2016 -- S 2629

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LC005053

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2016

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A N   A C T

RELATING TO MOTOR AND OTHER VEHICLES - CANCELLATION AND NON-

RENEWAL OF MOTOR VEHICLE INSURANCE POLICIES

     Introduced By: Senators Gallo, Nesselbush, and DaPonte

     Date Introduced: February 25, 2016

     Referred To: Senate Judiciary

     It is enacted by the General Assembly as follows:

     SECTION 1. Title 31 of the General Laws entitled "MOTOR AND OTHER

VEHICLES" is hereby amended by adding thereto the following chapter:

CHAPTER 32.1

CANCELLATION AND NON-RENEWAL OF MOTOR VEHICLE INSURANCE POLICIES

     31-32.1-1 Purpose. – The provisions of this chapter shall govern the procedures for the

cancellation and non-renewal of motor vehicle insurance policies and the enforcement of the

requirement that all owners of motor or other vehicles in this state maintain twenty-five thousand

dollars ($25,000) minimum liability coverage or face suspension or revocation of their

registration of a motor vehicle in Rhode Island.

     31-32.1-2 Definitions. – As used in this chapter, the following words and phrases shall

have the meanings set forth in this section:

     (1) "Administrator" or "registrar" means the administrator of the division of motor

vehicles or their designee.

     (2) "Cancellation" means the termination of an existing motor vehicle insurance policy, at

the request of either the insurer or the policyholder, as of an effective date, prior to the policy's

expiration date.

     (3) "Commissioner" means the commissioner of insurance of the department of business

regulation or their designee.

     (4) "Division" means the division of motor vehicles.

     (5) "Insurer" means any corporation, association, partnership, group or individual

engaged as a principal authorized to issue a motor vehicle insurance policy to an applicant for

motor vehicle insurance in the state of Rhode Island.

     (6) "Motor vehicle insurance policy" means a policy issued in accordance with the

definition set forth in §31-32-24.

     (7) "Non-renewal" means a declination to renew an existing motor vehicle insurance

policy at the request of either the insurer or the policyholder, upon the expiration date of that

policy.

     (8) "Notice" means the written communication delivered by an insurer or a policyholder

indicating the intent of the insurer or the policyholder to cancel or non-renew an existing motor

vehicle insurance policy.

     (9) "Person" means an insurer or a policyholder who initiates the cancellation or non-

renewal of an existing motor vehicle insurance policy.

     (10) "Policyholder" means the named insured on the motor vehicle insurance policy, or

any person the named insured identifies as their representative for purposes of giving or receiving

notices relating to the motor vehicle insurance policy.

     (11) "Short rate" means a fixed dollar value or percentage of premium, representing an

insurer's fixed policy acquisition expenses incurred prior to the date a motor vehicle insurance

policy becomes effective, that an insurer includes in its motor vehicle insurance rate manual filed

with the insurance commissioner and uses to adjust return premium when a policyholder cancels

a policy.

     31-32.1-3 Policy cancellation. – (a) An insurer may cancel a motor vehicle insurance

policy at any time during the policy effective period only for the following reasons:

     (1) Non-payment of premium;

     (2) Fraud or material misrepresentation in the application for or renewal of the policy;

     (3) Suspension or revocation during the policy period of the operator's license or motor

vehicle registration of the named insured or any other person residing in the same household as

the named insured and who usually operates a motor vehicle insured under the policy;

     (b) An insurer may cancel a motor vehicle insurance policy up to ninety (90) days after

the policy's renewal effective date if the applicant for insurance has failed to complete a renewal

application and return it to the insurer at least thirty (30) days before the expiration date of the

previous motor vehicle insurance policy.

     (c) An insurer may cancel a motor vehicle insurance policy issued to an individual

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member of a group insured pursuant to a group marketing plan only for the following reasons:

     (1) Non-payment of premium;

     (2) Fraud;

     (3) The individual member of the group insured pursuant to the group marketing plan has

had their motor vehicle registration or operator's license suspended for a period of one year or

more; or

     (4) Motor vehicle insurance coverage for the entire group insured pursuant to the group

marketing plan has been cancelled.

      (d) Cancellation initiated by the policyholder. A policyholder may cancel a motor

vehicle insurance policy, or any of its coverage parts, at any time.

     31-32.1-4 Content of notices of cancellation. – (a) Notices of cancellation must be in

writing and must include the following information:

     (1) A title which indicates the nature of the notice;

     (2) The complete name and address of the person requesting cancellation;

     (3) The complete name and address of the person to whom the notice of cancellation is

sent;

     (4) The policy number or other identifier specifying the motor vehicle insurance policy

being cancelled;

     (5) The date on which the person intends the cancellation of the motor vehicle insurance

policy to take effect; and

     (6) The person's specific reason for the cancellation. An insurer may not use phrases such

as "underwriting reasons" as the reason for cancellation. An insurer must inform the policyholder

of the specific facts on which the insurer based its decision to cancel the motor vehicle insurance

policy.

