2012 -- H 7478 AS AMENDED

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LC01347

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO INSURANCE -- PORTABLE ELECTRONICS INSURANCE

     Introduced By: Representatives Kennedy, San Bento, Lally, E Coderre, and Naughton

     Date Introduced: February 09, 2012

     Referred To: House Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Title 27 of the General Laws entitled "INSURANCE" is hereby amended

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by adding thereto the following chapter:

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     CHAPTER 2.7

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PORTABLE ELECTRONICS INSURANCE

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     27-2.7-1. Definitions. – For purposes of this section, the following terms shall have the

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following meanings:

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     (1) “Customer” means a person who purchases portable electronics or services;

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     (2) “Department” means the department of business regulation;

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     (3) “Enrolled customer” means a customer who elects coverage under a portable

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electronics insurance policy issued by a vendor of portable electronics;

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     (4) “Insurance commissioner” means the director of the department of business

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regulation or his/her designee;

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     (5) “Location” means any physical location in the state of Rhode Island or any website,

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call center site or similar location directed to residents of the state of Rhode Island;

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     (6) “Portable electronics” means electronic devices that are portable in nature, their

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accessories and services related to the use of the device;

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     (7)(i) “Portable electronics insurance” means insurance providing coverage for the repair

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or replacement of portable electronics which may provide coverage for portable electronics

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against any one or more of the following causes of loss: loss, theft, inoperability due to

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mechanical failure, malfunction, damage or other similar causes of loss.

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     (ii) “Portable electronics insurance” does not include:

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     (A) A service contract or extended warranty providing coverage limited to the repair,

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replacement or maintenance of property for the operational or structural failure of property due to

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a defect in materials, workmanship, accidental damage from handling, power surges, or normal

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wear and tear;

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     (B) A policy of insurance covering a seller’s or a manufacturer’s obligations under a

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warranty; or

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     (C) A homeowner’s renter’s, private passenger automobile, commercial multi-peril, or

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similar policy;

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     (8) “Portable electronics transaction” means:

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     (i) The sale or lease of portable electronics by a vendor to a customer; or

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     (ii) The sale of a service related to the use of portable electronics by a vendor to a

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customer.

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     (9) “Supervising entity” means a business entity that is a licensed insurer or insurance

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producer that is authorized by an insurer to supervise the administration of a portable electronics

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insurance program.

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     (10) “Vendor” means a person in the business of engaging in portable electronics

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transactions directly or indirectly.

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     27-2.7-2. Licensure of vendors. – (a) A vendor is required to hold a portable electronics

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insurance vendor license to sell or offer coverage under a policy of portable electronics insurance.

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     (b) A portable electronics insurance vendor license issued under this chapter shall

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authorize any employee or authorized representative of the vendor to sell or offer coverage under

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a policy of portable electronics insurance to a customer at each location at which the entity

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engages in portable electronics transactions.

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     (c) The supervising entity shall maintain a registry of vendor locations which are

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authorized to sell or solicit portable electronics insurance coverage in this state. Upon request by

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the insurance commissioner and with ten (10) days notice to the supervising entity, the registry

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shall be open to inspection and examination by the insurance commissioner during regular

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business hours of the supervising entity.

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     (d) Notwithstanding any other provision of law, a license issued pursuant to this section

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shall authorize the licensee and its employees or authorized representatives to engage in those

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activities that are permitted in this section.

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     27-2.7-3. Requirements for sale of portable electronics insurance. – (a) At every

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location where portable electronics insurance is offered to customers, brochures or other written

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materials must be made available to a prospective customer which:

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     (1) Disclose that portable electronics insurance may provide a duplication of coverage

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already provided by a customer’s homeowner’s insurance policy, renter’s insurance policy or

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other source of coverage;

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     (2) State that the enrollment by the customer in a portable electronics insurance program

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is not required in order to purchase or lease portable electronics or services;

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     (3) Summarize the material terms of the insurance coverage, including:

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     (i) The identity of the insurer;

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     (ii) The identity of the supervising entity;

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     (iii) The amount of any applicable deductible and how it is to be paid;

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     (iv) Benefits of the coverage; and

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     (v) Key terms and conditions of coverage such as whether portable electronics may be

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repaired or replaced with similar make and model reconditioned or non-original manufacturer

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parts or equipment.

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     (4) Summarize the process for filing a claim, including a description of how to return

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portable electronics and the maximum fee applicable in the event the customer fails to comply

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with any equipment return requirements; and

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     (5) State that an enrolled customer may cancel enrollment for coverage under a portable

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electronics insurance policy at any time and the person paying the premium shall receive a refund

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of any applicable unearned premium.

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     (b) Portable electronics insurance may be offered on a month-to-month or other periodic

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basis as a group or master commercial inland marine policy issued to a vendor of portable

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electronics for its enrolled customers.

