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Arizona Adjuster

Laws & Regulations

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Arizona Adjuster Laws & Regulations - 1

______________________________________________________________________________ Updated 04/20/2018 -- Copyright © Insurance Schools, Inc.

Persons copying, distributing, or posting any part of this text will be prosecuted.

Arizona Adjuster Laws & Regulations ______________________________________________________________________

Licensing Requirements

What is an Adjuster?

An adjuster is an individual or business that is paid to adjust, investigate or negotiate insurance

claims settlements on behalf of an insurance company or insured.

Who Must Be Licensed as an Adjuster?

An individual or business entity must be a licensed adjuster in Arizona in order to act as an

adjuster or to present themselves as an adjuster unless the scope of activities is limited to one

or more of the following conditions:

➢ You are a licensed attorney-at-law who is qualified to practice law in this state;

➢ You are a salaried employee of an insurer or of a managing general agent whose

compensation is not contingent on the outcome of a claim determination;

➢ You are an Arizona-licensed insurance producer and you only perform adjuster

activities for losses under policies you sold.

➢ You are an independent contractor retained by an adjuster to provide technical

assistance in connection with a claim such as photography, estimation, engineering,

private detection, handwriting evaluation, etc.

➢ You are licensed or otherwise permitted to act as an adjuster in your home state (state

of domicile) AND an insurer sends you to Arizona to investigate or adjust a particular

loss under an insurance policy or a series of losses resulting from a catastrophe

common to all those losses.

Individual who acts as an adjuster in Arizona must be individually licensed even if they

work for a business-entity adjuster.

"Automated claims adjudication system" means a preprogrammed computer system that is

designed for the collection, data entry, calculation and final resolution of portable consumer

electronic products insurance claims and that:

➢ May be used only by a licensed adjuster, licensed producer or supervised individuals

operating pursuant to this paragraph.

➢ Must comply with all claims payment requirements under this title and be certified as

compliant by a licensed adjuster.

"Portable consumer electronic products" means electronic devices and related accessories

that are portable in nature. (20-321)

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Adjuster License Qualifications

A person may not act as or claim to be an adjuster unless the person is licensed to do so. To

obtain a license as an adjuster a person must apply to the Director for the license and use the

forms prescribed and provided by the Director. The Director will issue the license to qualified

persons on payment of the required license fee. To be licensed as an adjuster the applicant

must meet all of the following qualifications:

➢ Be a person who is at least 18 years of age.

➢ Be a resident of this state, or a resident of another state that allows residents of this

state to act as adjusters in the other state.

➢ Take and pass an examination that is given by or under the supervision of the Director

and that reasonably tests the applicant's knowledge of insurance and legal responsibilities

as an adjuster and otherwise comply with insurance regulations.

An adjuster who is licensed or permitted to act as an adjuster in the state of the adjuster's

domicile is not required to be licensed or meet the qualifications of this section if the adjuster is

sent to this state on behalf of an insurer for the purpose of investigating or making adjustment of a particular loss under an insurance policy or a series of losses resulting from a catastrophe

common to all those losses.

To determine license eligibility, the Director may require fingerprints of applicants and submit

the fee and the fingerprints as required by regulation.

A resident of Canada may not be licensed as a nonresident adjuster unless the person has

obtained a resident adjuster license in another state and designated that state as the person's

home state.

The Director may contract with nongovernmental entities to perform any ministerial functions,

including collection of fees and data related to licensing, that the director deems appropriate.

A resident of Canada may apply for a license that grants the applicant the authority only to

adjust portable electronics insurance claims in this state if the person has obtained an adjuster

license in another state that permits that person to adjust portable electronics insurance claims

in that state.

An applicant who resides in a state that does not issue licenses to adjusters and who is

otherwise permitted to adjust portable electronics insurance claims in the applicant's resident

state may apply for a license that grants the applicant the authority only to adjust portable electronics insurance claims in this state. (20-321.01)

Business Name or Trade Name

A licensee doing business under any name other than their legal name, they must notify the

Director on a form prescribed by the Director before using the assumed name. The Director

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may deny the use of an assumed business name, require the use of a different assumed business

name or require the use of an assumed business name if a licensee uses or proposes to use an

assumed business name that either:

➢ Is so similar to the legal name or name already assumed under this section by any other

licensed insurance producer so as to cause uncertainty or confusion.

➢ Tends to deceive or mislead the public as to the nature of the business that is or will be

conducted.

A licensee must notify the Director in writing within 30 days after any material change to the

information filed with the Director under this section. The Director will not issue any license

in a trade name except to a business entity and on proof satisfactory to the Director that the

trade name has been lawfully registered. (20-297)

Application for Examination

A resident individual applying for an insurance license must pass an examination within the one

year period that precedes the date the Director received the individual's license application

unless the individual is exempt. The examination will test the knowledge of the individual

concerning the lines of authority for which the application is made, the duties and

responsibilities of a licensee and the insurance laws of this state.

For an individual called into active military service after passing the examination, the one year

period prescribed by this section will be extended by the number of days that the individual was

in active military service, not to exceed a total of one and one-half years. An individual applying

for a license must include with the license application a copy of the documentation from the

armed forces showing the period of time that the individual was in active military service. For

the purposes of this section, active military service does not include periodic and routine

service as a military reservist.

The Director will make the examination available to applicants for licenses with such frequency

as meets the reasonable convenience of both the Director and applicants, but at least every 60

days. The Director may reasonably prescribe by rule the time, places and conduct of

examinations. The Director may require a reasonable waiting period before examination of an

applicant who failed to pass a previous similar examination.

The Director will ensure that all examinations are given, conducted and graded in a fair and

impartial manner and without unfair discrimination as among individuals examined. At the

Director's discretion, any written examination may be supplemented by an oral examination of

the applicant. The Director will inform the applicant of the result of the examination within 30 days after the examination.

The Director may appoint one or more advisory committees to make recommendations to the

Director as to the scope, type and conduct of written examinations under this article. The

members of the committee will serve without pay and without expense to the state.

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An individual who fails to appear for the examination as scheduled or who fails to pass the

examination must reapply for an examination and remit all required fees and forms before being

rescheduled for another examination.

An individual may not take an examination for a line of authority for which the individual

already holds a license in this state.

The Director will not allow an individual to take an examination administered for any line of

license authority pursuant to this section more than four times within a twelve month period. If

an individual fails an examination for a specific line of authority four times, the individual may

not take an examination for that line of authority for one year. For the purposes of this section,

an individual who fails an examination that covers more than one line of license authority is

considered to have failed the examination for each individual line of license authority. (20-284)

➢ An applicant for a license as a nonresident insurance producer who meets the

requirements of this title.

➢ An applicant for a rental car agent license.

➢ An applicant for a self-service storage agent license.

➢ An applicant who resides in a state that does not license adjusters and who will be only

adjusting portable electronics insurance policy claims in this state. (20-288)

Nonresident Licensing

Unless the Director denies a license, the Director will issue a nonresident person a nonresident

license if all of the following apply:

➢ The person is currently licensed as a resident and in good standing in the person's home

state.

➢ The person has submitted the proper request for licensure and has paid the required

fees.

➢ The person has submitted the application for licensure as an insurance adjuster that the

person submitted to the person's home state or a completed uniform application on a

form prescribed by the National Association of Insurance Commissioners.

➢ The person's home state issues nonresident licenses to residents of this state on the

same basis.

A nonresident insurance adjuster who moves from one state to another state or a resident

insurance adjuster who moves from this state to another state must file a change of address

form and provide the Director with certification of licensure from the new resident state within

30 days after receiving the new resident license. A fee or license application is not required.

(20-287)

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License Maintenance and Duration

Expiration, Renewal or Surrender

Any license that is issued pursuant to this article, other than a temporary license, continues in

force until it expires or the Director suspends, revokes or terminates the license. The license is

also subject to renewal pursuant to this section. A license that is issued or renewed expires

quadrennially (every four years) as follows:

➢ If the licensee is an individual, on the last day of the month of the licensee's birthday, but

not less than three years and not more than four years after the last day of the month in

which the license is issued or is required to be renewed.

➢ If the licensee is a business entity, on the last day of the same month four years after the

issuance or renewal due date of the license as provided pursuant to this article.

The Director may renew a license if the Director receives from the licensee all of the following

on or before the license expiration date:

➢ An application on a form approved by the Director.

➢ The required license fee.

Before renewing a license, the Director may require the applicant to:

➢ Provide all documents that are reasonably necessary to verify the information that is

contained in the application and any other information including prior criminal records.

➢ Submit a full set of fingerprints to the Department. The Department of Insurance will

submit the fingerprints to the Department of Public Safety for the purpose of obtaining a

state and federal criminal records check. The Department of Public Safety may

exchange this fingerprint data with the Federal Bureau of Investigation.

