Commerce – Week of April 7, 2011

STAFF CONTACT:  Julie T. Simon

HF 299 – Unlawful possession of or entry on personal, public utility property

HF 329 – Farm equipment dealer and suppliers agreements

HF 404 – Payments for pre-paid funeral, cemetery contracts

HF 596 – Securities regulation for local development corporations in small cities

HF 597 – External review of health care coverage decisions

FLOOR ACTION:

HF 299 deals with the unlawful possession of or entry on specified personal and public utility property. It creates an optional copper theft ordinance which a political subdivision experiencing copper theft (a.k.a. “urban mining”) may adopt. The ordinance would require a salvage dealer to maintain complete, accurate and legible records of all purchases and receipt of salvaged materials. The records would be retained by the dealer at the dealer’s place of business for a minimum of one year from the date of purchase or receipt. If a political subdivision that adopts such an ordinance issues licenses or permits to salvage dealers, the ordinance may provide for the suspension, revocation or non-renewal of the license or permit of a dealer who violates the ordinance. The bill passed the House 92-6. [4/6: 49-0]

HF 329 addresses farm equipment supplier-dealership agreements. It clarifies that the cancellation of a dealership agreement without good cause if the supplier fails to pay or credit the dealer is grounds for civil liability. Iowa law regulates terms and conditions of supplier-dealership agreements and provides a list of supplier violations and a list of causes for a supplier’s liability, including damages sustained by a dealer as a consequence of a supplier’s violation of Iowa law. If a supplier terminates a dealership agreement, the supplier must re-purchase the dealer’s equipment and parts inventory. If a supplier is found liable for damages resulting from a violation of Iowa law, the amount due the supplier bears interest at the same rate as for the failure to repurchase equipment and  a supplier’s civil liability is in addition to the re-purchase amount that must be paid to the dealer. The bill passed the House 96-0. [4/4: 49-0]

HF 404 requires that all payments made pursuant to a non-guaranteed purchase agreement for pre-need cemetery merchandise, funeral merchandise and/or funeral services, must be placed in trust or secured by a surety bond in that amount. Currently, only 80 percent of the amount of such payments is required to be placed in trust or secured by a surety bond. It also allows any seller of a purchase agreement to withdraw specified amounts of interest or income earned on amounts deposited in trust. Currently, only a specified limited liability corporation is permitted to do so. The bill is a compromise proposal brought forward by the Iowa Funeral Directors Association and the Association of Iowa Cemeteries. The bill passed the House 99-0. [4/6: 47-2 (Ragan, Schoenjahn)]

COMMITTEE ACTION:

HF 596 originated as a proposal to help small cities and towns keep local businesses like grocery and hardware stores by allowing local economic development corporations to start up either an LLC or a business corporation that raises money from local residents to operate the grocery store. Currently this can be done by co-ops, but adding these two options provides a more familiar, more flexible, less costly plan. HF 596 exempts these businesses from Iowa securities requirements, but offers shareholder protection by requiring the owners, operators and shareholders to be local residents, limiting and controlling the sale of shares, and capping the investment at $250,000. It applies to cities with a population of 2,000 or less with local participation within 10 miles of the city, and defines a local economic development corporation as a nonprofit 501 (C) (3) with at least 25 members, whose principal business office is in the local community, and at least 75 percent of its directors and officers living or doing business in the community. These limits focus on the goal of helping local residents keep businesses that provide much-needed everyday services, rather than a “high profit” investment vehicle by out-of-towners. The bill passed the House 98-0. The bill will receive additional review regarding federal regulation and civil liability related to the investments. [3/31: short form]

HF 597 is a recommendation by the Iowa Insurance Division to update Iowa’s health insurance external review law. It replaces the current chapter with all-new language, including new definitions and clear statements of processes that must be followed by companies, independent review entities and regulators, and expands the scope of health care claim denial reasons for which an independent review is possible based on the National Association of Insurance Commissioners (NAIC) model. Iowa’s original external review law was enacted in 2000 and based on the then-current NAIC model. The new NAIC model, completed last year in response to the need for an external review process for the federal Affordable Care Act, is now the platform for all states to give uniformity in providing opportunities for consumers to get insurance claim denials independently reviewed. The bill passed the House 93-0. [3/31: short form]