CHAPTER 406
FORMERLY
SENATE BILL NO. 437
AS AMENDED BY HOUSE AMENDMENT NO. 1
AN ACT TO AMEND TITLE 18, DELAWARE CODE, RELATING TO INSURANCE PREMIUM FINANCING.
Be it enacted by the General Assembly of the State of Delaware:
Section 1. Amend Title 18, Delaware Code, by ad-
ding thereto a new Chapter to be designated as Chapter 48 which new Chapter shall read as follows:
"CHAPTER 48. INSURANCE PREMIUM FINANCING
§4801. Definitions.
As used in this Chapter, unless the context otherwise requires:
(1) "Premium Finance Agreement" means an agreement by which an insured or prospective insured promises to pay to an insurance premium financing company the amount advanced or to be advanced under the agreement to an insurer or to an insurance agent or broker in payment of premiums on an insurance contract together with a service charge as authorized and limited by this Chapter.
(2) "Insurance Premium Finance Company" means a person engaged in the business of entering into premium finance agreements or otherwise financing the payment of insurance premiums.
holding a license issued by the Commissioner under this Chapter.
(4) "Commissioner" means the Insurance Commissioner.
§4802. License Required of Insurance Premium Finance Companies.
(a) No person shall engage in the business of financing insurance premiums in this State without first having obtained a license as a premium finance company from the Commissioner, unless such person is exempted from obtaining such a license pursuant to §4810 of this Chapter. The fee for such a license shall be the sum of $300 per year which license shall be valid until the 1st day of January at which time it may be renewed for a full year and every year thereafter provided that the licensee shall have paid the said annual license fee of $300 and shall otherwise qualify for a license hereunder. All fees for licenses hereunder shall be paid to the Commissioner.
(b) All licensees or persons applying for licenses shall file sworn answers to such questions as the Commissioner may deem appropriate. The Commissioner shall have authority at any time to require the applicant to fully disclose the identity of all stockholders, partners, officers and employees and he may in his discretion refuse to issue or renew a license in the name of any firm, partnership or corporation so long as he remains satisfied that any officer, employee, stockholder or partner thereof who may materially influence the applicant's conduct fails to meet the standards of this Chapter.
§4803. Action By Commissioner on Application.
(a) Upon the filing of an application and the payment of the license fee the Commissioner shall make an investigation of each applicant and shall issue a license if the applicant is
qualified in accordance with this Chapter. If the Commissioner does not so find, he shall, within 30 days after he has received such application, if so requested by the applicant, give the applicant a full hearing on its application.
(b) The Commissioner shall issue or renew a license as may be applied for when he is satisfied that the person to be licensed -
(1) is competent and trustworthy and intends to act in good faith in the capacity required by the license applied for;
(2) has a good business reputation and has sufficient experience, training or education to be qualified in the business represented by the license applied for;
(0) if a corporation, is a corporation incorporated under the laws of the State of Delaware or is a foreign corporation authorized to transact business in the State of Delaware; and
(1) has the necessary financial resources available to enter in the business for which he is asking to be licensed or as to which he is requesting renewal of his license.
§4804. Revocation and Suspension of Licenses.
(a) The Commissioner may revoke or suspend the license of any premium finance company when and if, after investigation, it appears to the Commissioner that:
(1) any license issued to such company was obtained by fraud;
(2) there was any material misrepresentation in the application for the license;
himself untrustworthy or incompetent to act as a premium finance company; or,
(4) such company has violated any of the provisions of this subchapter.
(b) Before the Commissioner shall revoke, suspend or refuse to renew the license of any premium finance company, he shall give to such person an opportunity to be fully heard and to introduce evidence in his behalf and, in lieu of revoking or suspending his license for any of the causes enumerated in this section, after hearing as herein provided, the Commissioner may, for each of the first and second such offenses, subject such company to administration penalty of not less than $25 nor more than $500 for each such offense when in his judgment he finds that the public interest would not be harmed by the continued operation of such company. The amount of any such administrative penalty shall be paid by such company to the Commissioner within 30 days of the date such a penalty is levied.
