SENATE BILL 206

51st legislature - STATE OF NEW MEXICO - first session, 2013

INTRODUCED BY

Phil A. Griego

AN ACT

RELATING TO INSURANCE; ENACTING THE PORTABLE ELECTRONICS INSURANCE ACT WITHIN THE NEW MEXICO INSURANCE CODE TO REGULATE PORTABLE ELECTRONICS INSURANCE; AMENDING SECTIONS OF THE NEW MEXICO INSURANCE CODE TO CREATE AN ADJUSTER LICENSURE EXEMPTION FOR PORTABLE ELECTRONICS INSURANCE.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

     SECTION 1. A new section of the New Mexico Insurance Code is enacted to read:

     "[NEW MATERIAL] SHORT TITLE.--Sections 1 through 7 of this act may be cited as the "Portable Electronics Insurance Act"."

     SECTION 2. A new section of the New Mexico Insurance Code is enacted to read:

     "[NEW MATERIAL] DEFINITIONS.--As used in the Portable Electronics Insurance Act:

          A. "customer" means a person who purchases portable electronics or services;

          B. "enrolled customer" means a customer who elects coverage under a portable electronics insurance policy issued to a vendor of portable electronics;

          C. "location" means any physical location in the state of New Mexico or any web site, call center site or similar location directed to residents of the state of New Mexico;

          D. "portable electronics" means electronic devices that are portable in nature and their accessories;

          E. "portable electronics insurance" means insurance providing coverage for the repair or replacement of portable electronics that may provide coverage for portable electronics against any one or more of the following causes of loss: loss, theft, inoperability due to mechanical failure, malfunction, damage or other similar causes of loss. "Portable electronics insurance" also includes any agreement whereby a person or any legal entity, in exchange for consideration paid, agrees to provide for the future repair, replacement or provision of portable electronics. "Portable electronics insurance" does not include:

                (1) a service contract governed by the Service Contract Regulation Act;

                (2) a policy of insurance covering a seller's or a manufacturer's obligations under a warranty; or

                (3) a homeowner's, renter's, private passenger automobile, commercial multiperil or similar policy;

          F. "portable electronics transaction" means:

                (1) the sale or lease of portable electronics by a vendor to a customer; or

                (2) the sale of a service related to the use of portable electronics by a vendor to a customer;

          G. "superintendent" means the superintendent of insurance;

          H. "supervising entity" means a business entity that is a licensed insurer or insurance producer that is appointed by an insurer to supervise the administration of a portable electronics insurance program; and

          I. "vendor" means a person in the business of engaging in portable electronics transactions directly or indirectly."

     SECTION 3. A new section of the New Mexico Insurance Code is enacted to read:

     "[NEW MATERIAL] LICENSURE OF VENDORS.--

          A. A vendor is required to hold a limited agent's license pursuant to Section 59A-12-18 NMSA 1978 to sell or offer coverage under a policy of portable electronics insurance.

          B. A limited agent's license issued to a vendor shall authorize any employee or authorized representative of the vendor to sell or offer coverage under a policy of portable electronics insurance to a customer at each location at which the vendor engages in portable electronics transactions.

          C. The supervising entity shall maintain a registry of vendor locations that are authorized to sell or solicit portable electronics insurance coverage in this state. Upon request by the superintendent and with ten days' notice to the supervising entity, the registry shall be open to inspection and examination by the superintendent during regular business hours of the supervising entity.

          D. Notwithstanding any other provision of law, a limited agent's license issued to a vendor shall authorize the licensee and its employees or authorized representatives to engage in those activities that are permitted by the Portable Electronics Insurance Act."

