1.1                          A bill for an act 
  1.2             relating to insurance; regulating residual liability 
  1.3             insurance on nonowned vehicles; amending Minnesota 
  1.4             Statutes 1996, section 65B.49, subdivisions 3 and 5a. 
  1.5   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.6      Section 1.  Minnesota Statutes 1996, section 65B.49, 
  1.7   subdivision 3, is amended to read: 
  1.8      Subd. 3.  [RESIDUAL LIABILITY INSURANCE.] (1) Each plan of 
  1.9   reparation security shall also contain stated limits of 
  1.10  liability, exclusive of interest and costs, with respect to each 
  1.11  vehicle for which coverage is thereby granted, of not less than 
  1.12  $30,000 because of bodily injury to one person in any one 
  1.13  accident and, subject to said limit for one person, of not less 
  1.14  than $60,000 because of injury to two or more persons in any one 
  1.15  accident, and, if the accident has resulted in injury to or 
  1.16  destruction of property, of not less than $10,000 because of 
  1.17  such injury to or destruction of property of others in any one 
  1.18  accident. 
  1.19     (2) Under residual liability insurance the reparation 
  1.20  obligor shall be liable to pay, on behalf of the insured, sums 
  1.21  which the insured is legally obligated to pay as damages because 
  1.22  of bodily injury and property damage arising out of the 
  1.23  ownership, maintenance or use of a motor vehicle if the injury 
  1.24  or damage occurs within this state, the United States of 
  1.25  America, its territories or possessions, or Canada.  A 
  2.1   reparation obligor shall also be liable to pay sums which 
  2.2   another reparation obligor is entitled to recover under the 
  2.3   indemnity provisions of section 65B.53, subdivision 1. 
  2.4      (3) Every plan of reparation security shall be subject to 
  2.5   the following provisions which need not be contained therein: 
  2.6      (a) The liability of the reparation obligor with respect to 
  2.7   the residual liability coverage required by this clause shall 
  2.8   become absolute whenever injury or damage occurs; such liability 
  2.9   may not be canceled or annulled by any agreement between the 
  2.10  reparation obligor and the insured after the occurrence of the 
  2.11  injury or damage; no statement made by the insured or on the 
  2.12  insured's behalf and no violation of said policy shall defeat or 
  2.13  void said policy. 
  2.14     (b) The satisfaction by the insured of a judgment for such 
  2.15  injury or damage shall not be a condition precedent to the right 
  2.16  or duty of the reparation obligor to make payment on account of 
  2.17  such injury or damage. 
  2.18     (c) The reparation obligor shall have the right to settle 
  2.19  any claim covered by the residual liability insurance policy, 
  2.20  and if such settlement is made in good faith, the amount thereof 
  2.21  shall be deductible from the limits of liability for the 
  2.22  accident out of which such claim arose. 
  2.23     (d) Except as provided in subdivision 5a, A residual 
  2.24  liability insurance policy shall be excess of a nonowned vehicle 
  2.25  policy whether when the nonowned vehicle is borrowed or rented, 
  2.26  or used for business or pleasure.  A nonowned vehicle is one not 
  2.27  used or provided on a regular basis. 
  2.28     (e) Except as provided in subdivision 5a, a policy of 
  2.29  insurance or self-insurance, insuring the owner of a rented 
  2.30  vehicle, as defined in subdivision 5a, is excess of a residual 
  2.31  liability insurance policy insuring an operator of a rented 
  2.32  vehicle.  No act by the owner, operator, or insurer nor any 
  2.33  agreement among them shall render the operator's coverage excess.
