Bill Text: AZ SB1381 | 2018 | Fifty-third Legislature 2nd Regular | Chaptered
Bill Title: Service contracts
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2018-04-05 - Chapter 150 [SB1381 Detail]
Download: Arizona-2018-SB1381-Chaptered.html
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House Engrossed Senate Bill |
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State of Arizona Senate Fifty-third Legislature Second Regular Session 2018
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CHAPTER 150
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SENATE BILL 1381 |
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AN ACT
Amending sections 20‑1095, 20‑1095.01, 20‑1095.02, 20‑1095.03 and 20‑1095.04, Arizona Revised Statutes; repealing section 20‑1095.06, Arizona Revised Statutes; amending title 20, chapter 4, article 11, Arizona Revised Statutes, by adding a new section 20‑1095.06; amending section 20‑1095.07, Arizona Revised Statutes; relating to service companies.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 20-1095, Arizona Revised Statutes, is amended to read:
20-1095. Definitions
In this article, unless the context otherwise requires:
1. "Consumer" means a buyer other than for purposes of resale of any consumer product, any person to whom the product is transferred during the duration of an implied or written warranty or service contract applicable to the product and any other person who is entitled by the terms of the warranty or service contract or under applicable federal or state law to enforce against the warrantor or service company the obligations of the warranty or service contract. A Consumer also means the buyer, owner, lessor or seller of residential property.
2. "Consumer product" means any tangible personal property which that is distributed in commerce and which that is normally used solely for personal, family or household purposes including any such property intended to be attached to or installed in any real property without regard to whether it is so attached or installed.
3. "Home warranty or home protection contract" means a service contract as defined in paragraph 8 7, subdivision (b), item (i) of this section.
4. "Mechanical reimbursement insurance" means an insurance policy issued to a motor vehicle dealer to insure the performance of a motor vehicle service contract to a consumer if the motor vehicle dealer or the service contract administrator becomes insolvent or ceases to do business. All such policies shall provide that all purchasers of motor vehicle service contracts are covered if the motor vehicle dealer, the service contract administrator or the insurer becomes insolvent or ceases to do business. an obligor to either provide reimbursement to the obligor under the terms of the insured service contracts issued or sold by the obligor or, in the event of the obligor's nonperformance, to pay on behalf of the obligor all covered contractual obligations incurred by the obligor under the terms of the insured service contracts issued or sold by the obligor.
5. "Motor vehicle service contract program" means contractual documents, including service contract forms, claim forms and other forms, used in connection with the sale of service contracts by motor vehicle dealers.
6. 5. "Residential property" means a house, townhouse, condominium or other habitable structure consisting of no more than four units which that is used principally as a residence.
7. 6. "Service company" or "obligor" means any person who performs or arranges to perform services pursuant to a service contract which the person issues that is contractually obligated to the contract holder under the terms of the service contract. Service company does not include a service contract administration or seller if the person is not contractually obligated to the contract holder under the terms of the service contract.
8. 7. "Service contract":
(a) Means a written contract for a prepaid separately stated consideration to perform, over a fixed period of time or for a specified duration, services relating to the maintenance or repair, including replacement, of:
(a) A consumer product.
(b) All or any part of the structural components, the appliances or the electrical, plumbing, heating, cooling or air conditioning systems of residential property. or agreement for a separately stated consideration for any duration to perform the repair, replacement or maintenance of a consumer product or indemnification for repair, replacement or maintenance for the operational or structural failure of a consumer product due to a defect in materials, workmanship, accidental damage from handling, a power surge or interruption or normal wear and tear, with or without additional provisions for incidental payment of indemnity under limited circumstances, including towing, rental and emergency road service and road hazard protection.
(b) Includes a contract or agreement sold for a separately stated consideration for any duration that provides for any of the following:
(i) The service, maintenance or repair, including replacement, of all or any part of structural components, appliances, electrical, plumbing, heating, cooling or air conditioning systems of residential property or indemnification for the service, maintenance, repair or replacement.
(ii) The repair or replacement of tires or wheels on a motor vehicle damaged as a result of coming into contact with road hazards including potholes, rocks, wood debris, metal parts, glass, plastic, curbs or composite scraps.
(iii) The removal of dents, dings or creases on a motor vehicle that can be repaired using the process of paintless dent removal without affecting the existing paint finish and without replacing vehicle body panels, sanding, bonding or painting.
