1.1                          A bill for an act 
  1.2             relating to insurance; regulating rental vehicle 
  1.3             coverages; amending Minnesota Statutes 1998, sections 
  1.4             60K.03, subdivision 7; 65B.49, subdivisions 3 and 5a; 
  1.5             and 72A.125, subdivisions 1 and 2. 
  1.6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.7      Section 1.  Minnesota Statutes 1998, section 60K.03, 
  1.8   subdivision 7, is amended to read: 
  1.9      Subd. 7.  [EXCEPTIONS.] The following are exempt from the 
  1.10  general licensing requirements prescribed by this section:  
  1.11     (1) agents of township mutuals who are exempted pursuant to 
  1.12  section 60K.04; 
  1.13     (2) fraternal benefit society representatives exempted 
  1.14  pursuant to section 60K.05; 
  1.15     (3) any regular salaried officer or employee of a licensed 
  1.16  insurer, without license or other qualification, may act on 
  1.17  behalf of that licensed insurer in the negotiation of insurance 
  1.18  for that insurer, provided that a licensed agent must 
  1.19  participate in the sale of the insurance; 
  1.20     (4) employers and their officers or employees, and the 
  1.21  trustees or employees of any trust plan, to the extent that the 
  1.22  employers, officers, employees, or trustees are engaged in the 
  1.23  administration or operation of any program of employee benefits 
  1.24  for the employees of the employers or employees of their 
  1.25  subsidiaries or affiliates involving the use of insurance issued 
  2.1   by a licensed insurance company; provided that the activities of 
  2.2   the officers, employees and trustees are incidental to clerical 
  2.3   or administrative duties and their compensation does not vary 
  2.4   with the volume of insurance or applications for insurance; 
  2.5      (5) employees of a creditor who enroll debtors for credit 
  2.6   life, credit accident and health, or credit involuntary 
  2.7   unemployment insurance; provided the employees receive no 
  2.8   commission or fee for it; 
  2.9      (6) clerical or administrative employees of an insurance 
  2.10  agent who take insurance applications or receive premiums in the 
  2.11  office of their employer, if the activities are incidental to 
  2.12  clerical or administrative duties and the employee's 
  2.13  compensation does not vary with the volume of the applications 
  2.14  or premiums; 
  2.15     (7) rental vehicle companies and their employees in 
  2.16  connection with the offer of rental vehicle personal accident 
  2.17  insurance under section 72A.125; 
  2.18     (8) employees of a retailer who enroll purchasers for 
  2.19  credit insurance associated with a retail purchase; provided the 
  2.20  employees receive no commission, fee, bonus, or other form of 
  2.21  compensation for it; and 
  2.22     (9) representatives of prepaid legal service plans in 
  2.23  connection with the sale and marketing of these plans. 
  2.24     Sec. 2.  Minnesota Statutes 1998, section 65B.49, 
  2.25  subdivision 3, is amended to read: 
  2.26     Subd. 3.  [RESIDUAL LIABILITY INSURANCE.] (1) Each plan of 
  2.27  reparation security shall also contain stated limits of 
  2.28  liability, exclusive of interest and costs, with respect to each 
  2.29  vehicle for which coverage is thereby granted, of not less than 
  2.30  $30,000 because of bodily injury to one person in any one 
  2.31  accident and, subject to said limit for one person, of not less 
  2.32  than $60,000 because of injury to two or more persons in any one 
  2.33  accident, and, if the accident has resulted in injury to or 
  2.34  destruction of property, of not less than $10,000 because of 
  2.35  such injury to or destruction of property of others in any one 
  2.36  accident. 
  3.1      (2) Under residual liability insurance the reparation 
  3.2   obligor shall be liable to pay, on behalf of the insured, sums 
  3.3   which the insured is legally obligated to pay as damages because 
  3.4   of bodily injury and property damage arising out of the 
  3.5   ownership, maintenance or use of a motor vehicle if the injury 
  3.6   or damage occurs within this state, the United States of 
  3.7   America, its territories or possessions, or Canada.  A 
  3.8   reparation obligor shall also be liable to pay sums which 
  3.9   another reparation obligor is entitled to recover under the 
  3.10  indemnity provisions of section 65B.53, subdivision 1. 
