093_HB3626
LRB093 10864 JLS 11514 b
1 AN ACT concerning vehicle protection products.
2 Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
4 Section 1. Short title. This Act may be cited as the
5 Vehicle Protection Product Act.
6 Section 5. Definitions.
7 "Administrator" means a third party other than the
8 warrantor who is designated by the warrantor to be
9 responsible for the administration of vehicle protection
10 product warranties.
11 "Department" means the Department of Insurance.
12 "Director" means the Director of Insurance.
13 "Service contract" means a contract or agreement as
14 defined under Section 5 of the Service Contract Act.
15 "Incidental costs" means expenses specified in the
16 warranty incurred by the warranty holder related to the
17 failure of the vehicle protection product to perform as
18 provided in the warranty. Incidental costs may include,
19 without limitation, insurance policy deductibles, rental
20 vehicle charges, the difference between the actual value of
21 the stolen vehicle at the time of theft and the cost of a
22 replacement vehicle, sales taxes, registration fees,
23 transaction fees, and mechanical inspection fees.
24 "Vehicle protection product" means a vehicle protection
25 device, system, or service that is (i) installed on or
26 applied to a vehicle, (ii) is designed to prevent loss or
27 damage to a vehicle from a specific cause, and (iii) includes
28 a written warranty. For purposes of this Section, the term
29 vehicle protection product shall include, without limitation,
30 alarm systems, body part marking products, steering locks,
31 window etch products, pedal and ignition locks, fuel and
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1 ignition kill switches, and electronic, radio, and satellite
2 tracking devices.
3 "Warranty" or "vehicle protection product warranty" means
4 a written agreement by a warrantor that provides if the
5 vehicle protection product fails to prevent loss or damage to
6 a vehicle from a specific cause, that the warranty holder
7 shall be paid specified incidental costs by the warrantor as
8 a result of the failure of the vehicle protection product to
9 perform pursuant to the terms of the warranty.
10 "Warranty holder" means the person who purchases a
11 vehicle protection product or who is a permitted transferee.
12 "Warrantor" means a person who is contractually obligated
13 to the warranty holder under the terms of the vehicle
14 protection product warranty agreement. A warrantor does not
15 include an insurer.
16 "Warranty reimbursement insurance policy" means a policy
17 of insurance that is issued to the vehicle protection product
18 warrantor to provide reimbursement to the warrantor or to pay
19 on behalf of the warrantor all covered contractual
20 obligations incurred by the warrantor under the terms and
21 conditions of the insured vehicle protection product
22 warranties sold by the warrantor.
23 Section 10. Exemptions.
24 (a) Vehicle protection product warrantors and related
25 vehicle protection product sellers and warranty
26 administrators complying with this Act are not required to
27 comply with and are not subject to any provision of the
28 Illinois Insurance Code or the Service Contract Act.
29 (b) Service contract providers who do not sell vehicle
30 protection products are not subject to the requirements of
31 this Act.
32 Section 15. Financial requirements. No vehicle
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1 protection product shall be sold, or offered for sale in this
2 State unless one of the following conditions is satisfied:
3 (1) (A) The vehicle protection product warrantor is
4 insured under a warranty reimbursement insurance policy
5 issued by an insurer authorized to do business in this
6 State and providing that the insurer will pay to, or on
7 behalf of, the warrantor 100% of all sums that the
8 warrantor is legally obligated to pay according to the
9 warrantor's contractual obligations under the warrantor's
10 vehicle protection product warranty;
11 (B) a true and correct copy of the warranty
12 reimbursement insurance policy has been filed with the
13 Director by the warrantor;
14 (C) the vehicle protection product warranty states
15 that the obligations of the warrantor to the warranty
16 holder are covered under a warranty reimbursement
17 insurance policy; and
18 (D) the vehicle protection product warranty states
19 the name and address of the issuer of the warranty
20 reimbursement insurance policy and states that in the
21 event payment due under the terms of the warranty is not
22 provided by the warrantor within 60 days after proof of
23 loss has been filed according to the terms of the
24 warranty by the warranty holder, the warranty holder may
25 file directly with the warranty reimbursement insurance
26 company for reimbursement.
27 (2) (A) The vehicle protection product warrantor
28 maintains a funded reserve account for its obligations
29 under its vehicle protection products sold with
30 warranties still outstanding in this State. The reserves
31 shall not be less than 40% of the gross consideration
32 received, less claims paid, for all vehicle protection
33 products sold with warranties still then in force;
34 (B) the warrantor places in trust with the Director
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1 a financial security deposit, having a value of not less
2 than 5% of the gross consideration received, less claims
3 paid, for all vehicle protection products sold with
4 warranties then in force, but not less than $25,000,
5 consisting of securities of the type eligible for deposit
6 by authorized insurers in this State and;
7 (C) The warrantor provides the Director with an
8 audited financial statement annually of the vehicle
9 protection product revenues and claims.
