[ Search ] [ Legislation ] [ Bill Summary ]
[ Home ] [ Back ] [ Bottom ]
| [ Introduced ] | [ Engrossed ] | [ House Amendment 001 ] |
| [ Senate Amendment 001 ] |
90_HB3464enr
215 ILCS 5/357.31 from Ch. 73, par. 969.31
Amends the Illinois Insurance Code. Adds a caption to a
Section concerning the refund of unearned premium upon death
of the insured.
LRB9009408JSmb
HB3464 Enrolled LRB9009408JSmb
1 AN ACT concerning service contracts.
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 Service Contract Act.
6 Section 5. Definitions.
7 "Department" means the Department of Insurance.
8 "Director" means the Director of Insurance.
9 "Service Contract" means a contract or agreement whereby
10 a service contract provider undertakes for a specified period
11 of time, for separate and identifiable consideration, to
12 perform the repair, replacement, or maintenance, or
13 indemnification for such services, of any automobile, system,
14 or consumer product in connection with the operational or
15 structural failure due to a defect in materials or
16 workmanship, or normal wear and tear, with or without
17 additional provision for incidental payment or indemnity
18 under limited circumstances, for related expenses, including,
19 but not limited to, towing, rental, and emergency road
20 service. Service contracts may provide for the repair,
21 replacement, or maintenance of such property for damage
22 resulting from power surges and accidental damage from
23 handling. Service contracts shall not include contracts of
24 limited duration that provide for scheduled maintenance only.
25 "Service contract holder" means the person who purchases
26 a service contract or a permitted transferee.
27 "Service contract provider" means a person who is
28 contractually obligated to the service contract holder under
29 the terms of the service contract. A service contract
30 provider does not include an insurer.
31 "Service contract reimbursement insurance policy" means a
HB3464 Enrolled -2- LRB9009408JSmb
1 policy of insurance that is issued to the service contract
2 provider to provide reimbursement to the service contract
3 provider or to pay on behalf of the service contract provider
4 all covered contractual obligations incurred by the service
5 contract provider under the terms and conditions of the
6 insured service contracts issued or sold by the service
7 contract provider.
8 "System" means the heating, cooling, plumbing,
9 electrical, ventilation, or any other similar system of a
10 home.
11 Section 10. Exemptions. Service contract providers and
12 related service contract sellers and administrators complying
13 with this Act are not required to comply with and are not
14 subject to any provision of the Illinois Insurance Code. A
15 service contract provider who is the manufacturer or a
16 wholly-owned subsidiary of the manufacturer of the product or
17 the builder, seller, or lessor of the product that is the
18 subject of the service contract is required to comply only
19 with Sections 30, 35, 45, and 50 of this Act; except that, a
20 service contract provider who sells a motor vehicle or who
21 leases, but is not the manufacturer of, the motor vehicle
22 that is the subject of the service contract must comply with
23 this Act in its entirety.
24 Section 15. Financial requirements. No service contract
25 shall be issued, sold, or offered for sale in this State
26 unless one of the following conditions are satisfied:
27 (1) (A) The service contract provider is insured under a
28 service contract reimbursement insurance policy issued by
29 an insurer authorized to do business in this State and
30 providing that the insurer will pay to, or on behalf of,
31 the service contract provider all sums that the service
32 contract provider is legally obligated to pay according
HB3464 Enrolled -3- LRB9009408JSmb
1 to the service contract provider's contractual
2 obligations under the service contracts issued or sold by
3 the service contract provider;
4 (B) a true and correct copy of the service contract
5 reimbursement insurance policy has been filed with the
6 Director by the service contract provider;
7 (C) the service contract states that the
8 obligations of the service contract provider to the
9 service contract holder are covered under a service
10 contract reimbursement insurance policy; and
11 (D) the service contract states the name and
12 address of the issuer of the service contract
13 reimbursement insurance policy and states that in the
14 event covered service is not provided by the service
15 contract provider within 60 days of proof of loss by the
16 service contract holder, the service contract holder may
17 file directly with the service contract reimbursement
18 insurance company.
19 (2) (A) The service contract provider maintains a funded
20 reserve account for its obligations under its service
21 contracts issued and outstanding in this State. The
22 reserves shall not be less than 40% of the gross
23 consideration received, less claims paid, for all service
24 contracts sold and then in force;
25 (B) the service contract provider places in trust
26 with the Director a financial security deposit, having a
27 value of not less than 5% of the gross consideration
28 received, less claims paid, for all service contracts
29 sold and then in force, but not less than $25,000,
30 consisting of securities of the type eligible for deposit
31 by authorized insurers in this State and;
32 (C) the service contract provider provides the
33 Director with an audited financial statement annually of
34 the service contract revenues and claims.