  3.11     (3) Every plan of reparation security shall be subject to 
  3.12  the following provisions which need not be contained therein: 
  3.13     (a) The liability of the reparation obligor with respect to 
  3.14  the residual liability coverage required by this clause shall 
  3.15  become absolute whenever injury or damage occurs; such liability 
  3.16  may not be canceled or annulled by any agreement between the 
  3.17  reparation obligor and the insured after the occurrence of the 
  3.18  injury or damage; no statement made by the insured or on the 
  3.19  insured's behalf and no violation of said policy shall defeat or 
  3.20  void said policy. 
  3.21     (b) The satisfaction by the insured of a judgment for such 
  3.22  injury or damage shall not be a condition precedent to the right 
  3.23  or duty of the reparation obligor to make payment on account of 
  3.24  such injury or damage. 
  3.25     (c) The reparation obligor shall have the right to settle 
  3.26  any claim covered by the residual liability insurance policy, 
  3.27  and if such settlement is made in good faith, the amount thereof 
  3.28  shall be deductible from the limits of liability for the 
  3.29  accident out of which such claim arose. 
  3.30     (d) Except as provided in subdivision 5a, a residual 
  3.31  liability insurance policy shall be excess of a nonowned vehicle 
  3.32  policy whether when the nonowned vehicle is borrowed or rented, 
  3.33  or whether used for business or pleasure.  A nonowned vehicle is 
  3.34  one not used or provided on a regular basis.  
  3.35     Sec. 3.  Minnesota Statutes 1998, section 65B.49, 
  3.36  subdivision 5a, is amended to read: 
  4.1      Subd. 5a.  [RENTAL VEHICLES.] (a) Every plan of reparation 
  4.2   security, wherever issued, insuring a natural person as named 
  4.3   insured, covering private passenger vehicles as defined under 
  4.4   section 65B.001, subdivision 3, and pickup trucks and vans as 
  4.5   defined under section 168.011 must:  (1) provide that all of the 
  4.6   obligation for damage and loss of use to a rented private 
  4.7   passenger vehicle, including pickup trucks and vans as defined 
  4.8   under section 168.011, and rented trucks with a registered gross 
  4.9   vehicle weight of 26,000 pounds or less would be covered by the 
  4.10  property damage liability portion of the plan; and (2) extend 
  4.11  that plan's basic economic loss benefits, residual liability 
  4.12  insurance, and uninsured and underinsured motorist coverages to 
  4.13  the operation or use of the rented motor vehicle.  This 
  4.14  subdivision does not apply to plans of reparation security 
  4.15  covering only motor vehicles registered under section 168.10, 
  4.16  subdivision 1a, 1b, 1c, or 1d, or recreational equipment as 
  4.17  defined under section 168.011.  The obligation of the plan for 
  4.18  damage or loss of use to a rented motor vehicle must not be 
  4.19  contingent on fault or negligence.  In all cases where the 
  4.20  plan's property damage liability coverage is less than $35,000, 
  4.21  the coverage available under the subdivision must be $35,000.  
  4.22  Other than as described in this paragraph and paragraph (i), 
  4.23  clause (2), nothing in this section amends or alters the 
  4.24  provisions of the plan of reparation security as to primacy of 
  4.25  the coverages in this section. 
  4.26     (b) A vehicle is rented for purposes of this subdivision: 
  4.27     (1) if the rate for the use of the vehicle is determined on 
  4.28  a monthly, weekly, or daily basis; or 
  4.29     (2) during the time that a vehicle is loaned as a 
  4.30  replacement for a vehicle being serviced or repaired regardless 
  4.31  of whether the customer is charged a fee for the use of the 
  4.32  vehicle. 
