General Assembly: 81 (2005 Regular GA) - Chapter 70 - Entities and transactions subject to insurance division regulation — miscellaneous revisions


Published: 2005-04-28

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204LAWS OF THE EIGHTY-FIRST G.A., 2005 SESSIONCH. 69

support andmaintenance of the child and for the reasonable and necessary expenses incurred by or for themother in connectionwith prenatal care, the birth of the child, and postnatal care of the child and themother, and othermedical support as defined in section 252E.1. The court may award the prevailing party the reasonable costs of suit, including but not limited to rea- sonable attorney fees.

Sec. 57. Section 600B.41A, subsection 6, paragraph b, Code 2005, is amended to read as follows: b. If the court dismisses the action to overcome paternity and preserves the paternity deter-

mination under this subsection, the court shall enter an order establishing that the parent- child relationship exists between the established father and the child, and including establish- ment of a support obligation pursuant to section 598.21 598.21B and provision of custody and visitation pursuant to section 598.41.

Sec. 58. Sections 598.6, 598.7A, 598.14A, 598.14B, and 598.19A, Code 2005, are repealed.

Approved April 28, 2005

_________________________

CH. 70CH. 70

CHAPTER 70

ENTITIES AND TRANSACTIONS SUBJECT TO INSURANCE DIVISION REGULATION — MISCELLANEOUS REVISIONS

S.F. 360

AN ACT relating to various provisions administered by the insurance division of the depart- ment of commerce concerning premium tax refunds, the interstate insurance compact, insurer insolvency proceedings, individual health insurance, the small employer carrier reinsurance program, insurance applications, the Iowa comprehensive health associa- tion, fire insurance policies, the Iowa insurance guaranty association, the FAIR plan, mo- tor vehicle service contracts, investments by county and state mutual associations, recip- rocal or interinsurance contract premium rates, unauthorized activity of insurance producers, and annuity contracts for cemetery and funeral merchandise and funeral ser- vices, and making fees and penalties applicable and providing effective and retroactive applicability dates.

Be It Enacted by the General Assembly of the State of Iowa:

Section 1. Section 322.19, subsection 2, paragraph a, Code 2005, is amended to read as fol- lows: a. A motor vehicle service contract as defined in section 516E.1.

Sec. 2. Section 432.1, subsection 6, paragraph d, Code 2005, is amended to read as follows: d. The sums prepaid by a company or association under this subsection shall be allowed as

credits against its premium tax liability for the calendar year during which the payments are made. If a prepayment made under this subsection exceeds the annual premium tax liability, the excess shall be allowed as a credit against subsequent prepayment or tax liabilities. The commissioner of insurance shall authorize the department of revenue to make a cash refund to an insurer, in lieu of a credit against subsequent prepayment or tax liabilities, if the insurer demonstrates the inability to recoup the funds paid via a credit. The commissioner shall adopt

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rules establishing eligibility criteria for sucha refundand a refundprocess. The commissioner may suspendor revoke the license of a companyor association that fails tomakeaprepayment on or before the due date.

Sec. 3. Section 505A.1, Article II, section 8, Code 2005, is amended to read as follows: 8. “Member” means the person chosen by a compacting state as its representative to the

commission, or theperson’s designee. The commissioner of insurance shall be the representa- tive member of the compact for the state of Iowa.

Sec. 4. Section 507C.2, Code 2005, is amended by adding the following new subsections: NEWSUBSECTION. 01. “Affiliate” of or “affiliated”with a specific person,means a person

that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, the person specified. NEW SUBSECTION. 2A. “Commodity contract” means any of the following: a. A contract for the purchase or sale of a commodity for future delivery on, or subject to

the rules of, a board of trade designated as a contractmarket by the commodity futures trading commission under the federal Commodity Exchange Act, 7 U.S.C. § 1 et seq., or a board of trade outside the United States. b. An agreement that is subject to regulation under section 19 of the federal Commodity Ex-

change Act, 7 U.S.C. § 1 et seq., and that is commonly known to the commodities trade as a margin account, margin contract, leverage account, or leverage contract. c. An agreement or transaction that is subject to regulation under section 4c(b) of the feder-

al CommodityExchangeAct, 7U.S.C. § 1 et seq., and that is commonlyknown to the commodi- ties trade as a commodity option. NEW SUBSECTION. 2B. “Control” means the same as defined in section 521A.1, subsec-

tion 3. NEW SUBSECTION. 8A. “Forward contract” means a contract for the purchase, sale, or

transfer of a commodity, as defined in section 1 of the federal Commodity Exchange Act, 7 U.S.C. § 1 et seq., or any similar good, article, service, right, or interest that is presently or in the future becomes the subject of dealing in the forward contract trade, or product or byprod- uct thereof, with amaturity datemore than two days after the date the contract is entered into, including, but not limited to, a repurchase transaction, reverse repurchase transaction, con- signment, lease, swap, hedge transaction, deposit, loan, option, allocated transaction, unallo- cated transaction, or a combination of themor option on any of them. “Forward contract” does not include a commodity contract. NEWSUBSECTION. 12A. “Netting agreement”means an agreement, including terms and

conditions incorporated by reference therein, including a master agreement, which master agreement, together with all schedules, confirmations, definitions, and addenda thereto and transactions under any thereof, shall be treated as one netting agreement, that documents one or more transactions between parties to the agreement for or involving one or more qualified financial contracts and that provides for the netting or liquidation of qualified financial con- tracts or present or future payment obligations or payment entitlements thereunder, including liquidation or closeout values relating to such obligations or entitlements among the parties to the netting agreement. NEWSUBSECTION. 13A. “Qualified financial contract”means a commodity contract, for-

ward contract, repurchase agreement, securities contract, swap agreement, and any similar agreement that the commissioner determines by regulation, resolution, or order to be a quali- fied financial contract for the purposes of this chapter. NEW SUBSECTION. 15A. “Repurchase agreement” means an agreement, including re-

lated terms, that provides for the transfer of certificates of deposit, eligible bankers’ accep- tances, or securities that are direct obligations of, or that are fully guaranteed as to principal and interest by, the United States or an agency of the United States against the transfer of funds by the transferee of the certificates of deposit, eligible bankers’ acceptances or securi- ties, with a simultaneous agreement by the transferee to transfer to the transferor certificates of deposit, eligible bankers’ acceptances, or securities as described above, at a date certain not

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later than one year after the transfers or on demand against the transfer of funds. For the pur- poses of this definition, the items that may be subject to a repurchase agreement include, but are not limited to, mortgage-related securities, a mortgage loan, and an interest in amortgage loan, but shall not include any participation in a commercial mortgage loan, unless the com- missionerdeterminesby rule, resolution, or order to include theparticipationwithin themean- ing of the term. Repurchase agreement also applies to a reverse repurchase agreement. NEWSUBSECTION. 16A. “Securities contract”means a contract for the purchase, sale, or

loan of a security, including an option for the repurchase or sale of a security, certificate of deposit, or group or index of securities, including an interest therein or based on the value thereof, or an option entered into on a national securities exchange relating to foreign curren- cies, or the guarantee of a settlement of cash or securities by or to a securities clearing agency. For the purposes of this definition, the term “security” includes a mortgage loan, mortgage- related securities, and an interest in any mortgage loan or mortgage-related security. NEW SUBSECTION. 18A. “Swap agreement” means an agreement, including the terms

andconditions incorporated by reference in an agreement, that is a rate swapagreement, basis swap, commodity swap, forward rate agreement, interest rate future, interest rate option, for- ward foreign exchange agreement, spot foreign exchange agreement, rate cap agreement, rate floor agreement, rate collar agreement, currency swap agreement, cross-currency rate swap agreement, currency future, or currency option or any other similar agreement, and in- cludes any combination of agreements and an option to enter into an agreement.

