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."