means the commissioner of insurance.
   2.  “Customer” means a person who purchases portable electronics.
   3.  “Enrolled customer” means a customer who elects coverage under a portable electronics insurance policy issued to a vendor of portable electronics.
   4.  “Free trial offer” means an offer to a customer under which portable electronics insurance is provided free of charge for a limited time period subsequent to which a charge is made to the customer for the insurance without notice to the customer of such charge prior to the expiration of the free trial period.
   5.  “Location” means any physical location in this state, or any internet site, call center site, or similar location directed to residents of this state.
   6.  “Portable electronics” means electronic devices that are personal, self-contained, easily carried by an individual, battery operated, and used for communication, viewing, listening, recording, gaming, computing, or global positioning, including cell or satellite phones, pagers, personal global positioning satellite units, portable computers, portable audio listening, video viewing, or recording devices, digital cameras, video camcorders, portable gaming systems, docking stations, automatic answering devices, and other similar devices, and the accessories and services related to the use of such devices.
   7.
  a.  “Portable electronics insurance” means insurance providing coverage for the repair or replacement of portable electronics which may include coverage against any one or more of the following causes of loss:
   (1)  Property loss.
   (2)  Theft.

   (3)  Inoperability due to mechanical failure.
   (4)  Malfunction.
   (5)  Damage.
   (6)  Other similar causes of loss.
   b.  “Portable electronics insurance” does not include any of the following:
   (1)  A service contract or extended warranty providing coverage limited to the repair, replacement, or maintenance of property for the operational or structural failure of the property due to a defect in materials, workmanship, accidental damage from handling power surges, or normal wear and tear.
   (2)  A policy of insurance coverage of a seller’s or manufacturer’s obligations under a warranty.
   (3)  A homeowner’s, renter’s, private passenger automobile, commercial multiperil, or similar insurance policy.
   8.  “Portable electronics transaction” means any of the following:
   a.  The sale or lease of portable electronics by a vendor to a customer.
   b.  The sale of a service related to the use of portable electronics by a vendor to a customer.
   9.  “Supervising entity” means a business entity that is a licensed insurer or an insurance producer licensed under chapter 522B, that is appointed by an insurer to supervise the administration of a portable electronics insurance program.
   10.  “Vendor” means a person in the business of engaging in portable electronics transactions, directly or indirectly.
    Sec. 2.  NEW SECTION.  522E.2  Licensure of vendors.
   1.  A vendor shall obtain a portable electronics limited lines insurance license as required under this chapter to sell or offer for sale coverage under a policy of portable electronics insurance.
   2.  A portable electronics limited lines insurance license issued to a vendor pursuant to this chapter authorizes any employee or authorized representative of the vendor to sell or offer coverage under a policy of portable electronics insurance to a customer at each location at which the vendor engages in portable electronics transactions.
   3.  A supervising entity shall maintain a registry of vendor locations that are authorized to sell or solicit portable electronics insurance in this state. Upon request by the commissioner and with ten days’ notice to the supervising entity, the registry shall be open to inspection and examination by the commissioner during regular business hours of the supervising entity.
   4.  Notwithstanding any other provision of law to the contrary, a portable electronics limited lines insurance license issued pursuant to this chapter authorizes the licensee and its employees or authorized representatives to engage in those activities that are permitted in this chapter.
    Sec. 3.  NEW SECTION.  522E.3  Requirements for sale of portable electronics insurance.
   1.  At every location where portable electronics insurance is offered to customers, brochures or other written materials that do all of the following shall be made available to prospective customers:
   a.  Disclose that portable electronics insurance may provide a duplication of coverage already provided by the customer’s homeowner’s insurance policy, renter’s insurance policy, or other source of insurance coverage.
   b.  State that enrollment by the customer in a portable electronics insurance program is not required in order to purchase or lease portable electronics.
   c.  Summarize the material terms of the portable electronics insurance coverage including all of the following:
   (1)  The identity of the insurer.
   (2)  The identity of the supervising entity.
   (3)  The amount of any applicable deductible and how it is to be paid.
   (4)  Benefits of the coverage.

   (5)  Key terms and conditions of coverage such as whether portable electronics may be repaired or replaced with similar make and model reconditioned or nonoriginal manufacturer parts or equipment.
   d.  Summarize the process for filing a claim, including a description of how to return portable electronics and the maximum fee applicable in the event the customer fails to comply with any equipment return requirements.
   e.  State that an enrolled customer may cancel enrollment for coverage under a portable electronics insurance policy at any time and the person paying the premium shall receive a refund or credit of any applicable unearned premium.
