H-1479              _______________________________________________

                                                    HOUSE BILL NO. 735

                        _______________________________________________

State of Washington                              49th Legislature                              1985 Regular Session

By Representatives Vekich, Allen, Lux and McMullen

Read first time 2/8/85 and referred to Committee on Financial Institutions & Insurance.

AN ACT Relating to insurance frauds; and amending RCW 48.30.260.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

        Sec. 1.  Section 20, chapter 193, Laws of 1957 as last amended by section 2, chapter 6, Laws of 1984 and RCW 48.30.260 are each amended to read as follows:

          (1) Every debtor or borrower, when property insurance of any kind is required in connection with the debt or loan, shall have reasonable opportunity and choice in the selection of the agent, broker, and insurer through whom such insurance is to be placed; but only if the insurance is properly provided for the protection of the creditor or lender not later than at commencement of risk as to such property as respects such creditor or lender, and in the case of renewal of insurance, only if the renewal policy, or a proper binder therefor containing a brief description of the coverage bound and the identity of the insurer in which the coverage is bound, is delivered to the creditor or lender not later than thirty days prior to the renewal date.

          (2) Every person who lends money or extends credit and who solicits insurance on real and personal property must explain to the borrower in prominently displayed writing that the insurance related to such loan or credit extension may be purchased from an insurer or agent of the borrower's choice, subject only to the lender's right to reject a given insurer or agent as provided in subsection (3)(b) of this section.

          (3) No person who lends money or extends credit may:

          (a) Solicit insurance for the protection of real property, after a person indicates interest in securing a real estate loan or credit extension, until such person has received a commitment from the lender as to a loan or credit extension;

          (b) Unreasonably reject a contract of insurance furnished by the borrower for the protection of the property securing the credit or lien.  A rejection shall not be deemed unreasonable if it is based on reasonable standards, uniformly applied, relating to the extent of coverage required and the financial soundness and the services of an insurer.  Such standards shall not discriminate against any particular type of insurer, nor shall such standards call for rejection of an insurance contract because the contract contains coverage in addition to that required in the credit transaction;

          (c) Require that any borrower, mortgagor, purchaser, insurer, broker, or agent pay a separate charge, in connection with the handling of any contract of insurance required as security for a loan on real estate, or pay a separate charge to substitute the insurance policy of one insurer for that of another.  This subsection does not include the interest which may be charged on premium loans or premium advancements in accordance with the terms of the loan or credit document;

          (d) Use or disclose, without the prior written consent of the borrower, mortgagor, or purchaser taken at a time other than the making of the loan or extension of credit, information relative to a contract of insurance which is required by the credit transaction, for the purpose of replacing such insurance, or permitting another person to use such information for solicitations of any kind;

          (e) Require any procedures or conditions of duly licensed agents, brokers, or insurers not customarily required of those agents, brokers, or insurers affiliated or in any way connected with the person who lends money or extends credit; or

          (f) Require property insurance in an amount in excess of the amount which could reasonably be expected to be paid under the policy, or combination of policies, in the event of a loss.

          (4) Nothing contained in this section shall prevent a person who lends money or extends credit from placing insurance on real or personal property in the event the mortgagor, borrower, or purchaser has failed to provide required insurance in accordance with the terms of the loan or credit document.

          (5) Nothing contained in this section shall apply to credit life or credit disability insurance.