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(125th General Assembly)(Substitute House Bill Number 243)
AN ACTTo amend sections 3901.043, 3901.51, 3905.24, and 3915.073, to enact section 3905.422, and to repeal sections 3957.01, 3957.02, 3957.03, 3957.04, 3957.05, 3957.06, 3957.07, 3957.08, 3957.09, 3957.10, 3957.11, 3957.12, 3957.13, 3957.14, 3957.15, 3957.16, 3957.17, 3957.18, 3957.19, and 3957.99 of the Revised Code to regulate the sale of home service contracts as consumer transactions rather than as the sale of insurance. Be it enacted by the General Assembly of the State of Ohio:
SECTION 1. That sections 3901.043, 3901.51, 3905.24, and 3915.073 be amended and section 3905.422 of the Revised Code be enacted to read as follows:
Sec. 3901.043. The superintendent of insurance may adopt rules in accordance
with Chapter 119. of the Revised Code to establish reasonable fees for any
service or transaction performed by the department of insurance pursuant to
section 1751.03, 3901.321, 3901.341, 3907.09, 3907.10, 3907.11,
3907.12, 3911.011, 3913.40,
3915.14, 3917.06, 3918.07, 3923.02, 3935.04,
3937.03, or 3953.28, 3957.12, or 3957.13 of the Revised
Code or any provision in sections 3913.01 to 3913.23 or in Chapter
3905. of the Revised Code, if no fee is otherwise provided under Title XVII or
XXXIX of the Revised Code for such service or transaction. Any fee collected
pursuant to those rules shall be paid into the state treasury to the credit of
the department of insurance operating fund.
Sec. 3901.51. As used in sections 3901.51 to 3901.55 of
the
Revised Code: (A) "Clearing corporation" has the same meaning as in
section 1308.01 of the Revised Code, except that
with respect to
securities issued by institutions organized or
existing under the
laws of any foreign country or securities used
to meet the deposit
requirements pursuant to the laws of a
foreign country as a
condition of doing business in that country,
"clearing
corporation" includes a corporation that is organized
or existing
under the laws of any foreign country and is legally
qualified
under those laws to effect transactions in securities
by
computerized book-entry. (B) "Direct participant" means a bank, trust company, or
other entity that maintains an account in its name in a clearing
corporation and through which an insurance company participates
in
a clearing corporation. (C) "Federal reserve book-entry system" means the
computerized systems sponsored by the United States department of
the treasury and agencies and instrumentalities of the United
States for holding and transferring securities of the United
States government and agencies and instrumentalities in federal
reserve banks through banks that are members of the federal
reserve system or that otherwise have access to these
computerized
systems. (D) "Member bank" means a national or state bank or a
trust
company that is a member of the federal reserve system and
through
which an insurance company participates in the federal
reserve
book-entry system. (E) "Provisions of the insurance laws of this state" means
provisions of Title XXXIX of the Revised Code related to the
deposit of securities for the benefit and security of
policyholders, and includes, but is not limited to, sections
3901.18,
3901.74, 3901.75, 3901.86, 3903.73,
3907.07, 3909.03,
3909.09, 3909.17, 3913.01, 3913.04,
3919.13, 3919.36, 3919.37,
3919.41, 3925.07, 3927.02, 3927.06,
3929.01, 3929.07, 3929.08,
3929.09, 3929.10, 3929.11, 3941.30,
3941.31, 3941.32, 3941.33,
3941.34, 3941.42, 3953.06, and 3953.11, and
3957.03 of the Revised
Code. (F) "Securities" has the same meaning as in section 1308.01
of the Revised
Code.