Sec. 5. NEW SECTION. 507C.28A QUALIFIED FINANCIAL CONTRACTS. 1. Notwithstanding any other provision of this chapter to the contrary, including any other

provision of this chapter permitting themodification of contracts, or other law of a state, a per- son shall not be stayed or prohibited from exercising any of the following: a. A contractual right to terminate, liquidate, or close out anynetting agreement or qualified

financial contract with an insurer because of any of the following: (1) The insolvency, financial condition, or default of the insurer at any time, provided that

the right is enforceable under applicable law other than this chapter. (2) The commencement of a formal delinquency proceeding under this chapter. b. Any right under a pledge, security, collateral, or guarantee agreement or any other simi-

lar security arrangement or credit support document relating to a netting agreement or quali- fied financial contract. c. Subject to any provision of section 507C.30, subsection 2, any right to set off or net out

any termination value, payment amount, or other transfer obligation arising under or in con- nection with a netting agreement or qualified financial contract where the counterparty or its guarantor is organized under the laws of the United States or a state or foreign jurisdiction approved by the securities valuation office or the national association of insurance commis- sioners as eligible for netting. 2. Upon termination of a netting agreement, the net or settlement amount, if any, owed by

a nondefaulting party to an insurer against which an application or petition has been filed un- der this chapter shall be transferred to or on the order of the receiver for the insurer, even if the insurer is thedefaultingparty, notwithstandinganyprovision in thenettingagreement that may provide that the nondefaulting party is not required to pay any net or settlement amount due to the defaulting party upon termination. Any limited two-waypayment provision in anet- ting agreement with an insurer that has defaulted shall be deemed to be a full two-way pay- ment provision as against the defaulting insurer. Any such amount shall, except to the extent it is subject to one ormore secondary liens or encumbrances, be a general asset of the insurer. 3. Inmaking any transfer of a netting agreement or qualified financial contract of an insurer

subject to a proceeding under this chapter, the receiver shall do either of the following: a. Transfer to one party, other than an insurer subject to a proceeding under this chapter,

all netting agreements and qualified financial contracts between a counterparty or any affili- ate of the counterparty and the insurer that is the subject of the proceeding, including all of the following:

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(1) All rights andobligations of eachparty under each suchnetting agreement andqualified financial contract. (2) All property, including any guarantees or credit support documents, securing any

claims of each party under each such netting agreement and qualified financial contract. b. Transfer none of the netting agreements, qualified financial contracts, rights, obliga-

tions, or property referred to in paragraph “a”with respect to the counterparty andanyaffiliate of the counterparty. 4. If a receiver for an insurer makes a transfer of one or more netting agreements or quali-

fied financial contracts, the receiver shall use the receiver’s best efforts to notify any person who is a party to the netting agreements or qualified financial contracts of the transfer by noon of the receiver’s local timeon the business day following the transfer. For purposes of this sub- section, “business day”means a day other than aSaturday, Sunday, or any day onwhich either the New York stock exchange or the federal reserve bank of New York is closed. 5. Notwithstanding any other provision of this chapter to the contrary, a receiver shall not

avoid a transfer ofmoneyorother property arisingunderor in connectionwithanettingagree- ment or qualified financial contract, or any pledge security, collateral, or guarantee agreement or any other similar security arrangement or credit support document relating to a netting agreement or qualified financial contract, that is made before the commencement of a formal delinquency proceeding under this chapter. However, a transfer may be avoided under sec- tion 507C.28 if the transferwasmadewithactual intent tohinder, delay, ordefraud the insurer, a receiver appointed for the insurer, or existing or future creditors. 6. In exercising any of its powers under this chapter to disaffirm or repudiate a netting

agreement or qualified financial contract, the receiver must take action with respect to each netting agreement or qualified financial contract and all transactions entered into in connec- tion therewith, in its entirety. Notwithstanding any other provision of this chapter to the con- trary, any claim of a counterparty against the estate arising from the receiver’s disaffirmance or repudiation of a netting agreement or qualified financial contract that has not been pre- viously affirmed in the liquidation or in the immediately preceding rehabilitation case shall be determined and shall be allowed or disallowed as if the claim had arisen before the date of the filing of the petition for liquidation or, if a rehabilitation proceeding is converted to a liquida- tion proceeding, as if the claim had arisen before the date of filing the petition for rehabilita- tion. The amount of the claim shall be the actual direct compensatory damages determined as of the date of the disaffirmance or repudiation of the netting agreement or qualified finan- cial contract. The term “actual direct compensatory damages” does not include punitive or exemplary damages, damages for lost profit or lost opportunity, or damages for pain and suf- fering, but does include normal and reasonable costs of cover or other reasonable measures of damages utilized in the derivatives market for the contract and agreement claims. 7. The term “contractual right” as used in this section includes any right, whether or not evi-

denced in writing, arising under statutory or common law, a rule or bylaw of a national securi- ties exchange, national securities clearing organization or securities clearing agency, a rule or bylaw, or a resolution of the governing body of a contract market or its clearing organiza- tion, or under law merchant. 8. This section shall not apply to persons who are affiliates of the insurer that is the subject

of the proceeding. 9. All rights of a counterparty under this chapter shall apply to netting agreements andqual-

ified financial contracts entered into on behalf of the general account or separate accounts, provided that the assets of each separate account are available only to counterparties to net- ting agreements and qualified financial contracts entered into on behalf of that separate ac- count.

Sec. 6. Section 507C.30, subsection 2, paragraph a, subparagraphs (4) and (5), Code 2005, are amended to read as follows: (4) The obligation of the person is owed to the affiliate of the insurer, or any other entity or

association other than the insurer.

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(4) (5) The obligation of the person is to pay an assessment levied against the members or subscribers of the insurer, or is to pay a balance upon a subscription to the capital stock of the insurer, or is in any other way in the nature of a capital contribution. (5) (6) The obligation of the person is to pay earned premiums to the insurer.

Sec. 7. Section 509.3, subsection 1, Code 2005, is amended to read as follows: 1. The policy shall have a provision that a copy of the application, if any, of the policyholder

shall be attached to the policy when issued or shall be furnished to the policyholder within thirty days after the policy is issued, that all statementsmade by the policyholder or by the per- sons insured shall be deemed representations and notwarranties, and that no statementmade by any person insured shall be used in any contest unless a copy of the instrument containing the statement is or has been furnished to such person.

Sec. 8. Section 513B.12, Code 2005, is amended by adding the following new subsection: NEWSUBSECTION. 6. During the period of time that the operation of the small employer

carrier reinsurance program is suspended pursuant to section 513B.13, subsection 14, a small employer carrier is not required tomake anapplication tobecomea risk-assuming carrier pur- suant to this section.

Sec. 9. Section 513B.13, subsection 3, Code 2005, is amended by adding the following new paragraph: NEW PARAGRAPH. e. During the period of time that the program is suspended pursuant

to subsection 14, the size of the boardmay be reduced with the approval of the commissioner.

Sec. 10. Section 513B.17, subsection 4, Code 2005, is amended by striking the subsection.

