UPDATE: This bill was signed by the Governor on April 8. It will be effective 90 days after adjournment — which is approximately August 5, 2015.
A bill recently introduced in Colorado would expand the regulation of home-related service contracts currently administered under Title 12 – Professions and Occupations; Article 61 – Real Estate. This section of law currently applies only to home warranty service contracts cover pre-owned homes and specifically does not apply to the same type of contract covering new homes. Depending upon how benefits under a home warranty service contract are provided relative to new homes today, such contracts can be deemed to be contracts of insurance by the state’s Division of Insurance.
Under House Bill 1223, Title 12-61-602 of the Professions and Occupations law would be amended to potentially eliminate the classification as insurance for home warranty service contracts covering new homes. The legislation would define “Home Warranty Service Contract” to include:
“any contract or agreement whereby a person undertakes for a predetermined fee, with respect to a specified period of time, to maintain, repair, or replace any or all of the following elements of a specified new or pre-owned home:
- Structural components, such as the roof, foundation, basement, walls, ceilings, or floors;
- Utility systems, such as electrical, air conditioning, plumbing, and heating systems, including furnaces; and
- Appliances, such as stoves, washers, dryers, and dishwashers.”
Among other things, the legislation exempts a builder’s warranty against defects offered in connection with the sale of a new home.
Although other operational compliance requirements apply, no registration or license is required to offer such pre-owned home warranty service contracts under current law. This would not change with the expansion of the law to contracts covering new homes.
The legislation also amends Section 10-3-903 of the Insurance Code to revise the definition of transacting insurance business would not apply to the transaction of business by a service company, operating pursuant to the Professionals and Occupations law relative to either a preowned or new home warranty.
If enacted, this legislation would become effective 90 days after adjournment of the Legislature.