     (b) A notice of cancellation that an insurer issues to a policyholder also must comply with

the following requirements:

     (1) If the cancellation is for non-payment of premium, the notice of cancellation shall

state clearly the amount of premium and of any applicable fees included in the insurer's premium

payment plan, approved by the commissioner, that are owed to the insurer for the existing motor

vehicle insurance policy and shall state further that the cancellation will not take effect if the

policyholder pays the full amount of premium and fees owed on or before the effective date of the

cancellation. The notice of cancellation shall inform the policyholder of options for making such

payment; and

     (2) The notice of cancellation shall include the following language, unless the notice was

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issued as a result of non-payment of premium for a motor vehicle insurance policy insuring a

motor vehicle registered as a taxicab or public livery use, or unless the commissioner of insurance

approves alternate language:

     "IMPORTANT NOTICE TO POLICYHOLDERS: Please read carefully the information

below which outlines your legal rights relative to this cancellation.

     INFORMATION ABOUT MINIMUM INSURANCE REQUIREMENTS

     Rhode Island law requires that every motor vehicle registered in Rhode Island carry

minimum motor vehicle liability insurance. The registrar of motor vehicles will revoke your

registration and license plates on the effective date of cancellation shown in this notice unless:

     (1) We reinstate your required minimum motor vehicle insurance; or

     (2) Before the date of cancellation shown in this notice you obtain minimum motor

vehicle insurance from another insurance company. The new insurance company must notify the

registrar before the date of cancellation in this notice that it has insured your motor vehicle.

     If you are unable to obtain motor vehicle insurance from another insurance company, you

may be eligible to obtain motor vehicle insurance through the Rhode Island assigned risk plan.

Almost all insurance agents and all insurance companies are authorized to help you apply for

motor vehicle insurance through the plan. If you apply for motor vehicle insurance through the

plan, you will be not be able to choose an insurer, but you will be assigned to an insurance

company. In some cases, you may not be able to obtain coverage through the plan that is identical

to the coverage that was not renewed; or

     (3) Before the effective date of cancellation shown in this notice you file with the

administrator of the department of motor vehicles a written complaint on a form prescribed and

furnished by the administrator. The form is available on the division of motor vehicles website or

can be obtained by calling the division.

     Unless one of the three (3) above actions occurs, the registration for your motor vehicle

will be revoked on the effective date of cancellation shown in this notice."

     (c) The written notice of cancellation must be sent to the intended recipient at least

twenty (20) days before the proposed effective date of cancellation of the motor vehicle insurance

policy. The insurer must notify the registrar of motor vehicles of the cancellation of a motor

vehicle insurance policy, whether initiated by the insurer or the policyholder, in accordance with

the procedures prescribed by the registrar.

     (1) The insurer must give written notice of cancellation to the policyholder and to any

loss payee identified on the policyholder's coverage selections or declaration page of the motor

vehicle insurance policy in any of the following ways:

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     (i) Delivery in hand to the policyholder;

     (ii) Delivery in hand to the policyholder's last address known to the insurer (business,

residence or other); or

     (iii) Delivery by first class mail forwarded to the policyholder's last address known to the

insurer (business, residence or other). If the insurer mails the notice of cancellation to the

policyholder, it will not be deemed effective unless the insurer obtains a certificate of mailing

receipt from the United States Postal Service showing the name and address of the policyholder

to whom the notice of cancellation was mailed.

     (2) A policyholder must give written notice of cancellation either to the insurer or by

notifying the insurance producer through whom the policyholder purchased the motor vehicle

insurance policy. Notice of cancellation may be given by any reasonable means, including hand

delivery or first class mail.

     (d) An insurer that reinstates a motor vehicle insurance policy after issuing a notice of

cancellation must notify the registrar of motor vehicles of such reinstatement in accordance with

the procedures prescribed by the registrar.

     31-32.1-5 Return premium applicable to cancelled motor vehicle insurance policies.

– (a) If premium payments have been made on a motor vehicle insurance policy which is

cancelled, the policyholder may be entitled to the return of premium paid for the unexpired term

of that policy. Return premium, if any, shall be determined based on the rates in effect for the

insurer on the date the cancelled motor vehicle insurance policy first became effective.

     (b) An insurer that cancels a motor vehicle insurance policy shall calculate return

premium on a pro rata basis as of the intended effective date of cancellation, or the date upon

which a new certificate of insurance is filed with the registrar of motor vehicles covering the

same vehicle that was insured under the cancelled policy, if the effective date of the new motor

vehicle insurance policy is prior to the intended cancellation date of the cancelled motor vehicle

insurance policy. Any return premium associated with the unexpired portion of the term of the

cancelled motor vehicle insurance policy shall be delivered to the policyholder within thirty (30)

days of the effective date of cancellation of that policy.