Sec. 11. Section 513C.6, Code 2005, is amended by adding the following new subsection: NEW SUBSECTION. 7. An individual who has coverage as a dependent under a basic or

standard health benefit plan may, when that individual is no longer a dependent under such coverage, elect to continue coverage under the basic or standard health benefit plan if the indi- vidual so elects immediately upon termination of the coverage underwhich the individual was covered as a dependent.

Sec. 12. Section 514A.5, subsection 1, Code 2005, is amended to read as follows: 1. The insured shall not be bound by any statement made in an application for a policy un-

less a copy of such application is attached to or endorsed on the policy when issued as a part thereof or is furnished to the policyholder within thirty days after the policy is issued. If any such policy delivered or issued for delivery to any person in this state shall be reinstated or renewed, and the insured or the beneficiary or assignee of such policy shall make written re- quest to the insurer for a copy of the application, if any, for such reinstatement or renewal, the insurer shall within fifteen days after the receipt of such request at its home office or any branch office of the insurer, deliver or mail to the person making such request, a copy of such application. If such copy shall not be so delivered or mailed, the insurer shall be precluded from introducing such application as evidence in any action or proceeding based upon or in- volving such policy or its reinstatement or renewal.

Sec. 13. Section 514B.13, unnumbered paragraph 2, Code 2005, is amended to read as fol- lows: Health maintenance organizations providing services exclusively on a group contract basis

may limit the open enrollment provided for in this section to all members of the group covered by the contract, including those members of the group who previously waived coverage.

Sec. 14. Section 514E.2, subsection 1, paragraph a, Code 2005, is amended to read as fol- lows: a. All carriers and all organized delivery systems licensed by the director of public health

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providing health insurance or health care services in Iowa, whether on an individual or group basis, and all other insurers designated by the association’s board of directors and approved by the commissioner shall be members of the association.

Sec. 15. Section 514E.2, subsection 5, paragraph l, Code 2005, is amended to read as fol- lows: l. Develop amethod of advising applicants of the availability of other coverages outside the

association, and shall promulgate a list of healthconditions theexistenceofwhichwouldmake an applicant eligible without demonstrating a rejection of coverage by one carrier.

Sec. 16. Section 514E.2, subsection 7, Code 2005, is amended by adding the following new unnumbered paragraph: NEW UNNUMBERED PARAGRAPH. For purposes of this subsection, “total health insur-

ance premiums” and “payments for subscriber contracts” include, without limitation, pre- miums or other amounts paid to or received by amember for individual and group health plan care coverage provided under any chapter of the Code or Acts, and “paid losses” includes, without limitation, claimspaidbyamemberoperatingona self-fundedbasis for individual and grouphealth plan care coverage providedunder any chapter of theCode orActs. For purposes of calculating and conducting the assessment, the association shall have the express authority to require members to report on an annual basis each member’s total health insurance pre- miums and payments for subscriber contracts and paid losses. Amember is liable for its share of the assessment calculated in accordance with this section regardless of whether it partici- pates in the individual insurance market.

Sec. 17. Section 514E.7, subsection 1, Code 2005, is amended by adding the following new paragraphs: NEWPARAGRAPH. d. That the individual has a health condition that is established by the

association’s board of directors, with the approval of the commissioner, to be eligible for plan coverage. NEW PARAGRAPH. e. That the individual has coverage under a basic or standard health

benefit plan under chapter 513C.

Sec. 18. Section 514E.8, subsection 1, Code 2005, is amended to read as follows: 1. An association policy shall contain provisions under which the association is obligated

to renew the coverage for an individual until the day the individual becomes eligible forMedi- care coverage based on age, provided that any individual who is covered by an association policy and is eligible forMedicare coverage based on age prior to January 1, 2005,may contin- ue to renew the coverage under the association policy.

Sec. 19. Section 515.138, sixth subsection, paragraph entitled concealment— fraud, Code 2005, is amended to read as follows: CONCEALMENT — FRAUD. This entire policy shall be void if, whether before or after a

loss, the an insured has willfully concealed or misrepresented any material fact or circum- stance concerning this insurance or the subject thereof, or the interest of the an insured there- in, or in case of any fraud or false swearing by the an insured relating thereto.

Sec. 20. Section 515.138, sixth subsection, paragraph entitled perils not included, Code 2005, is amended to read as follows: PERILS NOT INCLUDED. This company shall not be liable for loss by fire or other perils

insured against in this policy caused, directly or indirectly, by: (a) Enemy attack by armed forces, including action taken bymilitary, naval or air forces in resisting an actual or an imme- diately impending enemy attack; (b) invasion; (c) insurrection; (d) rebellion; (e) revolution; (f) civil war; (g) usurped power; (h) order of any civil authority except acts of destruction at the time of and for the purpose of preventing the spread of fire, provided that such fire did not

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originate from any of the perils excluded by this policy; (i) neglect of the an insured to use all reasonable means to save and preserve the property at and after a loss, or when the property is endangered by fire in neighboring premises; (j) nor shall this company be liable for loss by theft.

Sec. 21. Section 515.138, sixth subsection, paragraph entitled conditions suspending or re- stricting insurance, Code 2005, is amended to read as follows: CONDITIONS SUSPENDING OR RESTRICTING INSURANCE. Unless otherwise pro-

vided in writing added hereto this company shall not be liable for loss occurring under any of the following circumstances: a. While the hazard is created or increased by any means within the control or knowledge

of the an insured; or. b. While adescribedbuilding,whether intended foroccupancybyowneror tenant, is vacant

or unoccupied beyond a period of sixty consecutive days; or. c. As a result of explosion or riot, unless fire ensue, and in that event for loss by fire only.

Sec. 22. Section 515B.2, subsection 4, paragraph b, subparagraph (7), Code 2005, is amended to read as follows: (7) That would otherwise be a covered claim, but is an obligation to or on behalf of a person

who has a net worth, on the date of the occurrence giving rise to the claim, greater than that allowed by the guarantee fund law of the state of residence of the claimant, and which state has denied coverage to that claimant on that basis.

Sec. 23. Section 515B.17, Code 2005, is amended to read as follows: 515B.17 TIMELY FILING OF CLAIMS. Notwithstanding any other provision of this chapter, a covered claim shall not include any

claim filed with the association after twenty-fourmonths from the date of the order of liquida- tion or after the final date set by the court for the filing of claims against the insolvent insurer or its receiver, whichever occurs first.

Sec. 24. Section 515F.36, subsection 2, Code 2005, is amended to read as follows: 2. The committee shall consist of seven members, one of whom. a. Five of the members shall be elected by to the committee, with one member from each

of the following: a. (1) American insurance association. b. (2) Alliance of American insurers Property casualty insurers association of America. c. National association of independent insurers. d. (3) Iowa insurance institute. e. (4) Mutual insurance association of Iowa. f. (5) Independent insurance agents of Iowa. g. b. All other insurersTwoof themembers shall be elected to the committeebyother insur-

er members of the plan.

