Oklahoma Senate Bill 1903 has passed out of both the House and the Senate in that state, proposing a new law that would regulate home service contract providers in a manner consistent with standards in place in a majority of other states. Entitled the Home Service Contract Act, this legislation would subject providers of home service contracts or home warranties, as defined in this bill, to a different regulatory framework than the Service Warranty Act that has been in place in Oklahoma for many years.
Under this bill, “Home service contract” or “home warranty” is defined, in part, as:
“a contract or agreement for a separately stated consideration for a specific duration to perform the service, repair, replacement or maintenance of property or indemnification for service, repair, replacement or maintenance, for the operational or structural failure of any residential property due to a defect in materials, workmanship, inherent defect or normal wear and tear, with or without additional provisions for incidental payment or indemnity under limited circumstances.”
Under the bill, home service contracts may provide coverage for damage resulting from power surges or power interruption as well as damage accidental damage from handling and for leaks or repair coverage to house roofing systems.
Home Service Contract providers would be required to register with the Oklahoma Department of Insurance and demonstrate compliance with one of three financial responsibility standards:
a) maintain a minimum reserve and file a minimum security deposit with the DOI of $25,000;
b) show proof of at least $25 million net worth, or
c) insure the service contracts via a contract liability policy.
Worth noting here may be the fact that this legislation does not impose the same A.M. Best rating or minimum surplus requirements on CLP insurers covering these home service contracts, as will be required under Senate Bill 2074, which appears to apply only to service warranties covering motor vehicles and consumer goods.
It also appears that under this legislation, sales representatives of home service contracts or home warranties, as defined, would no longer require licensure as they have been for years under the existing Service Warranty Act. This bill, if signed by the Governor, will be effective November 1, 2010.
