§ 4101. Purpose
The purpose of this chapter is to promote the public welfare by regulating credit
life insurance and credit accident and health insurance. Nothing in this chapter
is intended to prohibit or discourage reasonable competition. The provisions of this
chapter shall be liberally construed. (Added 1959, No. 221, § 1.)
§ 4102. Scope
All life insurance and all accident and health insurance sold in connection with loans
or other credit transactions shall be subject to the provisions of this chapter, except
such insurance sold in connection with a real estate first mortgage loan, or where
the issuance of that insurance is an isolated transaction on the part of the insurer
not related to an agreement or a plan for insuring debtors of the creditor. (Added 1959, No. 221, § 2(A); amended 1967, No. 58, § 1.)
§ 4103. Definitions
As used in this chapter:
(1) “Credit life insurance” means insurance on the life of a debtor pursuant to or in
connection with a specific loan or other credit transaction.
(2) “Credit accident and health insurance” means insurance on a debtor to provide indemnity
for payments becoming due on a specific loan or other credit transaction while the
debtor is disabled as defined in the policy.
(3) “Creditor” means the lender of money or vendor or lessor of goods, services, property,
right, or privileges, for which payment is arranged through a credit transaction or
any successor to the right, title, or interest of any such lender, vendor, or lessor,
and an affiliate, associate, or subsidiary of any of them or any director, officer,
or employee of any of them or any other person in any way associated with any of them.
(4) “Debtor” means a borrower of money or a purchaser or lessee of goods, services, property,
rights, or privileges for which payment is arranged through a credit transaction.
“Indebtedness” means the total amount payable by a debtor to a creditor in connection
with a loan or other transaction.
(5) “Commissioner” means the Commissioner of Financial Regulation. (Added 1959, No. 221, § 2(B); amended 1989, No. 225 (Adj. Sess.), § 25(b); 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)
§ 4104. Forms and plans
Credit life insurance and credit accident and health insurance shall be issued only
in the following forms:
(1) individual policies of life insurance issued to debtors on the term plan;
(2) individual policies of accident and health insurance issued to debtors on a term plan
or disability benefit provisions in individual policies of credit life insurance;
(3) group policies of life insurance issued to creditors providing insurance upon the
lives of debtors on the term plan; or
(4) group policies of accident and health insurance issued to creditors on a term plan
insuring debtors or disability benefit provisions in group credit life insurance policies
to provide such coverage. (Added 1959, No. 221, § 3.)
§ 4105. Amount of insurance
(a) Credit life insurance. The amount of credit life insurance shall not exceed the initial indebtedness. Where
an indebtedness repayable in substantially equal installments is secured by an individual
policy of credit life insurance the amount of insurance shall at no time exceed the
scheduled amount of indebtedness and, where secured by a group policy of credit life
insurance shall at no time exceed the amount of unpaid indebtedness. Notwithstanding
the provisions of this subsection, agricultural loans not exceeding one year may be
written up to the amount of the loan commitment on a nondecreasing or level term plan.
(b) Credit accident and health insurance. The amount of periodic indemnity payable by credit accident and health insurance in
the event of disability, as defined in the policy, shall not exceed the aggregate
of the periodic scheduled unpaid installments of indebtedness and shall not exceed
the original indebtedness divided by the number of periodic installments. (Added 1959, No. 221, § 4.)
§ 4106. Term
The term of any credit life insurance or credit accident and health insurance shall,
subject to acceptance by the insurer, commence on the date when the debtor becomes
obligated to the creditor, except that, where a group policy provides coverage with
respect to existing obligations, the insurance on a debtor with respect to such indebtedness
shall commence on the effective date of the policy. The term of such insurance shall
not extend more than 15 days beyond the scheduled maturity date of the indebtedness
except when extended without additional cost to the debtor. If the indebtedness is
discharged due to renewal or refinancing prior to the scheduled maturity date, the
insurance in force shall be terminated before any new insurance may be issued in connection
with the renewed or refinanced indebtedness. In all cases of termination prior to
scheduled maturity, a refund shall be paid or credited as provided in section 4109 of this title. (Added 1959, No. 221, § 5.)
§ 4107. Provisions of policies and certificates; disclosure to debtors
(a) All credit life insurance and credit accident and health insurance sold shall be evidenced
by an individual policy, or in the case of group insurance by a certificate of insurance,
which individual policy or group certificate of insurance shall be delivered to the
debtor.