  2.34     Section 2.  Minnesota Statutes 1996, section 65B.49, 
  2.35  subdivision 5a, is amended to read: 
  2.36     Subd. 5a.  [RENTAL VEHICLES.] (a) Every plan of reparation 
  3.1   security insuring a natural person as named insured, covering 
  3.2   private passenger vehicles as defined under section 65B.001, 
  3.3   subdivision 3, and pickup trucks and vans as defined under 
  3.4   section 168.011 must provide that all of the obligation for 
  3.5   damage and loss of use to a rented private passenger vehicle, 
  3.6   including pickup trucks and vans as defined under section 
  3.7   168.011, and rented trucks with a registered gross vehicle 
  3.8   weight of 26,000 pounds or less would be covered by the property 
  3.9   damage liability portion of the plan.  Every plan of reparation 
  3.10  security shall also provide primary liability coverage for 
  3.11  damages arising out of operation of a rented vehicle.  Such 
  3.12  coverage shall extend to each person who is an insured under the 
  3.13  plan.  The residual liability coverage provided by the owner of 
  3.14  the rental vehicle shall be secondary to the primary liability 
  3.15  coverage required under this paragraph unless the renter elects 
  3.16  to purchase primary liability coverage from the owner of the 
  3.17  rental vehicle or its designated agent.  This subdivision does 
  3.18  not apply to plans of reparation security covering only motor 
  3.19  vehicles registered under section 168.10, subdivision 1a, 1b, 
  3.20  1c, or 1d, or recreational equipment as defined under section 
  3.21  168.011.  The obligation of the plan must not be contingent on 
  3.22  fault or negligence.  In all cases where the plan's property 
  3.23  damage liability coverage is less than $35,000, the coverage 
  3.24  available under the subdivision must be $35,000.  Other than as 
  3.25  described in this paragraph, nothing in this section amends or 
  3.26  alters the provisions of the plan of reparation security as to 
  3.27  primacy of the coverages in this section. 
  3.28     (b) A vehicle is rented for purposes of this subdivision: 
  3.29     (1) if the rate for the use of the vehicle is determined on 
  3.30  a monthly, weekly, or daily basis; or 
  3.31     (2) during the time that a vehicle is loaned as a 
  3.32  replacement for a vehicle being serviced or repaired regardless 
  3.33  of whether the customer is charged a fee for the use of the 
  3.34  vehicle. 
  3.35     A vehicle is not rented for the purposes of this 
  3.36  subdivision if the rate for the vehicle's use is determined on a 
  4.1   period longer than one month or if the term of the rental 
  4.2   agreement is longer than one month.  A vehicle is not rented for 
  4.3   purposes of this subdivision if the rental agreement has a 
  4.4   purchase or buyout option or otherwise functions as a substitute 
  4.5   for purchase of the vehicle.  
  4.6      (c) The policy or certificate issued by the plan must 
  4.7   inform the insured of the application of the plan to private 
  4.8   passenger rental vehicles, including pickup trucks and vans as 
  4.9   defined under section 168.011, and that the insured may not need 
  4.10  to purchase additional coverage from the rental company. 
  4.11     (d) Where an insured has two or more vehicles covered by a 
  4.12  plan or plans of reparation security containing the rented motor 
  4.13  vehicle coverage required under paragraph (a), the insured may 
  4.14  select the plan the insured wishes to collect from and that plan 
  4.15  is entitled to a pro rata contribution from the other plan or 
  4.16  plans based upon the property damage limits of liability.  If 
  4.17  the person renting the motor vehicle is also covered by the 
  4.18  person's employer's insurance policy or the employer's 
  4.19  automobile self-insurance plan, the reparation obligor under the 
  4.20  employer's policy or self-insurance plan has primary 
  4.21  responsibility to pay claims arising from use of the rented 
  4.22  vehicle. 
  4.23     (e) A notice advising the insured of rental vehicle 
  4.24  coverage must be given by the reparation obligor to each current 
  4.25  insured with the first renewal notice after January 1, 1989.  
  4.26  The notice must be approved by the commissioner of commerce.  
  4.27  The commissioner may specify the form of the notice.  
  4.28     (f) When a motor vehicle is rented in this state, there 
  4.29  must be attached to the rental contract a separate form 
  4.30  containing a written notice in at least 10-point bold type, if 
  4.31  printed, or in capital letters, if typewritten, which states: 
  4.32     Under Minnesota law, a personal automobile insurance policy 
  4.33     issued in Minnesota must cover the rental of this motor 
  4.34     vehicle against damage to the vehicle and against loss of 
  4.35     use of the vehicle.  In addition, a personal automobile 
  4.36     policy issued in Minnesota must provide primary coverage 
  5.1      for liability for damages arising out of operation of a 
  5.2      rented vehicle.  Therefore, purchase of any collision 
  5.3      damage waiver or similar insurance affected in this rental 
  5.4      contract is not necessary if your policy was issued in 
  5.5      Minnesota.  In addition, purchase of any liability 
  5.6      insurance affected in this rental contract is not necessary 
  5.7      if your policy was issued in Minnesota unless you wish to 
  5.8      have coverage for liability damages above the amounts 
  5.9      specified in your policy.  