     SECTION 4. A new section of the New Mexico Insurance Code is enacted to read:

     "[NEW MATERIAL] REQUIREMENTS FOR SALE OF PORTABLE ELECTRONICS INSURANCE.--

          A. At every location where portable electronics insurance is offered to customers, brochures or other written materials shall be made available to a prospective customer that:

                (1) disclose that portable electronics insurance may provide a duplication of coverage already provided by a customer's homeowner's insurance policy, renter's insurance policy or other source of coverage;

                (2) state that the enrollment by the customer in a portable electronics insurance program is not required in order to purchase or lease portable electronics or services;

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

                     (a) the identity of the insurer;

                     (b) the identity of the supervising entity;

                     (c) the amount of any applicable deductible and how it is to be paid;

                     (d) benefits of the coverage; and

                     (e) key terms and conditions of coverage, including whether portable electronics may be repaired or replaced with similar make and model reconditioned or nonoriginal manufacturer parts or equipment;

                (4) summarize the process for filing a claim, including a description of how to return portable electronics, and the maximum fee applicable in the event the customer fails to comply with any equipment return requirements; and

                (5) state that an enrolled customer may cancel enrollment for coverage under a portable electronics insurance policy at any time and the person paying the premium shall receive a refund of any applicable unearned premium.

          B. The written materials required by this section shall not be subject to filing or approval requirements with the superintendent.

          C. Portable electronics insurance may be offered on a month-to-month or other periodic basis as a group or master commercial inland marine policy issued to a vendor for its enrolled customers.

          D. Eligibility and underwriting standards for customers electing to enroll in coverage shall be established for each portable electronics insurance program."

     SECTION 5. A new section of the New Mexico Insurance Code is enacted to read:

     "[NEW MATERIAL] AUTHORITY OF VENDORS OF PORTABLE ELECTRONICS.--

          A. The employees and authorized representatives of vendors may sell or offer portable electronics insurance to customers and shall not be subject to licensure as insurance agents under any other provision of the Insurance Code, provided that:

                (1) the vendor obtains a limited agent's license to authorize its employees or authorized representatives to sell or offer portable electronics insurance and complies with the provisions of the Portable Electronics Insurance Act;

                (2) the insurer issuing the portable electronics insurance either directly supervises or appoints a supervising entity to supervise the administration of the program, including development of a training program for employees and authorized representatives of the vendors. The training:

                     (a) shall be delivered to employees and authorized representatives of vendors who are directly engaged in the activity of selling or offering portable electronics insurance;

                     (b) may be provided in electronic form, provided that the supervising entity implements a supplemental education program regarding the portable electronics insurance product that is conducted and overseen by licensed employees of the supervising entity; and

                     (c) shall provide to each employee and authorized representative of a vendor basic instruction about the portable electronics insurance offered to customers and the disclosures required by the Portable Electronics Insurance Act; and

                (3) employees or authorized representatives of a vendor of portable electronics shall not advertise, represent or otherwise hold themselves out as nonlimited lines licensed insurance producers.

          B. Notwithstanding any other provision of law, employees or authorized representatives of a vendor shall not be compensated based primarily on the number of customers enrolled for portable electronics insurance coverage but may receive compensation for activities under the limited agent's license that is incidental to their overall compensation.

          C. The charges for portable electronics insurance coverage may be billed and collected by the vendor. Any charge to an enrolled customer for coverage that is not included in the cost associated with the purchase or lease of portable electronics or related services shall be separately itemized on the enrolled customer's bill. If the portable electronics insurance coverage is included with the purchase or lease of portable electronics or related services, the vendor shall clearly and conspicuously disclose to the enrolled customer that the portable electronics insurance coverage is included with the portable electronics or related services. Vendors billing and collecting such charges shall not be required to maintain such funds in a segregated account; provided that the vendor is authorized by the insurer to hold such funds in an alternative manner and remits such amounts to the supervising entity within sixty days of receipt. All funds received by a vendor from an enrolled customer for the sale of portable electronics insurance shall be considered funds held in trust by the vendor in a fiduciary capacity for the benefit of the insurer. Vendors may receive compensation for billing and collection services." 

