Indiana: Senate Enrolled Act 40 Effective Date Clarification

Information shared from Indiana Big I

The following is an article from Stephen Duff,
 executive vice president, Indiana Big I, explaining Indiana Senate Enrolled Act 40.  

The Insurance Institute of Indiana (III), National Association of Mutual Insurance Companies (NAMIC), Property Casualty Insurers Association of America (PCI), American Insurance Association (AIA), Independent Insurance Agents of Indiana (Big I) and Professional Insurance Agents of Indiana (PIA), have been working to address an issue that was inadvertently created upon the passage of Senate Enrolled Act (SEA) 40, increasing the state minimums on property loss or damage from $10,000 to $25,000. SEA 40 currently states an effective date of July 1, 2017, which allows companies the time to update policies and systems. However, what became clear once the legislation passed was the unintended ambiguity of the effective date. Are the increases applicable to policies issued prior to July 1, 2017?

The trade associations have worked with the Indiana Department of Insurance (IDOI) and Bureau of Motor Vehicles in an effort to provide guidance to the companies. Both agencies agree that policies issued or renewed after July 1, 2017, are the targeted group, but it is becoming clear that no matter what is done on the regulatory side, it is uncertain how a court would interpret the language if it were challenged.

The IDOI has posted this summary of SEA 40 and a general guideline:

SEA 40 Motor Vehicle Responsibility
PL 124-2016; Effective 7/1/2017
Increases the motor vehicle financial responsibility requirements for property damage liability to $25,000. Code Citations Affected: IC 9-25-2-3; IC 9-25-4-5; IC 9-25-4-10

PLEASE NOTE: Many companies have asked the Department of Insurance whether the provisions of PL 124-2016 apply only to policies issued on or after the effective date of July 1, 2017. The Department has had discussions with the Bureau of Motor Vehicles, and the provisions apply to anyone operating a motor vehicle on or after July 1, 2017, regardless of when the operator's policy renews. How the company implements the new law is a company decision; however, the Department reminds all companies of their duty of good faith toward insureds.

The trade associations will be working to provide a legislative fix this coming 2017 session, with the intent to provide clarity in the defined effective date. Rep. Matt Lehman (R-Berne), former House Insurance Committee Chair and current House Majority Floor Leader, has stated his intentions to author legislation ensuring any policies not updated before July 1, 2017, are not annexed by the effective date, but rather only policies issued or renewed after July 1, 2017, are impacted. This is obviously not the preferred fix since it puts the status of the required limits in limbo, but unfortunately the current situation cannot change until the legislative session begins.