() If the Commissioner refused to issue or renew any license or if the applicant or licensee is aggrieved by any action of the Commissioner, such applicant or licensee shall have the same right to a hearing and appeal as provided for other aggrieved parties in Title 18 of the Delaware Code.
(a) At any hearing provided for by this Chapter the Commissioner shall have all such authority as he otherwise has under Title 18 to conduct hearings.
§4805. Books and Records.
(a) Every licensee shall maintain records of its premium finance transactions and the said records shall be open to examination and investigation by the Commissioner. The Commissioner may at any time require any licensee to bring such records as he may direct to the Commissioner's office for examination provided that this can be done without causing that licensee undue hardship and further provided that the Commissioner shall give reasonable notice for the bringing of such records to his office for examination.
(b) Every licensee shall preserve its records of such premium finance transactions, including cards used in any card system, for at least three years after making the final entry in respect to any premium finance agreement. The preservation of records in photographic form shall constitute compliance with this requirement.
§4806. Form of Premium Finance Agreement. (a) A premium finance agreement shall -
(1) be dated, signed by or on behalf of the insured, and the printed portion thereof shall be in at least eight-point type;
(2) contain the name and place of business of the insurance agent negotiating the related insurance contract, the name and residence or the place of business of the insured as specified by him, the name and place of business of the premium finance company to which payments are to be made, a description of the insurance contracts involved and the amount of the premium therefor; and,
(3) set forth the following items where applicable:
(A) the total amount of the premiums,
(B) the amount of the downpayment,
(C) the principal balance (the difference between items (A) and (B) ),
(D) the amount of the service charge,
(E) the balance payable by the insured (sum of items (C) and (D), and
(F) the number of installments required, the amount of each installment, expressed in dollars, and the due date or period thereof.
(b) The items set out in clause (3) of subsection (a) need not be stated in the sequence or order in which they appear in such clause, and additional items may be included to explain the computations made in determining the amount to be paid by the insured.
§4807. Maximum Service Charge.
(a) A premium finance company shall not charge, contract for, receive, or collect a service charge other than as permitted by this Chapter.
(b) The service charge is to be computed on the balance of the premiums due, after subtracting the down payment made by the insured in accordance with the premium finance agreement, from the effective date of the insurance coverage for which the premiums are being advanced to and including the date when the final installment is payable under the premium finance agreement.
() The maximum service charge permissible shall be $9 per $100 per year plus an additional non-refundable initial charge of $10 per premium finance contract and the said maximum service charge shall include any interest charged on such loans within the limitations thereon stated above. Any service charge, including interest, which exceeds the said permissible maximum rate limitation, shall be considered usurious and any person paying such usurious rate shall be entitled to all the remedies permitted under 6 Del.C. §2304 for recovery of funds in an usurious loan.
(a) Notwithstanding any provisions to the contrary
within any premium finance agreements, any insured may prepay his obligations under any such agreement in full at any time. In such event he shall receive a refund credit. The amount of such refund credit shall represent at least as great a proportion of the service charge as the sum of the periodic balances after the month in which prepayment is made bears to the sum of all periodic balances under the schedule of installments in the agreement. Where the amount of the refund credit is less than $1, no refund need be made. If in addition to the service charge an additional initial non-refundable charge as permitted in subparagraph (c) above, was imposed, such additional charge need not be refunded nor taken into consideration in computing the refund credit.
(e) No premium finance company shall induce an insured to become obligated under more than one (1) premium finance agreement for the purpose of obtaining more than one (1) additional non-refundable initial charge.
§4808. Delinquencies and Cancellation Charges.
A premium finance agreement may provide for the payment by the insured of a delinquency charge per installment of at least $1 but which may not exceed a maximum charge of 5% of the delinquent installment of $5, whichever is less, for each installment which is in default for a period of 10 days or more. And if the default results in the cancellation of any insurance contract listed in the agreement, the agreement may provide for the payment by the insured of a cancellation charge equal to the difference between any delinquency charge imposed in respect to the installment in default as permitted hereinabove and the sum of $5.
