05/08/2003 01:36 PM Senate L&C

               CSHB 120(RLS)am-SERVICE CONTRACTS                                                                            
                                                                                                                                
CHAIR   BUNDE   announced   CSHB   120(RLS)am  to   be   up   for                                                               
consideration.                                                                                                                  
                                                                                                                                
REPRESENTATIVE JOHN  COGHILL, sponsor of  HB 120, said  this bill                                                               
speaks to  a gray area  in law  about service contracts.  He said                                                               
the past administration  made a ruling that a  company like Sears                                                               
can  provide  a  service  contract  through  a  direct  retailing                                                               
outfit. However,  if service is  provided under  other contracts,                                                               
it must be  provided as insurance rather than as  a contract. The                                                               
present administration wants this  issue clarified. The bill will                                                               
take service contracts out of  the insurance statute. He noted he                                                               
has  made  sure  the  service  contracts  in  the  motor  vehicle                                                               
industry are very clearly not a part of this discussion.                                                                        
                                                                                                                                
CHAIR  BUNDE noted  a letter  from  Linda Hall,  Director of  the                                                               
Division  of  Insurance, in  which  she  states  that HB  120  is                                                               
beneficial to both  the division and those  entities that provide                                                               
service  contracts. He  asked  if it  will  benefit consumers  as                                                               
well.                                                                                                                           
                                                                                                                                
MS.  LINDA HALL,  Director, Division  of Insurance,  replied that                                                               
she thought  so. The issue  of what is  and is not  insurance has                                                               
been problematic for a number  of years. This bill clarifies that                                                               
issue, which should benefit all involved.                                                                                       
                                                                                                                                
SENATOR  STEVENS asked  if  a service  contract  and an  extended                                                               
warranty are the same thing.                                                                                                    
                                                                                                                                
MS. HALL  replied that  they are technically  the same  thing. An                                                               
extended  warranty  is  normally  offered by  a  manufacturer;  a                                                               
service contract  does similar  things, but  is from  a different                                                               
entity  and  is  purchased.  This   bill  addresses  the  service                                                               
contracts.                                                                                                                      
                                                                                                                                
CHAIR BUNDE  said he thought  a service contract would  take care                                                               
of routine maintenance that wouldn't be part of a warranty.                                                                     
                                                                                                                                
MS. HALL elaborated that service  contracts cover things that are                                                               
generally operational.                                                                                                          
                                                                                                                                
SENATOR  FRENCH said  he  was interested  in  the exemption  that                                                               
takes service  contracts out  of the purview  of the  Division of                                                               
Insurance  and that  service contracts  include servicing  things                                                               
made by other people. He asked if  once they are taken out of the                                                               
division's  purview,  another entity  will  police  how they  are                                                               
administered and regulated. He asked  who he would complain to if                                                               
Best Buy  conned him into  buying a  $30 service contract  on his                                                               
new television but wouldn't come out and fix it.                                                                                
                                                                                                                                
MS. HALL  replied that court would  be an option, but  there is a                                                               
consumer protection agency somewhere.                                                                                           
                                                                                                                                
SENATOR STEVENS  moved to pass  CSHB 120 (RLS) am  from committee                                                               
with  its  zero  fiscal   note  and  individual  recommendations.                                                               
SENATORS FRENCH, DAVIS, STEVENS and  BUNDE voted yea and it moved                                                               
on to its next committee of referral.