215 ILCS 152/ Service Contract Act.

(215 ILCS 152/1)

Sec. 1. Short title. This Act may be cited as the Service Contract Act.

(Source: P.A. 90-711, eff. 8-7-98.)

(215 ILCS 152/5)

Sec. 5. Definitions.

"Department" means the Department of Insurance.

"Director" means the Director of Insurance.

"Road hazard" means a hazard that is encountered while driving a motor vehicle, including, but not limited to, potholes, rocks, wood debris, metal parts, glass, plastic, curbs, and composite scraps.

"Service contract" means a contract or agreement whereby a service contract provider undertakes for a specified period of time, for separate and identifiable consideration, to perform the repair, replacement, or maintenance, or indemnification for such services, of any automobile, system, or consumer product in connection with the operational or structural failure due to a defect in materials or workmanship, or normal wear and tear, with or without additional provision for incidental payment or indemnity under limited circumstances, for related expenses, including, but not limited to, towing, rental, and emergency road service. Service contracts may provide for:

(1) the repair, replacement, or maintenance of such property for damage resulting from power surges and accidental damage from handling;

(2) the repair or replacement of tires or wheels, or both, on a motor vehicle damaged as the result of coming into contact with road hazards;

(3) the removal of dents, dings, or creases on a motor vehicle that can be repaired using the process of paintless dent removal without affecting the existing paint finish and without replacing vehicle body panels, sanding, bonding, or painting;

(4) the repair of chips or cracks in or the replacement of motor vehicle windshields as a result of damage caused by road hazards;

(5) the replacement of a motor vehicle key or key-fob in the event that the key or key-fob becomes inoperable or is lost or stolen;

(6) the payment of specified incidental costs in the event that a vehicle protection product fails to prevent loss or damage as specified; the reimbursement of incidental costs must be tied to the purchase of a physical product that is formulated or designed to make the specified loss or damage less likely to occur; or

(7) other services that may be approved by the Director, if not inconsistent with other provisions of this Act.

Service contracts shall not include:

(i) contracts of limited duration that provide for scheduled maintenance only;

(ii) fuel additives, oil additives, or other chemical products applied to the engine, transmission, or fuel system of a motor vehicle;

(iii) coverage for the repair or replacement, or both, of damage to the interior surfaces of a vehicle, or for repair or replacement, or both, of damage to the exterior paint or finish of a vehicle; however, such coverage may be offered in connection with the sale of a vehicle protection product; and

(iv) a vehicle product protection warranty included, for no separate and identifiable consideration, with the purchase of a vehicle protection product.

"Service contract holder" means the person who purchases a service contract or a permitted transferee.

"Service contract provider" means a person who is contractually obligated to the service contract holder under the terms of the service contract. A service contract provider does not include an insurer.

"Service contract reimbursement insurance policy" means a policy of insurance that is issued to the service contract provider to provide reimbursement to the service contract provider or to pay on behalf of the service contract provider all covered contractual obligations incurred by the service contract provider under the terms and conditions of the insured service contracts issued or sold by the service contract provider.

"System" means the heating, cooling, plumbing, electrical, ventilation, or any other similar system of a home.

"Vehicle protection product" has the same meaning as that term is defined in subsection (a) of Section 155.39 of the Illinois Insurance Code.

"Vehicle protection product warranty" has the same meaning as that term is defined in subsection (a) of Section 155.39 of the Illinois Insurance Code.

(Source: P.A. 100-272, eff. 1-1-18.)

