Back in June 2011, my colleague blogged in an article in Compliance Corner about how many states enacted regulation that addresses the specialty insurance for portable electronics in the prior year. As we have hit the beginning of 2012, I thought it would be useful to note that this trend has continued. The states that have also followed suit by adopting such regulation which is now effective include: Oklahoma, Illinois, Kansas, Missouri, Nebraska, Oregon, North Carolina and Tennessee. Ohio has passed legislation that is effective in March 2012. Also, other states, such as California and Michigan, are considering such legislation. (See California AB 690 (2011) and Michigan SB 0511 (2011).)
Where states enact portable electronic insurance regulation, vendors get a limited license to sell the insurance but the insurer underwriting the coverage has the responsibility of giving compliant notice of termination or policy changes. In most states, there are special notice requirements for this notice. These adverse action notice requirements do vary from state to state, but many of the states’ laws contain the following rules:
- The notice of the adverse action to the insured must be in writing;
- The insurer may comply with the notice requirement by using the mail service of the U.S. Postal Service or by providing electronic notice through electronic means;
- Some form of proof of mailing is required whether the insurer uses the U.S. Postal Service or electronic means;
- 30 or 60 days’ for advance notice of the insurer’s intent to the insured is required for a mid-term cancellation, nonrenewal or policy change; and,
- There are exceptions to the general days’ notice rule. Usually 0 or 15 days’ notice is required for the situation where:
i. there is a discovery of fraud or material misrepresentation in obtaining the coverage or in the presentation of a claim;
ii. the enrolled customer exhausts an aggregate limit of liability under the insurance policy and the insurer sends a notice of termination to the customer within 30 days after exhaustion of the limit. If a notice is not sent within the 30-day period, the customer continues to be enrolled in the policy until the insurer sends notice of termination;
iii. the enrolled customer ceases to have an active service with the vendor; or,
iv. there is a nonpayment of premium.
North Carolina and Minnesota are examples of states that enacted portable electronic insurance but did not include special termination requirements in the legislation that was passed. Instead, as the laws state, the terms of termination or modification of coverage are to be set forth in the policy language itself.
I expect the trend to continue and to see even more states adopt portable electronic insurance laws in the near future even in light of the fact that many states will consider adoption of other laws that are intended to restrict consumers’ usage of portable electronic devices. For example, recently, the insurance industry showed “strong support” to the National Transportation Safety Board’s recommendation that all 50 states and the District of Columbia pass legislation banning complete non-emergency use of portable electronic devices by motorists while driving due to safety concerns. The insurance industry acknowledges possible common hazards of electronic portable device usage, but the industry also realizes that usage of these devices continue to grow and there is a need in the market to provide consumers with specialty insurance for these devices.
Editor’s Recommendation: Keep on top of adverse action notice requirements for portable electronics compliance requirements easily using the Adverse Decision Matrices and AuthenticWeb for Cancellation & Nonrenewal.
