Senate
File
619
-
Enrolled
Senate
File
619
AN
ACT
MODIFYING
PROVISIONS
APPLICABLE
TO
CERTAIN
SERVICE
CONTRACT
PROVIDERS
REGULATED
BY
THE
COMMISSIONER
OF
INSURANCE,
PROVIDING
FEES,
MAKING
PENALTIES
APPLICABLE,
MAKING
AN
APPROPRIATION,
AND
INCLUDING
EFFECTIVE
DATE
PROVISIONS.
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
Section
1.
Section
523C.1,
Code
2019,
is
amended
to
read
as
follows:
523C.1
Definitions.
As
used
in
this
chapter
,
unless
the
context
otherwise
requires:
1.
“Commissioner”
means
the
commissioner
of
insurance.
2.
“Custodial
account”
means
an
account
established
by
agreement
between
a
licensed
service
company
and
a
custodian
under
section
523C.5
.
3.
“Custodial
agreement”
means
an
agreement
entered
into
between
a
licensed
service
company
and
a
custodian
under
section
523C.5
.
4.
“Custodian”
means
an
institution
meeting
the
requirements
established
by
the
commissioner
which
institution
has
entered
into
a
custodial
agreement
or
reserve
account
agreement
with
a
licensed
service
company.
5.
“Depository”
means
an
institution
designated
by
the
commissioner
as
an
authorized
custodian
for
purposes
of
sections
523C.5
and
523C.11
.
Senate
File
619,
p.
2
6.
2.
“Licensed
service
company”
means
a
service
company
which
is
licensed
by
the
commissioner
pursuant
to
this
chapter
.
3.
“Maintenance
agreement”
means
a
contract
of
any
duration
that
provides
for
scheduled
maintenance
to
property.
4.
“Motor
vehicle”
means
any
self-propelled
vehicle
subject
to
registration
under
chapter
321.
5.
“Motor
vehicle
manufacturer”
means
any
of
the
following:
a.
A
person
who
manufactures
or
produces
motor
vehicles
and
sells
the
motor
vehicles
under
the
person’s
trade
name
or
label.
b.
A
person
who
is
a
wholly
owned
subsidiary
of
any
person
who
manufactures
or
produces
motor
vehicles.
c.
A
person
who
holds
a
one
hundred
percent
ownership
interest
in
another
person
who
manufactures
or
produces
motor
vehicles.
d.
A
person
who
does
not
manufacture
or
produce
motor
vehicles,
but
for
which
motor
vehicles
are
sold
under
the
person’s
trade
name
or
label.
e.
A
person
who
manufactures
or
produces
motor
vehicles,
but
the
motor
vehicles
are
sold
under
the
trade
name
or
label
of
another
person.
f.
A
person
who
does
not
manufacture
or
produce
motor
vehicles,
but
who
licenses
the
use
of
the
person’s
trade
name
or
label
to
another
person
pursuant
to
a
written
contract,
who
then
sells
motor
vehicles
under
the
trade
name
or
label
of
the
licensor.
6.
“Motor
vehicle
service
contract”
means
a
contract
or
agreement
sold
for
separate
consideration
for
a
specific
duration
that
undertakes
to
perform
the
repair,
replacement,
or
maintenance
of
a
motor
vehicle,
or
indemnification
for
such
repair,
replacement,
or
maintenance,
for
the
operation
or
structural
failure
of
a
motor
vehicle
due
to
a
defect
in
materials,
workmanship,
or
normal
wear
and
tear,
with
or
without
additional
provisions
for
the
incidental
payment
of
indemnity
under
limited
circumstances,
including
but
not
limited
to
motor
vehicle
towing,
rental,
emergency
road
service,
and
road
hazard
protection.
“Motor
vehicle
service
contract”
also
includes
a
contract
or
agreement
sold
for
separate
consideration
for
a
specific
duration
that
provides
Senate
File
619,
p.
3
for
any
of
the
following
services
or
products:
a.
The
repair
or
replacement
of
motor
vehicle
tires
or
wheels
that
are
damaged
as
a
result
of
contact
with
road
hazards,
including
but
not
limited
to
potholes,
rocks,
wood
debris,
metal
parts,
glass,
plastic,
curbs,
or
composite
scraps.
b.
The
removal
of
dents
or
creases
on
a
motor
vehicle
under
a
process
that
does
not
use
paint
or
affect
the
existing
paint
finish,
and
without
sanding,
bonding,
or
replacing
motor
vehicle
body
panels.
c.
The
repair
or
replacement
of
motor
vehicle
windshields
that
are
damaged
as
a
result
of
contact
with
road
hazards.
d.
The
replacement
of
motor
vehicle
keys
or
key
fobs
in
the
event
that
such
device
becomes
inoperable,
lost,
or
stolen.
e.
Any
other
service
or
product
approved
by
the
commissioner.
7.
“Premium”
means
the
consideration
paid
to
an
insurer
for
a
reimbursement
insurance
policy.
7.
8.
“Record”
means
the
same
as
defined
in
section
516E.1
information
stored
or
preserved
in
any
medium,
including
in
an
electronic
or
paper
format.
A
“record”
includes
but
is
not
limited
to
documents,
books,
publications,
accounts,
correspondence,
memoranda,
agreements,
computer
files,
film,
microfilm,
photographs,
and
audio
or
visual
tapes
.
9.
“Reimbursement
insurance
policy”
means
a
contractual
liability
insurance
policy
issued
to
a
service
company
that
either
provides
reimbursement
to
a
service
company
under
the
terms
of
insured
service
contracts
issued
or
sold
by
the
service
company
or,
in
the
event
of
nonperformance
by
the
service
company,
pays,
on
behalf
of
the
service
company,
all
covered
contractual
obligations
incurred
by
the
service
company
under
the
terms
of
the
insured
service
contracts
issued
or
sold
by
the
service
company.