  4.33     A vehicle is not rented for the purposes of this 
  4.34  subdivision if the rate for the vehicle's use is determined on a 
  4.35  period longer than one month or if the term of the rental 
  4.36  agreement is longer than one month.  A vehicle is not rented for 
  5.1   purposes of this subdivision if the rental agreement has a 
  5.2   purchase or buyout option or otherwise functions as a substitute 
  5.3   for purchase of the vehicle.  
  5.4      (c) The policy or certificate issued by the plan must 
  5.5   inform the insured of the application of the plan to private 
  5.6   passenger rental vehicles, including pickup trucks and vans as 
  5.7   defined under section 168.011, and that the insured may not need 
  5.8   to purchase additional coverage from the rental company. 
  5.9      (d) Where an insured has two or more vehicles covered by a 
  5.10  plan or plans of reparation security containing the rented motor 
  5.11  vehicle coverage required under paragraph (a), the insured may 
  5.12  select the plan the insured wishes to collect from and that plan 
  5.13  is entitled to a pro rata contribution from the other plan or 
  5.14  plans based upon the property damage limits of liability.  If 
  5.15  the person renting the motor vehicle is also covered by the 
  5.16  person's employer's insurance policy or the employer's 
  5.17  automobile self-insurance plan, the reparation obligor under the 
  5.18  employer's policy or self-insurance plan has primary 
  5.19  responsibility to pay claims arising from use of the rented 
  5.20  vehicle. 
  5.21     (e) A notice advising the insured of rental vehicle 
  5.22  coverage must be given by the reparation obligor to each current 
  5.23  insured with the first renewal notice after January 1, 1989.  
  5.24  The notice must be approved by the commissioner of commerce.  
  5.25  The commissioner may specify the form of the notice.  
  5.26     (f) When a motor vehicle is rented in this state, there 
  5.27  must be attached to the rental contract must contain a separate 
  5.28  form containing a written notice in at least 10-point bold type, 
  5.29  if printed, or in capital letters, if typewritten, which states: 
  5.30     Under Minnesota law, a personal automobile insurance policy 
  5.31     issued in Minnesota must (1) cover the rental of this motor 
  5.32     vehicle against damage to the vehicle and against loss of 
  5.33     use of the vehicle, and (2) must extend that policy's basic 
  5.34     economic loss benefits, residual liability insurance, and 
  5.35     uninsured and underinsured motorist coverages to the 
  5.36     operation or use of a rented motor vehicle.  Therefore, 
  6.1      purchase of any collision damage waiver or similar 
  6.2      insurance affected in this rental contract is not necessary 
  6.3      if your policy was issued in Minnesota.  In addition, 
  6.4      purchase of any additional liability insurance is not 
  6.5      necessary unless you wish to have coverage for liability 
  6.6      that exceeds the amount specified in your personal 
  6.7      automobile insurance policy. 
  6.8   No collision damage waiver or other insurance offered as part of 
  6.9   or in conjunction with a rental of a motor vehicle may be sold 
  6.10  unless the person renting the vehicle provides a written 
  6.11  acknowledgment that the above consumer protection notice has 
  6.12  been read and understood. 
  6.13     (g) When damage to a rented vehicle is covered by a plan of 
  6.14  reparation security as provided under paragraph (a), the rental 
  6.15  contract must state that payment by the reparation obligor 
  6.16  within the time limits of section 72A.201 is acceptable, and 
  6.17  prior payment by the renter is not required. 
  6.18     (h) Compensation for the loss of use of a damaged rented 
  6.19  motor vehicle is limited to a period no longer than 14 days. 
  6.20     (i)(1) For purposes of this paragraph subdivision, "rented 
  6.21  motor vehicle" means a rented vehicle described in paragraph 
  6.22  (a), using the definition of "rented" provided in paragraph (b). 