(iv) The replacement of a motor vehicle key or key fob in the event that the key or key fob becomes inoperable or is lost or stolen.
(v) Other services or products approved by the director.
9. 8. "Service contract administrator" means an entity which agrees to provide contract forms, process claims and procure insurance for and on behalf of a motor vehicle dealer in the performance of the obligations pursuant to the motor vehicle service contract but which may not itself perform actual repairs a person who is responsible for the administration of the service contracts or the service contracts plan or who is responsible for any submission required under this article.
10. 9. "Warranty" means:
(a) Any written affirmation by a manufacturer or seller of fact or written promise made in connection with the sale of a consumer product which that relates to the nature of the material or workmanship and affirms or promises that the material or workmanship is free of defects or will meet a specified level of performance over a specified period of time.
(b) Any undertaking by a manufacturer or seller in writing in connection with the sale of a consumer product to refund, repair, replace or take other remedial action with respect to such a product if the product fails to meet the specifications set forth in the undertaking, which written affirmation, promise or undertaking becomes part of the basis of the bargain for purposes other than resale of such product and if there is no separate identifiable charge to the consumer.
Sec. 2. Section 20-1095.01, Arizona Revised Statutes, is amended to read:
20-1095.01. Service companies; permits; rules; application of laws
A. No A service company may not offer or issue a service contract unless the service company has qualified for and been issued a permit by the director.
B. Except for the registration requirements in this article applicable to service companies, service companies and related service contract sellers, administrators and other persons that market, sell or offer to sell service contracts are exempt from any licensing requirements of this title as a result of activities related to the marketing, selling or offering of service contracts.
B. C. The director shall adopt rules and regulations which that provide for the application for permit, renewal procedures, fees, refund of the unearned portion of the contract price and approval of forms. Service companies are subject to the provisions of chapter 1 of this title, except section 20-116, and to this article.
d. a provider shall provide a consumer with a specimen copy of the service contract terms and conditions prior to the time of sale upon a request by the consumer. a provider may comply with this provision by providing the consumer with a complete sample copy of the terms and conditions or by directing the consumer to a website containing a complete sample of the terms and conditions of the service contract.
Sec. 3. Section 20-1095.02, Arizona Revised Statutes, is amended to read:
20-1095.02. Exemptions; definition
A. This article, except for section 20‑1095.09, does not apply to the following:
1. Warranties issued by manufacturers, builders or sellers on the actual items, structures or improvements that they manufacture, build or sell.
2. Service contract programs if a motor vehicle manufacturer or motor vehicle dealer has financial responsibility for performance.
3. Warranties and service contracts issued by a corporation other than a manufacturer or seller in connection with consumer products that are distributed by the corporation if the issuing corporation:
(a) Is an affiliate of a consumer products manufacturer.
(b) By March 1 of each year submits to the director an independently audited financial statement in which at least one officer of the issuing corporation attests and a certified public accountant certifies that the issuing corporation has and maintains a net worth in excess of one hundred million dollars. Any information, documents and copies that are obtained by or disclosed to the director or any other person pursuant to this subdivision are not available for public inspection, except that the director may use this information in any proceeding relating to this article.
4. A service company that issues a service contract to persons other than a consumer.
5. A service company that is in the business of selling or servicing any one of the following, if the service contract only covers the actual item the service company sells:
(a) Appliances or electronic equipment, or both.
(b) Residential heating, cooling or air conditioning systems.
(c) Mechanical equipment, other than motor vehicles or their components.
6. A service company only to the extent that it is in the business of selling or servicing directly, or through other retailers, cell phones and other electronic personal communications devices and accessories.
7. Any person licensed pursuant to title 32, chapter 10, or not required to be licensed because exempt pursuant to section 32‑1121, subsection A, paragraph 13 whose service contract only covers the actual items, structures or improvements that the person installs, constructs or builds.
8. A maintenance agreement of limited duration that provides for scheduled maintenance only and does not include repair or replacement.
B. The director may employ independent examiners pursuant to section 20‑156 to review and analyze the financial statements that are submitted pursuant to subsection A, paragraph 3 of this section.
C. A motor vehicle dealer who is licensed under title 28, chapter 10, who sells a service contract program approved by the director pursuant to section 20‑1095.06 and who notifies the director pursuant to section 20‑1095.07 shall be exempt from the remainder of the requirements of this article.
