00 HOUSE BILL NO. 206 01 "An Act relating to motor vehicle service contracts; and exempting motor vehicle 02 service contracts from regulation as insurance." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04  * Section 1. AS 21.03.021(e) is amended to read: 05 (e) This title does not apply to a service contract offered, issued for delivery, 06 delivered, or renewed in this state. In this subsection, "service contract" 07 (1) means a service contract or agreement for a separate or additional 08 consideration, for a specific duration, to 09 (A) maintain, service, repair, or replace tangible personal 10 property, or to indemnify for repair, replacement, or maintenance, for an 11 operational or structural failure due to a defect in materials or workmanship or 12 normal wear and tear, with or without additional provision for incidental 13 indemnity payments when service, repair, or replacement is not reasonably or 14 commercially feasible; 01 (B) repair, replace, or maintain tangible personal property 02 damaged as a result of power surges or as a result of accidental damage from 03 the handling of property damaged by power surges; or 04 (C) repair, replace, or maintain household consumer goods, 05 household appliances, and household systems, including damage resulting 06 from operational or structural failure due to a defect in materials or 07 workmanship or normal wear and tear; 08 (2) does not include 09 (A) mechanical breakdown insurance; 10 (B) a contract that requires an indemnity payment per incident, 11 and the payment exceeds the purchase price of the property serviced [; 12 (C) A CONTRACT TO PROVIDE SERVICE ON A MOTOR 13 VEHICLE SUBJECT TO REGISTRATION UNDER AS 28.10.011]; or 14 (C) [(D)] a home warranty; in this subparagraph, "home 15 warranty" means a warranty that covers the entire home and does not include a 16 warranty limited to a household system or appliance. 17  * Sec. 2. AS 21.03.021 is amended by adding new subsections to read: 18 (g) A motor vehicle service contract shall be governed by AS 21.59 except as 19 expressly provided in this title. 20 (h) A warranty, maintenance agreement, and a motor vehicle service contract 21 offered for sale or sold to a person other than a consumer are not insurance and do not 22 have to comply with any provision of this title. In this subsection, "maintenance 23 agreement" means a contract of limited duration that provides for scheduled 24 maintenance only and does not include an agreement for repair or replacement.  25  * Sec. 3. AS 21.27.010(h) is amended to read: 26 (h) This chapter does not apply to a person 27 (1) licensed to practice as an attorney at law while the person is acting 28 as an attorney at law; or 29 (2) who sells, solicits, or negotiates a 30 (A) service contract on a motor vehicle subject to registration 31 under AS 28.10.011; or 01 (B) home warranty; in this subparagraph, "home warranty" has 02 the meaning given in AS 21.03.021(e)(2)(C) [AS 21.03.021(e)(2)(D)]. 03  * Sec. 4. AS 21.59 is amended by adding new sections to read: 04 Sec. 21.59.110. Motor vehicle service contract. (a) A provider may, for 05 separately stated consideration, enter into a motor vehicle service contract for a 06 specified period 07 (1) to perform the repair, replacement, or maintenance of a motor 08 vehicle; or 09 (2) indemnify the service contract holder for repair, replacement, or 10 maintenance, or for the operational or structural failure of a motor vehicle because of a 11 defect in materials, workmanship, or normal wear and tear, with or without additional 12 provisions for incidental payment of indemnity under limited circumstances; a motor 13 vehicle service contract may also provide for 14 (A) towing, rental and emergency road service, and road hazard 15 protection; 16 (B) the repair or replacement of tires or wheels on a motor 17 vehicle damaged as a result of coming into contact with road hazards; 18 (C) the removal of dents, dings, or creases on a motor vehicle 19 that can be repaired using the process of paintless dent removal without 20 affecting the existing paint finish and without replacing vehicle body panels or 21 requiring sanding, bonding, or painting; 22 (D) the repair of chips or cracks in or the replacement of motor 23 vehicle windshields as a result of damage caused by road hazards; 24 (E) the repair of damage to the interior components of a motor 25 vehicle caused by wear and tear not including the replacement of any part or 26 component of a motor vehicle's interior; or 27 (F) the replacement of a motor vehicle key or key fob if the key 28 or key fob becomes inoperable or is lost or stolen. 