HB3464 Enrolled -4- LRB9009408JSmb
1 (3) (A) The service contract provider, or its parent
2 company in accordance with subdivision (3)(B), maintains
3 a net worth or stockholders' equity of $100,000,000; and
4 (B) the service contract provider provides the
5 Director with a copy of the service contract provider's
6 or the service contract provider's parent company's most
7 recent Form 10-K or Form 20-F filed with the Securities
8 and Exchange Commission within the last calendar year or,
9 if the service contract provider does not file with the
10 Securities and Exchange Commission, a copy of the service
11 contract provider's or the service contract provider's
12 parent company's audited financial statements that shows
13 a net worth of the service contract provider or its
14 parent company of at least $100,000,000. If the service
15 contract provider's parent company's Form 10-K, Form
16 20-F, or audited financial statements are filed to meet
17 the service provider's financial stability requirement,
18 then the parent company shall agree to guarantee the
19 obligations of the provider relating to service contracts
20 issued by the service contract provider in this State.
21 Section 20. Reimbursement policy; required provisions.
22 (a) No service contract reimbursement insurance policy
23 shall be issued, sold, or offered for sale in this State
24 unless the policy states that the issuer of the policy will
25 reimburse or pay on behalf of the service contract provider
26 all covered sums which the service contract provider is
27 legally obligated to pay or will provide the service that the
28 service contract provider is legally obligated to perform
29 according to the service contract provider's contractual
30 obligations under the provisions of the insured service
31 contracts issued or sold by the service contract provider.
32 (b) If covered service is not provided by the service
33 contract provider within 60 days of proof of loss by the
HB3464 Enrolled -5- LRB9009408JSmb
1 service contract holder, the service contract holder may
2 file directly with the insurance company writing the service
3 contract reimbursement insurance policy.
4 (c) A service contract reimbursement insurance company
5 that insures a service contract shall be deemed to have
6 received payment of the premium if the service contract
7 holder paid for the service contract coverage.
8 (d) If a service contract is canceled by a service
9 contract holder, the service contract reimbursement insurance
10 company shall be required to return the unearned service
11 contract reimbursement insurance premium for that contract to
12 the insured service contract provider. If the service
13 contract provider fails to refund the amounts required under
14 Section 35 of this Act, the service contract reimbursement
15 insurance company shall be responsible for the refund to the
16 service contract holder.
17 Section 25. Registration requirements for service
18 contract providers.
19 (a) No service contract shall be issued or sold in this
20 State until the following information has been submitted to
21 the Department:
22 (1) the name of the service contract provider;
23 (2) a list identifying the service contract
24 provider's executive officer or officers directly
25 responsible for the service contract provider's service
26 contract business;
27 (3) the name and address of the service contract
28 provider's agent for service of process in this State, if
29 other than the service contract provider;
30 (4) a true and accurate copy of all service
31 contracts to be sold in this State; and
32 (5) a statement indicating under which provision of
33 Section 15 the service contract provider qualifies to do
HB3464 Enrolled -6- LRB9009408JSmb
1 business in this State as a service contract provider.
2 (b) The service contract provider shall pay an initial
3 registration fee of $500 and a renewal fee of $75 each year
4 thereafter. All fees and penalties collected under this Act
5 shall be paid to the Director and deposited in the Insurance
6 Financial Regulation Fund.
7 Section 30. Required service contract disclosures. All
8 service contracts issued or sold in this State shall contain
9 the following disclosures written in clear and understandable
10 language.
11 (1) the name and address of the service contract
12 provider;
13 (2) the total consideration for the service contract
14 paid by the service contract holder;
15 (3) the conditions and procedures for obtaining service
16 under the service contract, including the name, address, and
17 local or toll-free telephone number of any person from whom
18 approval is required before covered repairs may be commenced;
19 (4) the existence and amount of a deductible, if any;
20 (5) merchandise and services to be provided and any
21 limitations, exceptions, or exclusions;
22 (6) the terms, conditions, and restrictions governing
23 transferability of the service contract, if any;
24 (7) the provisions governing cancellation and refunds in
25 accordance with Section 35 of this Act; and
26 (8) whether or not the service contract covers failure
27 resulting from normal wear and tear.
28 Section 35. Cancellation and refunds. No service
29 contract may be issued, sold, or offered for sale in this
30 State unless the service contract clearly states that the
31 service contract holder is allowed to cancel the service
32 contract. If the service contract holder elects
HB3464 Enrolled -7- LRB9009408JSmb
1 cancellation, the service contract provider may retain a
2 cancellation fee not to exceed the lesser of 10% of the
3 service contract price or $50. The service contract
4 cancellation provision must provide that the service contract
5 may be cancelled:
6 (1) within 30 days after its purchase if no service has
7 been provided and that a full refund of the service contract
8 consideration, less any cancellation fee stated in the
9 service contract will be paid to the service contract holder;
10 or
11 (2) at any other time and a pro rata refund of the
12 service contract consideration for the unexpired term of the
13 service contract, based on the number of elapsed months,
14 miles, hours, or such other reasonably applicable measure
15 which is clearly disclosed in the service contract, less the
16 value of any service received, and any cancellation fee
17 stated in the service contract will be paid to the service
18 contract holder.
