SENATE BILL 220
53rd legislature - STATE OF NEW MEXICO - first session, 2017
INTRODUCED BY
John M. Sapien
AN ACT
RELATING TO SERVICE CONTRACTS; AMENDING THE SERVICE CONTRACT REGULATION ACT; ADDING AND AMENDING DEFINITIONS; PROVIDING FOR THEFT PROTECTION PROGRAM WARRANTIES AND FOR SURETY THROUGH INSURANCE POLICIES; SPECIFYING INFORMATION TO BE INCLUDED IN CONTRACTS AND WARRANTIES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. Section 59A-58-1 NMSA 1978 (being Laws 2001, Chapter 206, Section 1) is amended to read:
"59A-58-1. SHORT TITLE.--[Sections 1 through 19 of this act] Chapter 59A, Article 58 NMSA 1978 may be cited as the "Service Contract Regulation Act"."
SECTION 2. Section 59A-58-2 NMSA 1978 (being Laws 2001, Chapter 206, Section 2, as amended) is amended to read:
"59A-58-2. DEFINITIONS.--As used in the Service Contract Regulation Act:
A. "administrator" means a person who is responsible for administering a service contract that is issued, sold or offered for sale by a provider or sold by a seller;
B. "consumer" means a person who purchases, other than for resale, property used primarily for personal, family or household purposes and not for business or research purposes;
C. "holder" means:
(1) in a service contract, a resident of this state who:
[(1)] (a) purchases a service contract; or
[(2)] (b) is legally in possession of a service contract and is entitled to enforce the rights of the original purchaser of the service contract; and
(2) in a theft protection program, a resident of this state who purchases a theft protection program, any authorized transferee or assignee of the purchaser or any other person legally assuming the purchaser's rights under the theft protection program warranty;
D. "incidental costs" means expenses specified in a theft protection program warranty that are incurred by the warranty holder due to the failure of a theft protection program to perform as provided in the contract. Incidental costs may include, without limitation, insurance policy deductibles, rental vehicle charges, the difference between the actual value of a stolen vehicle at the time of theft and the cost of a replacement vehicle, gross receipts taxes, registration fees, transaction fees and mechanical inspection fees. Incidental costs may be reimbursed in either a fixed amount specified in the theft protection program warranty or by use of a formula itemizing specific incidental costs incurred by the warranty holder;
[D.] E. "maintenance agreement" means a contract for a limited period that provides only for scheduled maintenance;
[E.] F. "major manufacturing company" means a person who:
(1) manufactures or produces and sells products under its own name or label or is a wholly owned subsidiary or affiliate of the person who manufactures or produces products; and
(2) maintains, or its parent company maintains, a net worth or stockholders' equity of at least one hundred million dollars ($100,000,000);
[F.] G. "property" means all property, whether movable at the time of purchase or a fixture, that is used primarily for personal, family or household purposes;
[G.] H. "provider" means a person who is contractually obligated to a holder or to indemnify the holder for the costs of repairing, replacing or performing maintenance on property;
I. "road hazard" means a hazard that is encountered while driving a motor vehicle and that may include potholes, rocks, wood debris, metal parts, glass, plastic, curbs or composite scraps;
J. "seller" means a person who sells service contracts that contractually obligate another party or parties;
[H.] K. "service contract" means a contract pursuant to which a provider, in exchange for separately stated consideration, is obligated for a specified period to a holder to repair, replace or perform maintenance on, or indemnify or reimburse the holder for the costs of repairing, replacing or performing maintenance on, property that is described in the service contract and that has an operational or structural failure as a result of a defect in materials, workmanship or normal wear and tear, including a contract that provides or includes one or more of the following:
(1) [a contract that includes a provision for] incidental payment of indemnity under limited circumstances, including towing, rental and emergency road service and food spoilage; [and]
(2) [a contract that provides for] the repair, replacement or maintenance of property for damages that result from power surges or accidental damage from handling; [and
I. "warranty" means a warranty provided solely by a manufacturer, importer or seller of property for which the manufacturer, importer or seller did not receive separate consideration and that:
(1) is not negotiated or separated from the sale of the property;
(2) is incidental to the sale of the property; and
(3) guarantees to indemnify the consumer for defective parts, mechanical or electrical failure, labor or other remedial measures required to repair or replace the property]
(3) the repair or replacement of tires and wheels on a motor vehicle damaged as a result of coming into contact with road hazards;
(4) 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;
(5) the repair of chips or cracks in motor vehicle windshields or the replacement of motor vehicle windshields as a result of damage caused by road hazards;
(6) the replacement of a motor vehicle key or key fob in the event the key or key fob becomes inoperable or is lost or stolen; and
(7) other services approved by the superintendent if not inconsistent with other provisions of the Service Contract Regulation Act;
L. "theft protection program" means a device or system that is installed on or applied to a motor vehicle, is designed to prevent loss or damage to a motor vehicle from theft and includes a theft protection program warranty, alarm systems, body part marking products, steering locks, window etch products, pedal and ignition locks, fuel and ignition kill switches and electronic, radio and satellite tracking devices; and does not include fuel additives, oil additives or other chemical products applied to the engine, transmission or fuel system or interior or exterior surfaces of a motor vehicle;
M. "theft protection program warranty" means a written agreement by a warrantor that provides that if the theft protection program fails to prevent loss or damage to a motor vehicle from theft, the warrantor will pay to or on behalf of the warranty holder specified incidental costs as a result of the failure of the theft protection program to perform pursuant to the terms of the theft protection program warranty; and