(b) Each individual policy or group certificate of credit life insurance or credit accident
and health insurance shall, in addition to other requirements of law, set forth the
name and home office address of the insurer, the name or names of the debtor, the
premium or amount of payment, if any, by the debtor separately for credit life insurance
and credit accident and health insurance, a description of the coverage including
the amount and term thereof, and any exceptions, limitations, or restrictions, and
shall state that the benefits shall be paid to the creditor to reduce or extinguish
the unpaid indebtedness and, wherever the amount of insurance may exceed the unpaid
indebtedness, that any such excess shall be payable to a beneficiary, other than the
creditor, named by the debtor or to his or her estate.
(c) Said individual policy or group certificate of insurance shall be delivered to the
insured debtor at the time the indebtedness is incurred except as hereinafter provided.
(d) If said individual policy or group certificate of insurance is not delivered to the
debtor at the time the indebtedness is incurred, a copy of the application for such
policy or a notice of proposed insurance, signed by the debtor and setting forth the
name and home office address of the insurer, the name or names of the debtor, the
premium or amount of payment by the debtor, if any, separately for credit life insurance
and credit accident and health insurance, the amount, term, and a brief description
of the coverage provided, shall be delivered to the debtor at the time such indebtedness
is incurred. The copy of the application for, or notice of, proposed insurance shall
refer exclusively to insurance coverage and shall be separate and apart from the loan,
sale, or other credit statement of account, instrument, or agreement, unless the information
required by this subsection is prominently set forth therein. Upon acceptance of
the insurance by the insurer and within 30 days of the date upon which the indebtedness
is incurred, the insurer shall cause the individual policy or group certificate of
insurance to be delivered to the debtor. Said application or notice of proposed insurance
shall state that upon acceptance by the insurer, the insurance shall become effective
as of the date the indebtedness is incurred. (Added 1959, No. 221, § 6.)
§ 4108. Filing, approval, and withdrawal of forms
(a) All forms of policies or contracts, certificates of insurance, notices of proposed
insurance, applications for insurance, endorsements, and riders shall be filed with
the Commissioner for approval prior to issuance or use by the insurer. Each such filing
shall be accompanied by a payment to the Commissioner of a nonrefundable fee of $50.00
per filing submission.
(b) The Commissioner shall, within 30 days after the filing of any such policies, certificates
of insurance, notices of proposed insurance, applications for insurance, endorsements,
and riders, disapprove any such form if the benefits provided therein are not reasonable
in relation to the premium charge, or if it contains provisions that are unjust, unfair,
inequitable, misleading, deceptive, or encourage misrepresentation of the coverage,
or are contrary to any provision of the insurance law or of any rule or regulation
promulgated thereunder.
(c) If the Commissioner notifies the insurer that the form is disapproved, it is unlawful
thereafter for such insurer to issue or use such form. In such notice, the Commissioner
shall specify the reason for his or her disapproval and state that a hearing will
be granted within 20 days after request in writing by the insurer. No such policy,
certificate of insurance, notice of proposed insurance, nor any application, endorsement,
or rider, shall be issued or used until the expiration of 30 days after it has been
so filed, unless the Commissioner shall give his or her prior written approval thereto.
(d) The Commissioner may, at any time after a hearing held not less than 20 days after
written notice to the insurer, withdraw his or her approval of any such form on any
ground set forth in subsection (b) above. The written notice of such hearing shall
state the reason for the proposed withdrawal.
(e) It is not lawful for the insurer to issue such forms or use them after the effective
date of such withdrawal.
(f) Any order or final determination of the Commissioner under the provisions of this
section shall be subject to judicial review. (Added 1959, No. 221, § 7; amended 1985, No. 236 (Adj. Sess.), § 7; 1991, No. 166 (Adj. Sess.), § 3.)
§ 4109. Premiums and refunds
(a) Each insurer issuing credit life insurance or credit accident and health insurance
shall file with the Commissioner its schedules of premium rates for use in connection
with such insurance. Any insurer may revise such schedules from time to time, and
shall file such revised schedules with the Commissioner. No insurer shall issue any
credit life insurance policy or credit accident and health insurance policy for which
the premium rate exceeds that determined by the schedules of such insurer as then
on file with the Commissioner. The Commissioner may require the filing of the schedule
of premium rates for use in connection with and as a part of the specific policy filings
as provided by section 4108 of this title. Each such filing shall be accompanied by payment to the Commissioner of a nonrefundable
fee of $50.00 per schedule of premium rates.