(215 ILCS 152/10)

Sec. 10. Exemptions. Service contract providers and related service contract sellers and administrators complying with this Act are not required to comply with and are not subject to any provision of the Illinois Insurance Code. A service contract provider who is the manufacturer or a wholly-owned subsidiary of the manufacturer of the product or the builder, seller, or lessor of the product that is the subject of the service contract is required to comply only with Sections 30, 35, 45, and 50 of this Act; except that, a service contract provider who sells a motor vehicle, excluding a motorcycle as defined in Section 1-147 of the Illinois Vehicle Code, or who leases, but is not the manufacturer of, the motor vehicle, excluding a motorcycle as defined in Section 1-147 of the Illinois Vehicle Code, that is the subject of the service contract must comply with this Act in its entirety. Contracts for the repair and monitoring of private alarm or private security systems regulated under the Private Detective, Private Alarm, Private Security, Fingerprint Vendor, and Locksmith Act of 2004 are not required to comply with this Act and are not subject to any provision of the Illinois Insurance Code.

(Source: P.A. 95-613, eff. 9-11-07.)

(215 ILCS 152/15)

Sec. 15. Financial requirements. No service contract shall be issued, sold, or offered for sale in this State unless one of the following conditions are satisfied:

(1) (A) The service contract provider is insured under a service contract reimbursement insurance policy issued by an insurer authorized to do business in this State and providing that the insurer will pay to, or on behalf of, the service contract provider all sums that the service contract provider is legally obligated to pay according to the service contract provider's contractual obligations under the service contracts issued or sold by the service contract provider;

(B) a true and correct copy of the service contract reimbursement insurance policy has been filed with the Director by the service contract provider;

(C) the service contract states that the obligations of the service contract provider to the service contract holder are covered under a service contract reimbursement insurance policy; and

(D) the service contract states the name and address of the issuer of the service contract reimbursement insurance policy and states that in the event covered service is not provided by the service contract provider within 60 days of proof of loss by the service contract holder, the service contract holder may file directly with the service contract reimbursement insurance company.

(2) (A) The service contract provider maintains a funded reserve account for its obligations under its service contracts issued and outstanding in this State. The reserves shall not be less than 40% of the gross consideration received, less claims paid, for all service contracts sold and then in force;

(B) the service contract provider places in trust with the Director a financial security deposit, having a value of not less than 5% of the gross consideration received, less claims paid, for all service contracts sold and then in force, but not less than $25,000, consisting of securities of the type eligible for deposit by authorized insurers in this State and;

(C) the service contract provider provides the Director with an audited financial statement annually of the service contract revenues and claims.

(3) (A) The service contract provider, or its parent company in accordance with subdivision (3)(B), maintains a net worth or stockholders' equity of $100,000,000; and

(B) the service contract provider provides the Director with a copy of the service contract provider's or the service contract provider's parent company's most recent Form 10-K or Form 20-F filed with the Securities and Exchange Commission within the last calendar year or, if the service contract provider does not file with the Securities and Exchange Commission, a copy of the service contract provider's or the service contract provider's parent company's audited financial statements that shows a net worth of the service contract provider or its parent company of at least $100,000,000. If the service contract provider's parent company's Form 10-K, Form 20-F, or audited financial statements are filed to meet the service provider's financial stability requirement, then the parent company shall agree to guarantee the obligations of the provider relating to service contracts issued by the service contract provider in this State.

(Source: P.A. 90-711, eff. 8-7-98.)

(215 ILCS 152/20)

Sec. 20. Reimbursement policy; required provisions.

(a) No service contract reimbursement insurance policy shall be issued, sold, or offered for sale in this State unless the policy states that the issuer of the policy will reimburse or pay on behalf of the service contract provider all covered sums which the service contract provider is legally obligated to pay or will provide the service that the service contract provider is legally obligated to perform according to the service contract provider's contractual obligations under the provisions of the insured service contracts issued or sold by the service contract provider.

(b) If covered service is not provided by the service contract provider within 60 days of proof of loss by the service contract holder, the service contract holder may file directly with the insurance company writing the service contract reimbursement insurance policy.

(c) A service contract reimbursement insurance company that insures a service contract shall be deemed to have received payment of the premium if the service contract holder paid for the service contract coverage.

(d) If a service contract is canceled by a service contract holder, the service contract reimbursement insurance company shall be required to return the unearned service contract reimbursement insurance premium for that contract to the insured service contract provider. If the service contract provider fails to refund the amounts required under Section 35 of this Act, the service contract reimbursement insurance company shall be responsible for the refund to the service contract holder.