8.
“Reserve
account
agreement”
means
an
agreement
entered
into
between
a
licensed
service
company
and
a
depository
under
section
523C.11
.
9.
10.
“Residential
service
contract”
means
a
contract
or
agreement
between
a
residential
customer
and
a
service
company
which
undertakes,
for
a
predetermined
fee
and
for
a
specified
Senate
File
619,
p.
4
any
period
of
time,
to
service,
maintain,
repair,
or
replace
,
or
indemnify
expenses
for
all
or
any
part
of
the
operational
or
structural
components,
appliances,
or
electrical,
mechanical,
plumbing,
heating,
cooling,
or
air-conditioning
systems
of
residential
property
containing
not
more
than
four
dwelling
units
in
the
state
which
fails
due
to
normal
wear
or
tear
or
inherent
defect.
“Residential
service
contract”
also
includes
a
contract
which
provides
for
the
service,
repair,
replacement,
or
maintenance
of
property
for
damage
resulting
from
power
surges,
roof
leakage,
and
accidental
damage
.
10.
11.
“Service
company”
means
a
person
who
issues
and
performs,
or
arranges
to
perform,
is
contractually
obligated
to
perform
services
pursuant
to
a
motor
vehicle
service
contract
or
residential
service
contract.
12.
“Service
contract”
means
a
motor
vehicle
service
contract
or
residential
service
contract.
13.
“Warranty”
means
a
statement
made
solely
by
the
manufacturer,
importer,
or
seller
of
property
or
services
without
consideration,
that
is
not
negotiated
or
separated
from
the
sale
of
the
product
and
is
incidental
to
the
sale
of
the
product,
and
that
guarantees
indemnity
for
defective
parts,
mechanical
or
electrical
breakdown,
and
labor
or
other
remedial
measures,
such
as
repair
or
replacement
of
the
property
or
repetition
of
services.
Sec.
2.
Section
523C.2,
Code
2019,
is
amended
to
read
as
follows:
523C.2
License
required.
1.
A
person
shall
not
issue
a
,
offer
for
sale,
or
sell
a
motor
vehicle
service
contract
or
residential
service
contract
or
undertake
or
arrange
to
perform
services
pursuant
to
a
residential
service
contract
in
this
state
unless
the
person
is
a
corporation
or
other
form
of
organization
approved
by
the
commissioner
by
rule
and
is
a
licensed
as
a
service
company
under
this
chapter
.
2.
The
licensure
requirements
of
this
chapter
shall
not
apply
to
any
person
who
provides
support
services
or
works
under
the
direction
of
a
licensed
service
company
in
connection
with
the
issuance,
offer
for
sale,
or
sale
of
a
service
contract
in
this
state,
including
but
not
limited
to
a
person
Senate
File
619,
p.
5
who
provides
marketing,
administrative,
or
technical
support.
Sec.
3.
Section
523C.3,
Code
2019,
is
amended
to
read
as
follows:
523C.3
Application
for
license.
1.
Application
for
a
license
as
a
service
company
shall
be
made
to
and
filed
with
the
commissioner
on
forms
approved
by
the
commissioner
and
shall
include
all
of
the
following
information:
a.
The
name
and
principal
address
of
the
applicant.
b.
The
state
of
incorporation
of
the
applicant.
c.
The
name
and
address
of
the
applicant’s
registered
agent
for
service
of
process
within
Iowa.
d.
A
certificate
of
good
standing
for
the
applicant
issued
by
the
secretary
of
state
and
dated
not
more
than
thirty
days
prior
to
the
date
of
the
application.
e.
Evidence
of
compliance
with
section
523C.5.
f.
A
copy
of
each
motor
vehicle
service
contract
form
to
be
used
or
issued
in
this
state,
if
applicable.
g.
A
copy
of
each
residential
service
contract
form
to
be
used
or
issued
in
this
state,
if
applicable.
2.
The
application
shall
be
accompanied
by
all
of
the
following:
a.
A
certificate
of
good
standing
for
the
applicant
issued
by
the
secretary
of
state
and
dated
not
more
than
thirty
days
prior
to
the
date
of
the
application.
b.
A
surety
bond,
a
copy
of
the
receipt
from
the
treasurer
of
state
that
a
cash
deposit
has
been
made,
or
a
copy
of
a
custodial
agreement
as
provided
in
section
523C.5
.
c.
A
copy
of
the
most
recent
financial
statement,
including
balance
sheets
and
related
statements
of
income,
of
the
applicant,
prepared
in
accordance
with
generally
accepted
accounting
principles,
audited
by
a
certified
public
accountant
and
dated
not
more
than
twelve
months
prior
to
the
date
of
the
application.
d.
An
affidavit
of
an
authorized
officer
of
the
service
company
stating
the
number
of
contracts
issued
by
the
service
company
in
the
preceding
calendar
year,
and
stating
that
the
net
worth
of
the
service
company
satisfies
the
requirements
of
section
523C.6
.
Senate
File
619,
p.
6
e.
a.
A
license
fee
in
the
amount
of
two
five
hundred
fifty
dollars.
b.
If
applicable,
a
fee
in
the
amount
of
fifty
dollars
for
each
motor
vehicle
service
contract
form
submitted
in
an
application
as
provided
in
subsection
1,
paragraph
“f”
.
3.