19 Section 40. Incidental benefits. A service contract may
20 provide full or partial reimbursement for other expenses
21 incurred by the service contract holder as a direct and
22 proximate result of an operational or structural failure if
23 covered by the service contract. A reimbursement for these
24 expenses shall not exceed the purchase price of the property
25 serviced per incident.
26 Section 45. Record keeping requirements.
27 (a) The service contract provider shall keep accurate
28 accounts, books, and records concerning transactions
29 regulated under this Act.
30 (b) The service contract provider's accounts, books, and
31 records shall include the following:
32 (1) copies of each type of service contract sold;
HB3464 Enrolled -8- LRB9009408JSmb
1 (2) the name and address of each service contract
2 holder, to the extend that the name and address has been
3 furnished by the service contract holder;
4 (3) a list of the locations where service contracts
5 are marketed, sold, or offered for sale; and
6 (4) written claims files which shall contain at
7 least the date and description of claims related to the
8 service contracts.
9 (c) Except as provided in subsection (e) of this
10 Section, the service contract provider shall retain all
11 records required to be maintained by Section 45 for at least
12 3 years after the specified period of coverage has expired.
13 (d) The records required under this Act may be, but are
14 not required to be, maintained on a computer disk or other
15 record keeping technology. If the records are maintained in
16 other than hard copy, the records shall be capable of
17 duplication to legible hard copy at the request of the
18 Director.
19 (e) A service contract provider discontinuing business
20 in this State shall maintain its records until it furnishes
21 the Director satisfactory proof that it has discharged all
22 obligations to service contract holders in this State.
23 Section 50. Examinations and enforcement provisions.
24 (a) The Director may conduct examinations of service
25 contract providers, administrators, or other persons to
26 enforce this Act and protect service contract holders in this
27 State. Upon request of the Director, a service contract
28 provider shall make available to the Director all accounts,
29 books, and records concerning service contracts sold by the
30 service contract provider that are necessary to enable the
31 Director to reasonably determine compliance or noncompliance
32 with this Act.
33 (b) The Director may take action that is necessary or
HB3464 Enrolled -9- LRB9009408JSmb
1 appropriate to enforce the provisions of this Act and the
2 Director's rules and orders and to protect service contract
3 holders in this State. If a service contract provider engages
4 in a pattern or practice of conduct that violates this Act
5 and that the Director reasonably believes threatens to render
6 the service contract provider insolvent or cause irreparable
7 loss or injury to the property or business of any person or
8 company located in this State, the Director may (i) issue an
9 order directed to that service contract provider to cease and
10 desist from engaging in further acts, practices, or
11 transactions that are causing the conduct; (ii) issue an
12 order prohibiting that service contract provider from selling
13 or offering for sale service contracts in violation of this
14 Act; (iii) issue an order imposing a civil penalty on that
15 service contract provider; or (iv) issue any combination of
16 the foregoing, as applicable. Prior to the effective date of
17 any order issued pursuant to this subsection, the Director
18 must provide written notice of the order to the service
19 contract provider and the opportunity for a hearing to be
20 held within 10 business days after receipt of the notice,
21 except prior notice and hearing shall not be required if the
22 Director reasonably believes that the service contract
23 provider has become, or is about to become, insolvent.
24 A person aggrieved by an order issued under this Section
25 may request a hearing before the Director. The hearing
26 request shall be filed with the Director within 20 days after
27 the date the Director's order is effective, and the Director
28 must hold such a hearing within 15 days after receipt of the
29 hearing request.
30 (c) At the hearing, the burden shall be on the Director
31 to show why the order issued pursuant to this Section is
32 justified. The provisions of Section 10-25 of the Illinois
33 Administrative Procedure Act shall apply to a hearing request
34 under this Section.
HB3464 Enrolled -10- LRB9009408JSmb
1 (d) The Director may bring an action in any court of
2 competent jurisdiction for an injunction or other appropriate
3 relief to enjoin threatened or existing violations of this
4 Act or of the Director's orders or rules. An action filed
5 under this Section also may seek restitution on behalf of
6 persons aggrieved by a violation of this Act or orders or
7 rules of the Director.
8 (e) A person who is found to have violated this Act or
9 orders or rules of the Director may be ordered to pay to the
10 Director a civil penalty in an amount, determined by the
11 Director, of not more than $500 per violation and not more
12 than $10,000 in the aggregate for all violations of a similar
13 nature. For purposes of this Section, violations shall be of
14 a similar nature if the violation consists of the same or
15 similar course of conduct, action, or practice, irrespective
16 of the number of times the conduct, action, or practice that
17 is determined to be a violation of this Act occurred.
18 Section 55. Rulemaking power. The Director may adopt
19 such administrative rules as are necessary to implement the
20 provisions of this Act.
21 Section 60. Applicability. This Act applies to all
22 service contracts sold or offered for sale 90 or more days
23 after the effective date of this Act.
24 Section 99. Effective date. This Act takes effect upon
25 becoming law.