N. "warrantor" means the person who is contractually obligated under the terms of a theft protection program warranty."
SECTION 3. Section 59A-58-3 NMSA 1978 (being Laws 2001, Chapter 206, Section 3) is amended to read:
"59A-58-3. EXCLUSIONS FROM ACT.--The provisions of the Service Contract Regulation Act do not apply to:
A. a warranty provided under the federal Manson-Moss Warranty-Federal Trade Commission Improvement Act;
B. a maintenance agreement;
C. a service contract provided by a public utility on its transmission device if the service contract is regulated by the public regulation commission;
D. a service contract sold or offered for sale to a person who is not a consumer; or
E. a service contract for property if the purchase price of the property is less than two hundred fifty dollars ($250) and the consideration for the service contract is less than twenty-five dollars ($25.00)."
SECTION 4. Section 59A-58-4 NMSA 1978 (being Laws 2001, Chapter 206, Section 4) is amended to read:
"59A-58-4. PROHIBITION OF SALE OF SERVICE CONTRACT UNLESS REGISTERED.--A provider shall not issue, sell or offer for sale service contracts in this state unless [he] the provider has been registered with the superintendent pursuant to the provisions of the Service Contract Regulation Act. However, an administrator or seller of a service contract is not required to be registered. The provisions of this section shall not apply to major manufacturing companies' service contracts."
SECTION 5. Section 59A-58-5 NMSA 1978 (being Laws 2001, Chapter 206, Section 5) is amended to read:
"59A-58-5. REGISTRATION REQUIREMENTS.--
A. A provider who wishes to issue, sell or offer for sale service contracts in this state must submit to the superintendent:
(1) a registration application on a form prescribed by the superintendent;
(2) proof that [he] the provider has complied with the requirements for security pursuant to Section [7 of the Service Contract Regulation Act] 59A-58-7 NMSA 1978;
(3) the name, address and telephone number of each administrator with whom the provider intends to contract, if any; and
(4) a fee of five hundred dollars ($500).
B. A provider's registration is valid for one year after the date the registration is filed. A provider may renew [his] the provider's registration if, before the registration expires, [he] the provider submits to the superintendent an application on a form prescribed by the superintendent and a fee of five hundred dollars ($500).
C. The provisions of this section shall not apply to major manufacturing companies' service contracts.
D. Service contract forms are not required to be filed with the superintendent."
SECTION 6. A new section of the Service Contract Regulation Act, Section 59A-58-5.1 NMSA 1978, is enacted to read:
"59A-58-5.1. [NEW MATERIAL] REGISTRATION REQUIREMENTS FOR WARRANTORS.--
A. A warrantor who wishes to offer theft protection program warranties in this state shall submit to the superintendent:
(1) a registration application on a form prescribed by the superintendent;
(2) proof that the warrantor has complied with the requirements for security pursuant to Section 59A-58-6.1 NMSA 1978;
(3) the name, address and telephone number of each administrator with whom the provider intends to contract, if any; and
(4) a fee of five hundred dollars ($500).
B. A warrantor's registration is valid for one year after the date the registration is filed. A warrantor may renew the warrantor's registration if, before the registration expires, the warrantor submits to the superintendent an application on a form prescribed by the superintendent and a fee of five hundred dollars ($500).