Sec. 25. Section 516E.1, Code 2005, is amended to read as follows: 516E.1 DEFINITIONS. For the purposes of this chapter: 1. “Administrator” means the deputy administrator appointed pursuant to section 502.601. 1. 2. “Commissioner”means the commissioner of insurance as provided in section 505.1 or

the deputy administrator appointed under section 502.601. 3. “Maintenance agreement” means a contract of limited duration that provides for sched-

uled maintenance only. 2. 4. “Mechanical breakdown insurance” means a policy, contract, or agreement that un-

dertakes to perform or provide repair or replacement service, or indemnification for that ser- vice, for the operational or structural failure of a motor vehicle due to a defect in materials or

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skill of work or normal wear and tear, and that is issued by an insurance company authorized to do business in this state. 3. 5. “Motor vehicle”means any self-propelled vehicle subject to registration under chapter

321. 4. “Motor vehicle service contract” or “service contract”means a contract or agreement giv-

en for consideration over and above the lease or purchase price of a new or usedmotor vehicle having a gross vehicle weight rating of less than sixteen thousand pounds that undertakes to perform or provide repair or replacement service, or indemnification for that service, for the operational or structural failure of a motor vehicle due to a defect in materials or skill of work or normal wear and tear, but does not include mechanical breakdown insurance or mainte- nance agreements providing scheduled repair and maintenance services for leased vehicles. 5. 6. “Motor vehicle service contract provider” or “provider” “Provider” means a person

who issues, makes, provides, sells, or offers to sell a motor vehicle service contract. 6. “Motor vehicle service contract reimbursement insurance policy” or “reimbursement in-

surance policy” means a policy of insurance providing coverage for all obligations and liabili- ties incurred by amotor vehicle service contract provider under the terms ofmotor vehicle ser- vice contracts issued by the provider. 7. “Record” means information stored or preserved in any medium, including in an elec-

tronic or paper format. A record includes but is not limited to documents, books, publications, accounts, correspondence, memoranda, agreements, computer files, film, microfilm, photo- graphs, and audio or visual tapes. 8. “Reimbursement insurance policy” means a policy of insurance issued to a service com-

pany and pursuant to which the insurer agrees, for the benefit of the service contract holders, to discharge all of the obligations and liabilities of the service company under the terms of ser- vice contracts issued by the service company in the event of nonperformance by the service company. For the purposes of this definition, “all obligations and liabilities” include, but are not limited to, failure of the service company to perform under the service contract and the return of the unearned service company fee in the event of the service company’s unwilling- ness or inability to reimburse the unearned service company fee in the event of termination of a service contract. 9. “Service company” means a person who issues and is obligated to perform, or arrange

for the performance of, services pursuant to a service contract. 10. “Service contract” means a contract or agreement given for consideration over and

above the lease or purchase price of a new or usedmotor vehicle having a gross vehicleweight rating of less than sixteen thousand pounds, that undertakes to perform or provide repair or replacement service, or indemnification for that service, for the operation or structural failure of amotor vehicle due to a defect inmaterials or skill ofworkor normalwear and tear, but does not include mechanical breakdown insurance or maintenance agreements. 8. 11. “Service contract holder”means apersonwhopurchases amotor vehicle service con-

tract. 12. “Third-party administrator” means a person who contracts with a service company to

be responsible for the administration of the service company’s service contracts, including processing and adjudicating claims pursuant to a service contract.

Sec. 26. Section 516E.2, Code 2005, is amended to read as follows: 516E.2 INSURANCE REQUIRED REQUIREMENTS FOR DOING BUSINESS. 1. A motor vehicle service contract shall not be issued, sold, or offered for sale in this state

unless the provider of the service contract is insured under a motor vehicle service contract reimbursement insurance policy issued by an insurer authorized to do business in this state. service company does all of the following: a. Provides a receipt for the purchase of the service contract to the service contract holder. b. Provides a copy of the service contract to the service contract holder within a reasonable

period of time after the date of purchase of the service contract. 2. The issuer of a reimbursement insurance policy shall not cancel a reimbursement insur-

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ance policy unless a written notice has been received by the commissioner and by each appli- cable provider, including automobile dealers and third-party administrators. The notice shall fix the date of cancellation at a date no earlier than ten days after receipt of the notice by the commissioner and by the applicable provider. The notice may be made in person or by mail and a post office department receipt of certified or registered mailing shall be deemed proof of receipt of the notice. A service company shall not issue a service contract or arrange to per- form services pursuant to a service contract unless the service company is registered with the commissioner. A service company shall file a registration with the commissioner annually, on a form prescribed by the commissioner, accompanied by a registration fee in the amount of five hundred dollars. 3. In order to assure the faithful performance of a service company’s obligations to its ser-

vice contract holders, the administratormayby rule require financial responsibility standards. 4. The commissionermay issue an order denying, suspending, or revoking any registration

if the commissioner finds that the order is in the public interest and finds any of the following: a. The registration is incomplete in any material respect or contains any statement which,

in light of the circumstancesunderwhich the registrationwasmade, is determinedby the com- missioner to be false or misleading with respect to any material fact. b. A provision of this chapter or a rule, order, or condition lawfully imposedunder this chap-

ter, has been willfully violated in connection with the sale of service contracts by any of the following persons: (1) The person filing the registration, but only if the person filing the registration is directly

or indirectly controlled by or acting for the service company. (2) The service company, any partner, officer, or director of the service companyor any per-

son occupying a similar status or performing similar functions for the service company, or any person directly or indirectly controlling or controlled by the service company. c. The service company has not filed a document or information required under this chap-

ter. d. The service company’s literature or advertising is misleading, incorrect, incomplete, or

deceptive. e. The service company has failed to pay the proper filing fee. However, the commissioner

shall vacate an order issued pursuant to this paragraph when the proper fee has been paid. f. The service company does not have theminimumnetworth, as determined in accordance

with generally accepted accounting principles, required under this chapter. The commissioner may vacate or modify an order issued under this subsection if the com-

missioner finds that the conditionswhichprompted the entry of the orderhave changedor that it is otherwise in the public interest to do so.

Sec. 27. Section 516E.3, Code 2005, is amended to read as follows: 516E.3 FILING AND FEE REQUIREMENTS. 1. SERVICE COMPANIES. a. A motor vehicle service contract shall not be issued, sold, or offered for sale in this state

unless a true and correct copy of the service contract, and the provider’s service company’s reimbursement insurance policy have been filedwith the commissioner by the service compa- ny. 2. b. In addition to any other required filings, an accurate copy of the service contract and

the provider’s reimbursement insurance policy, the A service company shall file a consent to service of process on the commissioner, and such other information as the commissioner re- quires shall be filed annually with the commissioner no later than the first day of August. If the first day of August falls on aweekend or a holiday, the date for filing shall be the next busi- ness day. In addition to the annual filing, theprovider service company shall promptly file cop- ies of any amended documents if material amendments have been made in the materials on file with the commissioner. If an annual filing is made after the first of August and sales have occurred during the period when the provider service company was in noncompliance with

213 LAWS OF THE EIGHTY-FIRST G.A., 2005 SESSION CH. 70

this section, the commissioner shall assess an additional filing fee that is two times the amount normally required for an annual filing. A fee shall not be charged for interim filings made to keep the materials filed with the division current and accurate. The annual filing shall be ac- companied by a filing fee determined by the commissioner which shall be sufficient to defray the costs of administering this chapter. 3. a. c. A motor vehicle service contract provider service company shall promptly file the

following information with the insurance commissioner: (1) A change in the name or ownership of the provider service company. (2) The termination of the provider’s service company’s business. b. (3) The provider service company is not required to submit a fee as part of this filing. 2. PROVIDERS. a. A service contract shall not be sold or offered for sale in this state unless a true and correct

copy of the service contract has been filed with the commissioner by the provider. b. A provider shall file a consent to service of process on the commissioner and such other

information as the commissioner requires annually with the commissioner no later than Au- gust 1. If August 1 falls on aweekend or a holiday, the date for filing shall be the next business day. In addition to the annual filing, the provider shall promptly file copies of any amended documents if material amendments have been made in the materials on file with the commis- sioner. If an annual filing is made after August 1 and sales have occurred during the period when the provider was in noncompliance with this section, the commissioner shall assess an additional filing fee that is two times the amount normally required for an annual filing. A fee shall not be charged for interim filings made to keep the materials filed with the division cur- rent and accurate. The annual filing shall be accompanied by a filing fee in the amount of one hundred dollars. c. A provider shall promptly file the following information with the commissioner: (1) A change in the name or ownership of the provider. (2) The termination of the provider’s business. (3) A provider is not required to submit a fee as part of this filing.