   2.  The disclosures required pursuant to subsection 1 or the full terms and conditions of portable electronics insurance coverage shall be provided to customers enrolling in such coverage by hand delivery, ordinary mail, or electronic mail, or by directing the customer to an internet site containing such information.
   3.  Portable electronics insurance may be offered on a month-to-month or other periodic basis as a group or master commercial inland marine policy issued to a vendor for its enrolled customers.
   4.  Portable electronics insurance shall not be sold through a free trial offer.
   5.  The commissioner of insurance shall establish eligibility and underwriting standards for customers electing to enroll in coverage for each portable electronics insurance program.
    Sec. 4.  NEW SECTION.  522E.4  Authority of vendors.
   1.  The employees and authorized representatives of a vendor may sell or offer portable electronics insurance to customers and shall not be subject to licensure under this chapter or as an insurance producer under chapter 522B provided that all of the following requirements are met:
   a.  The vendor obtains a portable electronics limited lines insurance license that authorizes the vendor’s employees or authorized representatives to sell or offer portable electronics insurance pursuant to this chapter.
   b.  The insurer issuing the portable electronics insurance either directly supervises the administration of the portable electronics insurance program or appoints a supervising entity to supervise the administration of the program, including development of a training program for employees and authorized representatives of the vendor. The training required by this paragraph shall comply with all of the following requirements:
   (1)  The training shall be delivered to employees and authorized representatives of a vendor who are directly engaged in the activity of selling or offering for sale portable electronics insurance.
   (2)  The training may be offered in electronic form. However, if the training is conducted in electronic form, the supervising entity shall implement a supplemental education program for employees and authorized representatives of the vendor regarding the portable electronics insurance product that is conducted and overseen by an employee of the supervising entity who is an insurance producer licensed under chapter 522B.
   (3)  Each employee and authorized representative of a vendor shall receive basic instruction about the portable electronics insurance offered to customers and the disclosures required under section 522E.3.
   c.  A vendor or an authorized representative shall maintain a list of all employees or authorized representatives of each vendor who are authorized to sell or offer portable electronics insurance to customers under this section. Upon request by the commissioner, and with ten days’ notice to the vendor or supervising entity, the list maintained shall be open to inspection and examination by the commissioner during normal business hours of the vendor or supervising entity.
   d.  An employee or authorized representative of a vendor shall not advertise, represent, or otherwise hold the employee or authorized representative out as being a licensed insurance producer under chapter 522B.
   2.
  a.  Charges for portable electronics insurance coverage may be billed and collected by the vendor. Any charge to an enrolled customer for coverage that is not included in the cost associated with the purchase or lease of portable electronics shall be separately itemized on the enrolled customer’s bill. If the portable electronics insurance is included with the purchase or lease of portable electronics, the vendor shall clearly and conspicuously disclose to the enrolled customer that the portable electronics insurance is included with the portable electronics.
   b.  A vendor that bills and collects charges for portable electronics insurance shall not be required to maintain such funds in a segregated account provided that the vendor is authorized by the insurer to hold such funds in an alternative manner and remits such amounts to the supervising entity within sixty days of receipt.
   c.  All funds received by a vendor from an enrolled customer for the purchase of portable electronics insurance shall be considered funds held in trust by the vendor in a fiduciary capacity for the benefit of the insurer. A vendor may receive compensation for billing and collection services.
    Sec. 5.  NEW SECTION.  522E.5  Penalties —— suspension or revocation of license.
   If a vendor or the vendor’s employee or authorized representative violates any provision of this chapter, the commissioner may do any of the following:
   1.  After notice and hearing, impose penalties not to exceed five hundred dollars per violation or five thousand dollars in the aggregate for such violations.
   2.  After notice and hearing, take other affirmative action that the commissioner deems necessary and reasonable to carry out the purposes of this chapter, including the following:

   a.  Suspend the privilege of selling or offering for sale portable electronics insurance pursuant to this chapter at specific business locations where violations of this chapter have occurred.
   b.  Suspend or revoke the ability of an individual employee or authorized representative to sell or offer for sale portable electronics insurance pursuant to the portable electronics limited lines insurance license of a vendor.
    Sec. 6.  NEW SECTION.  522E.6  Termination of portable electronics insurance.
   Notwithstanding any other provision of law to the contrary:
   1.  An insurer may terminate or otherwise change the terms and conditions of a policy of portable electronics insurance only upon providing the vendor and enrolled customers with at least thirty days’ notice of such termination or change.