C. The provisions of this section do not apply to major manufacturing companies' theft protection program warranties.
D. Theft protection program warranty forms are not required to be filed with the superintendent."
SECTION 7. Section 59A-58-6 NMSA 1978 (being Laws 2001, Chapter 206, Section 6, as amended) is amended to read:
"59A-58-6. SECURITY REQUIRED FOR REGISTRATION OF PROVIDER.--
A. To ensure the faithful performance of a provider's obligations to the provider's service contract holders, a provider shall comply with the requirements of one of the following:
(1) maintain a deposit with the superintendent as provided in this [section] paragraph:
[B.] (a) a provider of a service contract shall deposit fifty thousand dollars ($50,000) unless the contract covers the following, in which case the provider shall deposit one hundred thousand dollars ($100,000): [(1)] 1) a motor vehicle; and [(2)] 2) mechanical, plumbing and electrical systems and appliances at a residential dwelling when the service contract was sold in conjunction with the sale of the residential dwelling; and
[C.] (b) deposits required pursuant to [Subsection B of this section] Subparagraph (a) of this paragraph shall be: [(1)] 1) a surety bond issued by a surety company authorized to do business in New Mexico on a form acceptable to the superintendent; [(2)] 2) securities of the type eligible for deposit by an insurance company; or [(3)] 3) a clean and irrevocable letter of credit issued by a financial institution acceptable to the superintendent;
[D. Additional financial security may be required of any provider when it is determined by the superintendent that an additional deposit is necessary for the protection of the public] or
(2) insure all service contracts under a reimbursement insurance policy issued by an insurer licensed, registered or otherwise authorized to do business in this state, and either:
(a) at the time the policy is filed with the superintendent, and continuously thereafter: 1) maintain a surplus as to policyholders and paid-in capital of at least fifteen million dollars ($15,000,000); and 2) annually file copies of the insurer's financial statements, its national association of insurance commissioners annual statement and the actuarial certification required by and filed in the insurer's state of domicile; or
(b) at the time the policy is filed with the superintendent, and continuously thereafter: 1) maintain a surplus as to policyholders and paid-in capital of less than fifteen million dollars ($15,000,000) but at least equal to ten million dollars ($10,000,000); 2) demonstrate to the satisfaction of the superintendent that the company maintains a ratio of net written premiums, wherever written, to surplus as to policyholders and paid-in capital of not greater than three to one; and 3) annually file copies of the insurer's audited financial statements, its national association of insurance commissioners annual statement and the actuarial certification required by and filed in the insurer's state of domicile.
B. Except for the requirements specified in this section, no other financial security requirements shall be required by the superintendent.
[E.] C. The provisions of this section [shall] do not apply to major manufacturing companies' service contracts."
SECTION 8. A new section of the Service Contract Regulation Act, Section 59A-58-6.1 NMSA 1978, is enacted to read:
"59A-58-6.1. [NEW MATERIAL] SECURITY REQUIRED FOR REGISTRATION OF WARRANTOR.--
A. To ensure the faithful performance of a warrantor's obligations to the warrantor's warranty holders, a warrantor shall comply with the requirements of one of the following:
(1) maintain a deposit with the superintendent as provided in this paragraph:
(a) a warrantor shall deposit one hundred thousand dollars ($100,000); and
(b) deposits required pursuant to Subparagraph (a) of this paragraph shall be: 1) a surety bond issued by a surety company authorized to do business in New Mexico on a form acceptable to the superintendent; 2) securities of the type eligible for deposit by an insurance company; or 3) a clean and irrevocable letter of credit issued by a financial institution acceptable to the superintendent; or
(2) insure all service contracts under a reimbursement insurance policy issued by an insurer licensed, registered or otherwise authorized to do business in this state, and either:
(a) at the time the policy is filed with the superintendent and continuously thereafter: 1) maintain surplus as to policyholders and paid-in capital of at least fifteen million dollars ($15,000,000); and 2) annually file copies of the insurer's financial statements, its national association of insurance commissioners annual statement and the actuarial certification required by and filed in the insurer's state of domicile; or
(b) at the time the policy is filed with the superintendent and continuously thereafter: 1) maintain surplus as to policyholders and paid-in capital of less than fifteen million dollars ($15,000,000) but at least equal to ten million dollars ($10,000,000); 2) demonstrate to the satisfaction of the superintendent that the company maintains a ratio of net written premiums, wherever written, to surplus as to policyholders and paid-in capital of not greater than three to one; and 3) annually file copies of the insurer's audited financial statements, its national association of insurance commissioners annual statement and the actuarial certification required by and filed in the insurer's state of domicile.