Sec. 28. Section 516E.4, Code 2005, is amended by striking the section and inserting in lieu thereof the following: 516E.4 REIMBURSEMENT INSURANCE POLICY REQUIREMENTS. 1. REQUIRED DISCLOSURES. A reimbursement insurance policy insuring a service con-

tract issued, sold, or offered for sale in this state shall conspicuously state that, upon failure of the service company to perform under the contract, including but not limited to a failure to return the unearned consideration paid for a service contract in excess of the premium, the insurer that issued the policy shall pay on behalf of the service company any amount that is owed to the service contract holder by the service company to satisfy the service company’s obligations under a service contract issued or sold by the service company. 2. TERMINATION. As applicable, an insurer that issued a reimbursement insurance policy

shall not terminate the policy unless a written notice has been received by the commissioner and by each applicable provider, service company, or third-party administrator. The notice shall fix the date of termination at a date no earlier than ten days after receipt of the notice by the commissioner and by the applicable provider, service company, or third-party administra- tor. Thenoticemaybedelivered in person or sent bymail, and a restricted certifiedmail return receipt shall be deemed proof of receipt of notice. The termination of a reimbursement insur- ance policy shall not reduce the issuer’s responsibility for a service contract issued by a service company prior to the date of termination. 3. INDEMNIFICATION OR SUBROGATION. This section does not prevent or limit the

right of an insurer that issued a reimbursement insurance policy to seek indemnification from or subrogation against a service company if the insurer pays or is obligated to pay a service contract holder sums that the service companywas obligated to pay pursuant to the provisions of a service contract or pursuant to a contractual agreement.

214LAWS OF THE EIGHTY-FIRST G.A., 2005 SESSIONCH. 70

Sec. 29. Section 516E.5, Code 2005, is amended to read as follows: 516E.5 DISCLOSURETOSERVICECONTRACTHOLDERS—CONTRACTPROVISIONS. 1. A motor vehicle service contract shall not be issued, sold, or offered for sale in this state

unless the contract conspicuously states that the obligations of the provider service company to the service contract holder are guaranteed under the service contract a reimbursement in- surance policy, and unless the including a statement in substantially the following form: “Obligations of the service company under this service contract are guaranteed under a re- imbursement insurancepolicy. If the service company fails topayorprovide serviceonaclaim within sixty days after proof of loss has been filed with the service company, the service con- tract holder is entitled to make a claim directly against the reimbursement insurance policy.” A claim against a reimbursement insurance policy shall also include a claim for return of the unearned consideration paid for the service contract in excess of the premium paid. A service contract shall conspicuously states state the name and address of the issuer of the reimburse- ment insurance policy for that service contract. 2. A motor vehicle service contract shall be written in clear, understandable language and

the entire contract shall be printed or typed in easy-to-read type, size, and style, and shall not be issued, sold, or offered for sale in this state unless the contract does all of the following: a. Clearly and conspicuously states thenameand address of the service company, describes

the service company’s obligations to perform services or to arrange for theperformance of ser- vices under the service contract, and states that the obligations of the provider service compa- ny to the service contract holder are guaranteed under a service contract reimbursement in- surance policy. b. Clearly and conspicuously states the name and address of the issuer of the reimburse-

ment insurance policy. c. Identifies themotor vehicle service contract provider, the seller of themotor vehicle com-

pany obligated to perform the service under the service contract, any third-party administra- tor, and the service contract holder to the extent that the name and address of the service con- tract holder has been furnished by the service contract holder. d. Sets forth the total purchase price of the service contract and the terms under which the

purchase price of the service contract is to be paid. e. Sets forth the procedure for making a claim, including a telephone number. f. Clearly and conspicuously states the dates that coverage starts and ends and the exis-

tence, terms, and conditions of a deductible amount, if any. g. Specifies the merchandise or services, or both, to be provided and clearly states any and

all limitations, exceptions, or exclusions. h. Sets forth the conditions on which substitution of services will be allowed. i. Sets forth all of the obligations and duties of the service contract holder, including but not

limited to the duty to protect against any further damage to the motor vehicle, and the obliga- tion to notify the provider service company in advance of any repair, if any. j. Sets forth anyandall terms, restrictions, or conditionsgoverning transferability of the ser-

vice contract, if any. k. Describes or references any and all applicable provisions of the Iowa consumer credit

code, chapter 537. l. States the name and address of the commissioner. m. Sets forth any and all conditions on which the service contract may be canceled, the

terms and conditions for the refund of any portion of the purchase price, the identity of the person primarily liable to provide any refund, and the identity of anyother person liable topro- vide any portion of the refund. If the service contract holder cancels the service contract, the service company shallmail awrittennotice of termination to the service contract holderwithin fifteen days of the date of the termination. n. Permits the service contract holder to cancel and return the service contract within at

least twenty days of the date of mailing the service contract to the service contract holder or within at least ten days after delivery of the service contract if the service contract is delivered at the time of sale of the service contract, or within a longer period of time as permitted under

215 LAWS OF THE EIGHTY-FIRST G.A., 2005 SESSION CH. 70

the service contract. If no claim has been made under the service contract prior to its return, the service contract is void and the full purchase price of the service contract shall be refunded to the service contract holder. A ten percent penalty shall be added each month to a refund that is not paid to a service contract holder within thirty days of the return of the service con- tract to the service company. The applicable time period for cancellation of a service contract shall apply only to the original service contract holder that purchased the service contract. 3. A complete copy of the terms of the motor vehicle service contract shall be delivered to

the prospective service contract holder at or before the time that the prospective service con- tract holdermakes application for the service contract. If there is no separate application pro- cedure, then a complete copy of the motor vehicle service contract shall be delivered to the service contract holder at or before the time the service contract holder becomes bound under the contract.

Sec. 30. Section 516E.6, Code 2005, is amended to read as follows: 516E.6 COMMISSIONER MAY PROHIBIT CERTAIN SALES — INJUNCTION. The commissioner shall issue an order instructing the a provider, service company, or third-

party administrator to cease and desist from selling or offering for sale motor vehicle service contracts if the commissioner determines that the provider, service company, or third-party administrator has failed to complywith a provision of this chapter. Upon the failure of amotor vehicle provider, service contract provider company, or third-party administrator to obey a cease and desist order issued by the commissioner, the commissionermay give notice in writ- ing of the failure to the attorney general, who shall immediately commence an action against the provider, service company, or third-party administrator to enjoin the provider, service company, or third-party administrator from selling or offering for sale motor vehicle service contracts until the provider, service company, or third-party administrator complies with the provisions of this chapter and the district court may issue the injunction.

Sec. 31. Section 516E.7, Code 2005, is amended to read as follows: 516E.7 RULES. The commissionermay adopt rules as provided in chapter 17A to administer and enforce the

provisions of this chapter and to establishminimum standards for disclosure of motor vehicle service contract coverage limitations and exclusions.

