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| [ Introduced ] | [ Enrolled ] | [ House Amendment 001 ] |
| [ Senate Amendment 001 ] |
90_HB3464eng
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.
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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
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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.
15 Section 15. Financial requirements. No service contract
16 shall be issued, sold, or offered for sale in this State
17 unless one of the following conditions are satisfied:
18 (1) (A) The service contract provider is insured under a
19 service contract reimbursement insurance policy issued by
20 an insurer authorized to do business in this State and
21 providing that the insurer will pay to, or on behalf of,
22 the service contract provider all sums that the service
23 contract provider is legally obligated to pay according
24 to the service contract provider's contractual
25 obligations under the service contracts issued or sold by
26 the service contract provider;
27 (B) a true and correct copy of the service contract
28 reimbursement insurance policy has been filed with the
29 Director by the service contract provider;
30 (C) the service contract states that the
31 obligations of the service contract provider to the
32 service contract holder are covered under a service
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1 contract reimbursement insurance policy; and
2 (D) the service contract states the name and
3 address of the issuer of the service contract
4 reimbursement insurance policy and states that in the
5 event covered service is not provided by the service
6 contract provider within 60 days of proof of loss by the
7 service contract holder, the service contract holder may
8 file directly with the service contract reimbursement
9 insurance company.
10 (2) (A) The service contract provider maintains a funded
11 reserve account for its obligations under its service
12 contracts issued and outstanding in this State. The
13 reserves shall not be less than 40% of the gross
14 consideration received, less claims paid, for all service
15 contracts sold and then in force;
16 (B) the service contract provider places in trust
17 with the Director a financial security deposit, having a
18 value of not less than 5% of the gross consideration
19 received, less claims paid, for all service contracts
20 sold and then in force, but not less than $25,000,
21 consisting of securities of the type eligible for deposit
22 by authorized insurers in this State and;
23 (C) the service contract provider provides the
24 Director with an audited financial statement annually of
25 the service contract revenues and claims.
26 (3) (A) The service contract provider, or its parent
27 company in accordance with subdivision (3)(B), maintains
28 a net worth or stockholders' equity of $100,000,000; and
29 (B) the service contract provider provides the
30 Director with a copy of the service contract provider's
31 or the service contract provider's parent company's most
32 recent Form 10-K or Form 20-F filed with the Securities
33 and Exchange Commission within the last calendar year or,
34 if the service contract provider does not file with the
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1 Securities and Exchange Commission, a copy of the service
2 contract provider's or the service contract provider's
3 parent company's audited financial statements that shows
4 a net worth of the service contract provider or its
5 parent company of at least $100,000,000. If the service
6 contract provider's parent company's Form 10-K, Form
7 20-F, or audited financial statements are filed to meet
8 the service provider's financial stability requirement,
9 then the parent company shall agree to guarantee the
10 obligations of the provider relating to service contracts
11 issued by the service contract provider in this State.
12 Section 20. Reimbursement policy; required provisions.
13 (a) No service contract reimbursement insurance policy
14 shall be issued, sold, or offered for sale in this State
15 unless the policy states that the issuer of the policy will
16 reimburse or pay on behalf of the service contract provider
17 all covered sums which the service contract provider is
18 legally obligated to pay or will provide the service that the
19 service contract provider is legally obligated to perform
20 according to the service contract provider's contractual
21 obligations under the provisions of the insured service
22 contracts issued or sold by the service contract provider.
23 (b) If covered service is not provided by the service
24 contract provider within 60 days of proof of loss by the
25 service contract holder, the service contract holder may
26 file directly with the insurance company writing the service
27 contract reimbursement insurance policy.
28 (c) A service contract reimbursement insurance company
29 that insures a service contract shall be deemed to have
30 received payment of the premium if the service contract
31 holder paid for the service contract coverage.
