A bill proposing to clarify the status of service contracts as “non-insurance” in the state of Pennsylvania continues to move through the state’s Legislature. After a year of activity in the House, HB 1774 finally passed out of the House and was referred to the Senate Insurance Committee on July 1. This bill defines “service contract” in a manner consistent with industry standards already adopted in a majority of states. The bill would exempt from insurance regulation any motor vehicle, home or consumer goods contract meeting that definition. The language in the bill allows for coverage relating to towing, emergency road service or damage that results from power surges or accidental damage from handling. Although the bill refers to “normal wear and tear”, it is not clear whether or not this exemption would apply to contracts seeking to offer road hazard / tire & wheel failure-type of contracts offered either as a part of a more traditional mechanical breakdown service contract or on a stand-alone basis. Pennsylvania’s Legislature is in session until the end of the year. If adopted, the bill would become effective 60 days after passage.