     (c) If a motor vehicle insurance policy that an insurer cancelled is reinstated by the

director or by order of a court in any legal proceeding that the policyholder initiated relating to

the cancellation, any return premium shall be calculated based on the rates in effect when the

cancelled motor vehicle insurance policy first became effective.

     (d) If a policyholder cancels a motor vehicle insurance policy, return premium, if any,

shall reflect the unexpired portion of the term of the cancelled policy, pro rata, in any of the

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following circumstances:

     (i) The policyholder cancels the motor vehicle insurance policy within the first thirty (30)

days from the date on which the policy becomes effective or the date on which the policyholder

receives the policy documents, whichever is later;

     (ii) The policyholder cancels the motor vehicle insurance policy within thirty (30) days

after the date on which the insured motor vehicle is stolen or destroyed, if the loss to the motor

vehicle is a total loss or total constructive loss. The return premium, if any, shall be calculated

from the day following the date of loss;

     (iii) The policyholder cancels the motor vehicle insurance policy because of entry into the

military service of the United States of America; or

     (iv) The policyholder cancels a motor vehicle insurance policy issued through the Rhode

Island assigned risk plan because coverage has been obtained in the voluntary market. The return

premium, if any, shall be calculated from the effective date of the motor vehicle insurance policy

that replaces the policy issued through the Rhode Island assigned risk plan.

     Nothing precludes an insurer from identifying other circumstances in which it will

calculate the return premium to the policyholder on a pro rata basis without short rate

adjustments.

     (e) In all other cases, if the policyholder cancels a motor vehicle insurance policy the

insurer may reduce the otherwise calculated return premium in accordance with any short rate

adjustments contained in the insurer's motor vehicle insurance rate manual filed with the

commissioner and in effect on the date the policy became effective.

     (f) If a motor vehicle insurance policy terminates by operation of law, the return

premium, if any, is calculated based on the date of such automatic termination, regardless of any

other intended date of cancellation proposed by the insurer or the policyholder. A motor vehicle

insurance policy terminates by operation of law in any of the following circumstances:

     (i) Another insurer files with the registrar of motor vehicles a certificate of insurance

covering the same motor vehicle or trailer covered by the terminating policy. The date of

termination is the date on which a new certificate of insurance filed with the registrar of motor

vehicles becomes effective;

     (ii) The owner of the motor vehicle or trailer sells or transfers title. The date of

termination is thirty (30) days after such sale or transfer unless the owner, within that thirty (30)

day period, transfers the registration of the motor vehicle or trailer to a replacement motor vehicle

or trailer; or

     (iii) The owner of the motor vehicle or trailer surrenders the registration plates issued by

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the registrar of motor vehicles for the motor vehicle or trailer to the registrar of motor vehicles,

along with a written statement, in such form as the registrar of motor vehicles may require,

indicating that such registration plates are being surrendered to cancel the registration of the

motor vehicle or trailer, as well as the motor vehicle insurance policy covering such motor

vehicle or trailer. If the registration plates have been lost or stolen, the owner of the motor vehicle

or trailer may cancel the registration of the motor vehicle or trailer by filing a lost plate affidavit

with the registrar of motor vehicles in accordance with procedures prescribed by the registrar.

     (g) When a motor vehicle insurance policy terminates by operation of law, the return

premium, if any, may be reduced in accordance with any short rate adjustments contained in the

insurer's motor vehicle insurance rate manual filed with the commissioner and in effect on the

date the policy became effective.

     31-32.1-6 Policy non-renewal. – (a) Notices of non-renewal must be in writing and must

include the following information:

     (1) A title which indicates the nature of the notice;

     (2) The complete name and address of the person requesting non-renewal;

     (3) The complete name and address of the person to whom the notice of non­renewal is

sent;

     (4) The policy number or other identifier specifying the motor vehicle insurance policy

being non-renewed;

     (5) The date on which the non-renewing motor vehicle insurance policy will expire; and

     (6) An insurer must comply with all Rhode Island laws and regulations relating to non-

renewal of a motor vehicle insurance policy. An insurer that issues a notice of non-renewal must

state the reason for the non-renewal. An insurer may not use phrases such as "underwriting

reasons" as the reason for non-renewal. An insurer must inform the policyholder of the specific

facts on which the insurer based its decision not to renew the motor vehicle insurance policy.

     (b) A notice of non-renewal that an insurer issues to a policyholder of a private passenger

motor vehicle insurance policy also must include the following language, unless the

commissioner approves alternate language:

     "IMPORTANT NOTICE TO POLICYHOLDERS

     You must have compulsory motor vehicle insurance in order to keep your motor vehicle

registered in Rhode Island. We have notified the registrar of motor vehicles and you of our intent

to not renew your motor vehicle insurance policy.