If
the
application
contains
the
required
information
and
is
accompanied
by
the
items
set
forth
in
subsection
2
,
and
if
the
net
worth
requirements
of
section
523C.6
are
satisfied,
as
evidenced
by
the
audited
financial
statements,
the
commissioner
shall
issue
the
license.
If
the
form
of
application
is
not
properly
completed
or
if
the
required
accompanying
documents
are
not
furnished
or
in
proper
form,
the
commissioner
shall
not
issue
the
license
and
shall
give
the
applicant
written
notice
of
the
grounds
for
not
issuing
the
license.
A
notice
of
license
denial
shall
be
accompanied
by
a
refund
of
fifty
percent
of
the
fee
submitted
with
the
application.
4.
Fees
collected
under
this
section
shall
be
deposited
as
provided
in
section
505.7
523C.24
.
Sec.
4.
Section
523C.4,
Code
2019,
is
amended
to
read
as
follows:
523C.4
License
expiration
and
renewal.
1.
Each
license
issued
under
this
chapter
shall
expire
on
June
30
next
be
valid
for
a
period
of
one
year
and
shall
be
renewed
by
August
31
of
each
year
following
the
date
of
issuance.
If
the
service
company
maintains
in
force
the
surety
bond
described
in
section
523C.5
and
if
its
license
is
not
subject
to
or
under
suspension
or
revocation
under
section
523C.9
,
its
license
shall
be
renewed
by
the
commissioner
upon
receipt
by
the
commissioner
on
or
before
the
expiration
date
of
a
renewal
application
accompanied
by
the
items
required
by
section
523C.3,
subsection
2
,
paragraphs
“b”,
“c”,
“d”,
and
“e”
,
and
section
523C.15
.
2.
An
application
for
renewal
shall
include
the
information
required
for
an
initial
license
as
described
in
section
523C.3,
subsection
1.
3.
The
renewal
application
shall
be
accompanied
by
all
of
the
following:
a.
A
license
renewal
fee
in
the
amount
of
five
hundred
dollars.
Senate
File
619,
p.
7
b.
If
applicable,
a
fee
in
the
amount
of
three
percent
of
the
aggregate
amount
of
payments
the
licensee
received
for
the
sale
or
issuance
of
residential
service
contracts
in
this
state
during
the
preceding
fiscal
year,
provided
that
such
fee
shall
be
no
less
than
one
hundred
dollars
and
no
greater
than
fifty
thousand
dollars.
c.
If
applicable,
a
fee
in
the
amount
of
fifty
dollars
for
each
motor
vehicle
service
contract
form
submitted
in
a
renewal
application
as
provided
in
section
523C.3,
subsection
1,
paragraph
“f”
.
d.
Information
regarding
the
number
of
motor
vehicle
service
contracts
or
residential
service
contracts
issued
during
the
preceding
fiscal
year,
the
number
canceled
or
expired
during
the
preceding
fiscal
year,
the
number
in
effect
at
the
end
of
the
preceding
fiscal
year,
and
the
amount
of
service
contract
fees
received
during
the
preceding
fiscal
year.
4.
If
the
commissioner
denies
renewal
of
the
license,
the
denial
shall
be
in
writing
setting
forth
the
grounds
for
denial
and
shall
be
accompanied
by
a
refund
of
fifty
percent
of
the
license
renewal
fee.
5.
In
addition
to
the
annual
license
renewal
requirements
as
provided
in
this
section,
a
licensee
shall
report
to
the
commissioner
any
material
change
in
information
submitted
by
the
licensee
in
its
initial
license
application
which
has
not
been
reported
to
the
commissioner,
including
a
change
in
contact
information,
a
change
in
ownership,
or
any
other
change
which
substantially
affects
the
licensee’s
operations
in
this
state.
Sec.
5.
Section
523C.5,
Code
2019,
is
amended
by
striking
the
section
and
inserting
in
lieu
thereof
the
following:
523C.5
Financial
responsibility
——
demonstration
requirements.
In
order
to
assure
the
faithful
performance
of
a
service
company’s
obligations
to
its
contract
holders
in
this
state,
a
licensed
service
company
shall
demonstrate
financial
responsibility
to
the
commissioner
by
satisfying
one
of
the
following,
as
evidenced
by
the
service
company:
1.
Insuring
all
motor
vehicle
service
contracts
and
residential
service
contracts
offered
for
sale
in
this
state
Senate
File
619,
p.
8
under
a
reimbursement
insurance
policy
that
complies
with
section
523C.6.
2.
Doing
both
of
the
following:
a.
Maintaining
a
funded
reserve
account
for
the
service
company’s
obligations
under
any
issued
and
outstanding
service
contracts
in
this
state,
in
an
amount
no
less
than
forty
percent
of
gross
consideration
received,
less
claims
paid,
for
the
sale
of
all
service
contracts
issued
and
in
force
in
this
state.
The
reserve
account
shall
be
subject
to
examination
and
review
by
the
commissioner.
b.
Placing
in
trust
with
the
commissioner
a
financial
security
deposit
in
an
amount
no
less
than
five
percent
of
the
gross
consideration
received
by
the
service
company,
less
claims
paid,
for
the
sale
of
all
motor
vehicle
service
contracts
and
residential
service
contracts
issued
and
in
force
in
this
state,
but
not
less
than
twenty-five
thousand
dollars,
consisting
of
one
of
the
following:
(1)
Cash.
(2)
Securities
of
the
type
eligible
for
deposit
by
insurers
authorized
to
transact
business
in
this
state.
(3)
Certificates
of
deposit.
(4)
A
surety
bond
issued
by
an
authorized
surety
company.
(5)
Another
form
of
security
as
prescribed
by
the
commissioner
by
rule.