Any license for which the Director does not receive timely application for renewal and full

payment of fees expires at midnight on the renewal date. During the one year period after

the expiration of a license under this section, a person who otherwise meets the qualifications

for a license may renew an expired license by filing with the Director a renewal application, the

quadrennial license fee and an additional $100 as a late renewal fee. Any application that is

received during this one year period for the same license that expired under this section is deemed a renewal application. Any application that is received after the one year period for the

same license that expired under this section is deemed a new application.

On the written request of a licensed person, the Director may accept the voluntary surrender

of the person's authority to transact one or more lines of insurance or of the person's entire

license. A person who surrenders an authority or a license may not reapply for the same

authority or license for at least one year after the date of the surrender. (20-289)

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Inactive Status During Military Service

A licensee or applicant who is ordered into active military service may request that the license

or application be placed on inactive status by sending the Department a written statement that

includes all of the following:

➢ The licensee's name.

➢ The licensee's license number or social security number.

➢ The date that the active military service begins.

➢ A request for inactive status.

The license or application is deemed to be on inactive status while the licensee or applicant is in

active military service. A licensee whose license is on inactive status:

➢ May not sell, solicit or negotiate insurance.

➢ May receive renewal or other deferred commissions for selling, soliciting or negotiating

insurance in this state if the licensee was required to be licensed under this article at the

time of the sale, solicitation or negotiation and held an active license at that time.

The time periods for submission of the license renewal fee and for completion of the applicable

renewal requirements that apply to a licensee with an active license are extended for a licensee

whose license is on inactive status by the number of days that the licensee is in active military

service. A licensee applying for renewal under this section must include, with the renewal

application, a copy of the documentation from the armed forces showing the period of time

that the licensee was in active military service. For the purposes of this section, active military

service does not include periodic and routine service as a military reservist. (20-289.01)

Report of Actions

Within 30 days after the final disposition of the matter, an insurance licensee must report to

the Director any administrative action taken against the licensee in another jurisdiction or by

another governmental agency in this state. The report must include a copy of the order,

consent to order or other relevant dispositive document. Within 30 days after the initial

pretrial hearing date, an insurance licensee must report to the Director any criminal

prosecution of the licensee taken in any jurisdiction. The report must include a copy of the

initial complaint filed, the order resulting from the hearing and all other relevant legal documents. (20-301, 321.02)

Change of Address or Name

A licensee must inform the Director in writing within 30 days of any change in the licensee's:

➢ Residential, business or email address.

➢ Members, directors, officers or designated producer. The Director may require that a

licensee who notifies the Director of such a change to submit a full set of fingerprints of

each new member, Director, officer or designated producer to the Director for the

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purpose of obtaining a state and federal criminal records check. The Department of

Public Safety may exchange this fingerprint data with the Federal Bureau of Investigation.

(20-286(C))

Disciplinary Actions

License Denial, Suspension or Revocation

The Director may deny or suspend for not more than 12 months, revoke or refuse to renew

an insurance license or may impose a civil penalty in accordance with this section or any

combination of actions for any one or more of the following causes:

➢ Providing incorrect, misleading, incomplete or materially untrue information in the

license application.

➢ Violating any provision of this title or any rule, subpoena or order of the Director.

➢ Obtaining or attempting to obtain a license through misrepresentation or fraud.

➢ Improperly withholding, misappropriating or converting any monies or properties

received in the course of doing insurance business.

➢ Intentionally misrepresenting the terms of an actual or proposed insurance contract or

application for insurance.

➢ Having been convicted of a felony.

➢ Having admitted or been found to have committed any insurance unfair trade practice

or fraud.

➢ Using fraudulent, coercive or dishonest practices, or demonstrating incompetence,

untrustworthiness or financial irresponsibility in the conduct of business in this state or

elsewhere.

➢ Having an insurance license or its equivalent, denied, suspended or revoked in any other

state, province, district or territory.

➢ Forging another's name to any document related to an insurance transaction.

➢ Aiding or assisting any person in the unauthorized transaction of insurance business.

The Director may deny, suspend for not more than 12 months, revoke or refuse to renew the

license of a business entity:

➢ For any of the causes outlined above if the cause relates to the designated licensee or

any member, officer, Director or manager of the business entity.

➢ If the Director finds that a licensee’s violation was known or should have been known

by the designated licensee or one or more of the members, officers, Directors or

managers acting on behalf of the business entity and the violation was not seasonably

reported to the Director and no reasonable corrective action was taken.

If the Director denies an application for a license, the Director will notify the applicant by

personal delivery or certified mail, return receipt requested. The Director may revoke,

suspend or refuse to renew a license after notice and an opportunity for a hearing.

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If a hearing is required, not less than 10 days in advance the Director will give notice of the

time and place of the hearing, stating the matters to be considered. If the persons to be given

notice are not specified in the provision pursuant to which the hearing is held, the Director will

give such notice to all persons directly affected by such hearing. (20-163)

In addition to or instead of any suspension, revocation or refusal to renew a license pursuant to

this section, after a hearing the Director may:

➢ Impose a civil penalty of not more than $250 for each unintentional failure or violation,

up to an aggregate civil penalty of $2,500.

➢ Impose a civil penalty of not more than $2,500 for each intentional failure or violation,

up to an aggregate civil penalty of $15,000.

➢ Order the licensee to provide restitution to any party injured by the licensee's action.

The civil penalty is in addition to any other applicable penalty or restraint either in this article

or in any other law and may be recovered in a civil action brought by the Director.

The Director retains the authority to enforce this title and impose any penalty or remedy

authorized by this title against any person who is under investigation for or charged with a

violation of this title even if the person's license has been surrendered or has lapsed by

operation of law. (20-295)

Effect of Suspension or Revocation of License

On suspension or revocation of the license the licensee must deliver the license to the

Director. The Director will not again issue any license under this title to any person whose

license has been revoked until one year after the revocation and the person again qualifies in

accordance with the applicable provisions of this title.

If the license of a business entity is suspended or revoked, a member, officer or Director of or

designated producer for the business entity will not be issued a license or serve as the

designated producer for any licensee during the period of the suspension or revocation unless

the Director determines that the member, officer, Director or designated producer was not

personally at fault and did not acquiesce in the matter that resulted in the suspension or

revocation of the license. (20-296)

Cease and Desist Order

If the Director has cause to believe that any person is violating or about to violate the

insurance laws of this state, the Director may order the person to cease and desist and,

through the attorney general, may cause a complaint to be filed in the superior court in

Maricopa county to enjoin and restrain the person from continuing the violation, engaging in

the violation or doing any act in furtherance of the violation. If the Director orders the person

to cease and desist, the person may file a notice of appeal and may appeal any final order. If the

Director, through the attorney general, causes a complaint to be filed, the superior court in

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Maricopa county has jurisdiction of the proceeding and may make and enter an order or

judgment awarding the preliminary or final relief as in its judgment is proper. (20-292)

Cease and Desist Order for Defined or Prohibited Practices

If after a hearing the Director finds that the person charged has engaged or is engaging in any

act or practice defined in or prohibited under this article as an illegal or unfair method of

competition or an unfair or deceptive act or practice, the Director will order the person to

cease and desist from the acts or practices.

If the act or practice is an unfair trade practice, an act of fraud or a general business practice of committing or performing acts or omissions prohibited by this article, the Director may also

impose a civil penalty of not more than $1,000 for each act or violation but not to exceed an

aggregate penalty of $10,000 for unintentional acts or violations. However, if the acts or

violations are intentional, the Director may impose a civil penalty of up to $5,000 for each act

or violation but not to exceed an aggregate penalty of $50,000 in any six month period.

No order of the Director pursuant to this section or order of a court to enforce it, or holding

of a hearing, will in any manner relieve or absolve any person affected by the order or hearing

from any other liability, penalty or forfeiture under law. (20-456)

Claim Settlement Laws and Regulations

Unfair Claim Settlement Practices - Applicability

This rule applies to all persons and to all insurance policies, insurance contracts and

subscription contracts except policies of Worker’s Compensation and title insurance. (R20-6-

801)

Definitions

"Agent" means any individual, corporation, association, partnership or other legal entity

authorized to represent an insurer with respect to a claim.

"Claimant" means either a first party claimant, a third party claimant, or both and includes

such claimant's designated legal representative and includes a member of the claimant's

immediate family designated by the claimant.

"Director" means the Director of Insurance of the State of Arizona.

"First party claimant" means an individual, corporation, association, partnership or other legal

entity asserting a right to payment under an insurance policy or insurance contract arising out

of the occurrence of the contingency of loss covered by such policy or contract.