(b) Each individual policy, group certificate, or notice of proposed insurance shall provide
that in the event of termination of the insurance prior to the scheduled maturity
date of the indebtedness, any refund of an amount paid by the debtor for insurance
shall be paid or credited promptly to the person entitled thereto; provided, however,
that the Commissioner shall prescribe a minimum refund and no refund that would be
less than such minimum need be made. The formula to be used in computing such refund
shall be filed with and approved by the Commissioner.
(c) If a creditor requires a debtor to make any payment for credit life insurance or credit
accident and health insurance and an individual policy or group certificate of insurance
is not issued, the creditor shall immediately give written notice to such debtor and
shall promptly make an appropriate credit to the amount.
(d) The amount charged by the creditor to the debtor for any credit life or credit health
and accident insurance shall not exceed the premiums charged by the insurer, as computed
at the time the charge to the debtor is determined.
(e) Nothing in this chapter shall be construed to authorize any payments for insurance
prohibited under any statute or rule governing credit transactions. However, in the
case of a debtor under chapter 73 of this title, the collection of identifiable charges
for group credit life insurance by the creditor shall not be deemed as a violation
of said chapter if the transaction complies with this chapter and the payment of such
identifiable charge is optional with the debtor. (Added 1959, No. 221, § 8; amended 1961, No. 195, § 2, eff. July 5, 1961; 1985, No. 236 (Adj. Sess.), § 8; 1991, No. 166 (Adj. Sess.), § 4.)
§ 4110. Issuance of policies
All policies of credit life insurance and credit accident and health insurance shall
be delivered or issued for delivery in this State only by an insurer authorized to
do an insurance business therein, and shall be issued only through holders of licenses
or authorizations issued by the Commissioner. (Added 1959, No. 221, § 9.)
§ 4111. Claims
(a) All claims shall be promptly reported to the insurer or its designated claim representative
and the insurer shall maintain adequate claim files. All claims shall be settled
as soon as possible and in accordance with the terms of the insurance contract.
(b) All claims shall be paid either by draft drawn upon the insurer or by check of the
insurer to the order of the claimant to whom payment of the claim is due pursuant
to the policy provisions, or upon directions of such claimant to one specified.
(c) No plan or arrangement shall be used whereby any person, firm, or corporation other
than the insurer or its designated claim representative shall be authorized to settle
or adjust claims. The creditor shall not be designated as claim representative for
the insurer in adjusting claims; provided that a group policyholder may, by arrangement
with the group insurer, draw drafts or checks in payment of claims due to the group
policyholder subject to audit and review by the insurer. (Added 1959, No. 221, § 10.)
§ 4112. Existing insurance; choice of insurer
When credit life insurance or credit accident and health insurance is required as
additional security for any indebtedness, the debtor shall, upon request to the creditor,
have the option of furnishing the required amount of insurance through existing policies
of insurance owned or controlled by him or her or of procuring and furnishing the
required coverage through any insurer authorized to transact an insurance business
within this State. (Added 1959, No. 221, § 11.)
§ 4113. Enforcement
The Commissioner may, after notice and hearing, issue such rules and regulations as
he or she deems appropriate for the supervision of this chapter. Whenever the Commissioner
finds that there has been a violation of this chapter or any rules or regulations
issued pursuant thereto, and after written notice thereof and hearing given to the
insurer or other person authorized or licensed by the Commissioner, he or she shall
set forth the details of his or her findings together with an order for compliance
by a specified date. Such order shall be binding on the insurer and other person
authorized or licensed by the Commissioner on the date specified unless sooner withdrawn
by the Commissioner or a stay thereof has been ordered by a court of competent jurisdiction. (Added 1959, No. 221, § 12.)
§ 4114. Judicial review
Any party to the proceeding affected by an order of the Commissioner shall be entitled
to judicial review in the Supreme Court. (Added 1959, No. 221, § 13; amended 1995, No. 167 (Adj. Sess.), § 11; 1997, No. 161 (Adj. Sess.), § 6, eff. Jan. 1, 1998.)
§ 4115. Penalties
In addition to any other penalty provided by law, any person who violates an order
of the Commissioner after it has become final, and while such order is in effect,
shall forfeit and pay to the State of Vermont an administrative penalty not to exceed
$1,000.00, except that if such violation is found to be willful, the amount of such
penalty shall be a sum not to exceed $5,000.00. The Commissioner, in his or her discretion,
may revoke or suspend the license or certificate of authority of the person guilty
of such violation. Such order for suspension or revocation shall be upon notice and
hearing and shall be subject to judicial review as provided in section 4114 of this title. (Added 1959, No. 221, § 14; amended 1995, No. 167 (Adj. Sess.), § 10.)