   2.  If the insurer changes the terms and conditions of a policy of portable electronics insurance, the insurer shall provide the vendor with a revised policy or endorsement and each enrolled customer with a revised certificate, endorsement, updated brochure, or other evidence indicating that a change in the terms and conditions of the policy has occurred along with a summary of material changes.
   3.  Notwithstanding subsection 1, an insurer may terminate an enrolled customer’s enrollment under a portable electronics insurance policy with fifteen days’ notice upon discovery of fraud or material misrepresentation in obtaining coverage or in the presentation of a claim under that coverage.
   4.  Notwithstanding subsection 1, an insurer may immediately terminate an enrolled customer’s enrollment under a portable electronics insurance policy for any of the following reasons:
   a.  Nonpayment of premium.
   b.  If the enrolled customer ceases to have active service with the vendor.
   c.  If the enrolled customer exhausts the aggregate limit of liability, if any, under the terms of the portable electronics insurance policy and the insurer sends notice of termination to the enrolled customer within thirty days after exhaustion of the limit. However, if notice is not timely sent, enrollment shall continue notwithstanding the aggregate limit of liability until the insurer sends notice of termination to the enrolled customer.
   5.  If a portable electronics insurance policy is terminated by a vendor, the vendor shall mail or deliver written notice to each enrolled customer advising the enrolled customer of the termination of the policy and the effective date of termination. The written notice shall be mailed or delivered to the enrolled customer at least thirty days prior to the termination.
   6.
  a.  Whenever notice or correspondence with respect to a policy of portable electronics insurance is required pursuant to this section or is otherwise required by law, the notice or correspondence shall be in writing and sent within the notice period, if any, specified in the statute or regulation requiring the notice or correspondence.
   b.  Notwithstanding any other provision of law to the contrary, notices and correspondence may be sent by mail or by electronic means as set forth in this lettered paragraph “b”.
   (1)  If the notice or correspondence is sent by mail, it shall be sent to the vendor at the vendor’s mailing address specified for such purpose and to the affected enrolled customers at their last known mailing addresses on file with the insurer. The insurer or vendor, as the case may be, shall maintain proof of mailing in a form authorized or accepted by the United States postal service or other commercial mail delivery service.
   (2)  If the notice or correspondence is sent by electronic means, it shall be sent to the vendor at the vendor’s electronic mail address specified for such purpose and to the affected enrolled customers at their last known electronic mail address as provided by each enrolled customer to the insurer or vendor, as the case may be. For purposes of this subparagraph, an enrolled customer’s provision of an electronic mail address to an insurer or vendor shall be deemed consent to receive notices and correspondence by electronic means. The insurer or vendor, as the case may be, shall maintain proof that a notice or correspondence was sent by electronic means to an enrolled customer.
   7.  Notice or correspondence required by this section or otherwise required by law may be sent on behalf of an insurer or vendor, as the case may be, by the supervising entity appointed by the insurer.
    Sec. 7.  NEW SECTION.  522E.7  Application for license —— fees.
   1.  If a vendor is selling or offering to sell or will sell or offer to sell portable electronics insurance in this state, the vendor shall submit a sworn application for a portable electronics limited lines insurance license to the commissioner on an application form prescribed and furnished by the commissioner.
   2.  The application form shall include the following information:
   a.  The name, residence address, and other information required by the commissioner for an employee or officer of the vendor that is designated by the vendor as the person responsible for or who will be responsible for the vendor’s compliance with the requirements of this chapter. However, if the vendor derives more than fifty percent of its revenue from the sale of portable electronics insurance, the information required in this paragraph shall be provided for all officers, directors, and shareholders of record of the vendor that have beneficial ownership in the vendor of ten percent or more of any class of securities registered under federal securities law.
   b.  Provide the location of the vendor’s home office.
   3.  Any vendor engaging in the sale of or offering for sale portable electronics insurance on or before July 1, 2013, shall apply for licensure under this chapter within ninety days of the application form being made available by the commissioner. Any vendor commencing operations in this state after July 1, 2013, shall obtain a portable electronics limited lines insurance license prior to selling or offering for sale portable electronics insurance.
   4.  Initial portable electronics limited lines insurance licenses issued pursuant to this chapter shall be valid for a period of twenty-four months and shall expire on March of the renewal year assigned by the commissioner.
   5.  Each vendor licensed under this chapter shall pay to the commissioner a fee as prescribed by the commissioner by rule, but in no event shall the fee exceed one thousand dollars for an initial portable electronics limited lines insurance license or five hundred dollars for each renewal of the license. However, for a vendor that engages in portable electronics transactions at ten or fewer locations in the state, the fee shall not exceed one hundred dollars for an initial license and one hundred dollars for each renewal of the license.
