Certified Final Objection No. 109 of the

Joint Legislative Committee on Administrative Rules

At its meeting on November 20, 1998, the Joint Legislative Committee on Administrative Rules (Committee) voted, pursuant to RSA 541-A: 13, IV, to enter a preliminary objection to Final Proposal 98-134 containing rules of the Insurance Department (Department) relative to home warranty insurance. The Department responded by letter dated and received on January 4, 1999.

At its meeting on April 16, 1999, the Committee voted, pursuant to RSA 541-A:13, V(d), to enter a final objection to Final Proposal 98-134. The final objection has been filed with the Director of the Office of Legislative Services for publication in the New Hampshire Rulemaking Register. The effect of a final objection is stated in RSA 541-A:13, VI:

After a final objection by the committee to a provision of a rule is filed with the director under subparagraph V(d), the burden of proof thereafter shall be on the agency in any action for judicial review or for enforcement of the provision to establish that the part objected to is within the authority delegated to the agency, is consistent with the intent of the legislature, is in the public interest, or does not have a substantial economic impact not recognized in the fiscal impact statement. If the agency fails to meet its burden of proof, the court shall declare the whole or portion of the rule objected to invalid. The failure of the committee to object to a rule shall not be an implied legislative authorization of its substantive or procedural lawfulness.

The following summarizes the bases for the Committee’s final objection:

Suspensions, Revocations and Penalties

The Committee objected that Ins 2501 in Final Proposal 98-134 is, pursuant to Committee Rule 402.02(b)(2), contrary to legislative intent, and pursuant to Committee Rules 403.01(d) and 403.02(c), contrary to the public interest by not being clear and understandable and capable of uniform enforcement.

The Committee noted that numerous sections of Ins 2501 that were contained in the existing rules and in the Final Proposal were deleted in the Objection Response. These sections contained almost all procedural and substantive requirements regarding suspension and revocation of home warranty association licenses, and for administrative fines imposed on licensees. It is the Committee’s opinion that deletion of these sections severely limits the Department’s ability to take disciplinary measures against home warranty association licensees.

Pursuant to RSA 541-A:22, I, no rule is valid or enforceable unless it has been filed in accordance with the requirements of RSA 541-A. The Committee concluded that, without properly adopted rules, if a disciplinary issue arises, the Commissioner would be forced to either make an arbitrary decision which might violate due process, or develop rules outside the rulemaking process mandated by RSA 541-A:3. Enforcement of rules established outside the statutory process would violate RSA 541-A:22, I. Additionally, the Committee concluded that if Ins 2501 does not adequately address an issue, the rules are unclear and not capable of uniform enforcement because readers cannot determine what procedures are required to be followed.

Ins 2501.04(b)

The Committee objected that Ins 2501.04(b) is, pursuant to Committee Rule 402.02(b)(2), contrary to legislative intent, and pursuant to Committee Rules 403.01(d) and 403.02(c), contrary to the public interest by not being clear and understandable and capable of uniform enforcement.

The Committee noted this provision requires home warranty associations, as a qualification for licensure, to have management "which is competent and trustworthy." The Committee concluded that the term is unclear and not capable of uniform enforcement because applicants cannot tell, from reading the rule, what is actually required. The Committee determined that the lack of specificity in the rule will result in requirements being set outside the process mandated by RSA 541-A:3, and their enforcement in violation of RSA 541-A:22, I.

Ins 2501.06(d)

The Committee objected that Ins 2501.06(d) is, pursuant to Committee Rule 402.02(b)(2), contrary to legislative intent, and pursuant to Committee Rules 403.01(d) and 403.02(c), contrary to the public interest by not being clear and understandable and capable of uniform enforcement.

This provision states, in part, "Pursuant to the provisions of RSA 405:35, the Commissioner shall examine the and if the is qualified, the Commissioner shall issue to the applicant a license as a home warranty association."[sic] The Committee determined that this sentence was unclear as worded. The Committee noted that language referring to an "application" and an "applicant" was deleted from this sentence as part of the Objection Response, but no replacement language was inserted. Additionally, the Committee determined that the reference to RSA 405:35 was also unclear, as that statute does not relate to a review or determination by the Commissioner.

Despite the missing language, the Committee determined that the rule intends the Commissioner to make a determination regarding qualification. The Committee noted that the rules do not contain the criteria by which qualification shall be determined. The Committee concluded that, without properly adopted rules, the Commissioner would be forced to either make an arbitrary decision which might violate due process, or develop rules outside the rulemaking process mandated by RSA 541-A:3. Enforcement of rules established outside the statutory process would violate RSA 541-A:22, I.

Ins 2501.10(c)

The Committee objected that Ins 2501.10(c) is, pursuant to Committee Rule 402.02(b)(2), contrary to legislative intent, and pursuant to Committee Rules 403.01(d) and 403.02(c), contrary to the public interest by not being clear and understandable and capable of uniform enforcement.

Under this provision, licensees can be required to submit "certified copies" of certain reports. The Committee concluded that the term is unclear and not capable of uniform enforcement because licensees cannot tell, from reading the rule, what is actually required. The Committee determined that the lack of specificity in the rule will result in requirements being set outside the process mandated by RSA 541-A:3, and their enforcement in violation of RSA 541-A:22, I.

Ins 2501.20

The Committee objected that Ins 2501.20 is, pursuant to Committee Rule 402.02(b)(2), contrary to legislative intent, and pursuant to Committee Rules 403.01(d) and 403.02(c), contrary to the public interest by not being clear and understandable and capable of uniform enforcement.

This provision, in addressing penalties for violations, refers to applicable suspensions and revocations. The Committee determined that since this is the only remaining reference to suspension or revocation within Ins 2501, it is unclear what is intended. As discussed previously, all other provisions referring to suspension or revocation were deleted in the Objection Response. Therefore, the Committee had concluded that, without properly adopted rules, if a disciplinary issue arises, the Commissioner would be forced to either make an arbitrary decision which might violate due process, or develop rules outside the rulemaking process mandated by RSA 541-A:3. Enforcement of rules established outside the statutory process would violate RSA 541-A:22, I.