29 (b) A motor vehicle service contract marketed, offered for sale, sold, issued, 30 made, or administered in this state must be written, printed, or typed in clear, 31 understandable language and must include the following: 01 (1) the name and address of the provider and an administrator if 02 different from the provider, the service contract seller, and the service contract holder 03 to the extent that the name of the service contract holder has been furnished by the 04 service contract holder; names and addresses of the parties are not required to be 05 preprinted on the motor vehicle service contract and may be added to the motor 06 vehicle service contract at the time of sale; 07 (2) the provider fee and the terms of the motor vehicle service contract; 08 the provider fee is not required to be preprinted on the service contract and may be 09 negotiated at the time of sale; 10 (3) the applicable deductible amount, if any; 11 (4) a description of the materials and services to be provided and 12 applicable limitations, exceptions, or exclusions, including whether the service 13 contract provides for or excludes consequential damages or preexisting conditions; 14 (5) a description of the obligations and duties of the service contract 15 holder; 16 (6) whether the use of nonoriginal manufacturer's parts is allowed; 17 (7) restrictions on the transferability of the service contract, if 18 applicable; and 19 (8) the terms for return and cancellation of the service contract. 20 Sec. 21.59.120. Exemptions. (a) The following are exempt from this chapter: 21 (1) a warranty; 22 (2) a maintenance agreement; in this paragraph, "a maintenance 23 agreement" means a contract of limited duration that provides for scheduled 24 maintenance only and does not include an agreement for repair or replacement; 25 (3) a motor vehicle service contract sold or offered for sale to a person 26 other than a consumer. 27 (b) A motor vehicle manufacturer's motor vehicle service contract that applies 28 to the motor vehicle manufacturer's product must comply only with AS 21.59.110, 29 21.59.140, and 21.59.160. 30 (c) A motor vehicle manufacturer is exempt from the registration requirement 31 in this title.  01 Sec. 21.59.130. Motor vehicle service contract provider; duties. (a) A 02 provider may not market, offer for sale, sell, issue, or make a motor vehicle service 03 contract in this state unless the provider provides to the motor vehicle service contract 04 holder, within a reasonable time after the date of purchase, 05 (1) a receipt for, or other written evidence of, the purchase of the 06 motor vehicle service contract; and 07 (2) a copy of the motor vehicle service contract. 08 (b) A provider shall, on request, provide a prospective purchaser with a 09 sample copy of the provider's motor vehicle service contract showing terms and 10 conditions. A provider may comply with this subsection by providing the prospective 11 purchaser with a sample copy of the terms and conditions or by directing the 12 prospective purchaser to an Internet website containing a complete sample of the 13 terms and conditions of the proposed motor vehicle service contract. 14 (c) A motor vehicle service contract provider may not use in the provider's 15 name the word "insurance," "casualty," "surety," "mutual," or another word that 16 describes insurance, casualty, or surety business activity, or use a name deceptively 17 similar to the name or description of an insurance or surety corporation or another 18 provider; however, the name of a provider may include the word "guaranty." 19 (d) A provider or the provider's representative may not make, or permit or 20 cause to be made, a false or misleading statement or deliberately omit a material 21 statement that would be misleading if omitted in a motor vehicle service contract or 22 literature associated with the contract. 23 (e) A person may not require the purchase of a motor vehicle service contract 24 as a condition of a loan or a condition for the sale of a motor vehicle. 25 (f) A provider may appoint an administrator or other designee to administer all 26 or a part of a motor vehicle service contract. 27 (g) A provider or the provider's representative may not make a false, 28 deceptive, or misleading statement in a solicitation, during telemarketing, or in other 29 advertising, including a statement regarding 30 (1) the provider's affiliation with a motor vehicle manufacturer; 31 (2) information in the provider's possession regarding a motor vehicle 01 owner's current motor vehicle manufacturer's original equipment warranty; 02 (3) the expiration of a motor vehicle owner's current motor vehicle 03 manufacturer's original equipment warranty; or 04 (4) a requirement that a motor vehicle owner register for a new motor 05 vehicle service contract with the provider to maintain coverage under the motor 06 vehicle owner's current motor vehicle service contract or manufacturer's original 07 equipment warranty. 08 Sec. 21.59.140. Registration. A provider of a motor vehicle service contract 09 sold in this state shall file a registration with the director on a form prescribed by the 10 director and pay an annual fee to the director in an amount determined by the director. 11 If a material change occurs in the information submitted to the director, a provider 12 shall update the information in the registration filing by sending the changes to the 13 director in writing.  