32 (d) If a service contract is canceled by a service
33 contract holder, the service contract reimbursement insurance
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1 company shall be required to return the unearned service
2 contract reimbursement insurance premium for that contract to
3 the insured service contract provider. If the service
4 contract provider fails to refund the amounts required under
5 Section 35 of this Act, the service contract reimbursement
6 insurance company shall be responsible for the refund to the
7 service contract holder.
8 Section 25. Registration requirements for service
9 contract providers.
10 (a) No service contract shall be issued or sold in this
11 State until the following information has been submitted to
12 the Department:
13 (1) the name of the service contract provider;
14 (2) a list identifying the service contract
15 provider's executive officer or officers directly
16 responsible for the service contract provider's service
17 contract business;
18 (3) the name and address of the service contract
19 provider's agent for service of process in this State, if
20 other than the service contract provider;
21 (4) a true and accurate copy of all service
22 contracts to be sold in this State; and
23 (5) a statement indicating under which provision of
24 Section 15 the service contract provider qualifies to do
25 business in this State as a service contract provider.
26 (b) The service contract provider shall pay an initial
27 registration fee of $500 and a renewal fee of $75 each year
28 thereafter. All fees and penalties collected under this Act
29 shall be paid to the Director and deposited in the Insurance
30 Financial Regulation Fund.
31 Section 30. Required service contract disclosures. All
32 service contracts issued or sold in this State shall contain
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1 the following disclosures written in clear and understandable
2 language.
3 (1) the name and address of the service contract
4 provider;
5 (2) the total consideration for the service contract
6 paid by the service contract holder;
7 (3) the conditions and procedures for obtaining service
8 under the service contract, including the name, address, and
9 local or toll-free telephone number of any person from whom
10 approval is required before covered repairs may be commenced;
11 (4) the existence and amount of a deductible, if any;
12 (5) merchandise and services to be provided and any
13 limitations, exceptions, or exclusions;
14 (6) the terms, conditions, and restrictions governing
15 transferability of the service contract, if any;
16 (7) the provisions governing cancellation and refunds in
17 accordance with Section 35 of this Act; and
18 (8) whether or not the service contract covers failure
19 resulting from normal wear and tear.
20 Section 35. Cancellation and refunds. No service
21 contract may be issued, sold, or offered for sale in this
22 State unless the service contract clearly states that the
23 service contract holder is allowed to cancel the service
24 contract. If the service contract holder elects
25 cancellation, the service contract provider may retain a
26 cancellation fee not to exceed the lesser of 10% of the
27 service contract price or $50. The service contract
28 cancellation provision must provide that the service contract
29 may be cancelled:
30 (1) within 30 days after its purchase if no service has
31 been provided and that a full refund of the service contract
32 consideration, less any cancellation fee stated in the
33 service contract will be paid to the service contract holder;
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1 or
2 (2) at any other time and a pro rata refund of the
3 service contract consideration for the unexpired term of the
4 service contract, based on the number of elapsed months,
5 miles, hours, or such other reasonably applicable measure
6 which is clearly disclosed in the service contract, less the
7 value of any service received, and any cancellation fee
8 stated in the service contract will be paid to the service
9 contract holder.
10 Section 40. Incidental benefits. A service contract may
11 provide full or partial reimbursement for other expenses
12 incurred by the service contract holder as a direct and
13 proximate result of an operational or structural failure if
14 covered by the service contract. A reimbursement for these
15 expenses shall not exceed the purchase price of the property
16 serviced per incident.
17 Section 45. Record keeping requirements.
18 (a) The service contract provider shall keep accurate
19 accounts, books, and records concerning transactions
20 regulated under this Act.
21 (b) The service contract provider's accounts, books, and
22 records shall include the following:
23 (1) copies of each type of service contract sold;
24 (2) the name and address of each service contract
25 holder, to the extend that the name and address has been
26 furnished by the service contract holder;
27 (3) a list of the locations where service contracts
28 are marketed, sold, or offered for sale; and
29 (4) written claims files which shall contain at
30 least the date and description of claims related to the
31 service contracts.