  6.23     (2) Notwithstanding section 170.54, an owner of a rented 
  6.24  motor vehicle is not vicariously liable for legal damages 
  6.25  resulting from the operation of the rented motor vehicle in an 
  6.26  amount greater than $100,000 because of bodily injury to one 
  6.27  person in any one accident and, subject to the limit for one 
  6.28  person, $300,000 because of injury to two or more persons in any 
  6.29  one accident, and $50,000 because of injury to or destruction of 
  6.30  property of others in any one accident, if the owner of the 
  6.31  rented motor vehicle has in effect, at the time of the accident, 
  6.32  a policy of insurance or self-insurance, as provided in section 
  6.33  65B.48, subdivision 3, covering losses up to at least the 
  6.34  amounts set forth in this paragraph.  Nothing in this paragraph 
  6.35  alters or affects the obligations of an owner of a rented motor 
  6.36  vehicle to comply with the requirements of compulsory insurance 
  7.1   through a policy of insurance as provided in section 65B.48, 
  7.2   subdivision 2, or through self-insurance as provided in section 
  7.3   65B.48, subdivision 3, which policy of insurance or self-insured 
  7.4   plan must apply whenever the operator is not covered by a plan 
  7.5   of reparation security as provided under paragraph (a); or with 
  7.6   the obligations arising from section 72A.125 for products sold 
  7.7   in conjunction with the rental of a motor vehicle.  Nothing in 
  7.8   this paragraph alters or affects liability, other than vicarious 
  7.9   liability, of an owner of a rented motor vehicle. 
  7.10     (3) The dollar amounts stated in this paragraph shall be 
  7.11  adjusted for inflation based upon the consumer price index for 
  7.12  all urban consumers, known as the CPI-U, published by the United 
  7.13  States Bureau of Labor Statistics.  The dollar amounts stated in 
  7.14  this paragraph are based upon the value of that index for July 
  7.15  1995, which is the reference base index for purposes of this 
  7.16  paragraph.  The dollar amounts in this paragraph shall change 
  7.17  effective January 1 of each odd-numbered year based upon the 
  7.18  percentage difference between the index for July of the 
  7.19  preceding year and the reference base index, calculated to the 
  7.20  nearest whole percentage point.  The commissioner shall announce 
  7.21  and publish, on or before September 30 of the preceding year, 
  7.22  the changes in the dollar amounts required by this paragraph to 
  7.23  take effect on January 1 of each odd-numbered year.  The 
  7.24  commissioner shall use the most recent revision of the July 
  7.25  index available as of September 1.  Changes in the dollar 
  7.26  amounts must be in increments of $5,000, and no change shall be 
  7.27  made in a dollar amount until the change in the index requires 
  7.28  at least a $5,000 change.  If the United States Bureau of Labor 
  7.29  Statistics changes the base year upon which the CPI-U is based, 
  7.30  the commissioner shall make the calculations necessary to 
  7.31  convert from the old base year to the new base year.  If the 
  7.32  CPI-U is discontinued, the commissioner shall use the available 
  7.33  index that is most similar to the CPI-U. 
  7.34     Sec. 4.  Minnesota Statutes 1998, section 72A.125, 
  7.35  subdivision 1, is amended to read: 
  7.36     Subdivision 1.  [DEFINITION.] (a) "Auto rental company" 
  8.1   means a corporation, partnership, individual, or other person 
  8.2   that is engaged primarily in the renting of motor vehicles at 
  8.3   per diem rates. 
  8.4      (b) "Rental vehicle personal accident insurance" means 
  8.5   accident only insurance providing accidental death benefits, 
  8.6   dismemberment benefits and/or reimbursement for medical expenses 
  8.7   which is issued by an insurer authorized in this state to issue 
  8.8   accident and health insurance.  These coverages are nonqualified 
  8.9   plans under chapter 62E.  