Sec. 32. Section 516E.8, Code 2005, is amended to read as follows: 516E.8 EXEMPTION. This chapter does not apply to a motor vehicle service contract issued by the manufacturer

or importer of the motor vehicle covered by the service contract or to any third party acting in an administrative capacity on themanufacturer’s behalf in connectionwith that service con- tract.

Sec. 33. Section 516E.9, Code 2005, is amended to read as follows: 516E.9 MISREPRESENTATIONS OF STATE APPROVAL. Amotor vehicle service contract provider company shall not represent or imply in anyman-

ner that the provider service company has been sponsored, recommended, or approved or that the provider’s service company’s abilities or qualifications have in any respect been passed upon by the state of Iowa, including the commissioner, the insurance division, or the division’s securities bureau.

Sec. 34. Section 516E.10, Code 2005, is amended to read as follows: 516E.10 PROHIBITED ACTS — UNFAIR OR DECEPTIVE TRADE PRACTICES. 1. MISREPRESENTATIONS, FALSE ADVERTISING, AND UNFAIR PRACTICES. a. Unless licensed as an insurance company, amotor vehicle service contract provider com-

pany shall not use in its name, contracts, or literature, thewords “insurance”, “casualty”, “sure- ty”, “mutual”, or any other words descriptive of the insurance, casualty, or surety business or

216LAWS OF THE EIGHTY-FIRST G.A., 2005 SESSIONCH. 70

deceptively similar to the name or description of any insurance or surety corporation, or any other motor vehicle service contract provider company. b. Amotor vehicle service contract provider company shall not, without thewritten consent

of the purchaser, knowingly charge a purchaser for duplication of coverage or duties required by state or federal law, a warranty expressly issued by a manufacturer or seller of a product, or an implied warranty enforceable against the lessor, seller, or manufacturer of a product. c. A motor vehicle provider, service contract provider company, or third-party administra-

tor shall not make, permit, or cause a false or misleading statement, either oral or written, in connection with the sale, offer to sell, or advertisement of a motor vehicle service contract. d. A motor vehicle provider, service contract provider company, or third-party administra-

tor shall not permit or cause the omission of a material statement in connection with the sale, offer to sell, or advertisement of a motor vehicle service contract, which under the circum- stances should have been made in order to make the statement not misleading. e. A motor vehicle provider, service contract provider company, or third-party administra-

tor shall not make, permit, or cause to be made a false or misleading statement, either oral or written, about the benefits or services available under the motor vehicle service contract. f. Amotor vehicle provider, service contract provider company, or third-party administrator

shall not make, permit, or cause to be made a statement of practice which has the effect of creating or maintaining a fraud. g. A motor vehicle provider, service contract provider company, or third-party administra-

tor shall notmake, publish, disseminate, circulate, or place before the public, or cause, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public in a newspaper, magazine, or other publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over a radio or television station, or in any other way, an advertisement, announcement, or statement containing an assertion, representation, or statement with re- spect to themotor vehicle service contract industry orwith respect to amotor vehicle provider, service contract provider company, or third-party administrator which is untrue, deceptive, or misleading. It is deceptive or misleading to use any combination of words, symbols, or physical materials which by their content, phraseology, shape, color, or other characteristics are so similar to a combination of words, symbols, or physical materials used by a manufac- turer or of such a nature that the use would tend to mislead a person into believing that the solicitation is in some manner connected with the manufacturer, unless actually authorized or issued by the manufacturer. h. A bank, savings and loan association, credit union, insurance company, or other lending

institution shall not require the purchase of a motor vehicle service contract as a condition of a loan. 2. DEFAMATION. A motor vehicle provider, service contract provider company, or third-

party administrator shall not make, publish, disseminate, or circulate, directly or indirectly, or aid, abet, or encourage the making, publishing, disseminating, or circulating of an oral or written statement or a pamphlet, circular, article, or literature which is false or maliciously critical of or derogatory to the financial condition of a person, andwhich is calculated to injure the person. 3. BOYCOTT, COERCION, AND INTIMIDATION. A motor vehicle provider, service con-

tract provider shall not enter into an company, or third-party administrator agreement to com- mit, or by a concerted action commit, an act of boycott, coercion, or intimidation resulting in or tending to result in unreasonable restraint of, ormonopoly in, the service contract industry. 4. FALSESTATEMENTS. Amotor vehicle provider, service contract provider company, or

third-party administrator shall not knowingly file with a supervisory or other public official, or knowingly make, publish, disseminate, circulate, or deliver to a person, or place before the public, or knowingly cause directly or indirectly to be made, published, disseminated, circu- lated, delivered to a person, or placed before the public, a false material statement of fact as to the financial condition of a person. 5. FALSEENTRIES. Amotor vehicle provider, service contract provider company, or third-

party administrator shall not knowinglymake a false entry of amaterial fact in a book, report,

217 LAWS OF THE EIGHTY-FIRST G.A., 2005 SESSION CH. 70

or statement of a person or knowingly fail to make a true entry of a material fact pertaining to the business of the person in a book, report, or statement of the person. 6. USED OR REBUILT PARTS. A motor vehicle service contract provider company shall

not repair a motor vehicle covered by a motor vehicle service contract with any of the follow- ing: a. Used parts, unless the provider service company receives prior written authorization by

the vehicle owner. b. Rebuilt parts, unless the parts are rebuilt according to national standards recognized by

the insurance division. 7. MARKETING. A provider, service company, or third-party administrator shall not mar-

ket, advertise, offer to sell, or sell a service contract by using personal information obtained in violation of the federal Driver’s Privacy Protection Act, 18 U.S.C. § 2721 et seq. 7. 8. VIOLATIONS OF SECTION 714.16. a. A violation of this chapter or rules adopted by the commissioner pursuant to this chapter

is an unfair practice as defined in section 714.16. b. An enforcement agreement between the commissioner and amotor vehicle provider, ser-

vice contract provider company, or third-party administrator doesnot bar the attorneygeneral from bringing an action against the provider, service company, or third-party administrator under section 714.16 as to allegations that a violation of this chapter constitutes a violation of section 714.16.

Sec. 35. Section 516E.11, Code 2005, is amended to read as follows: 516E.11 RECORDS — EXPLANATION OF REASONS FOR DENIAL OF CLAIMS. 1. A motor vehicle provider, service contract provider company, or third-party administra-

tor shall keep accurate records concerning transactions regulated under this chapter. a. Amotor vehicle service contract provider’s recordsRecords of a provider, service compa-

ny, or third-party administrator shall include all of the following: (1) Copies of all service contracts each type of service contract issued or sold. (2) The name and address of each service contract holder. (3) TheClaim fileswhich shall contain, at aminimum, the dates, amounts, and descriptions

of all receipts, claims, and expenditures related to service contracts. (4) Copies of all materials relating to claims which have been denied. b. A motor vehicle provider, service contract provider company, or third-party administra-

tor shall retain all required records pertaining to a service contract holder for at least twoyears after the specified period of coverage has expired. A provider, service company, or third-party administrator discontinuing business in this state shall maintain its records until the provider, service company, or third-party administrator furnishes the commissioner satisfactory proof that the provider, service company, or third-party administrator has discharged all obligations to contract holders in this state. c. Motor vehicle service contract providers Providers, service companies, or third-party ad-

ministrators shallmake all records concerning transactions regulated under the chapter avail- able to the commissioner for the purpose of examination. d. A provider, service company, or third-party administrator may keep all records required

under this chapter in an electronic form. If an administratormaintains records in a form other than a printed copy, the records shall be accessible from a computer terminal available to the commissioner and shall be capable of duplication to a legible printed copy. 2. Amotor vehicle service contract provider, service company, or third-party administrator

shall promptly deliver a written explanation to the service contract holder, describing the rea- sons for denying a claimor for the offer of a compromise settlement, based on all relevant facts or legal requirements and referring to applicable provisions of the service contract. 3. A provider, service company, or third-party administrator shall keep accurate records

concerning transactions regulated under this chapter, including a list of the locations where service contracts are marketed, sold, offered for sale, or performed.