3.
Doing
both
of
the
following:
a.
Maintaining,
on
its
own
or
together
with
a
parent
company,
a
minimum
net
worth
or
stockholders’
equity
of
one
hundred
million
dollars
or
more.
b.
Upon
request
from
the
commissioner,
providing
either:
(1)
A
copy
of
the
service
company’s
financial
statements.
(2)
If
the
service
company’s
financial
statements
are
consolidated
with
those
of
its
parent
company,
a
copy
of
the
parent
company’s
most
recent
form
10-K
or
form
20-F
filed
with
the
federal
securities
and
exchange
commission
within
the
last
calendar
year,
or
if
the
parent
company
does
not
file
with
the
federal
securities
and
exchange
commission,
a
copy
of
the
parent
company’s
audited
financial
statements
showing
a
net
worth
of
at
least
one
hundred
million
dollars.
If
the
service
company’s
financial
statements
are
consolidated
with
those
of
Senate
File
619,
p.
9
its
parent
company,
the
service
company
shall
also
provide
a
copy
of
a
written
agreement
by
the
parent
company
guaranteeing
the
obligations
of
the
service
company
under
motor
vehicle
service
contracts
and
residential
service
contracts
issued
and
outstanding
by
the
service
company
in
this
state.
Sec.
6.
Section
523C.6,
Code
2019,
is
amended
by
striking
the
section
and
inserting
in
lieu
thereof
the
following:
523C.6
Reimbursement
insurance
policy
requirements
——
insurer
qualifications.
1.
Requirements.
A
reimbursement
insurance
policy
insuring
a
motor
vehicle
service
contract
or
residential
service
contract
issued,
sold,
or
offered
for
sale
in
this
state
shall
provide
for
all
of
the
following:
a.
The
reimbursement
insurance
policy
shall
obligate
the
insurer
that
issued
such
policy
to
reimburse
or
pay
on
behalf
of
the
service
company
any
covered
sums
that
the
service
company
is
legally
obligated
to
pay
according
to
the
terms
of
the
contract
or,
in
the
event
of
nonperformance
by
the
service
company,
provide
the
service
which
the
service
company
is
legally
obligated
to
perform
according
to
the
terms
of
the
service
contract,
which
shall
be
conspicuously
stated
in
the
reimbursement
insurance
policy.
b.
The
reimbursement
insurance
policy
shall
entitle
a
service
contract
holder
to
make
a
claim
directly
against
the
insurance
policy
if
the
service
company
fails
to
pay
or
provide
service
on
a
claim
within
sixty
days
after
proof
of
loss
is
filed
with
the
service
company.
c.
The
insurer
that
issued
a
reimbursement
insurance
policy
shall
be
deemed
to
have
received
the
premiums
upon
the
payment
of
the
total
purchase
price
of
the
service
contract
by
the
service
contract
holder.
2.
Termination.
As
applicable,
an
insurer
that
issued
a
reimbursement
insurance
policy
shall
not
terminate
the
policy
unless
a
written
notice
has
been
received
by
the
commissioner
and
by
each
applicable
service
company.
The
notice
shall
fix
the
date
of
termination
at
a
date
no
earlier
than
ten
days
after
receipt
of
the
notice
by
the
commissioner.
The
termination
of
a
reimbursement
insurance
policy
shall
not
reduce
the
issuer’s
responsibility
for
a
service
contract
Senate
File
619,
p.
10
issued
by
an
insured
service
company
prior
to
the
date
of
termination.
3.
Indemnification
or
subrogation.
This
section
does
not
prevent
or
limit
the
right
of
an
insurer
that
issued
a
reimbursement
insurance
policy
to
seek
indemnification
from
or
subrogation
against
a
service
company
if
the
insurer
pays
or
is
obligated
to
pay
a
service
contract
holder
sums
that
the
service
company
was
obligated
to
pay
pursuant
to
the
provisions
of
a
service
contract
or
pursuant
to
a
contractual
agreement.
4.
Premium
tax
liability.
Payments
for
the
purchase
price
of
a
service
contract
by
a
service
contract
holder
shall
be
exempt
from
premium
tax.
However,
premiums
shall
be
subject
to
premium
tax.
5.
Qualifications
of
insurer.
An
insurer
issuing
a
reimbursement
insurance
policy
under
this
chapter
shall
be
authorized,
registered,
or
otherwise
permitted
to
transact
business
in
this
state
and
shall
meet
one
of
the
following
requirements:
a.
At
the
time
the
policy
is
filed
with
the
commissioner,
and
continuously
thereafter,
the
insurer
maintains
surplus
as
to
policyholders
and
paid-in
capital
of
at
least
fifteen
million
dollars
and
annually
files
copies
of
the
insurer’s
financial
statements,
national
association
of
insurance
commissioners
annual
statement,
and
actuarial
certification,
if
required
and
filed
in
the
insurer’s
state
of
domicile.
b.
At
the
time
the
policy
is
filed
with
the
commissioner
and
continuously
thereafter,
the
insurer
does
all
of
the
following:
(1)
Maintains
surplus
as
to
policyholders
and
paid-in
capital
of
less
than
fifteen
million
dollars
but
at
least
ten
million
dollars.
(2)
Demonstrates
to
the
satisfaction
of
the
commissioner
that
the
insurer
maintains
a
ratio
of
net
written
premiums,
wherever
written,
to
surplus
as
to
policyholders
and
paid-in
capital
of
not
greater
than
three
to
one.
(3)
Files
copies
annually
of
the
insurer’s
financial
statements,
national
association
of
insurance
commissioners
annual
statement,
and
actuarial
certification,
if
required
and
filed
in
the
insurer’s
state
of
domicile.