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Unless the context otherwise requires, "insurer" includes all corporations, associations,

partnerships and individuals engaged as principals in the business of insurance and also includes

interinsurance exchanges and mutual benefit societies. (20-106)

"Investigation" means all activities of an insurer directly or indirectly related to the

determination of liabilities under coverages afforded by an insurance policy or insurance

contract.

"Notification of claim" means any notification, whether in writing or other means, acceptable

under the terms of any insurance policy or insurance contract, to an insurer or its agent, by a

claimant, which reasonably apprises the insurer of the facts pertinent to a claim.

"Third party claimant" means any individual, corporation, association, partnership or other

legal entity asserting a claim against any individual, corporation, association, partnership or

other legal entity insured under an insurance policy or insurance contract of an insurer.

"Worker's compensation" includes, but is not limited to, Longshoremen's and Harbor

Worker's Compensation.

Unfair Claim Settlement Practices

A person may not commit or perform with such a frequency to indicate as a general business

practice any of the following:

➢ Misrepresenting pertinent facts or policy provisions relating to coverage;

➢ Failing to acknowledge and act reasonably and promptly on communications regarding

claims;

➢ Failing to adopt and implement reasonable standards for the prompt investigation of

claims arising under an insurance policy;

➢ Refusing to pay claims without a reasonable investigation;

➢ Failing to affirm or deny coverage of claims within a reasonable time after proof of

loss statements have been completed;

➢ Not attempting in good faith to make prompt, fair and equitable settlement of claims in

which liability has become reasonably clear;

➢ As a property or casualty insurer, failing to recognize a valid assignment of a claim. The

property or casualty insurer shall have the rights consistent with the provisions of its

insurance policy to receive notice of loss or claim and to all defenses it may have to the

loss or claim, but not otherwise to restrict an assignment of a loss or claim after a loss

has occurred;

➢ Compelling insureds to resort to litigation to recover amounts due under a policy by

offering substantially less than the amount ultimately recovered in actions brought by

the insured;

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➢ Attempting to settle a claim for less than the amount to which a reasonable person

would have believed he or she was entitled by reference to written or printed

advertising material accompanying or made part of an application;

➢ Attempting to settle claims on the basis of an application that was altered without

notice to or the knowledge or consent of the insured;

➢ Making claim payments without stating the coverage under which the payments are

being made;

➢ Making known a policy of appealing from arbitration awards in favor of insureds for the

purpose of compelling them to accept settlements or compromises less than the

amount awarded in arbitration;

➢ Delaying the investigation or payment of claims by requiring a preliminary claim report

and formal proof of loss forms that contain substantially the same information;

➢ Failing to promptly settle claims if liability has become reasonably clear under one

portion of the policy in order to influence settlements under other portions of the

policy;

➢ Failing to promptly provide a reasonable explanation of the basis in the policy for denial

of a claim or offer of a compromise settlement;

➢ Attempting to settle claims for the replacement of any non-mechanical sheet metal or

plastic part that generally constitutes the exterior of a motor vehicle with an

aftermarket crash part that is not made by or for the manufacturer of an insured's

motor vehicle without properly notifying the insured and otherwise complying with the law;

➢ Denying liability for a claim under a motor vehicle liability policy in effect at the time of

an accident without having substantial facts based on reasonable investigation to justify

the denial for damages or injuries that are a result of the accident and that were caused

by the insured if the denial is based solely on a medical condition that could affect the

insured’s driving ability.

Nothing in this section will be construed to prohibit the application of deductibles, coinsurance,

preferred provider organization requirements, cost containment measures or quality assurance

measures if they are equally applied to all types of physicians referred to in this section, and if

any limitation or condition placed upon payment to or upon services, diagnosis or treatment by

any physician covered by this section is equally applied to all physicians, without discrimination

to the usual and customary procedures of any type of physician. A determination under this

section of discrimination to the usual and customary procedures of any type of physician will

not be based on whether an insurer applies medical necessity review to a particular type of

service or treatment.

In prescribing rules to implement this section, the Director will follow, to the extent

appropriate the National Association of Insurance Commissioners unfair claims settlement

practices model regulation.

Nothing contained in this section is intended to provide any private right or cause of action to

or on behalf of any insured or uninsured resident or nonresident of this state. It is, however,

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the specific intent of this section to provide solely an administrative remedy to the Director for

any violation of this section or rule related to this section. (20-461)

Timely Payment of Claims

From and after July 15, 1986 any first party claim not paid within 30 days after the receipt of

an acceptable proof of loss by the insurer which contains all information necessary for claim

adjudication will be required to pay interest at the legal rate from the date the claim is received

by the insurer. The interest will be calculated on the amount the insurer is legally obligated to

pay according to the terms of the insurance contract under which the claim is being submitted.

For purposes of determining whether the claim has been paid within 30 days, the date of

payment will be deemed to have been received by the addressee on the date shown by the

postmark or other official mark of the United States mail stamped on the payment envelope. If

the receipt disputes the date where there is no mark or the mark is not legible, the sender may

establish the mailing or transfer date by competent evidence.

This section does not apply to:

➢ Claims submitted for payment under Medicare.

➢ Claims submitted under a Medicare supplement contract where, according to the terms

of the supplement contract, claims will be based upon the amount paid by Medicare.

➢ The payment of a claim will not be overdue during any period in which the insurer is

unable to pay such claim because there is no recipient who is legally able to give a valid

release for such payment, or in which the insurer is unable to determine who is entitled

to receive such payment, if the insurer has promptly notified the claimant of such

inability and has offered in good faith to promptly pay said claim upon determination of

who is entitled to receive such payment.

➢ Claims submitted to a person who is the processing agent for a foreign insurer or other

person providing an insurance program for retirees residing in Arizona.

➢ Claims denied in good faith within 30 days after receipt of acceptable proofs of loss.

This section will apply only to claims that are to be paid by the insurer directly to the insured,

to a beneficiary named in the contract, or to a provider who has been assigned the right to

receive benefits under the contract by the insured. (20-462)

File and Record Documentation

The insurer's claim files are subject to examination by the Director or by his duly appointed

designees. Such files must contain all notes and work papers pertaining to the claim in such

detail that pertinent events and the dates of such events can be reconstructed.

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Misrepresentation of Policy Provisions

No insurer may fail to fully disclose to first party claimants all pertinent benefits, coverages or

other provisions of an insurance policy or insurance contract under which a claim is presented.

No agent may conceal from first party claimants benefits, coverages or other provisions of any

insurance policy or insurance contract when such benefits, coverages or other provisions are

pertinent to a claim.

No insurer may deny a claim on the basis that the claimant has failed to exhibit the damaged

property to the insurer, unless the insurer has requested the claimant to exhibit the property

and the claimant has refused without a sound basis.

No insurer may, except where there is a time limit specified in the policy, make statements,

written or otherwise, requiring a claimant to give written notice of loss or proof of loss within

a specified time limit and which seek to relieve the company of its obligations if such a time limit

is not complied with unless the failure to comply with such time limit prejudices the insurer's

rights.

No insurer may request a first party claimant to sign a release that extends beyond the subject

matter that gave rise to the claim payment.

No insurer may issue checks or drafts in partial settlement of a loss or claim under a specific

coverage which contain language that releases the insurer or it’s insured from its total liability.

Failure to Acknowledge Pertinent Communications

Upon receiving notification of a claim, every insurer must acknowledge the receipt of the notice

within 10 working days (unless payment is made within that period of time). If an

acknowledgment is made by means other than writing, an appropriate notation of the

acknowledgment must be made in the claim file of the insurer and dated. Notification given to

an agent of an insurer will be considered notification to the insurer.

Upon receipt of any inquiry from the Department of Insurance respecting a claim, every insurer

must furnish the Department with an adequate response to the inquiry within 15 working

days.

An appropriate reply must be made within 10 working days on all other pertinent

communications from a claimant who reasonably suggest that a response is expected.

Every insurer; upon receiving notification of claim, must promptly (within 10 days) provide

necessary claim forms, instructions and reasonable assistance so that first-party claimants can

comply with the policy conditions and the insurer's reasonable requirements.

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Standards for Prompt Investigation & Settlements - All Insurers

Every insurer must complete investigation of a claim within 30 days after notification of a

claim, unless the investigation cannot reasonably be completed within that time.

Within 15 working days after receipt by the insurer of properly executed proofs of loss, the

first-party claimant must be advised of the acceptance or denial of the claim by the insurer. If an

insurer denies a claim on the grounds of a specific policy provision, condition or exclusion, then

a reference to the provision, condition or exclusion must be included in the denial. The denial

must be given to the claimant in writing and the claim file of the insurer must contain a copy of

the denial.