Sec. 3905.24. (A)(1) All records and other
information
obtained by the superintendent of insurance or the
superintendent's deputies, examiners, assistants, or other
employees, or
agents relating to an investigation of an applicant
for licensure under
this chapter, or of an agent, solicitor,
broker, or other person
licensed
or appointed under this chapter
or Chapter 3951., 3957., or 3959. of the Revised
Code,
are
confidential and are not public records as defined in section
149.43 of
the Revised Code
until the applicant, licensee, or
appointee is provided notice and opportunity for hearing
pursuant
to Chapter 119. of the Revised Code with respect to such records
or
information. If no administrative action is initiated with
respect to a
particular matter about which the superintendent
obtained records or other
information as part of an investigation,
all such records and information
relating to that matter shall
remain confidential for three years after the
file on the matter
is
closed. (2) Division (A)(1)
of this section applies only to
investigations that could result
in administrative action under
Title
XVII or
XXXIX or
Chapter 119. of the
Revised
Code. (B) The records and other information
described in division
(A) of
this section shall remain confidential for all
purposes
except when it is appropriate for the superintendent and
the
superintendent's deputies, examiners, assistants, or other
employees, or
agents
to take official action regarding the affairs
of the applicant, licensee, or appointee or in connection with
actual or potential criminal
proceedings. (C) Notwithstanding
divisions (A) and (B) of this section,
the
superintendent may do
either of the following: (1) Share records and other information that are the subject
of this section with the chief deputy rehabilitator, the chief
deputy liquidator, other deputy rehabilitators and liquidators,
and any other person employed by, or acting on behalf of, the
superintendent pursuant to Chapter 3901. or 3903. of the Revised
Code, with other local, state, federal, and international
regulatory and law enforcement agencies, with local, state, and
federal prosecutors, and with the national association of
insurance commissioners and its affiliates and subsidiaries,
provided that the recipient agrees to maintain the confidential
status of the confidential record or
other information and has
authority to do so; (2) Disclose records and other information that are the
subject of this section in the furtherance of any regulatory or
legal action brought by or on behalf of the superintendent or the
state, resulting from the exercise of the superintendent's
official duties. (D) Notwithstanding divisions (A), (B), and (C) of this
section, the superintendent may authorize the national association
of insurance commissioners and its affiliates and subsidiaries by
agreement to share confidential records and other
information
received pursuant to division (C)(1) of this section
with local,
state, federal, and international regulatory and law
enforcement
agencies and with local, state, and federal
prosecutors, provided
that the recipient agrees to maintain the
confidential status of
the confidential record or other information and has authority to
do so. (E) Notwithstanding divisions (A), (B), and (C) of this
section, the chief deputy rehabilitator, the chief deputy
liquidator, and other deputy rehabilitators and liquidators may
disclose records and other information that are the subject of
this section in the furtherance of any regulatory or legal action
brought by or on behalf of the superintendent, the rehabilitator,
the liquidator, or the state
resulting from the exercise of the
superintendent's official
duties in any capacity. (F) Nothing in this section shall prohibit the
superintendent from receiving records and other information in
accordance with section 3901.045 of the Revised Code. (G)(1) No waiver of any applicable privilege or claim of
confidentiality in the records and other information that are the
subject of this section shall occur as a result of sharing or
receiving records or other information as authorized in divisions
(C)(1), (D), and (F) of this section. (2) The disclosure of records or other information in
connection with a regulatory or legal action pursuant to
divisions
(C)(2) and (E) of this section does not prohibit an
insurer or any
other person from taking steps to limit the dissemination of the
record
or other information to persons not involved in or the
subject of
the regulatory or legal action on the basis of any
recognized privilege arising
under any other section of the
Revised Code or the common law. (H) Employees or agents of the department of insurance shall
not be required by any court in this state to testify in a civil
action, if the testimony concerns any matter related to records or
other information considered confidential under this
section of
which they have knowledge. Sec. 3905.422. (A) As used in this section: (1) "Home service contract" means a contract, however described or denominated by the issuer of the contract, whereby, for a predetermined fee, a person undertakes to repair or replace all or any part of any structural component, appliance, or system of a home necessitated by wear and tear, deterioration, or inherent defect that occurs on or after the effective date of the home service contract.
(2) "Appliance" includes a stove, refrigerator, dishwasher, and any similar piece of equipment.
(3) "Structural component" includes the roof, foundation, basement, walls, ceiling, and similar components of a home.
(4) "System" includes the heating, cooling, plumbing, electrical system, and similar systems of a home.
(B) A home service contract is not insurance and its sale or issuance is not governed by the laws of this state relating to insurance, except a home service contract issued by a licensed property and casualty insurance company as an insurance policy shall be governed by the laws of this state relating to insurance. (C) The sale or other issuance of a home service contract constitutes a consumer transaction for purposes of Chapter 1345. of the Revised Code. A person who purchases or is entitled to the benefits of a home service contract is a consumer as defined in division (D) of section 1345.01 of the Revised Code.