218LAWS OF THE EIGHTY-FIRST G.A., 2005 SESSIONCH. 70

Sec. 36. Section 516E.12, Code 2005, is amended to read as follows: 516E.12 SERVICE OF PROCESS. The commissioner shall be the agent for service of process upon a motor vehicle provider,

service contract provider company, or third-party administrator and an issuer of a reimburse- ment insurance policy.

Sec. 37. Section 516E.13, subsection 4, unnumbered paragraph 1, Code 2005, is amended to read as follows: Upon the commissioner’s determination that a provider, service company, or third-party ad-

ministrator has engaged, is engaging, or is about to engage in any act or practice constituting a violation of this chapter or a rule adopted pursuant to this chapter, the commissioner may issue a summary order directing the person to cease and desist from engaging in the act or practice resulting in the violation or to take other affirmative action as in the judgment of the commissioner is necessary to comply with the requirements of this chapter.

Sec. 38. Section 516E.14, Code 2005, is amended to read as follows: 516E.14 AUDITS. The commissionermay examine or cause to be examined the records of amotor vehicle pro-

vider, service contract provider company, or third-party administrator for the purpose of veri- fying compliance with this chapter. The commissionermay require, by a subpoena, the atten- dance of the provider, service company, or third-party administrator, or the provider’s a representative thereof, and any otherwitnesswhom the commissioner deemsnecessary or ex- pedient, and the production of records relating in anymanner to compliancewith this chapter if a provider, service company, third-party administrator, orwitness fails or refuses to produce the documents for examination when requested by the commissioner.

Sec. 39. Section 516E.15, subsection 1, paragraph b, Code 2005, is amended to read as fol- lows: b. A motor vehicle provider, service contract provider who company, or third-party admin-

istrator that fails to file documents and information with the commissioner as required pur- suant to section 516E.3may be subject to a civil penalty. The amount of the civil penalty shall not bemore than four hundred dollars plus two dollars for eachmotor vehicle service contract that the person executed prior to satisfying the filing requirement. However, a person who fails to file information regarding a change in the provider’s name or the termination of the provider’s business of a provider, service company, or third-party administrator as required pursuant to section 516E.3 is subject to a civil penalty of not more than five hundred dollars.

Sec. 40. Section 516E.15, subsection 2, Code 2005, is amended to read as follows: 2. If the commissioner believes that grounds exist for the criminal prosecution of a motor

vehicle provider, service contract provider company, or third-party administrator for violating this chapter or anyother lawof this state, the commissionermay forward to the attorneygener- al or the county attorney the grounds for the belief, including all evidence in the commission- er’s possession for action deemed appropriate by the attorney general or county attorney. At the request of the attorney general, the county attorney shall appear and prosecute the action when brought in the county served by the county attorney.

Sec. 41. NEW SECTION. 516E.16 COURT ACTION FOR FAILURE TO COOPERATE. 1. If a person fails or refuses to file a statement or report or to produce any books, accounts,

papers, correspondence, memoranda, purchase agreements, files, or other documents or rec- ords, or to obey a subpoena issued by the commissioner, the commissionermay refer themat- ter to the attorney general, whomay apply to a district court to enforce compliance. The court may order any of the following:

219 LAWS OF THE EIGHTY-FIRST G.A., 2005 SESSION CH. 70

a. Injunctive relief restricting or prohibiting the offer or sale of service contracts. b. Production of documents or records including but not limited to books, accounts, papers,

correspondence, memoranda, purchase agreements, files, or other documents or records. c. Such other relief as may be appropriate. 2. A court order issued pursuant to subsection 1 is effective until the person who is subject

to the order files the statement or report, produces the documents requested, or obeys the sub- poena.

Sec. 42. NEW SECTION. 516E.17 NET WORTH REQUIREMENT. A service company that has issued or renewed in the aggregate one thousand or fewer ser-

vice contracts during the preceding calendar year shallmaintain aminimumnetworth of forty thousand dollars. Theminimumnetworth to bemaintained shall be increased by an addition- al twenty thousanddollars for eachadditional fivehundred contracts or fraction thereof issued or renewed, up to a maximum required net worth of four hundred thousand dollars. At least twenty thousand dollars of net worth shall consist of paid-in capital.

Sec. 43. NEW SECTION. 516E.18 PUBLIC ACCESS TO RECORDS. 1. The administrator shall keep a register of all filings and orders which have been entered.

The register shall be open for public inspection. 2. Upon request and for a reasonable fee, the administrator shall furnish to any person cop-

ies of any register entry or any document which is a matter of public record and not confiden- tial. Copies shall be available during normal business hours and may be certified upon re- quest. In any administrative, civil, or criminal proceeding, a certified copy is prima facie evidence of the contents of the document certified. 3. Pursuant to chapter 22, the administratormaymaintain the confidentiality of information

obtained during an investigation or audit.

Sec. 44. NEW SECTION. 516E.19 ADMINISTRATION. 1. This chapter shall be administered by the commissioner. The deputy administrator ap-

pointed pursuant to section 502.601 shall be the principal operations officer responsible to the commissioner for the routine administration of this chapter and management of the adminis- trative staff. In the absence of the commissioner, whether because of vacancy in the office, by reason of absence, physical disability, or other cause, the deputy administrator shall be the acting administrator and shall, for the time being, have and exercise the authority conferred upon the commissioner. The commissioner may from time to time delegate to the deputy ad- ministrator anyor all of the functions assigned to thecommissioner in this chapter. Thedeputy administrator shall employ officers, attorneys, accountants, auditors, investigators, and other employees as shall be needed for the administration of this chapter. 2. Upon request, the commissioner may honor requests from interested persons for inter-

pretive opinions.

Sec. 45. Section 518.14, subsection 4, paragraph a, Code 2005, is amended to read as fol- lows: a. UNITED STATES GOVERNMENT OBLIGATIONS. Obligations Bonds or other evi-

dences of indebtedness issued, assumed, or guaranteed by the United States of America, or by an any agency or instrumentality of the United States of America, include investments in an open-end management investment company registered with the federal securities and ex- change commission under the federal Investment Company Act of 1940, 15 U.S.C. § 80(a) and operated in accordancewith 17C.F.R. § 270.2a-7, the portfolio ofwhich is limited to theUnited States obligations described in this paragraph, andwhich are included in the national associa- tion of insurance commissioners’ securities valuation office’s United States direct obligation – full faith and credit list.

220LAWS OF THE EIGHTY-FIRST G.A., 2005 SESSIONCH. 70

Sec. 46. Section 518A.12, subsection 4, paragraph a, Code 2005, is amended to read as fol- lows: a. UNITED STATES GOVERNMENT OBLIGATIONS. Obligations Bonds or other evi-

dences of indebtedness issued, assumed, or guaranteed by the United States of America, or an by any agency or instrumentality of the United States of America, include investments in an open-end management investment company registered with the federal securities and ex- change commission under the federal Investment Company Act of 1940, 15 U.S.C. § 80(a) and operated in accordancewith 17C.F.R. § 270.2a-7, the portfolio ofwhich is limited to theUnited States obligations described in this paragraph, andwhich are included in the national associa- tion of insurance commissioners’ securities valuation office’s United States direct obligation – full faith and credit list.

