UPDATE – The New Mexico Division of Insurance has confirmed that with regard to the recent amendment to the state’s Service Contract Act, third-party warrantors are not contemplated in the new definition of an exempt warranty which now allows for “incidental benefits” such as insurance policy deductibles, rental vehicle charges, the difference between ACV and replacement cost of a vehicle, among other things typically associated with Vehicle Protection Product warranties. (See below for previous summary and analysis).
Legislation recently enacted in New Mexico substantially revises the state’s service contract law. Senate Bill 220 has been signed by the Governor and will provide for a more uniform framework for regulating service contracts.
Current law already requires registration of service contract providers. The new law expands the options for such a provider to demonstrate financial responsibility and qualify. Added to the current $50,000 deposit option ($100,000 for motor vehicle service contracts, and now home service contracts if they cover home appliances and systems when the contract is sold in conjunction with the sale of a home); a provider now has the option of insuring its obligations through a reimbursement insurance policy, rather than having to file such a deposit with the State.
Insurers offering reimbursement insurance policies must meet minimum capital and surplus requirements comparable to standards in place in numerous other states.
Service contract forms (terms & conditions) are no longer require to be filed with the Division of Insurance, however certain disclosures are still required to be provided for in a service contract.
The definition of “service contract” has been expanded to expressly permit benefits such as tire/wheel-road hazard; dent/ding repair; windshield crap repair or replacement and key/key fob replacement similar to that which is permitted in vehicle service contracts in many states.
And in an odd amendment to the current definition of “warranty”, SB 220 now states that a warranty, which is already exempt from regulation, may provide for specified “incidental costs” which are defined to include such things as insurance policy deductibles, rental vehicle charges, the difference between ACV and replacement cost of a vehicle, among other things. These are items typically associated with a Vehicle Protection Product warranty. However, this legislation appears to limit the offering of such an exempt warranty to those that are provided solely by a manufacturer, importer or seller of property for which the manufacturer, importer or seller does not receive separate consideration. In other words, the new law does not appear to permit third-party warrantors as is the case with many VPP laws throughout the country.
Check back for more updates on the implementation and effective date of this new law.