14 Sec. 21.59.150. Return and cancellation. (a) A motor vehicle service contract 15 must allow the service contract holder to cancel the motor vehicle service contract 16 within 20 days after the date that the motor vehicle service contract was delivered to 17 the service contract holder, within 10 days after the date of delivery if the motor 18 vehicle service contract is delivered to the service contract holder at the time of sale, 19 or within a longer period, as set out in the motor vehicle service contract. If the service 20 contract holder returns the motor vehicle service contract to the provider within the 21 applicable time period and a claim has not been made under the motor vehicle service 22 contract before the contract is returned to the provider, the motor vehicle service 23 contract is void and the provider shall refund the full amount of the provider fee to the 24 service contract holder or credit the account of the service contract holder. The right to 25 void the motor vehicle service contract provided in this subsection is not transferable 26 and applies only to the original service contract holder for a contract under which a 27 claim is not made before the contract is returned to the provider. If the provider does 28 not pay or credit a refund owed under this subsection within 45 days after a service 29 contract holder returns a motor vehicle service contract, a penalty in the amount of 10 30 percent of the provider fee paid by the service contract holder for each month the 31 refund remains unpaid shall be added to the refund. 01 (b) After the time specified in (a) of this section, or if a claim has been made 02 under the motor vehicle service contract within that time, a service contract holder 03 may cancel the motor vehicle service contract and the provider shall refund to the 04 contract holder the prorated amount of the unearned provider fee, less any claims paid. 05 A provider may charge a reasonable cancellation fee not to exceed 10 percent of the 06 provider fee paid by the service contract holder. 07 Sec. 21.59.160. Provider's financial responsibility. (a) To ensure the faithful 08 performance of a provider's obligations to its service contract holders, a provider shall 09 either 10 (1) obtain from an insurer licensed, registered, or otherwise authorized 11 to transact the business of insurance in the state insurance that either reimburses the 12 provider for obligations arising from a provider's motor vehicle service contract issued 13 in the state or, if the provider fails to perform its obligations under a motor vehicle 14 service contract issued in the state, pays to the service contract holder the provider's 15 covered contractual obligations under the terms of the service contract on behalf of the 16 provider. An insurer issuing a policy under this paragraph must satisfy one of the 17 following: 18 (A) maintain surplus as to policyholders and paid-in capital of 19 at least $15,000,000 and annually file with the director copies of the insurer's 20 financial statements, its annual statement to the National Association of 21 Insurance Commissioners, and the actuarial certification required by and filed 22 in the insurer's state of domicile; or 23 (B) maintain surplus as to policyholders and paid-in capital of 24 not less than $10,000,000 and demonstrate to the satisfaction of the director 25 that the company maintains a ratio of net written premiums, wherever written, 26 to surplus as to policyholders and paid-in capital of not greater than 3 to 1 and 27 annually files with the director copies of the insurer's audited financial 28 statements, its annual statement to the National Association of Insurance 29 Commissioners, and the actuarial certification required by and filed in the 30 insurer's state of domicile; or 31 (2) maintain, solely or together with the provider's parent company, a 01 net worth or stockholders' equity of $100,000,000. 02 (b) A motor vehicle service contract provider that has obtained insurance 03 under this section shall state the name and address of the insurer and include a 04 statement in substantially the following form: "Performance or payment of the 05 obligations of the provider under this service contract are insured." If the provider has 06 not obtained insurance under this section, the service contract shall contain a statement 07 in substantially the following form: "Obligations of the provider under this service 08 contract are not insured and are guaranteed only by the assets of the provider." 09 (c) If the provider fails to provide a covered service under the terms of the 10 motor vehicle service contract within 60 days after the service contract holder notifies 11 the provider of the claim, the service contract holder is entitled to apply directly to the 12 insurer for payment of the provider's obligation. 13 Sec. 21.59.170. Records. (a) The provider shall keep accurate accounts, books, 14 and records related to the sale of motor vehicle service contracts, including 15 (1) copies of each type of motor vehicle service contract sold; 16 (2) the name and address of each service contract holder to the extent 17 that the name and address have been furnished by the service contract holder; 18 (3) the locations where motor vehicle service contracts are marketed, 19 sold, or offered for sale; and 20 (4) claim files describing claims related to the motor vehicle service 21 contracts. 