(Source: P.A. 90-711, eff. 8-7-98.)

(215 ILCS 152/25)

Sec. 25. Registration requirements for service contract providers.

(a) No service contract shall be issued or sold in this State until the following information has been submitted to the Department:

(1) the name of the service contract provider;

(2) a list identifying the service contract provider's executive officer or officers directly responsible for the service contract provider's service contract business;

(3) the name and address of the service contract provider's agent for service of process in this State, if other than the service contract provider;

(4) a true and accurate copy of all service contracts to be sold in this State; and

(5) a statement indicating under which provision of Section 15 the service contract provider qualifies to do business in this State as a service contract provider.

(b) The service contract provider shall pay an initial registration fee of $1,000 and a renewal fee of $150 each year thereafter. All fees and penalties collected under this Act shall be paid to the Director and deposited in the Insurance Financial Regulation Fund.

(Source: P.A. 93-32, eff. 7-1-03.)

(215 ILCS 152/30)

Sec. 30. Required service contract disclosures. All service contracts issued or sold in this State shall contain the following disclosures written in clear and understandable language.

(1) the name and address of the service contract provider;

(2) the total consideration for the service contract paid by the service contract holder;

(3) the conditions and procedures for obtaining service under the service contract, including the name, address, and local or toll-free telephone number of any person from whom approval is required before covered repairs may be commenced;

(4) the existence and amount of a deductible, if any;

(5) merchandise and services to be provided and any limitations, exceptions, or exclusions;

(6) the terms, conditions, and restrictions governing transferability of the service contract, if any;

(7) the provisions governing cancellation and refunds in accordance with Section 35 of this Act; and

(8) whether or not the service contract covers failure resulting from normal wear and tear.

(Source: P.A. 90-711, eff. 8-7-98.)

(215 ILCS 152/35)

Sec. 35. Cancellation and refunds.

(a) No service contract may be issued, sold, or offered for sale in this State unless the service contract clearly states that the service contract holder is allowed to cancel the service contract. If the service contract holder elects cancellation, the service contract provider may retain a cancellation fee not to exceed the lesser of 10% of the service contract price or $50. The service contract cancellation provision must provide that the service contract may be cancelled:

(1) within 30 days after its purchase if no service has been provided and that a full refund of the service contract consideration, less any cancellation fee stated in the service contract will be paid to the service contract holder; or

(2) at any other time and a pro rata refund of the service contract consideration for the unexpired term of the service contract, based on the number of elapsed months, miles, hours, or such other reasonably applicable measure which is clearly disclosed in the service contract, less the value of any service received, and any cancellation fee stated in the service contract will be paid to the service contract holder.

(b) In the event of the cancellation of a service contract that includes the coverage described in paragraph (6) of the definition of "service contract" in Section 5 of this Act, the service contract provider is not required to, but may, refund the purchase price of the vehicle protection product. The coverage described in paragraph (6) of the definition of "service contract" in Section 5 of this Act may not be offered as or within a service contract unless the service contract clearly states whether the service contract holder is entitled to a refund of the purchase price of the vehicle protection product and, if applicable, the terms of such refund.

(Source: P.A. 100-272, eff. 1-1-18.)

(215 ILCS 152/40)

Sec. 40. Incidental benefits. A service contract may provide full or partial reimbursement for other expenses incurred by the service contract holder as a direct and proximate result of an operational or structural failure if covered by the service contract. A reimbursement for these expenses shall not exceed the purchase price of the property serviced per incident.

(Source: P.A. 90-711, eff. 8-7-98.)

(215 ILCS 152/45)

Sec. 45. Record keeping requirements.

(a) The service contract provider shall keep accurate accounts, books, and records concerning transactions regulated under this Act.