Sec.
7.
Section
523C.7,
Code
2019,
is
amended
by
striking
Senate
File
619,
p.
11
the
section
and
inserting
in
lieu
thereof
the
following:
523C.7
Disclosure
to
service
contract
holders
——
contract
form
——
required
provisions.
1.
A
motor
vehicle
service
contract
or
residential
service
contract
shall
not
be
issued,
sold,
or
offered
for
sale
in
this
state
unless
the
service
company
does
all
of
the
following:
a.
Provides
a
receipt
for
the
purchase
of
the
service
contract
to
the
service
contract
holder.
b.
Provides
a
copy
of
the
service
contract
to
the
service
contract
holder
within
a
reasonable
period
of
time
after
the
date
of
purchase
of
the
service
contract.
c.
Provides
a
complete
sample
copy
of
the
terms
and
conditions
of
the
service
contract
to
the
service
contract
holder
prior
to
the
date
of
purchase.
A
service
company
may
comply
with
this
paragraph
by
providing
the
service
contract
holder
with
a
complete
sample
copy
of
the
terms
or
conditions
of
the
service
contract,
or
directing
the
service
contract
holder
to
an
internet
site
containing
a
complete
sample
copy
of
the
terms
and
conditions
of
the
service
contract.
2.
A
motor
vehicle
service
contract
or
residential
service
contract
issued,
sold,
or
offered
for
sale
in
this
state
shall
comply
with
all
of
the
following,
as
applicable:
a.
A
service
contract
shall
be
written
in
clear,
understandable
language
in
at
least
eight
point
font.
b.
(1)
A
service
contract
insured
by
a
reimbursement
insurance
policy
as
provided
in
section
523C.5,
subsection
1,
shall
include
a
statement
in
substantially
the
following
form:
Obligations
of
the
service
company
under
this
service
contract
are
guaranteed
under
a
reimbursement
insurance
policy.
If
the
service
company
fails
to
pay
or
provide
service
on
a
claim
within
sixty
days
after
proof
of
loss
has
been
filed
with
the
service
company,
the
service
contract
holder
is
entitled
to
make
a
claim
directly
against
the
reimbursement
insurance
policy.
(2)
A
service
contract
insured
by
a
reimbursement
insurance
policy
shall
conspicuously
state
the
name
and
address
of
the
issuer
of
the
reimbursement
insurance
policy
for
that
service
contract.
A
claim
against
a
reimbursement
insurance
policy
shall
also
include
a
claim
for
return
of
any
refund
due
in
Senate
File
619,
p.
12
accordance
with
paragraphs
“k”
and
“l”
.
c.
A
service
contract
not
insured
under
a
reimbursement
insurance
policy
shall
contain
a
statement
in
substantially
the
following
form:
Obligations
of
the
service
company
under
this
service
contract
are
backed
by
the
full
faith
and
credit
of
the
service
company
and
are
not
guaranteed
under
a
reimbursement
insurance
policy.
d.
A
service
contract
shall
state
the
name
and
address
of
the
service
company
obligated
to
perform
services
under
the
contract,
and
shall
conspicuously
identify
the
service
company,
any
third-party
administrator,
and
the
service
contract
holder
to
the
extent
that
the
name
and
address
of
the
service
contract
holder
has
been
furnished.
The
identities
of
such
parties
are
not
required
to
be
printed
on
the
contract
in
advance
and
may
be
added
to
the
contract
at
the
time
of
sale.
e.
A
service
contract
shall
clearly
state
the
total
purchase
price
of
the
service
contract
and
the
terms
under
which
the
service
contract
is
sold.
The
total
purchase
price
is
not
required
to
be
printed
on
the
contract
in
advance
and
may
be
added
to
the
contract
at
the
time
of
sale.
f.
If
prior
approval
of
repair
work
is
required,
a
service
contract
shall
conspicuously
describe
the
procedure
for
obtaining
prior
approval
and
for
making
a
claim,
including
a
toll-free
telephone
number
for
claim
service,
and
the
procedure
for
obtaining
emergency
repairs
performed
outside
of
normal
business
hours.
g.
A
service
contract
shall
clearly
state
the
existence
of
any
deductible
amount.
h.
A
service
contract
shall
specify
the
merchandise
or
services,
or
both,
to
be
provided
and
any
limitations,
exceptions,
or
exclusions.
i.
A
service
contract
shall
clearly
state
the
conditions
on
which
the
use
of
substitute
parts
or
services
will
be
allowed.
Such
conditions
shall
comply
with
applicable
state
and
federal
laws.
j.
A
service
contract
shall
clearly
state
any
terms,
restrictions,
or
conditions
governing
the
transferability
of
the
service
contract.
Senate
File
619,
p.
13
k.
A
service
contract
shall
clearly
state
the
terms
and
conditions
governing
the
cancellation
of
the
contract
prior
to
the
termination
or
expiration
date
of
the
contract
by
the
service
company
or
the
service
contract
holder.
If
the
service
company
cancels
the
contract,
the
service
company
shall
mail
a
written
notice
of
termination
to
the
service
contract
holder
at
least
fifteen
days
before
the
date
of
the
termination.
Prior
notice
of
cancellation
by
the
service
company
is
not
required
if
the
reason
for
cancellation
is
nonpayment
of
the
purchase
price,
a
material
misrepresentation
by
the
service
contract
holder
to
the
service
company
or
its
administrator,
or
a
substantial
breach
of
duties
by
the
service
contract
holder
relating
to
the
covered
product
or
its
use.