  8.10     (c) "Liability insurance" means insurance that provides 
  8.11  coverage, as applicable, to renters and other authorized drivers 
  8.12  of rental vehicles for liability arising from the operation of 
  8.13  the rental vehicle.  At the option of the auto rental company, 
  8.14  this coverage may include uninsured or underinsured motorist 
  8.15  coverage whether offered separately or in combination with other 
  8.16  liability insurance. 
  8.17     (d) "Personal effects insurance" means coverage, as 
  8.18  applicable, to renters and other rental vehicle occupants for 
  8.19  the loss of, or damage to, personal effects which occurs during 
  8.20  the rental period. 
  8.21     Sec. 5.  Minnesota Statutes 1998, section 72A.125, 
  8.22  subdivision 2, is amended to read: 
  8.23     Subd. 2.  [SALE BY AUTO RENTAL COMPANIES.] An auto rental 
  8.24  company that offers or sells rental vehicle personal accident 
  8.25  insurance, personal effects insurance, or liability insurance in 
  8.26  this state in conjunction with the rental of a vehicle shall 
  8.27  only sell these products if the forms and rates have met the 
  8.28  relevant requirements of section 61A.02, 62A.02, or other 
  8.29  relevant sections requiring approval of forms and rates taking 
  8.30  into account the possible infrequency and severity of loss that 
  8.31  may be incurred.  Sections 60K.01 to 60K.19 do not apply if the 
  8.32  persons engaged in the sale of these products are employees of 
  8.33  the auto rental company who do not receive commissions or other 
  8.34  remuneration for selling the product in addition to their 
  8.35  regular compensation.  Compensation may not be determined in any 
  8.36  part by the sale of insurance products.  The auto rental company 
  9.1   before engaging in the sale of the product must file with the 
  9.2   commissioner the following documents:  
  9.3      (1) an appointment of the commissioner as agent for service 
  9.4   of process; 
  9.5      (2) an agreement that the auto rental company assumes all 
  9.6   responsibility for the authorized actions of all unlicensed 
  9.7   employees who sell the insurance product on its behalf in 
  9.8   conjunction with the rental of its vehicles; 
  9.9      (3) an agreement that the auto rental company with respect 
  9.10  to itself and its employees will be subject to this chapter 
  9.11  regarding the marketing of the insurance products and the 
  9.12  conduct of those persons involved in the sale of insurance 
  9.13  products in the same manner as if it were a licensed agent. 
  9.14     An auto rental company failing to file the documents in 
  9.15  clauses (1) to (3) is guilty of an individual violation as to 
  9.16  the unlicensed sale of insurance for each sale that occurs after 
  9.17  August 1, 1987, until they make the required filings.  Each 
  9.18  individual sale after August 1, 1987, and prior to the filing 
  9.19  required by this section is subject to, in addition to any other 
  9.20  penalties allowable by law, up to a $200 per violation fine.  
  9.21  Further, the sale of the insurance product by an auto rental 
  9.22  company or any employee or agent of the company after August 1, 
  9.23  1987, without having complied with this section shall be deemed 
  9.24  to be in acceptance of the provisions of this section. 
  9.25     Insurance sold pursuant to this subdivision must be limited 
  9.26  in availability to rental vehicle customers though coverage may 
  9.27  extend to the customer, other drivers, and passengers using or 
  9.28  riding in the rented vehicles; and limited in duration to a 
  9.29  period equal to and concurrent with that of the vehicle rental.  
  9.30     Persons purchasing rental vehicle personal accident 
  9.31  insurance, personal effects insurance, or liability insurance 
  9.32  may be provided a certificate summarizing the policy provisions 
  9.33  in lieu of a copy of the policy if a copy of the policy is 
  9.34  available for inspection at the place of sale and a free copy of 
  9.35  the policy may be obtained from the auto rental company's home 
  9.36  office.  
 10.1      The commissioner may, after a hearing, revoke an auto 
 10.2   rental company's right to operate under this section if the 
 10.3   company has repeatedly violated the insurance laws of this state 
 10.4   and the revocation is in the public interest.