(b) The service contract provider's accounts, books, and records shall include the following:

(1) copies of each type of service contract sold;

(2) the name and address of each service contract holder, to the extent that the name and address has been furnished by the service contract holder;

(3) a list of the locations where service contracts are marketed, sold, or offered for sale; and

(4) written claims files which shall contain at least the date and description of claims related to the service contracts.

(c) Except as provided in subsection (e) of this Section, the service contract provider shall retain all records required to be maintained by Section 45 for at least 3 years after the specified period of coverage has expired.

(d) The records required under this Act may be, but are not required to be, maintained on a computer disk or other record keeping technology. If the records are maintained in other than hard copy, the records shall be capable of duplication to legible hard copy at the request of the Director.

(e) A service contract provider discontinuing business in this State shall maintain its records until it furnishes the Director satisfactory proof that it has discharged all obligations to service contract holders in this State.

(Source: P.A. 99-78, eff. 7-20-15.)

(215 ILCS 152/50)

Sec. 50. Examinations and enforcement provisions.

(a) The Director may conduct examinations of service contract providers, administrators, or other persons to enforce this Act and protect service contract holders in this State. Upon request of the Director, a service contract provider shall make available to the Director all accounts, books, and records concerning service contracts sold by the service contract provider that are necessary to enable the Director to reasonably determine compliance or noncompliance with this Act.

(b) The Director may take action that is necessary or appropriate to enforce the provisions of this Act and the Director's rules and orders and to protect service contract holders in this State. If a service contract provider engages in a pattern or practice of conduct that violates this Act and that the Director reasonably believes threatens to render the service contract provider insolvent or cause irreparable loss or injury to the property or business of any person or company located in this State, the Director may (i) issue an order directed to that service contract provider to cease and desist from engaging in further acts, practices, or transactions that are causing the conduct; (ii) issue an order prohibiting that service contract provider from selling or offering for sale service contracts in violation of this Act; (iii) issue an order imposing a civil penalty on that service contract provider; or (iv) issue any combination of the foregoing, as applicable. Prior to the effective date of any order issued pursuant to this subsection, the Director must provide written notice of the order to the service contract provider and the opportunity for a hearing to be held within 10 business days after receipt of the notice, except prior notice and hearing shall not be required if the Director reasonably believes that the service contract provider has become, or is about to become, insolvent.

A person aggrieved by an order issued under this Section may request a hearing before the Director. The hearing request shall be filed with the Director within 20 days after the date the Director's order is effective, and the Director must hold such a hearing within 15 days after receipt of the hearing request.

(c) At the hearing, the burden shall be on the Director to show why the order issued pursuant to this Section is justified. The provisions of Section 10-25 of the Illinois Administrative Procedure Act shall apply to a hearing request under this Section.

(d) The Director may bring an action in any court of competent jurisdiction for an injunction or other appropriate relief to enjoin threatened or existing violations of this Act or of the Director's orders or rules. An action filed under this Section also may seek restitution on behalf of persons aggrieved by a violation of this Act or orders or rules of the Director.

(e) A person who is found to have violated this Act or orders or rules of the Director may be ordered to pay to the Director a civil penalty in an amount, determined by the Director, of not more than $500 per violation and not more than $10,000 in the aggregate for all violations of a similar nature. For purposes of this Section, violations shall be of a similar nature if the violation consists of the same or similar course of conduct, action, or practice, irrespective of the number of times the conduct, action, or practice that is determined to be a violation of this Act occurred.

(Source: P.A. 90-711, eff. 8-7-98.)

(215 ILCS 152/55)

Sec. 55. Rulemaking power. The Director may adopt such administrative rules as are necessary to implement the provisions of this Act.

(Source: P.A. 90-711, eff. 8-7-98.)

(215 ILCS 152/60)

Sec. 60. Applicability. This Act applies to all service contracts sold or offered for sale 90 or more days after the effective date of this Act.

(Source: P.A. 90-711, eff. 8-7-98.)

(215 ILCS 152/99)

Sec. 99. Effective date. This Act takes effect upon becoming law.

(Source: P.A. 90-711, eff. 8-7-98.)