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     (c) Eligibility and underwriting standards for customers electing to enroll in coverage

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shall be established for each portable electronics insurance program.

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     27-2.7-4. Authority of vendors of portable electronics. – (a) The employees and

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authorized representatives of vendors may sell or offer portable electronics insurance to

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customers and shall not be subject to licensure as an insurance producer under this title provided

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that:

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     (1) The vendor obtains a portable electronics insurance vendor license to authorize its

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employees or authorized representatives to sell or offer portable electronics insurance pursuant to

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this section;

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     (2) The insurer issuing the portable electronics insurance either directly supervises or

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appoints a supervising entity to supervise the administration of the program including

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development of a training program for employees and authorized representatives of the vendors.

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The training required by this subdivision shall comply with the following:

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     (i) The training shall be delivered to employees and authorized representatives of

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vendors who are directly engaged in the activity of selling or offering portable electronics

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insurance;

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     (ii) The training may be provided in electronic form. However, if conducted in an

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electronic form, the supervising entity shall implement a supplemental education program

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regarding the portable electronics insurance product that is conducted and overseen by licensed

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employees of the supervising entity; and

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     (iii) Each employee and authorized representative shall receive basic instruction about the

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portable electronics insurance offered to customers and the disclosures required under section 27-

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2.7-3.

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     (3) No employee or authorized representative of a vendor of portable electronics shall

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advertise, represent or otherwise hold himself or herself out as a licensed insurance producer.

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     (b) Notwithstanding any other provision of law, employees or authorized representatives

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of a vendor of portable electronics shall not be compensated based primarily on the number of

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customers enrolled for portable electronics insurance coverage but may receive compensation for

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activities under the limited lines license which is incidental to their overall compensation.

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     (c) The charges for portable electronics insurance coverage may be billed and collected

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by the vendor of portable electronics. Any charge to the enrolled customer for coverage that is not

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included in the cost associated with the purchase or lease of portable electronics or related

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services shall be separately itemized on the enrolled customer’s bill. If the portable electronics

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insurance coverage is included with the purchase or lease of portable electronics or related

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services the vendor shall clearly and conspicuously disclose to the enrolled customer that the

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portable electronics insurance coverage is included with the portable electronics or related

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services. Vendors billing and collecting such charges shall not be required to maintain such funds

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in a segregated account provided that the vendor is authorized by the insurer to hold such funds in

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an alternative manner and remits such amounts to the supervising entity within sixty (60) days of

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receipt. All funds received by a vendor from an enrolled customer for the sale of portable

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electronics insurance shall be considered funds held in trust by the vendor in a fiduciary capacity

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for the benefit of the insurer. Vendors may receive compensation for billing and collection

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services.

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     27-2.7-5. Suspension or revocation of license. – If a portable electronics insurance

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vendor or its employee or authorized representative violates any provision of this section, the

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insurance commissioner may do any of the following:

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     (1) After notice and hearing, impose fines not to exceed five hundred dollars ($500) per

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violation or five thousand dollars ($5,000) in the aggregate for such conduct.

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     (2) After notice and hearing, impose other penalties that the commissioner deems

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necessary and reasonable to carry out the purposes of this chapter including:

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     (i) Suspending the privilege of transacting portable electronics insurance pursuant to this

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section at specific business locations where violations have occurred; and

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     (ii) Suspending or revoking the ability of individual employees or authorized

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representatives to act under the license; and

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     (3) Any other penalties appropriate under section 42-14-16.

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     27-2.7-6. Termination of portable electronics insurance. – Notwithstanding any other

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provision of law:

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     (1) An insurer may terminate or otherwise change the terms and conditions of a policy of

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portable electronics insurance only upon providing the vendor and its enrolled customers with at

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least thirty (30) days notice. An insurer may not change the terms and conditions of a policy of

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portable electronics insurance more than once in any six (6) month period.

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     (2) If the insurer changes the terms and conditions, then the insurer shall provide the

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vendor with a revised policy or endorsement and each enrolled customer with a revised

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certificate, endorsement, updated brochure, or other evidence indicating a change in the terms and

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conditions has occurred and a summary of material changes.

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     (3) Notwithstanding subdivision (1) of this section, an insurer may terminate an enrolled

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customer’s enrollment under a portable electronics insurance policy upon fifteen (15) days notice

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for discovery of fraud or material misrepresentation in obtaining coverage or in the presentation

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of a claim thereunder.

