26mar03... 0865h

05/22/03 1625s

24jun03... 2208CofC

2003 SESSION

03-0713

01/09

HOUSE BILL 680-FN

COMMITTEE: Commerce

AMENDED ANALYSIS

This bill establishes a committee to study service contracts including prepaid legal services contracts.

The bill also establishes parameters for prepaid legal service contracts to be sold in this state.

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Explanation: Matter added to current law appears in bold italics.

Matter removed from current law appears [in brackets and struckthrough.]

Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

26mar03... 0865h

05/22/03 1625s

24jun03... 2208CofC

03-0713

01/09

STATE OF NEW HAMPSHIRE

In the Year of Our Lord Two Thousand Three

Be it Enacted by the Senate and House of Representatives in General Court convened:

293:1 Committee Established. There is established a committee to study service contracts, including prepaid legal services contracts.

293:2 Membership and Compensation.

I. The members of the committee shall be as follows:

(a) Three members of the house of representatives, appointed by the speaker of the house.

(b) Three members of the senate, appointed by the president of the senate.

II. Members of the committee shall receive mileage at the legislative rate when attending to the duties of the committee.

293:3 Duties. The committee shall study service contracts, including prepaid legal services contracts.

293:4 Chairperson; Quorum. The members of the study committee shall elect a chairperson from among the members. The first meeting of the committee shall be called by the first-named house member. The first meeting of the committee shall be held within 45 days of the effective date of this section. Four members of the committee shall constitute a quorum.

293:5 Report. The committee shall report its findings and any recommendations for proposed legislation to the speaker of the house of representatives, the senate president, the house clerk, the senate clerk, the governor, and the state library on or before November 1, 2003.

293:6 Reference Deletion. Amend RSA 404-D:3, I to read as follows:

I. This chapter shall apply to direct life insurance policies, health insurance policies, [legal services insurance policies,] annuity contracts, and contracts supplemental to life and health insurance policies and annuity contracts issued by persons authorized to transact insurance in this state at any time. The term health insurance is intended to include "accident and health" insurance, "sickness and accident" insurance, and "disability" insurance [and for the purposes of this chapter shall also include "legal services insurance" as defined by RSA 415-C].

293:7 Insurance; Prepaid Legal Services Contracts. RSA 415-C is repealed and reenacted to read as follows:

CHAPTER 415-C

PREPAID LEGAL SERVICES CONTRACTS

415-C:1 Scope and Purpose. The purpose of this chapter is to create a legal framework within which prepaid legal services contracts may be sold in this state.

415-C:2 Definitions. In this chapter:

I. "Commissioner" means the commissioner of insurance.

II. "Consumer" means a natural person who buys other than for purposes of resale any tangible personal property that is distributed in commerce and that is normally used for personal, family, or household purposes and not for business or research purposes.

III. "Department" means the insurance department.

IV.(a) "Prepaid legal services contract" means the assumption of a contractual obligation to reimburse the beneficiary against or pay on behalf of the beneficiary, or to provide specified legal services or reimbursement for all or a portion of legal fees, costs, and expenses related to or arising out of services provided by or under the supervision of an individual licensed or admitted to practice law in the state of New Hampshire, in which the services are to be rendered, in consideration of a specified payment for an interval of time, regardless of whether the payment is made by the beneficiaries individually or by a third person for them, in such a manner that the total cost incurred by assuming the obligation is to be spread directly or indirectly among a group of persons. "Contractual obligation" includes an arrangement in which those persons for whom services are to be provided under the arrangement have reasonable expectations of enforceable rights.

(b) "Prepaid legal services contract" shall not include the provision of or reimbursement for legal services incidental to insurance coverages. The following are not considered prepaid legal services contracts under the laws of this state:

(1) Retainer contracts made with individual clients with the fees based on estimates of the nature and amount of services that will be provided to the specific client, and similar contracts made with a group of clients involved in the same or closely related legal matters, such as class actions.

(2) Plans providing no benefits other than a limited amount of consultation and advice on simple matters either alone or in combination with referral services or on the promise of fee discounts for other matters.

(3) Plans providing limited benefits on simple legal matters on an informal basis, not involving a legally binding promise, in the context of an employment or educational or similar relationship.

(4) Contracts that provide benefits under automobile club membership contracts and automobile liability insurance policies with limited legal services or reimbursement for legal services in automobile-related matters under the certificates of authority issued by the commissioner.

(5) Legal services or other legal services programs for the indigent.

(6) Legal services provided by unions or employee associations to their members in matters relating to employment or occupation.

(7) Legal services provided by an agency of the federal or state government or subdivision thereof to its employees or are otherwise excluded from the provisions of this chapter by the Federal Retirement Income Security Act of 1974, or any amendments thereto.

415-C:3 Requirements For Doing Business. No later than June 14 of each year, each provider of prepaid legal service contracts sold in this state shall file a registration with the commissioner. For the initial registration, the provider shall use a form prescribed by the commissioner and pay to the department an initial registration fee pursuant to RSA 400-A:29, VIII-a. Renewal shall be made by paying an annual renewal fee pursuant to RSA 400-A:29, VIII-a(b) and supplementing the original form to the extent of any material change to the registration.

415-C:4 Exemptions. Prepaid legal service contracts are exempt from this title, except for the provisions of this chapter and RSA 400-A:16 - RSA 400-A:25.

415-C:5 Required Disclosures. Prepaid legal service contracts marketed, sold, or offered for sale, issued, made, proposed to be made or administered in this state shall be written in clear, understandable language, and specify the terms under which the service contract is sold, the specific services to be provided and any limitations, exceptions or exclusions thereon.

415-C:6 Examination. For the purpose of determining the provider's financial stability and protecting consumer interests, the commissioner shall have the power to examine and investigate into the affairs of every provider engaged in the business of service contracts in this state in order to determine compliance or noncompliance with this chapter. The expenses of examinations shall be paid to the state by the company or companies examined.

415-C:7 Penalties. The commissioner, after proper notice and opportunity for hearing, may take action to enforce the provisions of this chapter, or rules adopted pursuant to this chapter, and may:

I. Revoke or suspend the registration of the prepaid legal service provider;

II. Order the provider to cease and desist from further service contract operations;

III. Impose a penalty of not more than $1,000 for each violation or $10,000 for each violation the commissioner finds to be willful; and

IV. Order the provider make restitution to contract holders.

415-C:8 Rulemaking Authority. The commissioner may adopt rules, pursuant to RSA 541-A, as may be necessary to administer the provisions of this chapter.

415-C:9 Severability. If any provision of this chapter or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this chapter which can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.

293:8 New Paragraph; Prepaid Legal Services. Amend RSA 400-A:29 by inserting after paragraph VIII the following new paragraph:

VIII-a. Prepaid Legal Services

(a) Application fee $300

(b) Annual renewal $150

293:9 Repeal. The following are repealed:

I. RSA 415-C, relative to prepaid legal services contracts.

II. RSA 400-A:29, VIII-a, relative to prepaid legal services.

293:10 Effective Date.

I. Section 9 shall take effect September 30, 2004.

II. The remainder of this act shall take effect upon its passage.

(Approved: July 18, 2003)

(Effective Date: I. Section 9 shall take effect September 30, 2004.