     SECTION 6. A new section of the New Mexico Insurance Code is enacted to read:

     "[NEW MATERIAL] PENALTIES--SUSPENSION OR REVOCATION OF LICENSE.--A person who violates any provision of the Portable Electronics Insurance Act may, after notice and hearing, be subject to:

          A. fines not to exceed five hundred dollars ($500) per violation, not to exceed a total of five thousand dollars ($5,000); or

          B. as the superintendent deems necessary:

                (1) suspension of the privilege of transacting portable electronics insurance at specific locations where violations have occurred; or

                (2) suspension or revocation of the ability of individual employees or authorized representatives of a vendor to act under the license."

     SECTION 7. A new section of the New Mexico Insurance Code is enacted to read:

     "[NEW MATERIAL] TERMINATION OF PORTABLE ELECTRONICS INSURANCE.--Notwithstanding any other provision of law:

          A. an insurer may terminate or otherwise change the terms and conditions of a policy of portable electronics insurance only upon providing the policyholder and enrolled customers with at least thirty days' notice;

          B. if the insurer changes the terms and conditions of a policy, the insurer shall provide the vendor with a revised policy or endorsement and each enrolled customer with a revised certificate, endorsement, updated brochure or other evidence indicating that a change in the terms and conditions has occurred and shall provide a summary of material changes;

          C. notwithstanding the provisions of Subsection A of this section, an insurer may terminate an enrolled customer's enrollment under a portable electronics insurance policy upon fifteen days' notice for discovery of fraud or material misrepresentation in obtaining coverage or in the presentation of a claim thereunder;

          D. notwithstanding the provisions of Subsection A of this section, an insurer may immediately terminate an enrolled customer's enrollment under a portable electronics insurance policy without prior notice:

                (1) for nonpayment of premium;

                (2) if the enrolled customer ceases to have an active service with the vendor; or

                (3) if an enrolled customer exhausts the aggregate limit of liability, if any, under the terms of the portable electronics insurance policy and the insurer sends notice of termination to the enrolled customer within thirty calendar days after exhaustion of the limit. However, if notice is not timely sent, enrollment shall continue notwithstanding the aggregate limit of liability until the insurer sends notice of termination to the enrolled customer;

          E. if a portable electronics insurance policy is terminated by a policyholder, the policyholder shall mail or deliver written notice to each enrolled customer advising the enrolled customer of the termination of the policy and the effective date of termination. The written notice shall be mailed or delivered to the enrolled customer at least thirty days prior to the termination;

          F. if notice or correspondence with respect to a policy of portable electronics insurance is required pursuant to this section or is otherwise required by law, it shall be in writing and sent within the notice period, if any, specified within the statute or regulation requiring the notice or correspondence. Notwithstanding any other provision of law, notices and correspondence may be sent either by mail or by electronic means as set forth in this subsection. If the notice or correspondence is mailed, it shall be sent to the vendor at the vendor's mailing address specified for such purpose and to its affected enrolled customers' last known mailing addresses on file with the insurer. The insurer or vendor shall maintain proof of mailing in a form authorized or accepted by the United States postal service or other commercial mail delivery service. If the notice or correspondence is sent by electronic means, it shall be sent to the vendor at the vendor's electronic mail address specified for such purpose and to its affected enrolled customers' last known electronic mail addresses as provided by each enrolled customer to the insurer or vendor. For purposes of this subsection, an enrolled customer's provision of an electronic mail address to the insurer or vendor shall be deemed consent to receive notices and correspondence by electronic means. The insurer or vendor shall maintain proof that the notice or correspondence was sent; and

          G. notice or correspondence required by this section or otherwise required by law may be sent on behalf of an insurer or vendor by the supervising entity."

     SECTION 8. Section 59A-12-18 NMSA 1978 (being Laws 1984, Chapter 127, Section 219, as amended) is amended to read:

     "59A-12-18. LIMITED LICENSE.--

          A. The superintendent may issue a limited agent's license to:

                (1) individual applicants qualified pursuant to Chapter 59A, Article 12 NMSA 1978 and employed as transportation ticket sellers by public carriers, who in the course of such employment solicit or sell insurance incidental to transportation of persons or storage or transportation of baggage, provided that the license is limited to that insurance; or

                (2) individual applicants employed full time by a vendor of merchandise or other property or by a financial institution making consumer loans, on terms with respect to which credit life insurance or health insurance under individual policies is customarily required of or offered to the purchaser or borrower, covering only that credit life and health insurance.

