ARIZONA STATE SENATE
motor vehicle
insurers; lienholder status
Requires an insurer to obtain the lienholder status of the vehicle in which an applicant purchases collision or comprehensive coverage.
History
Arizona statutes are silent regarding third party payors (e.g. insurance companies) when there is damage to a motor vehicle caused by the negligence of another person. The provisions of the vehicle owner’s policy, and the claims handling practices of the insurer dictate the manner in which payment is made, and to whom payment is made. When the vehicle is a total loss, the payment is made jointly to the lienholder and vehicle owner, protecting the interests of the lienholder. However, when the vehicle sustains damage that does not amount to a total loss, in third-party situations, the insurance company sometimes makes payment directly to the vehicle owner. If the motor vehicle owner does not make the necessary repairs and then defaults on the loan, the lienholder may incur the ultimate loss.
Under H.B. 2571 it is the applicant’s responsibility to provide proof of the existence or non-existence of a lienholder. In the event of an accident where the insurer pays for the insured’s or claimant’s vehicle repairs, the insurer is required to notify the lienholder of the accident and issue the check in the names of both the insured/claimant and lienholder.
According to the Department of Insurance staff, there is not a fiscal impact to the general fund associated with this bill.
1. Requires a person purchasing comprehensive or collision coverage to provide the insurer with proof of the lienholder status of the vehicle.
2. Allows an applicant to provide the vehicle title to be in compliance with the proof requirement.
3. Requires the insurance provider give notice to the lien holder of any accidents, damage to the vehicle and the amount of payment by any of the following:
a. Issuing a release of claims in the names of both the insured/claimant and lienholder;
b. Making the proceeds payable to the repair facility after the insurer has verified that the vehicle has been repaired;
c. Making the proceeds available to the vehicle owner so long as the amount does not exceed the collision deductible under the owner’s policy;
d. Making the proceeds payable to another insurer to satisfy a right of subrogation.
4. Requires an insurer to notify the lienholder of an accident, damages to the vehicle and payment amount at the time the claim is paid.
5. Establishes that an insurer is in compliance with the notice requirement if the insurer issues a release of claims or a check in the names of both the insured/claimant and lienholder.
6. Requires a claimant who files a claim for property damage on a motor vehicle to provide the lienholder status of the claimant’s vehicle to the insurer.
7. States that the bill only applies to lienholders residing in Arizona.
8. Provides for a general effective date.
3rd Read 03/22/01 DPA 33–20–7–0
Prepared by Senate Staff
April 3, 2001