lienholder status
HB 2073 requires an insured or claimant to provide information regarding the existence of a lien or encumbrance on a vehicle when making an insurance claim. A claim shall not be made until satisfactory evidence of a lien is provided to the insurer. The bill contains payment options for an insurer making claims on leased vehicles or vehicles with liens.
A strike-everything amendment on the same
subject will be offered in the Committee on Financial Institutions and
Insurance.
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. HB 2073 requires an insured or claimant to provide information regarding the existence of a lien or encumbrance on a vehicle when making an insurance claim. A claim shall not be made until satisfactory evidence of the lien is provided to the insurer. The legislation also provides payment options for insurers making claims on leased vehicles or vehicles with liens.
Provisions
· Requires an insured or claimant to provide infomration as part of the proof of loss concerning the existence of any lien or encumbrance person purchasing comprehensive or collision coverage to provide the insurer the lienholder status of the vehicle.
· Allows an applicant to provide the insurer with the vehicle title to be in compliance with the proof requirement.
· Requires an insurer to notify the lienholder of an accident, damages to the vehicle and payment amount at the time the claim is paid.
· 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.
HB 2571 passed in the Retirement and Government Operations Committee with the following changes:
· 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.
· States that an insurer is in compliance with the notice requirement prescribed in the bill if the insurer does one of the following:
1) Issues a release of claims in the names of both the insured/claimant and lienholder;
2) Makes the proceeds payable to the repair facility after the insurer has verified that the vehicle has been repaired;
3) Makes the proceeds available to the vehicle owner so long as the amount does not exceed the collision deductible under the owner’s policy;
4) Makes the proceeds payable to another insurer to satisfy a right of subrogation.
· States that the bill only applies to lienholders residing in Arizona.