32 (c) Except as provided in subsection (e) of this
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1 Section, the service contract provider shall retain all
2 records required to be maintained by Section 45 for at least
3 3 years after the specified period of coverage has expired.
4 (d) The records required under this Act may be, but are
5 not required to be, maintained on a computer disk or other
6 record keeping technology. If the records are maintained in
7 other than hard copy, the records shall be capable of
8 duplication to legible hard copy at the request of the
9 Director.
10 (e) A service contract provider discontinuing business
11 in this State shall maintain its records until it furnishes
12 the Director satisfactory proof that it has discharged all
13 obligations to service contract holders in this State.
14 Section 50. Examinations and enforcement provisions.
15 (a) The Director may conduct examinations of service
16 contract providers, administrators, or other persons to
17 enforce this Act and protect service contract holders in this
18 State. Upon request of the Director, a service contract
19 provider shall make available to the Director all accounts,
20 books, and records concerning service contracts sold by the
21 service contract provider that are necessary to enable the
22 Director to reasonably determine compliance or noncompliance
23 with this Act.
24 (b) The Director may take action that is necessary or
25 appropriate to enforce the provisions of this Act and the
26 Director's rules and orders and to protect service contract
27 holders in this State. If a service contract provider engages
28 in a pattern or practice of conduct that violates this Act
29 and that the Director reasonably believes threatens to render
30 the service contract provider insolvent or cause irreparable
31 loss or injury to the property or business of any person or
32 company located in this State, the Director may (i) issue an
33 order directed to that service contract provider to cease and
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1 desist from engaging in further acts, practices, or
2 transactions that are causing the conduct; (ii) issue an
3 order prohibiting that service contract provider from selling
4 or offering for sale service contracts in violation of this
5 Act; (iii) issue an order imposing a civil penalty on that
6 service contract provider; or (iv) issue any combination of
7 the foregoing, as applicable. Prior to the effective date of
8 any order issued pursuant to this subsection, the Director
9 must provide written notice of the order to the service
10 contract provider and the opportunity for a hearing to be
11 held within 10 business days after receipt of the notice,
12 except prior notice and hearing shall not be required if the
13 Director reasonably believes that the service contract
14 provider has become, or is about to become, insolvent.
15 A person aggrieved by an order issued under this Section
16 may request a hearing before the Director. The hearing
17 request shall be filed with the Director within 20 days after
18 the date the Director's order is effective, and the Director
19 must hold such a hearing within 15 days after receipt of the
20 hearing request.
21 (c) At the hearing, the burden shall be on the Director
22 to show why the order issued pursuant to this Section is
23 justified. The provisions of Section 10-25 of the Illinois
24 Administrative Procedure Act shall apply to a hearing request
25 under this Section.
26 (d) The Director may bring an action in any court of
27 competent jurisdiction for an injunction or other appropriate
28 relief to enjoin threatened or existing violations of this
29 Act or of the Director's orders or rules. An action filed
30 under this Section also may seek restitution on behalf of
31 persons aggrieved by a violation of this Act or orders or
32 rules of the Director.
33 (e) A person who is found to have violated this Act or
34 orders or rules of the Director may be ordered to pay to the
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1 Director a civil penalty in an amount, determined by the
2 Director, of not more than $500 per violation and not more
3 than $10,000 in the aggregate for all violations of a similar
4 nature. For purposes of this Section, violations shall be of
5 a similar nature if the violation consists of the same or
6 similar course of conduct, action, or practice, irrespective
7 of the number of times the conduct, action, or practice that
8 is determined to be a violation of this Act occurred.
9 Section 55. Rulemaking power. The Director may adopt
10 such administrative rules as are necessary to implement the
11 provisions of this Act.
12 Section 60. Applicability. This Act applies to all
13 service contracts sold or offered for sale 90 or more days
14 after the effective date of this Act.
15 Section 99. Effective date. This Act takes effect upon
16 becoming law.