The
notice
of
cancellation
shall
state
the
effective
date
of
the
cancellation
and
the
reason
for
the
cancellation.
If
a
service
contract
is
canceled
by
the
service
company
for
any
reason
other
than
nonpayment
of
the
purchase
price,
the
service
company
shall
refund
the
service
contract
holder
in
an
amount
equal
to
one
hundred
percent
of
the
unearned
purchase
price
paid,
calculated
on
a
pro
rata
basis
based
upon
elapsed
time
or
mileage,
less
any
claims
paid.
The
service
company
may
also
charge
a
reasonable
administrative
fee
in
an
amount
no
greater
than
ten
percent
of
the
total
purchase
price.
l.
(1)
A
service
contract
shall
permit
the
original
service
contract
holder
that
purchased
the
contract
to
cancel
and
return
the
service
contract
within
at
least
twenty
days
of
the
date
of
mailing
the
service
contract
to
the
service
contract
holder
or
within
at
least
ten
days
after
delivery
of
the
service
contract
if
the
service
contract
is
delivered
at
the
time
of
sale
of
the
service
contract,
or
within
a
longer
period
of
time
as
permitted
under
the
service
contract.
If
no
claim
has
been
made
under
the
service
contract
prior
to
its
return,
the
service
contract
is
void
and
the
full
purchase
price
of
the
service
contract
shall
be
refunded
to
the
service
contract
holder.
A
ten
percent
penalty
shall
be
added
each
month
to
a
refund
that
is
not
paid
to
a
service
contract
holder
within
thirty
days
of
the
return
of
the
service
contract
to
the
service
company.
(2)
If
the
service
contract
holder
cancels
the
service
Senate
File
619,
p.
14
contract
outside
of
the
applicable
time
as
provided
in
subparagraph
(1)
or
after
a
claim
is
made
under
the
service
contract,
the
service
company
shall
refund
the
service
contract
holder
in
an
amount
equal
to
one
hundred
percent
of
the
unearned
purchase
price
paid,
calculated
on
a
pro
rata
basis
based
upon
elapsed
time
or
mileage,
less
any
claims
paid.
The
service
company
may
also
charge
a
reasonable
administrative
fee
in
an
amount
no
greater
than
ten
percent
of
the
total
purchase
price.
m.
A
service
contract
shall
set
forth
all
of
the
obligations
and
duties
of
the
service
contract
holder,
including
but
not
limited
to
the
duty
to
protect
against
any
further
damage,
and
the
obligation
to
follow
an
owner’s
manual
or
any
other
required
service
or
maintenance.
n.
A
service
contract
shall
clearly
state
whether
or
not
the
contract
provides
for
or
excludes
consequential
damages
or
preexisting
conditions,
if
applicable.
A
service
contract
may,
but
is
not
required
to,
cover
damage
resulting
from
rust,
corrosion,
or
damage
caused
by
a
part
or
system
which
is
not
covered
under
the
service
contract.
o.
A
service
contract
shall
clearly
state
the
fee,
if
any,
charged
on
the
service
contract
holder
for
making
a
service
call.
p.
A
service
contract
shall
state
the
name
and
address
of
the
commissioner.
Sec.
8.
Section
523C.9,
Code
2019,
is
amended
to
read
as
follows:
523C.9
Suspension
or
revocation
of
license.
1.
In
addition
to
the
license
revocation
provisions
of
section
523C.5
,
the
The
commissioner
may
suspend
or
revoke
or
refuse
to
renew
the
license
of
a
service
company
for
any
of
the
following
grounds:
a.
1.
The
service
company
violated
a
lawful
order
of
the
commissioner
or
any
provision
of
this
chapter
.
b.
2.
The
service
company
failed
to
pay
any
final
judgment
rendered
against
it
in
this
state
within
sixty
days
after
the
judgment
became
final.
c.
3.
The
service
company
has
without
just
cause
refused
to
perform
or
negligently
or
incompetently
performed
services
Senate
File
619,
p.
15
required
to
be
performed
under
its
residential
service
contracts
and
the
refusal,
or
negligent
or
incompetent
performance
has
occurred
with
such
frequency,
as
the
commissioner
determines,
as
to
indicate
the
general
business
practices
of
the
service
company.
d.
4.
The
service
company
violated
section
523C.13
.
e.
5.
The
service
company
failed
to
maintain
the
net
worth
required
by
section
523C.6
demonstrate
financial
responsibility
pursuant
to
section
523C.5
.
f.
The
service
company
failed
to
maintain
the
reserve
account
required
by
section
523C.11
.
g.
6.
The
service
company
failed
to
maintain
its
corporate
certificate
of
good
standing
with
the
secretary
of
state.
2.
If
the
license
of
a
service
company
is
terminated
under
section
523C.5
because
of
failure
to
maintain
bond,
the
commissioner
shall
give
written
notice
of
termination
to
the
service
company.
The
notice
shall
include
the
effective
date
of
the
termination.
Sec.
9.
Section
523C.12,
Code
2019,
is
amended
to
read
as
follows:
523C.12
Optional
examination.
The
commissioner
or
a
designee
of
the
commissioner
may
make
an
examination
of
the
books
and
records
of
a
service
company,
including
copies
of
contracts
and
records
of
claims
and
expenditures,
and
verify
its
assets,
liabilities,
and
reserves.
The
actual
costs
of
the
examination
shall
be
borne
by
the
service
company.
The
costs
of
an
examination
under
this
section
shall
not
exceed
an
amount
equal
to
ten
percent
of
the
service
company’s
reported
net
income
in
the
previous
fiscal
year.
Sec.
10.