          [B. The superintendent may issue a limited agent's license to applicants who are retail vendors or lessors of portable electronics or services. The license shall authorize any employee or authorized representative of the vendor, in connection with the lease, retail sale or provision of portable electronics or services for portable electronics, to sell insurance covering the loss, theft, mechanical failure or malfunction of or damage to the portable electronics. A license issued pursuant to this section shall authorize the licensee and its employees or authorized representatives to engage only in those activities that are expressly permitted in this section. The licensee shall be required to keep a record of the name, address, contact information and any other information of the locations operating pursuant to this section as required by the superintendent. These records shall be made available by the vendor upon the request of the superintendent. The licensee shall provide training to all employees and authorized representatives of the vendors who sell that insurance. The conduct of the licensee's business under the limited license by its employees or authorized representatives shall be attributed to the licensee. As used in this subsection, "portable electronics" means electronic devices that are portable in nature and their accessories and services related to the use of the device.]

          B. The superintendent may issue a limited agent's license to vendors in accordance with provisions of the Portable Electronics Insurance Act. The application shall provide:

                (1) the name, residence address and other information required by the superintendent for an employee or officer of the vendor that is designated by the applicant as the person responsible for the vendor's compliance with the requirements of the Portable Electronics Insurance Act. However, if the vendor derives more than fifty percent of its revenue from the sale of portable electronics insurance, the information noted above shall be provided for all officers, directors and shareholders of record having beneficial ownership of ten percent or more of any class of securities registered under the federal securities law; and

                (2) the location of the applicant's home office.

          C. No holder of a limited license issued pursuant to Subsection A of this section shall concurrently be otherwise licensed under the Insurance Code."

     SECTION 9. Section 59A-13-2 NMSA 1978 (being Laws 1984, Chapter 127, Section 230, as amended) is amended to read:

     "59A-13-2. DEFINITIONS.--

          A. For the purposes of the Insurance Code:

                (1) "adjuster" [is] means a person that:

                     (a) investigates, negotiates, settles or adjusts a loss or claim arising under an insurance contract on behalf of an insurer, insured or self-insurer, for a fee, commission or other compensation; however, an adjuster acting on behalf of an insured shall not investigate, negotiate, settle or adjust a claim involving personal injury to the insured; and

                     (b) advises the insured of the insured's rights to settlement and the insured's rights to settle, arbitrate and litigate the dispute;

                (2) "automated claims adjudication system" means a preprogrammed computer system designed for the collection, data entry, calculation and final resolution of portable electronics insurance claims that shall:

                     (a) only be utilized by a licensed independent adjuster, licensed agent or supervised individuals operating pursuant to Subsection C of Section 59A-13-3 NMSA 1978;

                     (b) comply with all claims payment requirements of the Insurance Code; and

                     (c) be certified as compliant with the Portable Electronics Insurance Act by a licensed independent adjuster who is an officer of a licensed business entity pursuant to the Insurance Code;

                [(2)] (3) "staff adjuster" [is] means an adjuster individual who is a salaried employee of an insurer or affiliates of the employer insurer, representing and adjusting claims solely under policies of the employer insurer;

                [(3)] (4) "independent adjuster" [is] means an adjuster who is not a staff adjuster and includes a representative and an employee of an independent adjuster; and

                [(4)] (5) "resident adjuster" [is] means an adjuster who resides principally in New Mexico and who conducts business primarily in New Mexico.