Sec. 3915.073. (A) This section shall be known as the
standard nonforfeiture law for individual deferred annuities. (B) This section does not apply to any reinsurance, group
annuity purchased under a retirement plan or plan of deferred
compensation established or maintained by an employer, including
a
partnership or sole proprietorship, or by an employee
organization, or by both, other than a plan providing individual
retirement accounts or individual retirement annuities under
section 408 of the Internal Revenue Code of 1954, 26 U.S.C.A.
408,
as amended, premium deposit fund, variable annuity,
investment
annuity, immediate annuity, any deferred annuity
contract after
annuity payments have commenced, or reversionary
annuity, nor to
any contract which is delivered outside this
state through an
agent or other representative of the company
issuing the contract. (C) In the case of contracts issued on or after the
operative date of this section as defined in division (L) of this
section, no contract of annuity, except as stated in division (B)
of this section shall be delivered or issued for delivery in this
state unless it contains in substance the following provisions,
or
corresponding provisions that in the opinion of the
superintendent
are at least as favorable to the contractholder,
upon cessation of
payment of consideration under the contract: (1) That upon cessation of payment of considerations under
a
contract, the company will grant a paid-up annuity benefit on a
plan stipulated in the contract of such value as is specified in
divisions (E), (F), (G), (H), and (J) of this section; (2) If a contract provides for a lump sum settlement at
maturity, or at any other time, that upon surrender of the
contract at or prior to the commencement of any annuity payments,
the company will pay in lieu of any paid-up annuity benefit a
cash
surrender benefit of such amount as is specified in
divisions (E),
(F), (H), and (J) of this section. The company
shall reserve the
right to defer the payment of such cash
surrender benefit for a
period of six months after demand
therefor with surrender of the
contract. (3) A statement of the mortality table, if any, and
interest
rates used in calculating any minimum paid-up annuity,
cash
surrender, or death benefits that are guaranteed under the
contract, together with sufficient information to determine the
amounts of such benefits; (4) A statement that any paid-up annuity, cash surrender,
or
death benefits that may be available under the contract are
not
less than the minimum benefits required by any statute of the
state in which the contract is delivered and an explanation of
the
manner in which such benefits are altered by the existence of
any
additional amounts credited by the company to the contract,
any
indebtedness to the company on the contract, or any prior
withdrawals from or partial surrenders of the contract. Notwithstanding the requirements of this section, any
deferred annuity contract may provide that if no considerations
have been received under a contract for a period of two full
years
and the portion of the paid-up annuity benefit at maturity
on the
plan stipulated in the contract arising from
considerations paid
prior to such period would be less than
twenty dollars monthly,
the company may at its option terminate
such contract by payment
in cash of the then present value of
such portion of the paid-up
annuity benefit, calculated on the
basis of the mortality table,
if any, and interest rate specified
in the contract for
determining the paid-up annuity benefit, and
by such payment shall
be relieved of any further obligation under
such contract. (D) The minimum values as specified in divisions (E), (F),
(G), (H), and (J) of this section of any paid-up annuity, cash
surrender, or death benefits available under an annuity contract
shall be based upon minimum nonforfeiture amounts as defined in
this section. (1) With respect to contracts providing for flexible
considerations, the minimum nonforfeiture amount at any time at
or
prior to the commencement of any annuity payments shall be
equal
to an accumulation up to such time at a rate of interest of
three
per cent per annum of percentages of the net
considerations, as
defined in this section, paid prior to such
time, decreased by the
sum of: (a) Any prior withdrawals from or partial surrenders of
the
contract accumulated at a rate of interest of three per cent
per
annum; and (b) The amount of any indebtedness to the company on the
contract, including interest due and accrued; and increased by
any
existing additional amounts credited by the company to the
contract. The net considerations for a given contract year used to
define the minimum nonforfeiture amount shall be an amount not
less than zero and shall be equal to the corresponding gross
considerations credited to the contract during that contract year
less an annual contract charge of thirty dollars and less a
collection charge of one dollar and twenty-five cents per
consideration credited to the contract during that contract year.
The percentages of net considerations shall be sixty-five per
cent
of the net consideration for the first contract year and
eighty-seven and one-half per cent of the net considerations for
the second and later contract years. Notwithstanding the
provisions of the preceding sentence, the percentage shall be
sixty-five per cent of the portion of the total net consideration
for any renewal contract year that exceeds by not more than two
times the sum of those portions of the net considerations in all
prior contract years for which the percentage was sixty-five per
cent.