Section
523C.13,
Code
2019,
is
amended
to
read
as
follows:
523C.13
Prohibited
acts
or
practices
——
penalty
——
violations
——
contracts
voided
.
1.
A
licensed
service
company
which
offers
motor
vehicle
service
contracts
for
sale
in
this
state,
or
its
representative,
shall
not,
directly
or
indirectly,
represent
in
any
manner,
whether
by
written
solicitation
or
telemarketing,
a
false,
deceptive,
or
misleading
statement
with
respect
to
any
Senate
File
619,
p.
16
of
the
following:
a.
Statements
regarding
the
service
company’s
affiliation
with
a
motor
vehicle
manufacturer
or
importer.
b.
Statements
regarding
the
validity
or
expiration
of
a
warranty.
c.
Statements
regarding
a
motor
vehicle
service
contract
holder’s
coverage
under
a
motor
vehicle
service
contract,
including
statements
suggesting
that
the
service
contract
holder
must
purchase
a
new
service
contract
in
order
to
maintain
coverage
under
the
existing
service
contract
or
warranty.
2.
The
commissioner
shall
may
adopt
rules
which
regulate
motor
vehicle
service
contracts
and
residential
service
contracts
to
prohibit
misrepresentation,
false
advertising,
defamation,
boycotts,
coercion,
intimidation,
false
statements
and
entries
and
unfair
discrimination
or
practices.
If
the
commissioner
finds
that
a
person
has
violated
the
rules
adopted
under
this
section
,
the
commissioner
may
order
any
or
all
of
the
following:
1.
a.
Payment
of
a
civil
penalty
of
not
more
than
one
thousand
dollars
for
each
and
every
act
or
violation,
but
not
to
exceed
an
aggregate
of
ten
thousand
dollars,
unless
the
person
knew
or
reasonably
should
have
known
the
person
was
in
violation
of
this
section
,
in
which
case
the
penalty
shall
be
not
more
than
five
thousand
dollars
for
each
and
every
act
or
violation,
but
not
to
exceed
an
aggregate
penalty
of
fifty
thousand
dollars
in
any
one
six-month
period.
The
commissioner
shall,
if
it
finds
the
violations
of
this
section
were
directed,
encouraged,
condoned,
ignored,
or
ratified
by
the
employer
of
such
person,
assess
such
penalty
to
the
employer
and
not
such
person.
Any
civil
penalties
collected
under
this
subsection
shall
be
deposited
as
provided
in
section
505.7
.
2.
b.
Suspension
or
revocation
of
the
license
of
a
person,
if
the
person
knew
or
reasonably
should
have
known
the
person
was
in
violation
of
this
section
.
3.
A
violation
of
this
chapter
constitutes
an
unlawful
practice
pursuant
to
section
714.16.
4.
A
service
contract
issued
or
sold
in
this
state
is
void
if
the
person
that
issued
or
sold
the
service
contract,
at
the
Senate
File
619,
p.
17
time
of
issuance
or
sale,
was
not
licensed
as
a
service
company
under
this
chapter.
Sec.
11.
Section
523C.15,
Code
2019,
is
amended
to
read
as
follows:
523C.15
Annual
report.
A
licensed
service
company
that
does
not
demonstrate
financial
responsibility
by
insuring
service
contracts
under
a
reimbursement
insurance
policy
as
provided
in
section
523C.5,
subsection
1,
shall
file
with
the
commissioner
an
annual
report
within
ninety
days
of
the
close
of
its
fiscal
no
later
than
August
31
of
each
year.
The
annual
report
shall
be
in
a
form
prescribed
by
the
commissioner
and
contain
all
of
the
following:
1.
A
current
financial
statement
including
a
balance
sheet
and
statement
of
operations
prepared
in
accordance
with
generally
accepted
accounting
principles
and
certified
by
an
independent
certified
public
accountant.
2.
The
number
of
residential
service
contracts
issued
during
the
preceding
fiscal
year,
the
number
canceled
or
expired
during
the
year,
the
number
in
effect
at
year
end
and
the
amount
of
residential
service
contract
fees
received.
3.
2.
Any
other
information
relating
to
the
performance
and
solvency
of
the
residential
service
company
required
by
the
commissioner.
Sec.
12.
Section
523C.16,
Code
2019,
is
amended
to
read
as
follows:
523C.16
Exclusions.
This
chapter
does
not
apply
to
any
of
the
following
and
the
following
do
not
constitute
the
practice
of
insurance
:
1.
A
performance
guarantee
given
by
a
builder
of
a
residence
or
the
manufacturer
or
seller
or
lessor
of
residential
property
if
no
identifiable
charge
is
made
for
the
guarantee.
2.
A
residential
service
contract,
guarantee
or
warranty
between
a
residential
customer
and
a
service
company
which
will
perform
the
work
itself
and
not
through
subcontractors
for
the
service,
repair
or
replacement
of
residential
property,
appliances
,
or
electrical,
plumbing,
heating,
cooling
or
air-conditioning
systems.
3.
A
contract
between
a
service
company
issuing
residential
Senate
File
619,
p.
18
service
contracts
and
a
person
who
actually
performs
the
maintenance,
repairs,
or
replacements
of
structural
components,
or
appliances,
or
electrical,
plumbing,
heating,
cooling,
or
air-conditioning
systems,
if
someone
other
than
the
service
company
actually
performs
these
functions.
4.
A
residential
service
contract,
guarantee
or
warranty
issued
by
a
retail
merchant
to
a
retail
customer,
guaranteeing
or
warranting
the
repair,
service
or
replacement
of
appliances
or
electrical,
plumbing,
heating,
cooling
or
air-conditioning
systems
sold
by
said
retail
merchant.