If the insurer needs more time to determine whether a first-party claim should be accepted or

denied, it must also notify the first-party claimant within 15 working days after receipt of the

proofs of loss, giving the reasons more time is needed. If the investigation remains incomplete,

the insurer must send a letter to the claimant within 45 days from the date of the initial

notification and every 45 days thereafter setting forth the reasons additional time is needed

for investigation.

Where there is a reasonable basis supported by specific information for suspecting that the

first-party claimant has fraudulently caused or contributed to the loss by arson, the insurer is

relieved from the above requirements. However, the claimant must be advised of the

acceptance or denial of the claim by the insurer within a reasonable time for full investigation.

If a claim is denied for reasons other than those described above, and is made by any other

means than writing, an appropriate notation must be made in the claim file of the insurer.

Insurers must not fail to settle first-party claims on the basis that responsibility for payment

should be assumed by others.

Insurers shall not continue negotiations for settlement of a claim directly with a claimant who is

neither an attorney nor represented by an attorney until the claimant’s rights may be affected

by a statute of limitations or a policy or contract time limit, without giving the claimant written notice that the time limit may be expiring and may affect the claimant’s right. Such notice shall

be given to first party claimants 30 days and to third party claimants 60 days before the

date on which such time limit may expire.

An insurer must not make statements which indicate that the rights of a third-party claimant

may be impaired if a form or release is not completed within a given period of time unless the

statement is given for the purpose of notifying the third party claimant of the provision of a

statute of limitations.

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Standards for Prompt Settlements Applicable to Automobile Claims

When the insurance policy provides for the adjustment and settlement of first party automobile

total losses on the basis of actual cash value or replacement with another of like kind and

quality, one of the following methods must apply:

➢ The insurer may elect to offer a replacement automobile which is a specific comparable

automobile available to the insured, with all applicable taxes, license fees and other fees

incident to transfer of evidence of ownership of the automobile paid, at no cost other

than any deductible provided in the policy. The offer and any rejection thereof must be

documented in the claim file.

➢ The insurer may elect a cash settlement based upon the actual cost, less any deductible

provided in the policy, to purchase a comparable automobile including all applicable

taxes, license fees and other fees incident to transfer of evidence of ownership of a

comparable automobile. Such cost may be determined by:

▪ The cost of a comparable automobile in the local market area when a

comparable automobile is available in the local market area.

▪ One of two or more quotations obtained by the insurer from two or more

qualified dealers located within the local market area when a comparable

automobile is not available in the local market area.

➢ When a first party automobile total loss is settled on a basis which deviates from the

methods described above, the deviation must be supported by documentation giving

particulars of the automobile condition. Any deductions from such cost, including

deduction for salvage, must be measurable, discernible, itemized and specified as to

dollar amount and must be appropriate in amount. The basis for such settlement must

be fully explained to the first party claimant.

Where liability and damages are reasonably clear, insurers may not recommend that third party

claimants make claim under their own policies solely to avoid paying claims under such insurer's

policy or insurance contract.

Insurers may not require a claimant to travel unreasonably either to inspect a replacement

automobile, to obtain a repair estimate or to have the automobile repaired at a specific repair

shop.

Insurers must, upon the claimant's request, include the first party claimant's deductible, if any, in

subrogation demands. Subrogation recoveries must be shared on a proportionate basis with the

first party claimant, unless the deductible amount has been otherwise recovered. No deduction

for expenses can be made from the deductible recovery unless an outside attorney is retained

to collect such recovery. The deduction may then be for only a pro rata share of the allocated

loss adjustment expense.

If an insurer prepares an estimate of the cost of automobile repairs, such estimate must be in an

amount for which it may be reasonably expected the damage can be satisfactorily repaired. The

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insurer must give a copy of the estimate to the claimant and may furnish to the claimant the

names of one or more conveniently located repair shops.

When the amount claimed is reduced because of betterment or depreciation all information for

such reduction must be contained in the claim file. Such deductions must be itemized and

specified as to dollar amount and must be appropriate for the amount of deductions.

When the insurer elects to repair and designates a specific repair shop for automobile repairs,

the insurer will cause the damaged automobile to be restored to its condition prior to the loss

at no additional cost to the claimant other than as stated in the policy and within a reasonable

period of time.

The insurer may not use as a basis for cash settlement with a first party claimant an amount

which is less than the amount which the insurer would pay if the repairs were made, other than

in total loss situations, unless such amount is agreed to by the insured. (R20-6-801)

Bad Faith and Unfair Claim Processing Practices – Workers

Compensation Claims

An employer, self-insured employer, insurance carrier, or claims processing representative

commits “bad faith” if the employer, self-insured employer, insurance carrier, or claims

processing representative:

➢ Institutes a proceeding or interposes a defense that is not:

▪ Well-grounded in fact;

▪ Warranted by existing law; or

▪ A good faith argument for the extension, modification, or reversal of existing

law;

➢ Unreasonably delays:

▪ Payment of benefits; or

▪ Authorization for, or receipt of, medical benefits or treatment;

➢ Unreasonably underpays benefits;

➢ Unreasonably terminates benefits;

➢ Intentionally misleads a claimant as to applicable statutes of limitation, benefits, or

remedies available to the claimant under the Act or under this Article; or

➢ Unreasonably interferes with or obstructs the claimant’s right to choose the claimant’s

attending physician, except in cases involving a self-insured employer.

An employer, self-insured employer, insurance carrier, or claims processing representative

commits “unfair claim processing practices” if the employer, self-insured employer, insurance

carrier, or claims processing representative:

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➢ Unreasonably issues a notice of claim status without adequate supporting information in

its possession or available to it;

➢ Unreasonably fails to acknowledge communications from the Commission, an

unrepresented claimant, or a claimant’s attorney with respect to a claim;

➢ Fails to act reasonably and promptly upon communications from the Commission, an

unrepresented claimant, or a claimant’s attorney with respect to a claim;

➢ Directly advises a claimant not to consult or obtain the services of an attorney; or

➢ Communicates directly, for an improper purpose, with a claimant represented by an

attorney.

A person alleging bad faith or unfair claim processing practices (“complainant”) must file a

written complaint with the claims manager of the Commission. The complainant, or the

complainant’s authorized representative, must sign the complaint.

The complaint must describe the specific actions of the employer, self-insured employer,

insurance carrier, or claims processing representative, that are alleged to constitute bad faith or

unfair claim processing practices. A complaint form is available upon request from the

Commission.

Upon receipt of a complaint under this section, the claims manager of the Commission will

serve the complaint upon all parties.

If the Commission acts on its own motion, the claims manager must mail a notice of alleged bad

faith or unfair claim processing practices to the claimant or the claimant’s authorized

representative and the:

➢ Employer;

➢ Self-insured employer;

➢ Insurance carrier; or

➢ Claims processing representative.

The person or entity named in a complaint or notice served must file with the claims manager a

written response to the complaint or notice, within 30 days after service by the Commission of

the complaint or notice.

The person or entity filing a written response must serve a copy of the response upon the

complainant, or the complainant’s authorized representative, if represented.

If the person or entity named in a complaint or notice fails to file a written response, the

Commission will consider the absence of a response a denial of the allegations of the complaint

or notice. Upon receipt of a written response, or upon the expiration of 30 days if no

response is filed, the Commission will enter an award as it deems, in its discretion, appropriate

under this Article. (R20-5-163)

Required Provisions

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Fraudulent Practices

It is a fraudulent practice and unlawful for a person to knowingly:

➢ Present, cause to be presented or prepare with the knowledge or belief that it will be

presented an oral or written statement, including computer generated documents, to or

by an insurer, reinsurer, purported insurer or reinsurer, insurance producer or agent of

a reinsurer that contains untrue statements of material fact or that fails to state any

material fact with respect to any of the following:

▪ An application for the issuance or renewal of an insurance policy.

▪ The rating of an insurance policy.

▪ A claim for payment or benefit pursuant to an insurance policy.

▪ Premiums paid on any insurance policy.

▪ Payments made pursuant to the terms of any insurance policy.

▪ An application for a certificate of authority.

▪ The financial condition of an insurer, reinsurer or purported insurer or

reinsurer.

▪ The acquisition of an insurer or reinsurer or the concealing of any information

concerning any fact material to the acquisition.

➢ Solicit or accept new or renewal insurance risks by or for any insolvent insurer,

reinsurer or other entity licensed to transact insurance business in this state.

➢ Conceal or attempt to conceal from the Department or remove or attempt to remove

from the home office, place of safekeeping or other place of business of any insurer,

reinsurer or other entity licensed to transact insurance business in this state part or all

of the assets or records of the assets, transactions and affairs.

