Vt. Gov. Signs Bill That Will Encourage Electronic Commerce

Vermont Gov. Jim Douglas (R) yesterday signed into law a bill that will reportedly greatly enhance insurers’ and policyholders’ ability to conduct the business of insurance electronically.

The new law, formerly HB 148, enacts a version of the Uniform Electronic Transactions Act (UETA), which supports use of electronic records and signatures. The bill also includes a so-called “bomb shelter” provision to protect Vermont residents from application of the Uniform Computer Information Transactions Act (UCITA). The Alliance of American Insurers worked for passage of the bill and says it is pleased with the result.

UETA was developed in 1999 by the National Conference of Commissioners on Uniform State Laws (NCCUSL). About 40 states have a version of UETA in place to encourage use of electronic records and signatures. It assures that electronic records and signatures are not found to be invalid merely because they are in electronic form. UETA does not require any person to use electronic records or signatures, nor does it mandate the type of technology used to transmit the signature.

“This aspect of HB 148 allows insurers to conduct business electronically without prescribing a particular kind of technology,” said Frank O’Brien, vice president of the Alliance’s New England Region. “This increased ease of operation will result in cost savings and conveniences that will benefit consumers and insurers alike.”

The bill also adds the “UCITA bomb shelter” provision. UCITA also is an NCCUSL product, but the Alliance “opposes it because it gives too much power to software companies in negotiating software licenses,” O’Brien explained.

UCITA allows software licenses to name the state whose law will control a software license, regardless of whether the jurisdiction whose law is selected bears a reasonable relation to the transaction. “This ‘choice of law’ provision raises the specter that a software company could select the law of a state that has enacted UCITA (Maryland or Virginia) as the controlling law of a software license, even if those states have nothing to do with the transaction,” O’Brien noted.

“However, HB 148 prevents UCITA from being imported into states, such as Vermont, that have not enacted UCITA,” he said. “The bomb shelter provides that a contractual choice of law provision in a computer information agreement (i.e., a software license) is voided if it results in the application of UCITA.”

Vermont now joins Iowa, North Carolina and West Virginia as states with UCITA bomb shelter legislation.