22 (b) The provider shall retain all records required by this section for at least one 23 year after a motor vehicle service contract has expired. 24 (c) Records required to be maintained under this section may be maintained 25 electronically. 26 (d) A provider discontinuing business in this state shall maintain records as 27 required by this section until the provider's obligations to all service contract holders 28 in this state have been discharged. 29 Sec. 21.59.180. Examination, enforcement, and penalties. (a) The director 30 may conduct examinations of a provider, administrator, insurer, or other person to 31 enforce the provisions of this chapter and to protect service contract holders in this 01 state. On request of the director, the provider shall make available to the director 02 accounts, books, and records relating to a service contract sold by the provider as 03 necessary to enable the director reasonably to determine compliance or noncompliance 04 with this chapter. 05 (b) The director may take necessary or appropriate action to enforce this 06 chapter and protect service contract holders in this state. 07 (c) A person found to have violated this chapter may be assessed a civil 08 penalty in an amount determined by the director not to exceed $500 for each violation 09 and not to exceed $10,000 in the aggregate for all violations of a similar nature. In this 10 subsection, a violation is of a similar nature if the violation consists of the same or a 11 similar course of conduct, action, or practice of another violation, notwithstanding the 12 number of times the act, conduct, or practice occurred.  13 (d) A service contract holder may bring an action in a court of competent 14 jurisdiction for damages, injunctive relief, restitution, or other appropriate relief for a 15 threatened or existing violation relating to the motor vehicle service contract. 16 Sec. 21.59.190. Definitions. In this chapter, 17 (1) "administrator" means a person who is responsible for the 18 administration of a motor vehicle service contract or the motor vehicle service contract 19 plan, or who is responsible for an act required in AS 21.59;  20 (2) "motor vehicle" means an automobile, truck, motorcycle, 21 recreational vehicle, all-terrain vehicle, snowmobile, camper, boat, personal 22 watercraft, motorcycle, or other self-propelled or towable vehicle; 23 (3) "motor vehicle manufacturer" means a person that 24 (A) manufactures or produces motor vehicles and sells motor 25 vehicles under the person's own name or label; 26 (B) is a subsidiary of a person who manufactures or produces 27 motor vehicles; 28 (C) is a corporation that owns 100 percent of the person that 29 manufactures motor vehicles; 30 (D) that sells motor vehicles under the trade name or label of a 31 person that manufactures or produces motor vehicles; 01 (E) manufactures and sells motor vehicles under the trade name 02 or label of another person that manufactures or produces motor vehicles; or 03 (F) under a written contract, licenses the use of its trade name 04 or label to another person that manufactures motor vehicles and sells motor 05 vehicles under the licensor's trade name or label; 06 (4) "nonoriginal manufacturer's parts" means replacement parts or 07 "after market" parts not made for or by the original manufacturer of the motor vehicle; 08 (5) "provider" means a person that is contractually obligated to provide 09 motor vehicle services to a service contract holder under the terms of a motor vehicle 10 service contract; 11 (6) "provider fee" means the consideration paid for a motor vehicle 12 service contract; 13 (7) "road hazard" means obstacles in the road, including potholes, 14 rocks, wood debris, metal parts, glass, plastic, curbs, or composite scraps; 15 (8) "service contract holder" means a person who is the purchaser or 16 holder of a motor vehicle service contract; 17 (9) "warranty" means a warranty made solely by the manufacturer, 18 importer, or seller of a motor vehicle without consideration, that is not negotiated or 19 separated from the sale of the motor vehicle and is incidental to the sale of the motor 20 vehicle, and that guarantees indemnity for defective parts, mechanical or electrical 21 breakdown, and labor or other remedial measures, such as repair or replacement of the 22 motor vehicle or repetition of services.  23  * Sec. 5. AS 45.25.620(a) is amended to read: 24 (a) A motor vehicle service contract must be in writing and contain all 25 disclosures required by AS 21.59 [ESSENTIAL PROVISIONS REGARDING THE 26 ADMINISTRATION OF THE CONTRACT]. 27  * Sec. 6. AS 21.59.010, 21.59.020, 21.59.030, 21.59.040, 21.59.050, 21.59.060, 21.59.070, 28 and 21.59.900 are repealed. 29  * Sec. 7. The uncodified law of the State of Alaska is amended by adding a new section to 30 read: 31 TRANSITION. AS 21.59.130(c), enacted by sec. 4 of this Act, does not apply to a 01 person using words prohibited by that subsection in the person's name before the effective 02 date of this Act. However, a person using the prohibited language in the person's name shall 03 include in all motor vehicle service contracts a statement in substantially the following form: 04 "This agreement is not an insurance contract."