10 (3) (A) The vehicle protection product warrantor,
11 or its parent company in accordance with subdivision
12 (3)(B), maintains a net worth or stockholders' equity of
13 $50,000,000; and
14 (B) the warrantor provides the Director with a copy
15 of the warrantor's or the warrantor's parent company's
16 most recent Form 10-K or Form 20-F filed with the
17 Securities and Exchange Commission within the last
18 calendar year or, if the warrantor does not file with the
19 Securities and Exchange Commission, a copy of the
20 warrantor's or the warrantor's parent company's audited
21 financial statements that shows a net worth of the
22 warrantor or its parent company of at least $50,000,000.
23 If the warrantor's parent company's Form 10-K, Form 20-F,
24 or audited financial statements are filed to meet the
25 warrantor's financial stability requirement, then the
26 parent company shall agree to guarantee the obligations
27 of the warrantor relating to warranties issued by the
28 warrantor in this State.
29 Section 20. Reimbursement policy; required provisions.
30 (a) No warranty reimbursement insurance policy shall be
31 issued, sold, or offered for sale in this State unless the
32 policy states that the issuer of the policy will reimburse or
33 pay on behalf of the vehicle protection product warrantor all
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1 covered sums which the warrantor is legally obligated to pay
2 or will provide the service that the warrantor is legally
3 obligated to perform according to the warrantor's contractual
4 obligations under the provisions of the insured warranties
5 sold by the warrantor.
6 (b) If services or payment due under the terms of the
7 warranty is not provided by the warrantor within 60 days
8 after proof of loss has been filed according to the terms of
9 the warranty by the warranty holder, the warranty holder may
10 file directly with the insurance company writing the warranty
11 reimbursement insurance policy for reimbursement.
12 (c) A warranty reimbursement insurance company that
13 insures a warranty shall be deemed to have received payment
14 of the premium if the warranty holder paid for the vehicle
15 protection product.
16 Section 25. Registration requirements for warrantors.
17 (a) No vehicle protection product shall be sold in this
18 State until the following information has been submitted to
19 the Department:
20 (1) the name of the vehicle protection product
21 warrantor;
22 (2) a list identifying the warrantor's executive
23 officer or officers directly responsible for the
24 warrantor's warranty business;
25 (3) the name and address of the warrantor's agent
26 for service of process in this State, if other than the
27 warrantor;
28 (4) a true and accurate copy of all warranties to
29 be used in this State; and
30 (5) a statement indicating under which provision of
31 Section 15 the warrantor qualifies to do business in this
32 State as a warrantor.
33 (b) The warranty provider shall pay an initial
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1 registration fee of $200 and a renewal fee of $75 each year
2 thereafter. All fees and penalties collected under this Act
3 shall be paid to the Director and deposited in the Insurance
4 Financial Regulation Fund.
5 Section 30. Required warranty disclosures. All vehicle
6 protection product warranties used in this State shall
7 contain all of the following disclosures written in clear and
8 understandable language:
9 (1) the name and address of the warrantor;
10 (2) the total consideration for the vehicle
11 protection product paid by the purchaser of the vehicle
12 protection product and the terms under which the vehicle
13 protection product is sold; however, the purchase price
14 is not required to be preprinted on the vehicle
15 protection product warranty and may be negotiated with
16 the product purchaser at the time of sale;
17 (3) the conditions and procedures for making a
18 claim under the warranty, including the name, address,
19 and local or toll-free telephone number of the person or
20 office where such claim must be filed or approvals
21 obtained;
22 (4) the existence and amount of a deductible, if
23 any;
24 (5) the details of the warrantor's duties, payment
25 obligations, or performance to be provided under the
26 terms of the warranty and any limitations, exceptions, or
27 exclusions;
28 (6) the terms, conditions, and restrictions
29 governing transferability of the warranty, if any;
30 (7) the provisions governing cancellation and
31 refunds in accordance with Section 35 of this Act;
32 (8) whether or not the warranty covers failure
33 resulting from normal wear and tear;
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1 (9) the requirements concerning warranty
2 reimbursement insurance disclosure in subdivision (1)(C)
3 of Section 15 of this Act, if required, which information
4 may be stamped or printed on the form at the time of
5 sale; and
6 (10) the duties, if any, of the warranty holder to
7 protect against any further damage and any requirements
8 to follow the warranty's instructions.
9 Section 35. Cancellation and refunds.
10 (a) No vehicle protection product may be sold or offered
11 for sale in this State unless the vehicle protection product
12 warranty clearly states the terms and conditions governing
13 the cancellation of the sale and warranty, if any.
14 (b) The warrantor may only cancel the warranty if the
15 warranty holder:
16 (1) fails to pay for the vehicle protection
17 product;
18 (2) makes a material misrepresentation of fact to
19 the seller or warrantor;
20 (3) commits fraud; or
21 (4) substantially breaches the warranty holder's
22 duties under the warranty.
23 (c) A warrantor canceling a warranty shall mail written
24 notice of cancellation to the warranty holder at the last
25 address of the warranty holder in the warrantor's records at
26 least 30 days prior to the effective date of the
27 cancellation. The notice shall state the effective date of
28 the cancellation and the reason for the cancellation.
