S-1346.1                   _______________________________________________

 

                                                     SENATE BILL 5714

                              _______________________________________________

 

State of Washington                              53rd Legislature                             1993 Regular Session

 

By Senators Fraser, Moore and Barr

 

Read first time 02/10/93.  Referred to Committee on Labor & Commerce.

 

Regulating vendor single interest insurance.


          AN ACT Relating to vendor single interest insurance coverage; adding new sections to chapter 48.22 RCW; and providing an effective date.

 

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

 

          NEW SECTION.  Sec. 1.  Unless the context clearly requires otherwise, the definitions in this section apply throughout sections 1 through 5 of this act.

          (1) "Borrower" means an individual.

          (2) "Motor vehicle" means a motor vehicle in this state subject to registration under chapter 46.16 RCW, except motor vehicles governed by RCW 46.16.020 or registered with the Washington utilities and transportation commission as common or contract carriers.

          (3) "Secured party" means a person, corporation, association, partnership, or venture that possesses a bona fide security interest in a motor vehicle or vessel.

          (4) "Vendor single interest coverage" means insurance coverage insuring primarily the interest of a secured party in a motor vehicle or vessel serving as collateral and obtained by the secured party or its agent after the borrower has failed to obtain or maintain insurance coverage required by the financing agreement for the motor vehicle or vessel.  Vendor single interest coverage does not include insurance coverage purchased by a secured party for which the borrower is not charged.

          (5) "Vessel" means a vessel as defined in RCW 88.02.010 and includes personal watercraft as defined in RCW 88.12.080.

 

          NEW SECTION.  Sec. 2.  (1) No person who has a secured interest in a motor vehicle or vessel may obtain vendor single interest coverage for the motor vehicle or vessel as provided in subsection (2) of this section until the following or substantially similar warning printed in ten-point type is sent to the borrower:

 

                                                           FINAL NOTICE AND WARNING

 

UNLESS YOU PROVIDE US WITHIN SEVENTY-TWO HOURS OF RECEIPT OF THIS LETTER WITH EVIDENCE OF INSURANCE COVERAGE AS REQUIRED BY OUR LOAN AGREEMENT, WE WILL PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTEREST.  IF THE COLLATERAL BECOMES DAMAGED, THIS COVERAGE MAY NOT PAY ANY CLAIM YOU MAKE OR ANY CLAIM MADE AGAINST YOU.  YOU MAY LATER CANCEL THIS COVERAGE BY PROVIDING EVIDENCE THAT YOU HAVE OBTAINED PROPER COVERAGE ELSEWHERE.

 

YOU ARE RESPONSIBLE FOR THE COST OF THE INSURANCE PURCHASED BY US.  THE COST OF THIS INSURANCE MAY BE ADDED TO YOUR LOAN BALANCE.  IF THE COST IS ADDED TO THE LOAN BALANCE, THE INTEREST RATE ON THE UNDERLYING LOAN WILL APPLY TO THIS ADDED AMOUNT.

 

THIS COVERAGE WILL COST YOU A TOTAL OF APPROXIMATELY $ ______ AND MAY BE CONSIDERABLY MORE EXPENSIVE THAN INSURANCE YOU CAN OBTAIN ON YOUR OWN.

 

          (2)  If reasonable efforts to provide the borrower with the notice required under subsection (1) of this section have failed to produce evidence of the required insurance, the secured party may proceed to acquire vendor single interest coverage no sooner than ten business days after giving the notice.  Reasonable efforts must include sending a certified letter to the borrower's last known address as contained in the secured party's records.

 

          NEW SECTION.  Sec. 3.  (1) The secured party shall cancel vendor single interest coverage effective the date of receipt of proper evidence from the borrower that the borrower has obtained insurance to protect the secured party's interest.  Proper evidence includes an insurance binder that is no older than ninety days from the date of issuance and that contains physical damage coverage.

          (2)  If the underlying loan or extension of credit is satisfied, the secured party may not require the borrower to maintain a vendor single interest coverage that has been purchased.

          (3)  The interest rate for financing the cost of vendor single interest coverage may not exceed the interest rate applied to the underlying loan obligation.

 

          NEW SECTION.  Sec. 4.  If a vendor single interest coverage is canceled or discontinued under sections 3(1) or (2) of this act, the secured party shall credit or refund or cause to be credited or refunded to the borrower the amount of unearned premium on a pro rata basis.

 

          NEW SECTION.  Sec. 5.  In a contract or loan agreement to provide financing for a motor vehicle or vessel that authorizes a secured party to purchase vendor single interest coverage, the following or substantially similar warning must be set forth in ten-point print:

 

                                                                           WARNING

 

UNLESS YOU PROVIDE EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY OUR LOAN AGREEMENT, WE WILL PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTEREST ONLY.  IF THE COLLATERAL BECOMES DAMAGED, THIS COVERAGE MAY NOT PAY ANY CLAIM YOU MAKE OR ANY CLAIM MADE AGAINST YOU.  YOU MAY LATER CANCEL THIS COVERAGE BY PROVIDING EVIDENCE THAT YOU HAVE OBTAINED PROPER COVERAGE ELSEWHERE.

 

YOU ARE RESPONSIBLE FOR THE COST OF ANY INSURANCE PURCHASED BY US.  THE COST OF THIS INSURANCE MAY BE ADDED TO YOUR LOAN BALANCE.  IF THE COST IS ADDED TO THE LOAN BALANCE, THE INTEREST RATE ON THE UNDERLYING LOAN WILL APPLY TO THIS ADDED AMOUNT.

 

THIS COVERAGE MAY BE CONSIDERABLY MORE EXPENSIVE THAN INSURANCE YOU CAN OBTAIN ON YOUR OWN.

 

          NEW SECTION.  Sec. 6.  Sections 1 through 5 of this act are added to chapter 48.22 RCW.

 

          NEW SECTION.  Sec. 7.  This act takes effect January 1, 1994.

 


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