➢ Divert or attempt or conspire to divert the monies of an insurer, reinsurer, entity

licensed to transact insurance business in this state or other person in connection with:

▪ The transaction of insurance or reinsurance.

▪ The conduct of business activities by any insurer, reinsurer or other entity

licensed to transact insurance business in this state.

▪ The formation, acquisition or dissolution of any insurer, reinsurer or other entity

licensed to transact insurance business in this state.

➢ Assist, abet, solicit or conspire with another person to violate section.

➢ Employ, use or act as a runner, capper or steerer for the purposes of violating this

section.

A person who acts without malice, fraudulent intent or bad faith is not subject to liability for

filing reports or furnishing orally or in writing other information concerning suspected,

anticipated or completed fraudulent insurance acts if the reports or information is provided to

or received from:

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➢ The Director or the Department.

➢ Law enforcement officials and their agents and employees.

➢ The National Association of Insurance Commissioners, other state insurance

departments, a federal or state agency or bureau established to detect and prevent

fraudulent insurance acts, and the agency's or bureau's agents, employees or designees,

or an organization established by insurers to assist in the detection and prevention of

fraudulent insurance acts, and the organization's agents, employees or designees.

A person, or an officer, employee or agent of the person acting within the scope of

employment or agency of that officer, employee or agent, above when performing authorized

activities without malice, fraudulent intent or bad faith is not subject to civil liability for libel,

slander or another relevant tort. No civil cause of action may be brought against the person or

entity.

A person or entity under this section is entitled to an award of attorney fees and costs if the

person or entity is a prevailing party in a civil cause of action for libel, slander or other relevant

tort and the action is not substantially justified. For purposes of this section, "substantially

justified" means a proceeding that has a reasonable basis in law or fact at the time that it is

initiated.

Nothing in this section limits any common law right of the person or entity.

Nothing in this section is intended to prohibit contact or communication with clients or

patients for any lawful purpose, including communication by and between insurers, the insurers'

policyholders and claimants under policies issued to the insurers' policyholders regarding the

investigation or settlement of any claim.

For the purposes of this section:

➢ "Runner", "capper" or "steerer" means a person who procures clients at the direction

of, or in cooperation with, a person who intends to perform or obtain services or

benefits under a contract of insurance or who intends to assert a claim against an

insured.

➢ "Statement" includes any notice, proof of injury, bill for services, payment for services,

hospital or doctor records, x-rays, test reports, medical or legal expenses, or other

evidence of loss or injury, or other expense or payment. (20-463)

Personal Insurance - Cancellation and Nonrenewal

This section applies to policies of insurance on personal risks in Arizona which insure any of the

following contingencies:

➢ Loss of or damage to real property which is used predominantly for residential purposes

and which consists of not more than four dwelling units;

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➢ Loss of or damage to personal property in which natural persons who reside in

specifically described real property have an insurable interest, except personal property

used in the conduct of a commercial or industrial enterprise.

➢ Legal liability of a natural person for loss, damage or injury to persons or property, but

not including policies primarily insuring risks arising from the conduct of a commercial

or industrial enterprise.

This section does not apply to motor vehicle insurance and workers compensation insurance.

(20-1651)

Reasons for Cancellation - After a policy has been in effect for 60 days (or, if the policy is

a renewal, effective immediately) no notice of cancellation is effective unless it is based on the

occurrence, after the effective date of the policy, of one or more of the following:

➢ Nonpayment of premium

➢ Conviction of the named insured of a crime arising out of acts increasing the hazard

insured against

➢ Acts or omissions by the insured or his representative constituting fraud or material

misrepresentation in obtaining the policy, continuing the policy or in presenting a claim

under the policy

➢ Discovery of grossly negligent acts or omissions by the insured substantially increasing

any of the hazards insured against

➢ Substantial change in the risk assumed by the insurer; since the policy was issued, except

to the extent that the insurer should reasonably have foreseen the change or

contemplated the risk in writing the contract

➢ A determination by the Director of Insurance that the continuation of the policy would

place the insurer in violation of the insurance laws of this state

➢ Failure of the insured to take reasonable steps to eliminate or reduce any conditions in

or on the insured premises which contributed to a loss in the past or will increase the

probability of future losses

In the event of nonrenewal, the insured must be given 30 days' notice to remedy the identified

conditions. In the event that the identified conditions are remedied, coverage must be renewed.

In the event that the identified conditions are not satisfactorily remedied, the insured must be

given an additional 30 days, upon payment of premium, to cure the defective condition.

Any insured who believes nonrenewal under this subsection is arbitrary or capricious may

utilize the appeal procedures set forth in Arizona law.

Notice of Cancellation - All notices of cancellation or nonrenewal must be in writing, must

be mailed to the named insured at the address shown in the policy or to the last known

address of the insured and must state the specific reason the policy is being denied or

nonrenewed. The insurer may not fail to renew a policy upon payment of the premium due unless the insurer mails or delivers a notice of its intention not to renew the policy to the

named insured at the address shown in the policy at least 30 days in advance of the end of

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the policy period. Any policy written for a term of less than one year may be renewed for a

term of one year if the notice is not given as required. A policy with no fixed expiration date

shall be deemed written for successive policy periods of one year. These regulations will not

apply if the insured has accepted replacement coverage or has agreed to nonrenewal. (20-1653,

1654)

Immunity From Liability - There is no liability on the part of any insurer or any licensed

insurance agent or broker for any statement made, unless the statement is shown to have been

made in bad faith with malice in any of the following:

➢ Written notice of cancellation or nonrenewal or in any other oral or written

communication specifying the reasons for cancellation or nonrenewal.

➢ Communication providing information pertaining to such cancellation or

nonrenewal.

➢ Evidence submitted at any court proceeding or information inquiry in which such

cancellation or nonrenewal is an issue. (20-1655)

Proof of Mailing - Proof of mailing of a notice of cancellation and the reasons for cancellation

or of intention not to renew to the named insured at the address shown in the policy is

sufficient proof of the required notice. (20-1656)

Commercial Insurance - Cancellation and Nonrenewal

This section only applies to commercial property insurance policies, commercial liability policies

and commercial multi-peril insurance policies. This article does not apply to any of the following

➢ Life and disability insurance;

➢ Annuities;

➢ Workers’ compensation and employers’ liability insurance written in connection with

workers’ compensation;

➢ Motor vehicle policies;

➢ Surplus lines insurance;

➢ Mortgage guaranty insurance;

➢ Title insurance;

➢ Marine insurance;

➢ Policies covering multi-state location risks;

➢ Excess policies;

➢ Policies issued through assigned risk plans, joint underwriting associations or other

residual market mechanisms;

➢ Such other policies as the Director may exempt. (20-1671)

Definitions - In this article, unless the context otherwise requires:

➢ "Cancellation" means termination of a policy at a date other than its expiration date.

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➢ "Expiration date" means the date on which coverage under a policy ends as set forth in

the policy. For a policy written for a term longer than one year or with no fixed

expiration date, each annual anniversary date of the policy is the expiration date.

➢ "Nonpayment of premium" means the failure or inability of the named insured to

discharge any obligation in connection with the payment of premiums on a policy of

insurance subject to this article, whether the payments are payable directly to the

insurer or its agent or payable through a premium finance plan or extension of credit.

➢ "Nonrenewal" means termination of a policy at its expiration date.

➢ "Renewal" or "to renew" means the issuance of or the offer to issue by an insurer a

policy succeeding a policy previously issued and delivered by the same insurer or an

insurer within the same group of insurers or the issuance of a certificate or notice

extending the term of an existing policy for a specified period beyond its expiration

date. (20-1672)

Reasons for Cancellation - No insurer may cancel an insurance policy before the expiration

of the agreed term or one year from the effective date of the policy or renewal, whichever is

less, if one or more of the following is true:

➢ The policy has been in effect for 60 days.

➢ The policy is a renewal, effective immediately.

An insurer may cancel a policy for nonpayment of a premium or one of the following grounds,

which must be stated in the policy:

➢ Conviction of the named insured of a crime arising out of acts increasing the hazard

insured against,

➢ Acts or omissions by the insured constituting fraud or material misrepresentation in

obtaining the policy, in continuing the policy or in presenting a claim under the policy;

➢ A substantial change in the risk assumed, except to the extent that the insurer should

reasonably have foreseen the change or contemplated the risk in writing the contract, a

substantial breach of contractual duties or conditions;

➢ Loss of reinsurance applicable to the risk insured against, but only if the absence of

reinsurance has resulted from termination of treaty or facultative reinsurance initiated

or implemented by the reinsurer or reinsurers of the company issuing the policy;

➢ A determination by the Director that the continuation of the policy would place the

insurer in violation of the insurance laws of Arizona or would jeopardize the solvency of

the insurer; or

➢ Acts or omissions by the insured which materially increase the hazard insured against.