B. Except for the requirements specified in this section, no other financial security requirements shall be required by the superintendent.
C. The provisions of this section do not apply to major manufacturing companies' theft protection program warranties."
SECTION 9. Section 59A-58-10 NMSA 1978 (being Laws 2001, Chapter 206, Section 10) is amended to read:
"59A-58-10. INFORMATION REQUIRED IN SERVICE CONTRACT.--
A. A service contract shall:
(1) be written in language that is understandable and printed in a typeface that is easy to read;
(2) include the amount, if applicable, of any deductible that the holder is required to pay;
(3) include the name, address and telephone number of the provider and, if applicable:
(a) the name, address and telephone number of the administrator; [and]
(b) the name of the holder, if provided by the holder; [however, the names and addresses of the foregoing persons are not required to be preprinted on the service contract and may be added to the service contract at the time of the sale] and
(c) the name, address and telephone number of the seller; however, the names and addresses of the foregoing persons are not required to be preprinted on the service contract and may be added to the service contract at the time of the sale;
(4) include the purchase price of the service contract; however, the purchase price of the service contract is not required to be preprinted on the service contract and may be added to the service contract at the time of the sale;
(5) include a description of the property covered by the service contract;
(6) specify the duties of the provider and any limitations, exceptions or exclusions;
(7) if the service contract covers a motor vehicle, indicate whether replacement parts that are not made for or by the original manufacturer of the motor vehicle may be used to comply with the terms of the service contract;
(8) include, if applicable, any restrictions on transferring or renewing the service contract;
(9) include the terms, restrictions or
conditions for canceling the service contract before it expires and the procedure for canceling the service contract. The conditions for canceling the service contract shall include the provisions of Section [13 of the Service Contract Regulation Act] 59A-58-13 NMSA 1978;
(10) include the duties of the holder under the contract, including the duty to protect against damage to the property covered by the service contract or to comply with any instructions included in the owner's manual for the property;
(11) indicate whether the service contract authorizes the holder to recover consequential damages; and
(12) indicate whether any defect in the property covered by the service contract existing on the date the contract is purchased is not covered under the service contract.
B. A provider shall not allow, make or cause to be made a false or misleading statement in any of [his] the provider's service contracts or intentionally omit a material statement that causes a service contract to be misleading. The superintendent may require the provider to amend any service contract that the superintendent determines is false or misleading."
SECTION 10. A new section of the Service Contract Regulation Act, Section 59A-58-10.1 NMSA 1978, is enacted to read:
"59A-58-10.1. [NEW MATERIAL] INFORMATION REQUIRED IN THEFT PROTECTION WARRANTY PRODUCT WARRANTY.--
A. A theft protection program warranty shall:
(1) be written in language that is understandable and printed in a typeface that is easy to read;
(2) include the amount, if applicable, of a deductible that the holder is required to pay;
(3) include the name, address and telephone number of the provider and, if applicable:
(a) the name, address and telephone number of the administrator;
(b) the name of the holder, if provided by the holder; and
(c) the name, address and telephone number of the seller; however, the names and addresses of the foregoing persons are not required to be preprinted on the theft protection program warranty and may be added to the theft protection program warranty at the time of the issuance;
(4) include the purchase price of the theft protection program; however, the purchase price of the theft protection program is not required to be preprinted on the theft protection program warranty and may be added to the service contract at the time of the issuance;
(5) include a description of the property covered by the theft protection program warranty;
(6) specify the duties of the provider and any limitations, exceptions or exclusions;
(7) include the restrictions on canceling, transferring or renewing the service contract, if any. The cancellation provision of a theft protection program warranty, if any, is not required to comply with Section 59A-58-12 NMSA 1978;
(8) include the duties of the holder under the theft protection program warranty, including the duty to protect against damage to the property covered by the theft protection program warranty or to comply with any instructions included in the owner's manual for the property; and
(9) indicate whether the theft protection program warranty authorizes the holder to recover consequential damages.
B. A warrantor shall not allow, make or cause to be made a false or misleading statement in any of the warrantor's theft protection program warranties or intentionally omit a material statement that causes a theft protection program warranty to be misleading. The superintendent may require the provider to amend any theft protection program warranty that the superintendent determines is false or misleading."