Notwithstanding any other provision of this section, for any
contract issued on or after
the effective date of this amendment
August 6, 2002,
and before September 1, 2004 2006,
the interest rate at which net
considerations, partial
withdrawals, and partial surrenders shall
be accumulated for
purposes of determining minimum nonforfeiture
amounts shall be one
and one-half per cent per annum. (2) With respect to contracts providing for fixed
scheduled
considerations, minimum nonforfeiture amounts shall be
calculated
on the assumption that considerations are paid
annually in advance
and shall be defined as for contracts with
flexible considerations
which are paid annually with two
exceptions: (a) The portion of the net consideration for the first
contract year to be accumulated shall be the sum of sixty-five
per
cent of the net consideration for the first contract year
plus
twenty-two and one-half per cent of the excess of the net
consideration for the first contract year over the lesser of the
net considerations for the second and third contract years; (b) The annual contract charge shall be the lesser of (i)
thirty dollars or (ii) ten per cent of the gross annual
consideration. (3) With respect to contracts providing for a single
consideration, minimum nonforfeiture amounts shall be defined as
for contracts with flexible considerations except that the
percentage of net consideration used to determine the minimum
nonforfeiture amount shall be equal to ninety per cent and the
net
consideration shall be the gross consideration less a
contract
charge of seventy-five dollars. (E) Any paid-up annuity benefit available under a contract
shall be such that its present value on the date annuity payments
are to commence is at least equal to the minimum nonforfeiture
amount on that date. Such present value shall be computed using
the mortality table, if any, and the interest rate specified in
the contract for determining the minimum paid-up annuity benefits
guaranteed in the contract. (F) For contracts which provide cash surrender benefits,
such cash surrender benefits available prior to maturity shall
not
be less than the present value as of the date of surrender of
that
portion of the maturity value of the paid-up annuity benefit
that
would be provided under the contract at maturity arising
from
considerations paid prior to the time of cash surrender
reduced by
the amount appropriate to reflect any prior
withdrawals from or
partial surrenders of the contract, such
present value being
calculated on the basis of an interest rate
not more than one per
cent higher than the interest rate
specified in the contract for
accumulating the net considerations
to determine such maturity
value, decreased by the amount of any
indebtedness to the company
on the contract, including interest
due and accrued, and increased
by any existing additional amounts
credited by the company to the
contract. In no event shall any
cash surrender benefit be less
than the minimum nonforfeiture
amount at that time. The death
benefit under such contracts
shall be at least equal to the cash
surrender benefit. (G) For contracts that do not provide cash surrender
benefits, the present value of any paid-up annuity benefit
available as a nonforfeiture option at any time prior to maturity
shall not be less than the present value of that portion of the
maturity value of the paid-up annuity benefit provided under the
contract arising from considerations paid prior to the time the
contract is surrendered in exchange for, or changed to, a
deferred
paid-up annuity, such present value being calculated for
the
period prior to the maturity date on the basis of the
interest
rate specified in the contract for accumulating the net
considerations to determine such maturity value, and increased by
any existing additional amounts credited by the company to the
contract. For contracts that do not provide any death benefits
prior to the commencement of any annuity payments, such present
values shall be calculated on the basis of such interest rate and
the mortality table specified in the contract for determining the
maturity value of the paid-up annuity benefit. However, in no
event shall the present value of a paid-up annuity benefit be
less
than the minimum nonforfeiture amount at that time. (H) For the purpose of determining the benefits calculated
under divisions (F) and (G) of this section, in the case of
annuity contracts under which an election may be made to have
annuity payments commence at optional maturity dates, the
maturity
date shall be deemed to be the latest date for which
election
shall be permitted by the contract, but shall not be
deemed to be
later than the anniversary of the contract next
following the
annuitant's seventieth birthday or the tenth
anniversary of the
contract, whichever is later. (I) Any contract that does not provide cash surrender
benefits or does not provide death benefits at least equal to the
minimum nonforfeiture amount prior to the commencement of any
annuity payments shall include a statement in a prominent place
in
the contract that such benefits are not provided. (J) Any paid-up annuity, cash surrender, or death benefits
available at any time, other than on the contract anniversary
under any contract with fixed scheduled considerations, shall be
calculated with allowance for the lapse of time and the payment
of
any scheduled considerations beyond the beginning of the
contract
year in which cessation of payment of considerations
under the
contract occurs. (K) For any contract that provides, within the same
contract
by rider or supplemental contract provision, both
annuity benefits
and life insurance benefits that are in excess
of the greater of
cash surrender benefits or a return of the
gross considerations
with interest, the minimum nonforfeiture
benefit shall be equal to
the sum of the minimum nonforfeiture
benefits for the annuity
portion and the minimum nonforfeiture
benefits, if any, for the
life insurance portion computed as if
each portion were a separate
contract. Notwithstanding the
provisions of divisions (E), (F),
(G), (H), and (J) of this
section, additional benefits payable: (1) In the event of total and permanent disability; (2) As reversionary annuity or deferred reversionary
annuity
benefits; or (3) As other policy benefits additional to life insurance,
endowment and annuity benefits, and considerations for all such
additional benefits shall be disregarded in ascertaining the
minimum nonforfeiture amounts, paid-up annuity, cash surrender,
and death benefits that may be required by this section. The inclusion of such additional benefits shall not be
required in any paid-up benefits, unless such additional benefits
separately would require minimum nonforfeiture amounts, paid-up
annuity, cash surrender, and death benefits. (L) Any company may file with the superintendent a written
notice of its election to comply with the provisions of this
section on or before July 1, 1980. The date specified in the
notice shall be the operative date of this section for such
company. If a company makes no such election, the operative date
of this section for the company shall be July 1, 1980.