(20-1673)

Cancellation Notice - No cancellation is effective unless the insurer mails or electronically

delivers, a copy of the notice of cancellation to the insured's agent and written notice of the

cancellation is mailed by certified mail to the named insured at least 45 days before the

effective date of the cancellation. The required Arizona changes to the Businessowners

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form, changes this 45-day notice to a 60-day notice, but only for the Businessowners

policy. If cancellation is for nonpayment of premium, at least 10 days' notice of cancellation

must be given. The notice of cancellation and any refund of unearned premium may be mailed

separately, but both must be mailed within the time frames established above. (20-1674)

Immunity from Liability - Unless bad faith or malice can be proven, insurers may not be

held liable or prosecuted for:

➢ A written notice of cancellation or in any other oral or written communication

specifying the reasons for cancellation,

➢ A communication providing information pertaining to cancellation, or

➢ Evidence submitted at any court proceeding or informal inquiry in which cancellation is

an issue. (20-1675)

Nonrenewal - No nonrenewal of any policy of insurance is effective unless the insurer mails

or electronically delivers, a copy of the notice of nonrenewal to the insured's agent and the

named insured and mails with the insurer obtaining proof of mail by United States certified mail

or first class mail using intelligent mail barcode or another similar tracking method used or

approved by the United States postal service written notice to the named insured, at the

address shown in the policy or to the last known address of the insured, at least 45 days

before the end of the policy period. The required Arizona changes to the Businessowners

form, changes this 45-day notice to a 60-day notice, but only for the Businessowners

policy. Notice of nonrenewal is not required if the insurer has offered to issue a renewal policy

or the named insured has obtained replacement coverage or has agreed in writing to obtain

replacement coverage. If an insurer provides a nonrenewal notice described and subsequently

extends the policy for 90 days at the request of the policyholder, an additional notice of

nonrenewal is not required. If the notice of nonrenewal is mailed less than 45 days before

expiration, the coverage must remain in effect until 45 days after the notice is mailed. Earned premium for any period of coverage that extends beyond the expiration date must be

considered pro rata based upon the previous year's rate. (20-1676)

Notice of Change - An insurer must mail or deliver to the name insured at the mailing

address shown on the policy written notice of premium increase, change in deductible,

reduction in limits, or substantial reduction in coverage at least 30 days before the expiration

date of the policy. The required Arizona changes to the Businessowners form, changes this

30-day notice to a 60-day notice, but only for the Businessowners policy. If the insurer

fails to provide 30 days' notice, the coverage provided to the named insured remains in effect

until notice is given or until the effective date of replacement coverage obtained by the named

insured, whichever occurs first.

Notice is considered given 30 days following the date of mailing or delivery of the notice. If the

insured elects not to renew, any earned premium for the period of extension of the terminated

policy must be calculated pro rata at the lower of the current or previous year's rate. If the

insured accepts the renewal, the premium increase and other changes are effective the day

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following the prior policy's expiration or anniversary date. For the purposes of this section,

notice shall be considered given if an insurer delivers new policy terms and conditions thirty

days before the expiration date of the policy. (20-1677)

Proof of Notice - For cancellations, nonrenewals, premium changes, or coverage changes,

proof of mailing notices to the insured at the address shown in the policy will suffice as

sufficient proof of notice. (20-1678)

Arizona Special Provisions and Selected Endorsements

Special Provisions – Arizona Dwelling Policy Endorsement

In Arizona, a special provisions endorsement (DP 01 02) must be attached to all Dwelling

policies to amend the coverages on the ISO standardized form. This endorsement:

➢ Adds the following definition of actual cash value: “means the amount it would currently

cost to repair or replace covered property with new material of like kind and quality,

less allowance for physical deterioration and depreciation, including obsolescence”

(becoming obsolete);

➢ Deletes the “Other Coverage” of $500 contained on the ISO Dwelling policies for fire

department service charges;

➢ Changes the “Glass or Safety Glazing Material” coverage to deny coverage if the

dwelling has been vacant for more than 30 days. The ISO Dwelling policy allows

vacancy of up to 60 days and coverage would still apply;

➢ Changes the “Concealment or Fraud” Condition to deny coverage with respect to all

persons insured under the policy if one or more persons “made false statements of fact which, if known to us, would have caused us not to issue the policy”;

➢ Changes the “Loss Payment” Condition to require that the insurance company pay the

loss within 30 days after receiving the insured’s proof of loss. The ISO form allows the

insurance company 60 days to pay the claim;

➢ Allows the insurer to cancel the Dwelling policy if the insured fails to take reasonable

steps to eliminate or reduce any conditions in or on the insured premises which

contributed to a loss in the past or will increase the probability of future losses.

➢ Allows the insurer to nonrenew a policy based on a condition of the premises if 30-

days’ notice is given to allow the insured to remedy the condition. If the condition is not

remedied within that 30-day period, the insured can still pay the premium and have an

additional 30 days to correct the defective condition before the policy may be

nonrenewed.

Special Provisions – Arizona Homeowners Endorsement

In Arizona, a special provisions endorsement (HO 01 02) must be attached to Homeowners

policies issued in Arizona. This endorsement:

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➢ Adds a definition of the term actual cash value: "the amount it would currently cost to

repair or replace covered property with new material of like kind and quality, less

allowance for physical deterioration and depreciation, including obsolescence"

(becoming obsolete);

➢ Deletes the “Additional Coverage” of $500 on the ISO standardized form for Fire

Department Service Charge;

➢ Amends the Section I - Exclusion for “intentional loss” so that it does not apply to an

innocent insured's claim for an otherwise covered property loss caused by an act of

domestic violence. If payment is made to an insured who is a victim of domestic violence

for a loss caused by an act of domestic violence, the insurer has the right to recover

damages from the perpetrator of the violence;

➢ Amends the Section I – Conditions as follows:

▪ The “appraisal condition” specifies that the umpire should be "competent and

impartial";

▪ Losses must be paid by the insurer within 30 days of reaching agreement with the

insured (the standardized forms specify 60 days);

▪ The concealment or fraud condition of both Sections I and II is amended to include

false statements that would have precluded policy issuance.

➢ Following the 60-day underwriting period, a Homeowners policy in Arizona can be

cancelled for nonpayment of premium with a 10-day notice to the insured, and for all

other reasons, the insured must receive a 30-day notice from the insurer.

➢ Allows the insurer to nonrenew a policy based on a condition of the premises if 30-

days’ notice is given to allow the insured to remedy the condition. If the condition is not

remedied within that 30-day period, the insured can still pay the premium and have an

additional 30 days to correct the defective condition before the policy may be

nonrenewed.

Arizona Businessowners Endorsement

The Arizona form BP 01 38 changes the standardized ISO Businessowners form:

➢ To remove the $2,500 Fire Department Service Charge Additional Coverage;

➢ To remove the exclusion for intentional acts by an insured if the insured was a victim of

domestic violence and the loss was caused by a perpetrator who was also an insured;

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➢ To change the required notice for cancellation, nonrenewal, or policy changes to 60

days for the Businessowners policy, instead of the 45-day notice required for other

commercial policies.

Arizona Automobile Insurance Laws

Required Limits of Liability

An insurer writing or an insurance producer soliciting applications for motor vehicle liability

policies that insure six or fewer motor vehicles shall make available a policy for the mandatory

minimum motor vehicle liability limits as prescribed by state law, if requested by a named

insured or an applicant who meets the underwriting criteria of the insurer. (20-266)

An owner's motor vehicle liability policy must comply with the following:

➢ The policy must explicitly designate all motor vehicles for which coverage is granted. If

coverage is provided for a fleet of seven or more motor vehicles, the maximum payable

for any one accident is the limit of liability stated in the policy. There is no accumulation of coverage for each separate vehicle covered. (28-4009)

➢ The policy must insure the person named in the policy as the insured and any other

person, as insured, using the motor vehicle (or vehicles) with the express or implied

permission of the named insured against loss which results from damages arising out of

the ownership, maintenance or use of the motor vehicle occurring within the United

States or the dominion of Canada as follows:

▪ $15,000 because of bodily injury to or death of one person in any one accident;

▪ $30,000 because of bodily injury to or death of two or more persons in any one

accident;

▪ $10,000 because of injury to or destruction of property of others in any one

accident.

➢ By agreement in writing between a named insured and the insurer the policy may

exclude coverage while operating a motor vehicle for a person or persons designated by

name.

An operator's motor vehicle liability policy insures the named insured in the policy against loss

which results from damages arising out of the person's use of a motor vehicle not owned by

the named insured within the same territorial limits and subject to the same limits of liability

provided in this section for an owner's motor vehicle liability policy.