C. the types of agreements referred to in subsection A of this section are not insurance and are not required to comply with the insurance laws of this state unless a provision is made expressly applicable in this article.
D. For the purposes of this section, "affiliate" means a corporation that is owned or controlled by or is under common control with a manufacturer.
Sec. 4. Section 20-1095.03, Arizona Revised Statutes, is amended to read:
20-1095.03. Qualifications for permit
A. The director shall not issue a permit to a service company unless all of the following conditions are met:
1. If the applicant is a corporation, The applicant is a solvent corporation incorporated and organized under the laws of this state or another state, district, territory or possession of the United States.
2. The applicant furnishes proof as necessary to the director that the directors and management of the service company are competent and trustworthy and are capable of successfully managing the service company's affairs in compliance with law.
3. The applicant either:
(a) Files cash, alternatives to cash or a surety bond or an alternative to a surety bond as required by section 20‑1095.04.
(b) Is insured by a mechanical reimbursement insurance policy issued by an insurer authorized to do business in this state and provides a copy of the policy to the director.
4. The applicant is in compliance and continues to be in compliance with all applicable laws.
5. The applicant pays the initial fee prescribed in section 20‑167.
B. This article does not require the director to determine the actual financial condition or claims practices of any service company, motor vehicle dealer or service contract administrator. The approval of a service contract program or the issuance of a service company permit indicates only that the entity appears to be financially sound and to have satisfactory claims practices and that the director has no credible evidence to the contrary.
Sec. 5. Section 20-1095.04, Arizona Revised Statutes, is amended to read:
20-1095.04. Filing of surety bond, securities or bonds
A. To assure ensure faithful performance of its obligations to contract holders, every service company electing to comply with section 20‑1095.03, subsection A, paragraph 3, subdivision (a) shall, prior to before the issuance of a permit, shall file with or for the benefit of the director cash or alternatives to cash which a surety bond that complies with subsection C of this section and that at all times have has a value of at least one hundred thousand dollars.
B. The service company may file alternatives to cash such as certificates of deposit purchased from a financial institution licensed to conduct business in this state a surety bond in the form of securities eligible for the INVESTMENT OF capital funds of domestic insurers under this title or bonds of the United States government.
C. In lieu of the cash or alternatives to cash required by this section, the applicant may file with the director A surety bond in the amount required by that is filed under subsection A which is of this section must be issued by a surety insurer licensed to do business in this state and which is must be for the same purpose as required in subsection A of this section. The surety bond is subject to the approval of the director. The surety insurer shall not cancel the bond or subject the bond to cancellation unless thirty days' written notice is given to the director.
D. If alternatives to cash are made in the form of certificates of deposit or a securities or bonds of the United States government are filed as an alternative to a surety bond, it the securities or bonds shall be irrevocably pledged to the director. The service company is entitled to any accrued interest earned from the alternatives to cash securities or bonds.
E. The service company shall not impair or encumber the cash, alternatives to cash or surety bond, securities or bonds of the United States government filed under this section and shall pledge the cash, alternatives to cash or surety bond same to the director. The service company shall maintain the cash, alternatives to cash or surety bond, securities or bonds of the United States government in force until such time as all of the service company's contractual obligations to contract holders are fulfilled.
F. Notwithstanding sections 20‑116 and 35‑155, a service company may not use a cash deposit to comply with this section.
Sec. 6. Repeal
Section 20-1095.06, Arizona Revised Statutes, is repealed.
Sec. 7. Title 20, chapter 4, article 11, Arizona Revised Statutes, is amended by adding a new section 20-1095.06, to read:
20-1095.06. Required service contract disclosures
A. Each service company holding a service company permit shall submit all service contract forms to the director for approval at least thirty days before the proposed effective date of the form. A form may not be used until it is approved by the director or has been on file with the director more than thirty days.
B. The director may not approve a service contract if:
1. The service contract may be canceled or voided due to acts or omissions of the service company or its assignees or subcontractors for their failure to provide correct information or their failure to perform the services or repairs provided in a timely, competent and workmanlike manner.
2. Parts or components repaired or replaced under the service contract are excluded.
3. The service contract may be canceled or voided by the service company or its representatives for any of the following reasons:
(a) Preexisting conditions that were known or that reasonably should have been known by the service company or the person selling the service contract on the service company's behalf.
