UPDATE: This post is being further updated to announce the publication of Bulletin 210, by the Indiana Department of Insurance, which provides guidance and explanation of the agency’s implementation of House Bill 1206, effective on July 1, 2014.
This bulletin provides guidance for compliance with this new law governing motor vehicle service contracts. New informational filings will now be required for certain MV service contract programs. In addition, the bulletin advises of the continuing applicability of a much older Bulletin (#78) to non-MV service contracts/programs….ones that the new bulletin refers to as covering “homes, personal goods, and utilities”. The new bulletin is available on the DOI’s website at www.in.gov/idoi
Prior Post: This summary is being updated relative to House Bill 1206 which was ordered enrolled on March 18 and is on its way to the Governor’s desk for signature. This was a Department of Insurance “omnibus” bill and includes new law governing motor vehicle service contracts. Prior to this law, the industry relied upon a long-standing Department bulletin for guidance as to the regulatory treatment and status of vehicle service contracts.
Once signed, House Bill 1206 will provide definitive law relating to offering motor vehicle service contracts including contracts with benefits such as tire & wheel/road hazard protection, paintless dent removal, windshield crack repair and key/key fob replacement. Additionally, the new law defines and permits the offering of VSCs relating to “ancillary protection products” which include protective chemicals, alarm systems, body part marking products, window etching products and other products or systems that are designed to deter or prevent the theft of a vehicle.
Under the new law, no registration is required, however obligors must either insure their vehicle service contract programs under a “service contract reimbursement policy” or maintain a funded reserve account at minimum levels consistent with similar laws in other states. If the obligor elects to insure its programs, the reimbursement policy must be with the Department on an informational basis. The new law establishes requirements for disclosures within the terms and conditions of these vehicle service contracts. These, too, are comparable to that which have been adopted by a number of other states.
This law will become effective July 1, 2014.
Previously reported House Bill 1307 relating to home warranties/service contracts died in committee and will not be taken up again this year). Legislation was recently introduced in the State of Indiana that proposes to regulate home service contracts (a.k.a. home warranties) and the companies that offer them. House Bill 1377 provides for regulation by the Indiana Department of Insurance and would require licensure of home warranty providers (obligors). Qualifying for the license would require the filing of a surety bond, or other eligible security in the amount of $100,000. The bill does not provide for any other financial performance requirements or options.
The legislation defines “home warranty” as being a contract under which a person undertakes to indemnify the warranty holder against the cost of repairing or replacing, or to repair or replace, a home appliance if the home appliance needs repair or replacement.” The legislation does not appear to limit benefits or coverage to instances relating only to defect in materials or workmanship, or wear and tear. “Home appliance” is broadly defined as any electrical or mechanical machine that performs or aids in the performance of a household function and includes HVAC, electrical and plumbing systems of a home.
This legislation would not apply to a warranty or guarantee that is provided by the builder of a home, or the manufacturer or seller of an appliance, where there is no separate charge imposed by the builder, manufacturer or seller.
Information about the provider’s management and owners would be required as a part of the application process as well as a review of the provider’s most recent financial statements.
Indiana does not currently have a service contract law specific to homes or home appliances. Historically, the Indiana DOI has recognized “dealer-obligor” programs as not being subject to its insurance laws, but third-party obligated programs have been informally regulated pursuant to an “ancient” Department bulletin that required that such programs be backed by a contractual liabiity policy. A new law in this area would provide for greater regulatory certainty for the industry. If enacted, the new law would be effective July 1, 2014.