SECTION 2. That existing sections 3901.043, 3901.51, 3905.24, and 3915.073 and sections Sec. 3957.01. , Sec. 3957.02. , Sec. 3957.03. , Sec. 3957.04. , Sec. 3957.05. , Sec. 3957.06. , Sec. 3957.07. , Sec. 3957.08. , Sec. 3957.09. , Sec. 3957.10. , Sec. 3957.11. , Sec. 3957.12. , Sec. 3957.13. , Sec. 3957.14. , Sec. 3957.15. , Sec. 3957.16. , Sec. 3957.17. , Sec. 3957.18. , Sec. 3957.19. , and Sec. 3957.99. of the Revised Code are hereby repealed.
SECTION 3. No home warranty company established and operating in this state on the effective date of this act pursuant to a certificate of authority issued by the Superintendent of Insurance under Chapter 3957. of the Revised Code shall sell, offer to sell, or solicit offers for, home service contracts on or after the effective date of this act as contracts regulated by Chapter 3957. of the Revised Code.
All home service contracts issued pursuant to Chapter 3957. of the Revised Code and outstanding on the effective date of this act shall be consummated. The interpretation and fulfillment of the terms and conditions of these outstanding contracts, and of any home service contract sold or issued by a home warranty company on or after the effective date of this act, is subject to Chapter 1345. of the Revised Code on and after the act's effective date, rather than to Ohio's Insurance Law.
A home warranty company with outstanding home service contracts in this state on the effective date of this act shall maintain a single reserve sufficient to provide for its liability to furnish repair and replacement services under those contracts. The amount of this reserve shall be calculated according to sound actuarial principles.
The repeal of Chapter 3957. of the Revised Code pursuant to this act does not: (1) invalidate any home service contract issued by a home warranty company prior to the effective date of this act; (2) discharge any liability based on the acts or conduct of a home warranty company or its agents or employees prior to the effective date of this act; (3) discharge or otherwise affect any other liability incurred by a home warranty company prior to the effective date of this act; or (4) affect a home warranty company's conduct of business in accordance with other provisions of state and federal law.
The repeal of Chapter 3957. of the Revised Code pursuant to this act does not affect the authority of licensed property and casualty insurers to issue home service contracts in accordance with the Ohio Insurance Law.
SECTION 4. Section 3901.043 of the Revised Code is
presented in
this act as a composite of the section as amended by
both Sub. H.B. 370 and Am. Sub. S.B. 67 of
the 122nd General
Assembly. The General Assembly, applying the
principle stated in
division (B) of section 1.52 of the Revised
Code that amendments
are to be harmonized if reasonably capable of
simultaneous
operation, finds that the composite is the resulting
version of
the section in effect prior to the effective date of
the section
as presented in this act.
SECTION 5. Section 3905.492 (3905.24) of the Revised Code is presented in
this act as a composite of the section as amended and renumbered by Sub. S.B. 129 and amended by Am. Sub. S.B. 138, both of
the 124th General Assembly. The General Assembly, applying the
principle stated in division (B) of section 1.52 of the Revised
Code that amendments are to be harmonized if reasonably capable of
simultaneous operation, finds that the composite is the resulting
version of the section in effect prior to the effective date of
the section as presented in this act.
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