(b) Prior use or unlawful acts relating to the product.
(c) Misrepresentation by either the service company or the person selling the service contract on the service company's behalf.
C. Service contracts may not be issued, sold or offered for sale in this state unless the service company has provided both:
1. A receipt for or other written evidence of the purchase of the service contract to the contract holder.
2. A copy of the service contract to the service contract holder within a reasonable period of time from the date of purchase.
D. Service contracts that are marketed, sold, offered for sale, issued, made, proposed to be made or administered in this state shall be written, printed or typed in clear, understandable language that is easy to read and shall disclose the following, as applicable:
1. Service contracts that are insured under a mechanical reimbursement insurance policy pursuant to section 20‑1095.03, subsection A, paragraph 3, subdivision (b) shall state the name and address of the insurer and contain a statement in substantially the following form: "Obligations of the obligor under this service contract are insured under a mechanical service contract reimbursement insurance policy".
2. Service contracts that are not insured under a reimbursement insurance policy pursuant to section 20‑1095.03, subsection A, paragraph 3, subdivision (b) shall contain a statement in substantially the following form: "Obligations of the obligor under this service contract are backed by the full faith and credit of the obligor".
3. Service contracts shall state the name and address of the obligor and shall identify an administrator if different from the obligor, the service contract seller and the service contract holder to the extent that the name of the service contract holder has been furnished by the service contract holder. The identities of these parties are not required to be preprinted on the service contract and may be added to the service contract at the time of sale.
4. Service contracts shall state the total purchase price of the service contract. The purchase price is not required to be preprinted on the service contract and may be negotiated at the time of sale with the service contract holder.
5. Service contracts shall state the existence of a deductible amount, if applicable.
6. Service contracts shall specify the merchandise and services to be provided and any limits, exceptions or exclusions. Exclusions from coverage shall be in bold‑faced type. Service contracts may, but are not required to, cover damage resulting from rust, corrosion or damage caused by a noncovered part or system.
7. Service contracts covering automobiles shall state whether the use of nonoriginal manufacturers' parts is allowed.
8. Service contracts shall state any restrictions governing the transferability of the service contract, if applicable.
9. Service contracts shall state the terms, restrictions or conditions governing cancellation of the service contract before the termination or expiration date of the service contract by either the service company or the service contract holder. At a minimum, a service contract shall provide for a pro rata refund after deducting for benefits paid and administrative expenses associated with the cancellation. The administrative expenses may not exceed ten percent of the gross amount paid by the service contract holder for the service contract.
10. Service contracts shall set forth all of the obligations and duties of the service contract holder, including the duty to protect against any further damage and any requirement to follow owner's manual.
11. Service contracts shall disclose the material acts or omissions of the contract holder that cancel or void coverage, if any.
12. A service contract may not exclude preexisting conditions if such conditions were known or should reasonably have been known by the service company or the person selling the service contract on the service company's behalf.
e. brochures and other advertising or marketing materialS are not required to be filed with or approved by the director.
Sec. 8. Section 20-1095.07, Arizona Revised Statutes, is amended to read:
20-1095.07. Sale of unapproved service contract; violation; classification
A. Any licensed motor vehicle dealer, acting through its regularly employed sales personnel, may sell any motor vehicle service contract program approved pursuant to section 20‑1095.06.
B. Prior to commencing the sale of any approved service contract program, the licensed motor vehicle dealer shall, by certified mail, inform the director of the intent to sell the identified program. No fee is required for such notification.
C. The director shall maintain a file of all approved motor vehicle service contract programs and a list of the motor vehicle dealers selling a specific program.
D. A. A person who sells an unapproved motor vehicle service contract program is guilty of a class 2 misdemeanor.
E. B. A motor vehicle service contract is not invalid solely by reason of not being approved as required by this article.
F. The director may adopt rules and regulations prescribing the form of application for approval of a motor vehicle service contract program, the form of surety bond, the criteria for the policy of mechanical reimbursement insurance, refund of the unearned portion of the contract price and to provide procedures for hearings in connection with the disapproval of a motor vehicle service contract program.
APPROVED BY THE GOVERNOR APRIL 5, 2018.
FILED IN THE OFFICE OF THE SECRETARY OF STATE APRIL 5, 2018.