          B. Except as otherwise provided, "adjuster" does not include:

                (1) an attorney-at-law who adjusts insurance losses or claims from time to time incidental to practice of law and who does not advertise or represent as an adjuster;

                (2) a licensed agent or general agent of an authorized insurer or an employee of an agent or general agent who adjusts claims or losses under specific authority from the insurer and solely under policies issued by the insurer;

                (3) an agent or employee of a life or health insurer who adjusts claims or losses under the insurer's policies or contracts to administer policies or benefits of that type; [or]

                (4) a salaried or part-time claims agent or investigator employed by a self-insured person; or

                (5) an individual who, for purposes of portable electronics insurance claims, collects claim information from, or furnishes claim information to, insureds or claimants, and who conducts data entry, including entering data into an automated claims adjudication system, provided that the individual is an employee of a licensed independent adjuster or its affiliate where no more than twenty-five such persons are under the supervision of one licensed independent adjuster or licensed agent who is exempt from licensure pursuant to Paragraph (2) of this subsection."

     SECTION 10. Section 59A-13-3 NMSA 1978 (being Laws 1984, Chapter 127, Section 231, as amended) is amended to read:

     "59A-13-3. LICENSE REQUIRED.--

          A. No person shall, in this state, act as, or [hold himself out to be] make any representation as being, an adjuster unless licensed as such by the superintendent under the Insurance Code.

          B. No person, regardless of location, shall act as, or [hold himself out to be] make any representation as being, an adjuster with respect to workers' compensation claims of claimants resident or located in New Mexico unless licensed as such by the superintendent under the Insurance Code.

          C. Notwithstanding any other provision of law, a resident of Canada may be licensed as a nonresident independent adjuster for the purposes of portable electronics insurance if that applicant has designated another state as the applicant's resident state and has complied with the other provisions of the Insurance Code typically applied to resident-state applicants."

     SECTION 11. Section 59A-13-4 NMSA 1978 (being Laws 1984, Chapter 127, Section 232) is amended to read:

     "59A-13-4. QUALIFICATIONS FOR LICENSE AS ADJUSTER.--

          A. The superintendent shall license as an adjuster only an individual who is otherwise in compliance with [this article and Article 11 (licensing procedures) of the Insurance Code] Chapter 59A, Articles 11 and 13 NMSA 1978 and who has furnished evidence satisfactory to the superintendent that the applicant for license:

                (1) is not less than eighteen [(18)] years of age;

                (2) is a bona fide resident of this state, or of a state or country that permits residents of this state to act as adjusters therein, except that under circumstances of necessity the superintendent may waive the requirement of reciprocity;

                (3) can demonstrate a good business reputation, and intends to engage in a bona fide manner in the business of adjusting insurance claims;

                (4) except as to temporary license provided for under Section [234 of this article] 59A-13-6 NMSA 1978, has had at least one year's experience or special education or training in handling of losses or claims under insurance contracts, such experience, education and training to be of such nature and extent as to demonstrate the applicant's competence to fulfill the responsibilities of an adjuster; and

                (5) has filed the bond required under Section [233 of this article] 59A-13-5 NMSA 1978.

          B. Paragraphs (2) and (5) [above] of Subsection A of this section shall not apply as to staff adjusters.

          C. Individuals holding licenses as adjusters on the effective date of the Insurance Code shall be deemed to meet the qualifications for the license except as provided in [Article 11 (licensing procedures) of the Insurance Code and in this article hereinafter provided] Chapter 59A, Articles 11 and 13 NMSA 1978.

          D. A business entity applying for an independent adjuster license for the purposes of portable electronics insurance in New Mexico shall submit the names, addresses, social security numbers, criminal and administrative histories, background checks, biographical statements and fingerprints of all executive officers and directors of the applicant and of all executive officers and directors of entities owning and any individuals owning, directly or indirectly, fifty-one percent or more of the outstanding voting securities of the applicant. Any nonresident business entity applicant whose resident state has enacted into law provisions that are substantively duplicative of the provisions of this subsection shall not be required to submit criminal histories, background checks, biographical statements and fingerprints for its executive officers, directors and owners of outstanding voting securities."

     SECTION 12. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2013.

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