     You must replace your policy as soon as possible. The registrar of motor vehicles will

cancel your motor vehicle registration if it does not receive a new certificate of insurance

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covering your motor vehicle before your current policy expires. You may contact an insurance

company directly, or work with a licensed insurance agent to obtain new insurance from a

company that the insurance agent represents.

     If no insurance company is willing to insure you, you may be eligible to obtain motor

vehicle insurance through the Rhode Island assigned risk plan. Almost all insurance agents and

all insurance companies are authorized to help you apply to the plan. If you apply for insurance

through the plan, you will not be able to choose an insurer, but you will be assigned to an

insurance company. In some cases, you may not be able to obtain coverage through the plan that

is identical to the insurance coverage that was not renewed.

     This notice shall not be deemed a refusal to issue a motor vehicle liability policy or to

execute a motor vehicle liability bond as surety."

     (c) Procedures for delivering a notice of non-renewal.

     (1) An insurer must give written notice that it will not renew an existing motor vehicle

insurance policy forty-five (45) days before the policy expiration date. Notices of non-renewal

must be given as follows:

     (i) For policies with expiration dates between January 1, 2017 and December 31, 2017,

the insurer shall send the notice of non-renewal to the insurance producer of record, regardless of

whether that insurance producer is then appointed as an agent of the insurer.

     (ii) For policies with expiration dates on or after January 1, 2018, the insurer shall send

the notice of non-renewal to the insurance producer of record only if that producer is then

appointed as an agent of the insurer. If the insurer has terminated that insurance producer's agent

appointment, the insurer must send the notice of non-renewal to the policyholder.

     (iii) For all policies, if the insurance producer of record no longer is licensed as an

insurance producer by the commissioner, the insurer shall send the notice of non-renewal to the

policyholder.

     (2) Notification procedures applicable to insurance producers.

     (i) The insurance producer who receives a notice of non-renewal from an insurer shall

send a copy of the notice of non-renewal to the policyholder within fifteen (15) days of receiving

such notice, unless another insurer has issued a motor vehicle insurance policy covering the

motor vehicle insured under the non-renewing motor vehicle insurance policy.

     (ii) An insurance producer who receives a notice of non-renewal from a policyholder

must notify the insurer promptly that the policyholder does not intend to renew the motor vehicle

insurance policy.

     (3) Notification procedures to the registrar of motor vehicles. The insurer shall send the

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notice of non-renewal to the registrar of motor vehicles at least forty-five (45) days prior to the

expiration of the policy in accordance with procedures of the registrar of motor vehicles.

     (4) Effect of failure to comply with non-renewal notice requirements.

     (i) An insurer that fails to comply with the statutory requirements related to a notice of

non-renewal, or that sends such notice of non-renewal and then subsequently renews the motor

vehicle insurance policy, must, at the policyholder's request, issue motor vehicle insurance

coverage of at least the same type and amount as existed on the non-renewed motor vehicle

insurance policy.

     (ii) The failure of an insurance producer to comply with the requirements for sending a

notice of non-renewal to a policyholder or to an insurer may be grounds for revoking an insurance

producer's license and may be considered an unfair or deceptive act or practice in the business of

insurance.

     (5) An insurer that reinstates a motor vehicle insurance policy after issuing a notice of

non-renewal must notify the registrar of motor vehicles of such reinstatement in accordance with

the procedures prescribed by the registrar of motor vehicles.

     31-32.1-7 Enforcement. – Pursuant to the provisions of this chapter, the division of

motor vehicles shall suspend or revoke the registration of owners or motor or other vehicles who

fail to maintain a motor vehicle insurance policy with twenty-five thousand dollar ($25,000)

minimum liability coverage.

     31-32.1-8 Severability. – The provisions of this chapter are declared to be severable. In

case any part, section, or provision of this chapter is held void by any court of competent

jurisdiction, the remaining parts, sections, and provisions of the chapter shall not be impaired or

otherwise affected.

     SECTION 2. This act shall take effect upon passage and apply to the cancellation or non-

renewal of motor vehicle insurance policies issued or renewed after January 1, 2017.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO MOTOR AND OTHER VEHICLES - CANCELLATION AND NON-

RENEWAL OF MOTOR VEHICLE INSURANCE POLICIES

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     This act would authorize the division of motor vehicles to suspend or revoke the

registration of any motor vehicle in this state due to the cancellation or non-renewal of the motor

vehicle liability insurance coverage maintained by the owner of the motor vehicle.

     This act would take effect upon passage and would apply to the cancellation or non-

renewal of motor vehicle insurance policies issued or renewed after January 1, 2017.

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