§4809. Cancellation of Insurance Contract Upon Default.
(a) When in connection with a premium finance agreement, a power of attorney or other authority to cancel any insurance contract or contracts on behalf of the insured is given to a premium finance company, such insurance contract or contracts may not be cancelled by the premium finance company unless such cancellation is effectuated in accordance with this section; provided, however, that cancellation of automobile casualty insurance contracts pursuant to this section may be made only in a manner which is consistent with 18 Del. C. Chapter 39 and the method of such cancellation shall be consistent with the time periods and be subject to the rights of reinstatement provided in that Chapter for cancellation on the basis of nonpayment of premium.
(b) Not less than 10 days written notice shall be mailed to the insured at the insured's last known address of the intent of the premium finance company to cancel the insurance contract unless a default is cured within such 10 day period.
(c) After the expiration of such 10 day period, the premium finance company may thereafter cancel in the name of the insured such insurance contract or contracts by mailing to the insurer a notice of cancellation and the insurance contract shall be cancelled as if notice of cancellation had been submitted by the insured himself but without requiring the return of the insurance contract or contracts. The premium finance company shall also mail notice of cancellation to insured at the insured's last known address.
() No policy may be cancelled by a premium finance company solely because of nonpayment of a delinquency or collection charge provided for in this Chapter has not been paid.
() All statutory, regulatory and contractual restrictions providing that the insurance contract may not be cancelled unless notice is given to a government agency, mortgagee or other third party shall apply where cancellation is effected under the provisions of this Section. The insurer, in accordance with the said prescribed notice, any time it is required to give such notice on behalf of itself or the insured,
shall give notice to such governmental agency, mortgagee or other person before the end of the second business day after the day it receives the notice of cancellation from the premium finance company and shall determine the effective date of cancellation, taking into consideration the number of days notice required to complete the cancellation.
(f) Whenever an insurance contract is cancelled in accordance with this section, the insurer shall return whatever gross unearned premiums are due under the contract to the premium finance company effecting the cancellation for the account of the insured or insureds as soon as reasonably possible, but in no event shall the period for such payment exceed 90 days after the effective date of the cancellation.
(a) The provisions of this Chapter relating to licensing, the filing of reports and the keeping of books and records shall not apply with respect to:
(1) insurers, agents or brokers otherwise licensed by the Commissioner and who engage in the business of financing insurance premiums or any subsidiaries owned or controlled, directly or indirectly, by such insurere; and
(2) any bank, savings bank, trust company, savings and loan association, credit union, industrial finance company or other such entity regulated pursuant to the laws of the State of Delaware or of the United States; provided, however, that all other provisions of this Chapter shall apply to all such insitutitions or persons who engage in the business of financing insurance premiums in the State of Delaware.
(b) Notwithstanding paragraph (a) of this section, the provisions of this Chapter shall not apply with respect to the inclusion or deduction of a charge for insurance made pursuant to any other law of this State expressly or impliedly authorizing the financing of insurance premiums in connec-
tion with loan transactions or the financing of goods or services or both goods and services, including, but not limited to charges for premiums for either or both credit life insurance and credit accident or health insurance.
(a) No filing of the premium finance agreement shall be necessary to perfect the security interest of the premium finance company as against creditors, subsequent purchasers, pledgees, and other such parties, their successors or assigns.
(b) Notwithstanding Title 30, all institutions licensed in accordance with this Chapter shall be exempt from all other occupational and use taxes levied by the State of Delaware.
The Commissioner shall have authority to make and enforce such reasonable rules and regulations as may be necessary in making effective the provisions of this Chapter but such rules and regulations shall not be contrary to nor inconsistent with the provisions of this Chapter."
(a) This Act shall become effective on September 30, 1976 and its provisions shall apply only to insurance premium financing agreements or transactions entered into after that date.
(b) All licensees will be required to obtain an interim license by that date, the fee for which will be one-quarter of the annual fee required by this Act and which interim license will expire December 31, 1976