29 Section 40. Incidental benefits. A vehicle protection
30 product warranty may provide full or partial reimbursement
31 for other expenses such as incidental costs incurred by the
32 warranty holder as a direct and proximate result of the
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1 failure of the vehicle protection product to perform as
2 provided in the warranty. The warranty shall clearly describe
3 the manner for the calculation of payment.
4 Section 45. Record keeping requirements.
5 (a) The vehicle protection product warrantor shall keep
6 accurate accounts, books, and records concerning transactions
7 regulated under this Act.
8 (b) The warrantor's accounts, books, and records shall
9 include the following:
10 (1) copies of each type of warranty sold;
11 (2) the name and address of each warranty holder,
12 to the extent that the name and address has been
13 furnished by the warranty holder;
14 (3) a list of the locations where vehicle
15 protection products are marketed, sold, or offered for
16 sale; and
17 (4) written claims files which shall contain at
18 least the date and description of claims related to the
19 vehicle protection product warranties.
20 (c) Except as provided in subsection (e) of this
21 Section, the warrantor shall retain all records required to
22 be maintained by this Section for at least 3 years after the
23 specified term of a warranty has expired.
24 (d) The records required under this Act may be, but are
25 not required to be, maintained on a computer disk or other
26 record keeping technology. If the records are maintained in
27 other than hard copy, the records shall be capable of
28 duplication to legible hard copy at the request of the
29 Director.
30 (e) A warrantor discontinuing business in this State
31 shall maintain its records until it furnishes the Director
32 satisfactory proof that it has discharged all obligations to
33 warranty holders in this State.
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1 Section 50. Examinations and enforcement provisions.
2 (a) The Director may conduct examinations of warrantors,
3 administrators, or other persons to enforce this Act and
4 protect warranty holders in this State. Upon request of the
5 Director, a warrantor shall make available to the Director
6 all accounts, books, and records concerning vehicle
7 protection products sold by the warrantor that are necessary
8 to enable the Director to reasonably determine compliance or
9 noncompliance with this Act.
10 (b) The Director may take action that is necessary or
11 appropriate to enforce the provisions of this Act and the
12 Director's rules and orders and to protect warranty holders
13 in this State. If a warrantor engages in a pattern or
14 practice of conduct that violates this Act and that the
15 Director reasonably believes threatens to render the
16 warrantor insolvent or cause irreparable loss or injury to
17 the property or business of any person or company located in
18 this State, the Director may:
19 (1) issue an order directed to that warrantor to
20 cease and desist from engaging in further acts,
21 practices, or transactions that are causing the conduct;
22 (2) issue an order prohibiting that warrantor from
23 selling or offering for sale service contracts in
24 violation of this Act;
25 (3) issue an order imposing a civil penalty on that
26 warrantor; or
27 (4) issue any combination of the foregoing, as
28 applicable.
29 Prior to the effective date of any order issued pursuant
30 to this subsection, the Director must provide written notice
31 of the order to the warrantor and the opportunity for a
32 hearing to be held within 10 business days after receipt of
33 the notice, except prior notice and hearing shall not be
34 required if the Director reasonably believes that the
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1 warrantor has become, or is about to become, insolvent.
2 A person aggrieved by an order issued under this Section
3 may request a hearing before the Director. The hearing
4 request shall be filed with the Director within 20 days after
5 the date the Director's order is effective, and the Director
6 must hold such a hearing within 15 days after receipt of the
7 hearing request.
8 (c) At the hearing, the burden shall be on the Director
9 to show why the order issued pursuant to this Section is
10 justified. The provisions of Section 10-25 of the Illinois
11 Administrative Procedure Act shall apply to a hearing request
12 under this Section.
13 (d) The Director may bring an action in any court of
14 competent jurisdiction for an injunction or other appropriate
15 relief to enjoin threatened or existing violations of this
16 Act or of the Director's orders or rules. An action filed
17 under this Section also may seek restitution on behalf of
18 persons aggrieved by a violation of this Act or orders or
19 rules of the Director.
20 (e) A person who is found to have violated this Act or
21 orders or rules of the Director may be ordered to pay to the
22 Director a civil penalty in an amount, determined by the
23 Director, of not more than $500 per violation and not more
24 than $10,000 in the aggregate for all violations of a similar
25 nature. For purposes of this Section, violations shall be of
26 a similar nature if the violation consists of the same or
27 similar course of conduct, action, or practice, irrespective
28 of the number of times the conduct, action, or practice that
29 is determined to be a violation of this Act occurred.
30 Section 55. Rulemaking power. The Director may adopt
31 such administrative rules consistent with the provisions of
32 this Act as are necessary to implement them.
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1 Section 60. Applicability. This Act applies to all
2 vehicle protection products sold or offered for sale on or
3 after the effective date of this Act. The failure of any
4 person to comply with this Act prior to its effective date
5 shall not be admissible in any court proceeding,
6 administrative proceeding, arbitration, or alternative
7 dispute resolution proceeding and may not otherwise be used
8 to prove that the action of any person or the affected
9 vehicle protection product was unlawful or otherwise
10 improper.
11 Section 99. Effective date. This Act takes effect on
12 January 1, 2004.