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     (4) Notwithstanding subdivision (1) of this section, an insurer may immediately terminate

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an enrolled customer’s enrollment under a portable electronics insurance policy:

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     (i) For nonpayment of premium;

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     (ii) If the enrolled customer ceases to have an active service with the vendor of portable

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electronics; or

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     (iii) If an enrolled customer exhausts the aggregate limit of liability, if any, under the

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terms of the portable electronics insurance policy and the insurer sends notice of termination to

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the enrolled customer within thirty (30) calendar days after exhaustion of the limit. However, if

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notice is not timely sent, enrollment shall continue notwithstanding the aggregate limit of liability

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until the insurer sends notice of termination to the enrolled customer.

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     (5) When a portable electronics insurance policy is terminated by a vendor, the vendor

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shall mail or deliver written notice to each enrolled customer advising the enrolled customer of

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the termination of the policy and the effective date of termination. The written notice shall be

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mailed or delivered to the enrolled customer at least thirty (30) days prior to the termination.

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     (6) Whenever notice or correspondence with respect to a policy of portable electronics

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insurance is required pursuant to this section or is otherwise required by law, it shall be in writing

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and sent within the notice period, if any, specified within the statute or regulation requiring the

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notice or correspondence. Notwithstanding any other provision of law, notices and

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correspondence may be sent either by mail or by electronic means as set forth in this subdivision.

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If the notice or correspondence is mailed, it shall be sent to the vendor of portable electronics at

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the vendor’s mailing address specified for such purpose and to its affected enrolled customers’

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last known mailing addresses on file with the insurer. The insurer or vendor of portable

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electronics, as the case may be, shall maintain proof of mailing in a form authorized or accepted

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by the United States postal service or other commercial mail delivery service. If the notice or

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correspondence is sent by electronic means, it shall be sent to the vendor of portable electronics at

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the vendor’s electronic mail address specified for such purpose and to its affected enrolled

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customers’ last known electronic mail address as provided by each enrolled customer to the

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insurer or vendor of portable electronics, as the case may be. For purposes of this subdivision, an

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enrolled customer’s provision of an electronic mail address to the insurer or vendor of portable

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electronics, as the case may be, shall be deemed consent to receive notices and correspondence by

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electronic means. The insurer or vendor of portable electronics, as the case may be, shall maintain

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proof that the notice or correspondence was sent.

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     (7) Notice or correspondence required by this section or otherwise required by law may

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be sent on behalf of an insurer or vendor, as the case may be, by the supervising entity appointed

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by the insurer.

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     27-2.7-7. Application for license and fees. – (a) A sworn application for a license under

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this chapter shall be made to and filed with the department on forms prescribed and furnished by

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the department in accordance with the provisions of subdivision 27-2.4- 9(a)(8).

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     (b) The application shall:

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     (1) Provide the name, residence address, and other information required by the

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department for an employee or officer of the vendor that is designated by the applicant as the

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person responsible for the vendor’s compliance with the requirements of this chapter. However, if

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the vendor derives more than fifty percent (50%) of its revenue from the sale of portable

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electronics insurance the information noted above shall be provided for all officers, directors, and

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shareholder of record having beneficial ownership of ten percent (l0%) or more of any class of

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securities registered under the federal securities law; and

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     (2) The location of the applicant’s home office.

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     (c) Any license under this chapter is subject to all applicable provisions of chapter 2.4 of

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this title, including, but not limited to, notification of change of address, lapse of license,

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notification of administrative actions, assumed names and basis for suspension or revocation of

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license; provided however, in the event there is a conflict between the provisions of this chapter

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and chapter 27-2.4, this chapter shall prevail.

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     (d) Any vendor engaging in portable electronics insurance transactions on or before the

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effective date of this chapter must apply for licensure within ninety (90) days of the application

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being made available by the department. Any applicant commencing operations after the effective

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date of this chapter must obtain a license prior to offering portable electronics insurance.

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     (e) Initial licenses issued pursuant to this chapter shall be valid for a period of two (2)

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calendar years expiring on May 31st of the second (2nd) renewal year. Applicants for an initial

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license shall pay the full two (2) year fee regardless of the number of months of the initial

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licensure. Renewal licenses shall be effective for twenty-four (24) months effective and expiring

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on May 31st..

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     (f) Each vendor of portable electronics licensed under this chapter shall pay to the

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department a fee of two hundred dollars ($200) for an initial license and for each renewal thereof.

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The department is authorized to institute miscellaneous fees for this license type in accordance

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with section 27-2.4-4.

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     SECTION 2. This act shall take effect on July 1, 2012.

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LC01347

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO INSURANCE -- PORTABLE ELECTRONICS INSURANCE

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     This act would create regulations for portable electronics insurance including requiring

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licenses for vendors of portable electronics insurance, mandating disclosures to customers

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regarding portable electronics insurance, requiring training for employees and authorized

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representatives of vendors of portable electronics regarding portable electronics insurance and

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providing provisions for termination of portable electronics insurance

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     This act would take effect on July 1, 2012.

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LC01347

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