1998 Regular Session
To: Insurance; Judiciary
By: Senator(s) Kirby, Stogner
Senate Bill 2325
AN ACT TO CREATE THE MISSISSIPPI COLLATERAL PROTECTION INSURANCE ACT; TO AUTHORIZE THE PURCHASE OF CREDITOR-PLACED INSURANCE BY A SECURED CREDITOR WHEN THE BORROWER EITHER FAILS TO MAINTAIN REQUIRED INSURANCE ON THE SECURED COLLATERAL OR FAILS TO PROVIDE A CREDITOR WITH EVIDENCE OF INSURANCE COVERAGE ON THE COLLATERAL; TO PROVIDE NOTICE REQUIREMENTS TO BE GIVEN TO THE BORROWER; TO PROVIDE THAT THIS ACT DOES NOT CREATE A FIDUCIARY RELATIONSHIP BETWEEN THE CREDITOR AND THE DEBTOR OR ANY OTHER PERSON; TO AMEND SECTION 63-19-33, MISSISSIPPI CODE OF 1972, TO CLARIFY THAT THE PLACEMENT OF CREDITOR-PLACED INSURANCE SHALL BE GOVERNED BY CERTAIN PROVISIONS OF THIS ACT; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. This act shall be known and may be cited as the "Mississippi Collateral Protection Insurance Act."
SECTION 2. When a debtor fails to maintain required property insurance or fails to provide his creditor with timely notice of the purchase or renewal of such insurance coverage, the creditor may, after notice to the debtor and expiration of a fifteen-day curative period from the mailing of such notice, purchase insurance on the customer's property sufficient to protect the creditor's interest in the property. Such insurance premiums along with the administrative fees for obtaining such insurance may be added to the outstanding balance of the debtor's indebtedness and made subject to additional loan finance charges or credit service charges at the rate previously agreed to by the debtor. For the debtor to be liable for the purchase of creditor-placed insurance, the loan agreement covering the secured collateral must state that such insurance is to be purchased at the expense of the debtor.
SECTION 3. Notice to the debtor is deemed sufficient by mailing to the debtor's most recent address on file with the creditor, by United States mail, first class, postage prepaid, a letter indicating that pursuant to the loan agreement, creditor-placed insurance will be purchased after the expiration of fifteen (15) days from the mailing of the notice, unless the debtor shows proof of insurance coverage on the secured collateral. The notice must also inform the debtor that pursuant to the loan agreement, the insurance premium and administrative fees incurred in purchasing the insurance will be added to the outstanding balance of the debtor's indebtedness and made subject to additional loan finance charges or credit service charges at the rate previously agreed to by the debtor. The notice should also inform the debtor that the creditor is under no duty to purchase the least expensive insurance, nor is the creditor under a duty to purchase any insurance at all but may, at the creditor's option, purchase insurance from any insurance salesperson licensed to sell insurance in the State of Mississippi in order to protect the creditor's interest in the secured collateral.
SECTION 4. Within fifteen (15) days following the purchase of creditor-placed insurance, the creditor shall mail to the debtor at the debtor's most recent address on file with the creditor, by United States mail, first class, postage prepaid, a notice informing the debtor that creditor-placed insurance has been purchased for the collateral. The notice must contain an itemized statement showing the cost of the insurance, administrative fees, and any additional finance charges the borrower will incur as a result of the creditor-placed insurance. The notice shall also inform the debtor of his right to cancel the remaining term of the creditor-placed insurance by showing proof to the creditor of insurance on the collateral sufficient to protect the creditor's interest in the collateral, and that upon such a showing the debtor shall be entitled to a credit in the amount of the unearned premium charged to him.
SECTION 5. This act does not create a fiduciary relationship between the creditor and the debtor or any other person. The purchase of creditor-placed insurance is for the purpose of giving the creditor the option, but not the obligation, to protect its interest by insuring the collateral when the debtor fails to provide evidence of insurance covering the collateral although required to do so by the credit agreement.
SECTION 6. Section 63-19-33, Mississippi Code of 1972, is amended as follows:
63-19-33. (1) The amount, if any, included in a retail installment contract for insurance, which may be purchased by the holder of the retail installment contract, shall not exceed the applicable premiums chargeable in accordance with the rates filed with the state insurance commission. If dual interest insurance on the motor vehicle is purchased by the holder it shall, within thirty (30) days after execution of the retail installment contract, send or cause to be sent to the buyer a policy or policies or certificates of insurance, written by an insurance company authorized to do business in this state, clearly setting forth the amount of the premium, the kind or kinds of insurance, the coverages and all the terms, exceptions, limitations, restrictions and conditions of the contract or contracts of insurance. The buyer shall have the privilege of purchasing such insurance from an agent or broker of his own selection; in such case, however, the inclusion of the insurance premium in the retail installment contract shall be optional with the seller.
No holder shall unreasonably or arbitrarily refuse to accept coverage by an insurance company tendered by the buyer.
(2) If any insurance is cancelled, or the premium adjusted, any refund of the insurance premium received by the holder shall be credited to the final maturing installments of the contract except to the extent applied toward payment for similar insurance protecting the interests of the buyer and the holder or either of them.
(3) This section does not apply to creditor-placed insurance which is purchased pursuant to a loan agreement and as a result of the debtor failing to maintain insurance, or failing to show proof of insurance to his creditor, or secured collateral. Such creditor-placed insurance shall be governed by the provisions of Sections 1 through 5 of Senate Bill No. 2325, 1998 Regular Session.
SECTION 7. This act shall take effect and be in force from and after July 1, 1998.