Recently signed by the Governor of North Carolina, House Bill 575 will establish a new financial responsibility option for service contract providers offering motor vehicle, home and certain consumer goods service contracts. The new law, which was effective July 1, 2011, will allow companies offering service contracts to now maintain a funded reserve account in lieu of insuring their obligations through a contractual liability policy or maintaining a $100M net worth. The account must be maintained at a level equal to or greater than 40% of gross consideration, less claims paid, for all contracts in force in that state. This standard is consistent with what many of other states permit for funded reserve accounts.