Sec. 47. Section 520.19, Code 2005, is amended to read as follows: 520.19 ANNUAL TAX — FEES. In lieu of all other taxes, licenses, charges, and feeswhatsoever, suchattorney shall annually

pay to the commissioner the same fees as are paid bymutual companies transacting the same kind of business, and an annual tax of two percent, if a domestic reciprocal organization, and two percent, if a foreign reciprocal organization, based upon the applicable percentage stated in section 432.1, subsection 4, calculated upon the gross premiums or deposits collected from subscribers in this state during the preceding calendar year, after deducting therefrom re- turns, or cancellations, and all amounts returned to subscribers or credited to their accounts as savings, and theamount returneduponcanceledpolicies and rejected applications covering property situated or on business done within this state.

Sec. 48. Section 522B.17, Code 2005, is amended to read as follows: 522B.17 PENALTY. An insurer or insurance producer who, after hearing, is found to have violated this chapter

may be ordered to cease and desist from engaging in the conduct resulting in the violation and may be assessed a civil penalty pursuant to chapter 507B. A person found who, after hearing, is found to have acted violated this chapter by acting as

an agent of an insurer or otherwise selling, soliciting, or negotiating insurance in this state, or offering to the public advice, counsel, or serviceswith regard to insurance, who is not properly licensed is subject to may be ordered to cease and desist from engaging in the conduct result- ing in the violation and may be assessed a civil penalty according to the provisions of chapter 507A. If a person does not comply with an order issued pursuant to this section, the commissioner

may petition a court of competent jurisdiction to enforce the order. The court shall not require the commissioner to post a bond in an action or proceeding under this section. If the court finds, after notice and opportunity for hearing, that the person is not in compliance with an order, the court may adjudge the person to be in civil contempt of the order. The court may impose a civil penalty against the person for contempt in an amount not less than three thou- sand dollars but not greater than ten thousand dollars for each violation and may grant any other relief that the court determines is just and proper in the circumstances.

Sec. 49. NEW SECTION. 522B.17A INJUNCTIVE RELIEF. 1. Anassociationwithat least twenty-five insuranceproducermembersmaybringanaction

in district court to enjoin a person from selling, soliciting, or negotiating insurance in violation of section 522B.2. However, before bringing an action in district court to enjoin a person pur- suant to this section, an association shall file a complaint with the insurance division alleging that the person is selling, soliciting, or negotiating insurance in violation of section 522B.2. 2. If the division makes a determination to proceed administratively against the person for

a violation of section 522B.2, the complainant shall not bring an action in district court against the person pursuant to this section based upon the allegations contained in the complaint filed with the division.

221 LAWS OF THE EIGHTY-FIRST G.A., 2005 SESSION CH. 70

3. If the division does notmake a determination to proceed administratively against the per- son for a violation of section 522B.2, the division shall issue, on or before ninety days from the date of filing of the complaint, a release to the complainant that permits the complainant to bring an action in district court pursuant to this section. 4. The filing of a complaint with the division pursuant to this section tolls the statute of limi-

tations pursuant to section 614.1 as to the alleged violation for a period of one hundred twenty days from the date of filing the complaint. 5. Any action brought in district court by a complainant against a person pursuant to this

section, based upon the allegations contained in the complaint filed with the division, shall be brought within one year after the ninety-day period following the filing of the complaint with the division, or the date of the issuance of a release by the division, whichever is earlier. 6. If the court finds that the person is in violation of section 522B.2 and enjoins the person

from selling, soliciting, or negotiating insurance in violation of that section, the court’s find- ings of fact and law, and the judgment and decree, when final, shall be admissible in any pro- ceeding initiatedpursuant to section522B.17by the commissioner against thepersonenjoined and the person enjoined shall be precluded from contesting in that proceeding the court’s de- termination that the person sold, solicited, or negotiated insurance in violation of section 522B.2.

Sec. 50. Section 523A.402, subsection 6, paragraph c, Code 2005, is amended to read as fol- lows: c. The annuity shall not be contestable, or limit death benefits in the case of suicide, with

respect to that portion of the face amount of the annuity which is required by paragraph “b”. The annuity shall not refer to physical examination, or otherwise operate as an exclusion, limi- tation, or condition other than requiring submission of proof of deathor surrender of the annu- ity at the time the prepaid purchase agreement is funded, matures, or is canceled, as the case may be.

Sec. 51. EFFECTIVEANDRETROACTIVEAPPLICABILITYDATES. This section and the sections of this Act amending sections 513C.6 and 514E.2, and amending section 514E.7, sub- section 1, by enacting paragraph “e”, beingdeemedof immediate importance, take effect upon enactment. The section of theAct amending section 513C.6 is retroactively applicable to Janu- ary 1, 2005, and is applicable on and after that date. The sections of the Act amending section 514E.2 are retroactively applicable to July 1, 1986, and are applicable on and after that date. The portion of the section of the Act amending section 514E.7, subsection 1, by enacting para- graph “e” is retroactively applicable to January 1, 2005, and is applicable on andafter that date.

Approved April 28, 2005

222LAWS OF THE EIGHTY-FIRST G.A., 2005 SESSIONCH. 71

CH. 71CH. 71

CHAPTER 71

SALES AND USE TAX — TOY SALES TO NONPROFIT ORGANIZATIONS

H.F. 310

ANACT exempting the sale of toys to certain nonprofit organizations from state sales and use taxes.

Be It Enacted by the General Assembly of the State of Iowa:

Section 1. Section 423.3, Code 2005, is amended by adding the following new subsection: NEW SUBSECTION. 85. The sales price from the sales of toys to a nonprofit organization

exempt from federal income tax under section 501 of the Internal Revenue Code that pur- chases the toys fromdonations collected by the nonprofit organization anddistributes the toys to children at no cost.

Approved April 28, 2005

_________________________

CH. 72CH. 72

CHAPTER 72

REGULATION OF ELECTIONS AND POLITICAL CAMPAIGNS

H.F. 312

ANACT relating to campaign finance committee reporting, use of committee funds or proper- ty, independent expenditures, and placement of campaign signs.

Be It Enacted by the General Assembly of the State of Iowa:

Section 1. Section 53.10, unnumbered paragraph 3, Code 2005, is amended to read as fol- lows: During the hours when absentee ballots are available in the office of the commissioner, the

posting of political signs is prohibited within thirty three hundred feet of the absentee voting site. No electioneering shall be allowed within the sight or hearing of voters at the absentee voting site.

Sec. 2. Section 53.11, subsection 4, Code 2005, is amended to read as follows: 4. During the hours when absentee ballots are available at a satellite absentee voting sta-

tion, the posting of political signs is prohibited within thirty three hundred feet of the satellite absentee voting station. Electioneering shall not be allowedwithin the sight or hearing of vot- ers at the satellite absentee voting station.

Sec. 3. Section 68A.102, subsection 9, Code 2005, is amended to read as follows: 9. “Consultant”means a personwho provides or procures services for or on behalf of a can-

didate including but not limited to consulting, public relations, advertising, fundraising, poll- ing, managing or organizing services.

Sec. 4. Section 68A.102, subsection 12, Code 2005, is amended to read as follows: 12. “County statutory political committee” means a committee as defined described in sec-

tion 43.100 that accepts contributions in excess of seven hundred fifty dollars in the aggregate,