5.
A
residential
service
contract,
guarantee,
or
warranty
issued
by
a
manufacturer,
third
party,
or
retail
company,
covering
the
repair,
maintenance,
or
replacement
of
residential
property,
individual
appliances
,
and
other
individual
items
of
merchandise
marketed
and
sold
by
a
retail
company,
in
the
ordinary
course
of
business.
6.
A
motor
vehicle
service
contract
issued
by
the
manufacturer
or
importer
of
the
motor
vehicle
covered
by
the
service
contract
or
to
any
third
party
acting
in
an
administrative
capacity
on
the
manufacturer’s
behalf
in
connection
with
that
service
contract.
7.
A
residential
service
contract
involving
residential
property
containing
more
than
four
dwelling
units.
8.
A
warranty.
9.
A
motor
vehicle
service
contract
issued,
offered
for
sale,
or
sold
to
any
person
other
than
a
consumer.
10.
A
maintenance
agreement.
Sec.
13.
Section
523C.17,
Code
2019,
is
amended
to
read
as
follows:
523C.17
Lending
institutions
,
service
companies,
and
insurance
companies
.
A
bank,
savings
association,
insurance
company,
or
other
lending
institution
shall
not
require
the
purchase
of
a
motor
vehicle
service
contract
or
residential
service
contract
as
a
condition
of
a
loan
or
the
sale
of
any
property
or
motor
vehicle
.
A
service
company
or
an
insurer,
either
directly
or
indirectly,
as
a
part
of
any
real
property
transaction
in
which
a
residential
service
contract
will
be
issued,
purchased,
or
acquired,
shall
not
require
that
a
residential
service
contract
Senate
File
619,
p.
19
be
issued,
purchased,
or
acquired
in
conjunction
with
or
as
a
condition
precedent
to
the
issuance,
purchase,
or
acquisition,
by
any
person,
of
a
policy
of
insurance.
A
lending
institution
shall
not
sell
a
residential
service
contract
to
a
borrower
unless
the
borrower
signs
an
affidavit
acknowledging
that
the
purchase
is
not
required.
Violation
of
this
section
is
punishable
as
provided
in
section
523C.13
.
Sec.
14.
Section
523C.22,
Code
2019,
is
amended
to
read
as
follows:
523C.22
Claim
procedures.
A
licensed
service
company
shall
promptly
provide
a
written
explanation
to
the
residential
customer
service
contract
holder
,
describing
the
reasons
for
denying
a
claim
or
for
the
offer
of
a
compromise
settlement,
based
on
all
relevant
facts
or
legal
requirements
and
referring
to
applicable
provisions
of
the
residential
service
contract.
Sec.
15.
NEW
SECTION
.
523C.24
Service
company
oversight
fund.
1.
A
service
company
oversight
fund
is
created
in
the
state
treasury
as
a
separate
fund
under
the
control
of
the
commissioner.
The
fund
shall
consist
of
all
moneys
deposited
in
the
fund
pursuant
to
subsection
2.
2.
The
commissioner
shall
deposit
in
the
service
company
oversight
fund
an
amount
equal
to
one-third
of
all
licensing,
examination,
renewal,
and
inspection
fees
collected
under
this
chapter,
provided
that
the
maximum
amount
of
fees
deposited
in
the
fund
each
fiscal
year
shall
not
exceed
five
hundred
thousand
dollars.
Any
remaining
fees
collected
under
this
chapter
and
not
deposited
in
the
service
company
oversight
fund
shall
be
deposited
as
provided
in
section
505.7.
3.
Moneys
in
the
service
company
oversight
fund
are
appropriated
to
the
commissioner
for
the
administration
and
enforcement
of
this
chapter,
and
for
establishing
service
contract
consumer
complaint,
education,
and
outreach
programs.
4.
Notwithstanding
section
12C.7,
subsection
2,
interest
or
earnings
on
moneys
deposited
in
the
service
company
oversight
fund
shall
be
credited
to
the
fund.
Notwithstanding
section
8.33,
moneys
credited
to
the
fund
shall
not
revert
at
the
close
of
a
fiscal
year.
Senate
File
619,
p.
20
Sec.
16.
REPEAL.
Chapter
516E,
Code
2019,
is
repealed.
Sec.
17.
REPEAL.
Sections
523C.8,
523C.8A,
523C.11,
523C.14,
and
523C.18,
Code
2019,
are
repealed.
Sec.
18.
EMERGENCY
RULES.
The
commissioner
of
insurance
may
adopt
emergency
rules
under
section
17A.4,
subsection
3,
and
section
17A.5,
subsection
2,
paragraph
“b”,
to
implement
the
provisions
of
this
Act
and
the
rules
shall
be
effective
immediately
upon
filing
unless
a
later
date
is
specified
in
the
rules.
Any
rules
adopted
in
accordance
with
this
section
shall
also
be
published
as
a
notice
of
intended
action
as
provided
in
section
17A.4.
Sec.
19.
EFFECTIVE
DATE.
This
Act,
being
deemed
of
immediate
importance,
takes
effect
upon
enactment.
______________________________
CHARLES
SCHNEIDER
President
of
the
Senate
______________________________
LINDA
UPMEYER
Speaker
of
the
House
I
hereby
certify
that
this
bill
originated
in
the
Senate
and
is
known
as
Senate
File
619,
Eighty-eighth
General
Assembly.
______________________________
W.
CHARLES
SMITHSON
Secretary
of
the
Senate
Approved
_______________,
2019
______________________________
KIM
REYNOLDS
Governor