Any motor vehicle liability policy must state the name and address of the named insured, the

coverage afforded by the policy, the premium charged for the policy, the complete vehicle

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identification number of all vehicles covered by the policy, the policy period, and the limits of

liability.

A motor vehicle liability policy may also grant coverage in addition to the required coverage;

the additional coverage is not subject to this chapter. With respect to a policy that grants

additional coverage, the term "motor vehicle liability policy" applies only to that part of the

coverage that is required by this section. The requirements for a motor vehicle liability policy

may be fulfilled by the policies of one or more insurance carriers that meet the requirements in

combination.

A binder issued, pending the issuance of a motor vehicle liability policy must fulfill the

requirements for the policy. (28-4009)

Required Proof of Insurance

An authorized insurer must issue at least two motor vehicle insurance identification cards for a

motor vehicle or automobile liability policy. The card will state that:

➢ A person is required to possess evidence of financial responsibility within the motor

vehicle;

➢ The card meets the requirement or an image of the card that is displayed on a wireless

communication device meets the requirement;

➢ The card or an image of the card that is displayed on a wireless communication device is

satisfactory evidence if the person is asked by the department of transportation to verify

financial responsibility on the motor vehicle.

All documentary evidence issued by an insurer or an authorized agent of the insurer will

indicate:

➢ The name of the insurer as listed with the Department of Insurance.

➢ For the purpose of verifying insurance coverage, the mailing address and telephone

number of the insurer or an authorized agent of the insurer.

➢ In order to accurately verify insurance coverage, other information as required by the

Department of Transportation.

➢ If a binder is issued by an authorized agent of an insurer, the name, address and

telephone number of the agent.

This section does not apply to a commercial vehicle policy that provides automatic coverage for

additional or newly acquired vehicles until the policy’s expiration date. (28-4133)

Arizona Automobile Insurance Plan

The Director will implement a reasonable plan for the distribution of applicants for policies and

for motor vehicle liability policies who are in good faith entitled to but are unable to procure

the policies through ordinary methods among the participating companies. After a plan has

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been approved, all insurance companies authorized to issue motor vehicle liability policies in

this state must participate in the plan. Any of the following parties may appeal any ruling or

decision of the plan manager to the Director:

➢ An applicant for a policy under this section;

➢ A person insured under an assigned risk plan;

➢ An affected insurance company.

Within 10 days after notice of an order or act of the Director; an adversely affected person

may file a petition in superior court against the Director for a review of an order or act. The

court will hear the petition and may make any appropriate order or decree. (28-4008)

Uninsured/Underinsured Motorist

Uninsured and Underinsured motorist coverage must be offered in the state of Arizona,

however, the insured accept or reject the coverage. The coverage that is extended by the

producer must offer coverage in limits not less than the liability limits for bodily injury or death

contained within the policy.

Minimum limits are $15,000 BI for one person in one accident and $30,000 BI for two or more

persons injured in one accident. The selection of limits or rejection of coverage by a named

insured or applicant on a form approved by the Director is valid for all insureds under the

policy. A named insured’s selection of limits or rejection of the coverage on the form approved

by the Director constitutes the final expression of the named insured’s decision to purchase or

reject the coverage.

"Uninsured motorist coverage", subject to the terms and conditions of that coverage, means

coverage for damages due to bodily injury or death if the motor vehicle that caused the bodily

injury or death is not insured by a motor vehicle liability policy that contains at least the limits

prescribed by law. For the purposes of uninsured motorist coverage, an uninsured motorist

does not include a person who is insured under a motor vehicle liability policy that complies

with state law.

"Underinsured motorist coverage" includes coverage for a person if the sum of the limits of

liability under all bodily injury or death liability bonds and liability insurance policies applicable at

the time of the accident is less than the total damages for bodily injury or death resulting from

the accident. To the extent that the total damages exceed the total applicable liability limits, the

underinsured motorist coverage is applicable to the difference.

Uninsured and underinsured motorist coverages are separate and distinct and apply to different

accident situations. Underinsured motorist coverage will not provide coverage for a claim

against an uninsured motorist in addition to any applicable uninsured motorist coverage.

If multiple policies or coverages purchased by one insured on different vehicles apply to an

accident or claim, the insurer may limit the coverage so that only one policy or coverage,

selected by the insured, will be applicable to any one accident. If the policy does not contain a

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statement that informs the insured of the insured's right to select one policy or coverage as

required by this subsection, within 30 days after the insurer receives notice of an accident, the

insurer must notify the insured in writing of the insured's right to select one policy or coverage.

Insurers that make payments for damages to insureds for uninsured motorist coverage may

subrogate and sue for reimbursement of the total amount of the payments in the name of the

insured against any uninsured motorist responsible for the damages to the insured.

Any automobile liability or motor vehicle liability insurer that makes a payment under the

medical payments coverage of a motor vehicle insurance policy to or on behalf of any insured

for an injury that arises out of an accident that occurs after December 31, 1998 may have a lien

against any amount in excess of $5,000 that is paid to or on behalf of that insured under the

medical payments coverage of the policy for that accident. The insurer must compromise the

lien in a fair and equitable manner. In order to perfect a lien granted pursuant to this section,

within 60 days after issuing a payment that is more than $5,000 to the insured under medical

payments coverage, the insurer or the insurer's authorized representative must record in the

office of the recorder of the county in which the accident occurred a written statement that

sets forth the name and address of the insured as they appear in the records of the insurer, the

name and address of the insurer at the insurer's principal office in this state, the amount

claimed and, to the best of the insurer's knowledge, the names and addresses of all persons,

firms and corporations and their insurance carriers that the insured or the insured's legal

representative alleges are liable for damages arising from the accident. Within five days after recording the lien, the insurer must also mail a copy of the lien, postage prepaid, to the insured

and to each person, firm and corporation and their insurance carriers alleged to be liable for

damages at the address given in the statement.

The recording of the lien is notice of the lien to all persons, firms and corporations that are

liable for damages regardless of whether they are named in the lien. The recorder must

endorse on the lien recorded the date and hour of receipt and all facts that are necessary to

indicate that the lien has been recorded. The lien may be amended to reflect payments to the

insured made after the lien is recorded. Within 30 days after the lien is satisfied, the lienholder

must issue and record a release of the lien.

If an insured makes a bodily injury or death claim under uninsured or underinsured motorist

coverage based on an accident that involved an unidentified motor vehicle and no physical

contact with the motor vehicle occurred, the insured must provide corroboration that the

unidentified motor vehicle caused the accident. For the purposes of this section,

"corroboration" means any additional and confirming testimony, fact or evidence that

strengthens and adds weight or credibility to the insured's representation of the accident. (20-

259.01)

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Personal Automobile Insurance

Grounds for Cancellation/Nonrenewal

For renewal policies and policies that have been in effect for more than 60 days, the insurer

may only cancel or nonrenew for the following reasons:

➢ Nonpayment of premium;

➢ Insurance was obtained through fraudulent misrepresentation;

➢ The insured, a member of his or her household or any other person who regularly

operates the insured auto:

▪ Has had his or her driver’s license suspended or revoked;

▪ Becomes physically or mentally permanently disabled and cannot produce a

physician's certificate testifying to his or her ability to drive;

▪ Has been convicted of any of the following during the policy period or in the 36

months immediately preceding the effective date of the policy:

● Criminal negligence resulting in death, homicide or assault arising out of the

operation of an auto;

● Driving while intoxicated or under the influence of drugs;

● Leaving the scene of an accident;

● Making false statements in a license application;

● Reckless driving

(NOTE: If a driver other than the named insured has violated one of the previous

conditions, the named insured may avoid cancellation or nonrenewal by excluding this

person in writing from coverage.)

➢ Insurer is placed in rehabilitation or receivership, or the Director has suspended the

insurer's certificate of authority based on its financially hazardous condition;

➢ Insured auto is used regularly for commercial purposes;

➢ Director determines that continuation of the policy would place the insurer in violation

of state law or jeopardize its solvency. (20-1631)

Notice of Cancellation or Nonrenewal

A notice by the insurer to the policyholder of cancellation, nonrenewal or reduction in the

limits of liability or coverage for reasons other than nonpayment of premium must be

mailed to the named insured by certified mail or United States post office certificate of mailing

at least 45 days prior to the effective date of such nonrenewal, cancellation or reduction in

limits of liability or coverage. Such notice must include or be accompanied by all of the

following:

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➢ A statement in writing of the specific facts which constitute the reasons for such action

by the insurer and a notice indicating the named insured's right to complain to the

Director of the insurer's action within 10 days after receipt of the notice by the insured;

➢ Notice of the insured's possible eligibility for insurance through the automobile

assigned risk plan;

➢ A refund of unearned premium, except a premium that has been financed or remitted to

the insurer by a company that is affiliated with the insurer and that bills and collects premiums on the insurer's behalf. In the case of a notice of cancellation of a policyholder

whose premium payment is collected and remitted by the insurer's affiliate, the insurer

must refund any unearned premium to the policyholder within 10 days after the policy

cancellation;

➢ Notice of cancellation for nonpayment of premium must be mailed at least 10 days

before the policy is cancelled.