  5.10  No collision damage waiver or other insurance offered as part of 
  5.11  or in conjunction with a rental of a motor vehicle may be sold 
  5.12  unless the person renting the vehicle provides a written 
  5.13  acknowledgment that the above consumer protection notice has 
  5.14  been read and understood. 
  5.15     (g) When damage to a rented vehicle is covered by a plan of 
  5.16  reparation security as provided under paragraph (a), the rental 
  5.17  contract must state that payment by the reparation obligor 
  5.18  within the time limits of section 72A.201 is acceptable, and 
  5.19  prior payment by the renter is not required. 
  5.20     (h) Compensation for the loss of use of a damaged rented 
  5.21  motor vehicle is limited to a period no longer than 14 days. 
  5.22     (i)(1) For purposes of this paragraph, "rented motor 
  5.23  vehicle" means a rented vehicle described in paragraph (a), 
  5.24  using the definition of "rented" provided in paragraph (b). 
  5.25     (2) Notwithstanding section 170.54, an owner of a rented 
  5.26  motor vehicle is not vicariously liable for legal damages 
  5.27  resulting from the operation of the rented motor vehicle in an 
  5.28  amount greater than $100,000 because of bodily injury to one 
  5.29  person in any one accident and, subject to the limit for one 
  5.30  person, $300,000 because of injury to two or more persons in any 
  5.31  one accident, and $50,000 because of injury to or destruction of 
  5.32  property of others in any one accident, if the owner of the 
  5.33  rented motor vehicle has in effect, at the time of the accident, 
  5.34  a policy of insurance or self-insurance, as provided in section 
  5.35  65B.48, subdivision 3, covering losses up to at least the 
  5.36  amounts set forth in this paragraph.  Nothing in this paragraph 
  6.1   alters or affects the obligations of an owner of a rented motor 
  6.2   vehicle to comply with the requirements of compulsory insurance 
  6.3   through a policy of insurance as provided in section 65B.48, 
  6.4   subdivision 2, or through self-insurance as provided in section 
  6.5   65B.48, subdivision 3; or with the obligations arising from 
  6.6   section 72A.125 for products sold in conjunction with the rental 
  6.7   of a motor vehicle.  Nothing in this paragraph alters or affects 
  6.8   liability, other than vicarious liability, of an owner of a 
  6.9   rented motor vehicle. 
  6.10     (3) The dollar amounts stated in this paragraph shall be 
  6.11  adjusted for inflation based upon the consumer price index for 
  6.12  all urban consumers, known as the CPI-U, published by the United 
  6.13  States Bureau of Labor Statistics.  The dollar amounts stated in 
  6.14  this paragraph are based upon the value of that index for July 
  6.15  1995, which is the reference base index for purposes of this 
  6.16  paragraph.  The dollar amounts in this paragraph shall change 
  6.17  effective January 1 of each odd-numbered year based upon the 
  6.18  percentage difference between the index for July of the 
  6.19  preceding year and the reference base index, calculated to the 
  6.20  nearest whole percentage point.  The commissioner shall announce 
  6.21  and publish, on or before September 30 of the preceding year, 
  6.22  the changes in the dollar amounts required by this paragraph to 
  6.23  take effect on January 1 of each odd-numbered year.  The 
  6.24  commissioner shall use the most recent revision of the July 
  6.25  index available as of September 1.  Changes in the dollar 
  6.26  amounts must be in increments of $5,000, and no change shall be 
  6.27  made in a dollar amount until the change in the index requires 
  6.28  at least a $5,000 change.  If the United States Bureau of Labor 
  6.29  Statistics changes the base year upon which the CPI-U is based, 
  6.30  the commissioner shall make the calculations necessary to 
  6.31  convert from the old base year to the new base year.  If the 
  6.32  CPI-U is discontinued, the commissioner shall use the available 
  6.33  index that is most similar to the CPI-U.