    Sec. 8.  NEW SECTION.  522E.8  Rules.
   The commissioner shall adopt rules pursuant to chapter 17A as necessary to implement and administer the provisions of this chapter.
EXPLANATION
   This bill regulates the sale of portable electronics insurance in new Code chapter 522E by requiring licensure, and providing for fees and penalties. “Portable electronics” are electronic devices that are personal, self-contained, easily carried by an individual, battery operated, and used for communication, viewing, listening, recording, gaming, computing, or global positioning, including cell or satellite phones, pagers, personal global positioning satellite units, portable computers, portable audio listening, video viewing, or recording devices, digital cameras, video camcorders, portable gaming systems, docking stations, automatic answering devices, and other similar devices, and the accessories and services related to the use of such devices.
   “Portable electronics insurance” is insurance that provides coverage for the repair or replacement of portable electronics including various causes of loss. “Portable electronics insurance” does not include a service contract or extended warranty, a seller’s or manufacturer’s warranty obligations, or other insurance such as homeowner’s, renter’s, automobile, or commercial multiperil insurance. Vendors of portable electronics sell or offer for sale such insurance pursuant to a policy issued to the vendor by an insurer that offers such coverage. The bill applies to vendors that have physical locations in the state, as well as any internet site, call center site, or similar location directed to residents of this state.
   Vendors are required to obtain a portable electronics limited lines insurance license as required under new Code chapter 522E to sell or offer for sale coverage under a portable electronics insurance policy. Such a license issued to a vendor authorizes any employee or authorized representative of the vendor to sell or offer the insurance coverage at each location in the state where the vendor sells portable electronics. A “supervising entity” that is a licensed insurer or licensed insurance producer under Code chapter 522B must maintain a registry of vendor locations at which portable electronics insurance is sold or solicited that is available for inspection by the commissioner of insurance. 
   Vendors that sell portable electronics insurance are required to offer written materials to customers that disclose certain specified information about the insurance that is being offered. Such insurance may be offered on a month-to-month or other periodic basis. The disclosures contained in the written materials must be offered to persons enrolling in portable electronics coverage by hand delivery, ordinary mail, or electronic mail, or by directing the customer to an internet site containing the information. Portable electronics insurance cannot be sold through a free trial offer. A “free trial offer” is an offer to provide such insurance to a customer free of charge for a limited time period subsequent to which a charge is made to the customer without notice prior to expiration of the free trial period. Eligibility and underwriting standards must be established for each portable electronics insurance program by the commissioner of insurance.
   Employees and authorized representatives of a vendor may sell or offer portable electronics insurance to customers and are not subject to licensure under new Code chapter 522E or Code chapter 522B if certain training and oversight requirements are met by the insurer and the supervising entity appointed by the insurer. A vendor or an authorized representative is required to maintain a list of all employees or authorized representatives of the vendor who are authorized to sell or offer portable electronics insurance to customers. The list must be available for inspection and examination during the vendor’s normal business hours by the commissioner of insurance upon 10 days’ notice.
   A vendor may bill and collect charges for portable electronics insurance and be paid for doing so but is considered to hold any funds collected in trust for the insurer.
   The commissioner of insurance may subject a vendor or the vendor’s employees or authorized representatives to penalties for violations of the Code chapter not to exceed $500 per violation or $5,000 in the aggregate. The commissioner may also suspend the vendor’s privilege of selling the insurance at specific locations of the vendor or suspend or revoke the selling privileges of a specific employee or authorized representative of a vendor.
   An insurer cannot terminate or otherwise change the terms of a portable electronics insurance policy without giving notice to the vendor and enrolled customers as provided in the bill. Notice may be sent in writing by mail or by electronic means.
   A vendor who is selling or offering to sell or will sell or offer to sell portable electronics insurance in this state must submit a sworn application for a portable electronics limited lines insurance license to the commissioner. A vendor who is engaging in the sale of such insurance on or before the effective date of the bill must apply for a license within 90 days of the date the application form is made available by the commissioner of insurance. Any vendor that commences operations in the state after the effective date of the bill must obtain a license prior to selling or offering for sale portable electronics insurance.
   Portable electronics limited lines insurance licenses shall be valid for 24 months and shall not exceed $1,000 for an initial license or $500 for a renewal of the license, except that if a vendor has 10 or fewer locations in the state, the license cost shall not exceed $100 for an initial license and for each renewal of the license.
   The commissioner of insurance is required to adopt rules pursuant to Code chapter 17A to implement and administer the provisions of the bill.