Failure of the insurer to comply with this section will invalidate any cancellation, nonrenewal or

reduction in limits of liability or coverage. If a premium has been financed, a refund of unearned

premium must be returned as provided by law. (20-1632)

Grace Period - In motor vehicle insurance policies there must be a provision that the

policyholder is entitled to a minimum grace period of seven days for the payment of any

premium due except the first payment, during which grace period the policy must continue in

full force. For the purposes of this section, an initial payment on the renewal of a policy is not a

first payment of premium. (20-1632.01(A))

Cancellation/Nonrenewal for Nonpayment of Premium AFTER the Grace Period -

For any motor vehicle insurance policy cancelled or nonrenewed for nonpayment of premium

by the insurer after the grace period, the insurer must mail a notice of cancellation or

nonrenewal to the policyholder at the policyholder's last address on record with the insurer by

first class mail. The cancellation or nonrenewal is effective on the date the notice is mailed

to the policyholder. The notice must include or be accompanied by a statement in writing of

the reasons for such action by the insurer and a notice indicating the named insured's right to

complain to the Director of the insurer's action within 10 days after receipt of the notice by

the insured.

An insurer may not cancel or refuse to renew an auto policy solely on the grounds of the

insured's age, race, color; religion, sex, or national origin or ancestry, except that an insurer

may refuse to renew a motor vehicle insurance policy if a named insured establishes a

primary residence in a state other than Arizona. (20-1632.01(B))

Subrogated Claim

If a motor vehicle claim is subject to subrogation, the insured may bring a cause of action

separate and apart from the insurer seeking recovery of damages for which the insured has not

been compensated by the insurer. Any settlement or judgment of the claim of the insured alone

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will not affect the rights of the insurer. If requested in writing by an insured, the insurer must

report to the insured the status of the subrogated claim. (20-268)

Personal Auto Policy – Arizona Selected Endorsements

Amendment of Policy Provisions – Arizona - PP 01 67

This endorsement modifies the Personal Auto policy as follows:

Cancellation and the Offer to Renew Provision in Part F – General Provisions – A grace

period of at least seven days is added.

Definitions – a definition is added for “minimum limits” to refer to the minimum limits of

liability under an auto insurance policy for Arizona.

Part A - Liability Coverage: This section is amended as follows:

➢ The exclusion for vehicles while being used as “a public or livery conveyance” is

amended so that the ownership or operation of a vehicle while it is being used in the

course of volunteer work for a tax-exempt organization is covered according to Arizona law.

➢ An exclusion is added: “We do not provide Liability Coverage for any insured for bodily

injury to you or any family member to the extent that the limits of liability for this

coverage exceed the minimum limits of liability required by the Arizona Financial

Responsibility Law”.

The “Other Insurance” provision is replaced by the following:

Insurance provided for a vehicle that is not owned by the insured is excess over any other

collectible insurance. However; the coverage is primary if:

➢ The auto is insured under a policy providing coverage to a named insured engaged in the

business of selling, repairing, servicing, delivering, testing, road testing, parking, or

storing motor vehicles. This applies only if an “insured” is:

▪ The insured is operating the vehicle; and

▪ The insured is not the person engaged in the business or employed by that

person.

Insurance provided for a vehicle that is owned by the insured is excess to that of a person

engaged in any of the businesses described previously if the accident occurs while the vehicle is

being operated by that person or that person's employee. In all other situations, the insurer

will pay its share of the loss on a pro rata basis.

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Part B - Medical Payments Coverage - The exclusion for vehicles while being used as “a

public or livery conveyance” is amended so that the ownership or operation of a vehicle while

it is being used in the course of volunteer work for a tax-exempt organization is covered

according to Arizona law.

Part D - Coverage For Damage To Your Auto - The exclusion for vehicles while being used

as “a public or livery conveyance” is amended so that the ownership or operation of a vehicle

while it is being used in the course of volunteer work for a tax-exempt organization is covered

according to Arizona law.

Part F - General Provisions - Our Right to Recover Payment Provision under Part B – Medical Payments – This provision is amended to indicate that if the insurer has paid the

claim but payment is also received from another party, the insurer is entitled to recover their

payment. To recover the payment, the insurer has the right to impose a lien for amounts in

excess of $5,000. Notice of the lien will be made in writing to any court having jurisdiction, the

insured, each person, firm and corporation (or their insurer) that the insured alleges are liable

for damages.

Part F - General Provisions – Termination Provision – This provision is amended:

➢ The policy may be cancelled during the policy period for nonpayment of premium if

notice is mailed at least eight days after the premium due date.

➢ The policy may be cancelled during the policy period for “other than” nonpayment of

premium if notice is mailed at least 10 days prior to the date that cancellation is

to take effect.

➢ If the policy has been in effect for 60 days or if it is a renewal or continuation policy, the

insurer will cancel only for nonpayment of premium, the insurance was obtained

through fraudulent misrepresentation, or any insured on the policy:

▪ Has had their driver’s license suspended or revoked during the policy period;

▪ Becomes permanently disabled either physically or mentally and that individual

does not produce a certificate from a physician or a registered nurse

practitioner testifying to that individual’s ability to operate a motor vehicle;

▪ Is or has been convicted during the 36 months immediately preceding the

effective date of the policy or during the policy period for:

● Criminal negligence resulting in death, homicide or assault, and arising out

of the operation of a motor vehicle;

● Operating a motor vehicle while intoxicated or while under the influence

of drugs;

● Leaving the scene of an accident;

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● Making false statements in an application for a driver’s license;

● Reckless driving;

▪ Unless the named insured agrees in writing to exclude as an “insured” such

person by name from the policy.

➢ The insurer may cancel the policy if they are placed in rehabilitation or receivership by

the Insurance Supervisory Official in our state of domicile or by a court of competent

jurisdiction or the Director of Insurance has suspended the Certificate of Authority of

the insurer based on their financially hazardous condition.

Uninsured Motorists Coverage – Arizona - PP 04 77

This endorsement amends the uninsured motorists coverage of the Personal Auto policy to:

➢ Further explain the coverage when the insured is struck by a hit-and-run driver. If

there is no physical contact with the hit-and-run vehicle the facts of the accident must

be proved. The person making the claim must provide corroboration that the

unidentified motor vehicle caused the accident. “Corroboration” means any additional

and confirming testimony, fact or evidence that strengthens and adds weight or

credibility to such person’s representation of the accident.

➢ Remove the exclusion when “your covered auto” is being used in the course of

volunteer work for a tax-exempt organization;

➢ Clarify that coverage is not provided under Uninsured Motorists Coverage for punitive

or exemplary damages;

➢ Replace the “Two or More Auto Policies” provision to clarify that if the insurer has

issued more than one policy that would apply to the accident, only one policy will pay.

The insured has the right to select which of the policies will provide coverage.

Underinsured Motorists Coverage – Arizona - PP 04 89

This endorsement amends the uninsured motorists coverage of the Personal Auto policy to:

➢ Allow the insured to schedule the limits of liability for bodily injury, per person, per

accident;

➢ Remove the exclusion when “your covered auto” is being used in the course of

volunteer work for a tax-exempt organization;

➢ Clarify that coverage is not provided under Uninsured Motorists Coverage for punitive

or exemplary damages;

➢ Show the limit of liability as the amount scheduled on the endorsement, not the amount

shown in the Declarations of the policy;

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➢ Replace the “Two or More Auto Policies” provision to clarify that if the insurer has

issued more than one policy that would apply to the accident, only one policy will pay.

The insured has the right to select which of the policies will provide coverage.

Miscellaneous Type Vehicles – Arizona

These endorsements provide means for insureds to schedule coverage on other types of

vehicles for liability, medical payments, uninsured motorists, collision, and other than collision

coverages. The forms cover:

➢ Golf Carts (PP 13 69)

➢ Motorcycles (PP 13 70)

➢ Motorhomes (PP 13 71)

➢ Recreational Vehicles (PP 13 72)

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Review Quiz

PLEASE NOTE: The questions you need to prepare for the state licensing exam are

contained in the Exam Simulator portion of your course. You can access this invaluable

resource by going to our homepage at: www.insurance-schools.com and clicking the red

“Logon to my Courses” button in the upper right area of the page.

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