REMINDER –This law goes into effect on October 1, 2015 and creates a new registration and form filing requirement for certain mechanical repair contracts.
Maryland Senate Bill 630 amends Maryland’s Insurance Code, Commercial Law and Transportation Article relative to offering “service contracts” and “mechanical repair contracts” (a.k.a., vehicle service contracts).
Under the new law, obligors of mechanical repair contracts must now register with the Maryland Insurance Administration (MIA) and mechanical repair contracts may now include benefits relating to road hazard, dent/ding repair, windshield crack repair, key/key fob replacement among other things.
“Obligor” is defined as a “the person specified in a mechanical repair contract that is contractually obligated to perform the services set forth in the mechanical repair contract.” Although it appears from the legislation that licensed motor vehicle dealers are not required to register if they act as obligors of mechanical repair contracts.
Obligors are still required to maintain what the law refers to as “adequate insurance reserves” and a contractual liability or reimbursement insurance policy providing coverage for all obligations and liabilities incurred by an obligor under the terms of a mechanical repair contract will continue to constitute “adequate insurance reserves”. The CLP must accompany the registration application.
In addition, mechanical repair contracts must now be filed with the MIA at least 45 days prior to the contract being offered in this state. Mechanical repair contracts are not subject to prior approval of the Insurance Commissioner. Such contracts are not to be filed with the obligor registration form, but rather are to be filed through SERFF.
