Relating to licensing of service companies, motor vehicle service contracts, and residential service contracts, and providing civil penalties and including effective date provisions

This bill relates to the licensing of service companies, motor vehicle service contracts, and residential service contracts. The bill prohibits a person from issuing, offering for sale, or selling a motor vehicle service contract or residential service contract in the state unless the person is a licensed service company. The requirements of the bill do not apply to any person who provides support services. “Support services” is defined in the bill. A service company shall maintain a license for the entirety of any service contract that the service company has entered, unless otherwise ordered by the commissioner of insurance (commissioner) after a hearing. A service company shall report to the commissioner within 30 calendar days any material change to the information submitted in the initial or renewal application, within 30 days of any final disposition of an administrative action taken against the service company related to the service company’s service contract business, and within 30 days of the initial pretrial hearing date in a criminal prosecution against the service company as detailed in the bill. A residential service contract and motor vehicle service contract shall not be considered insurance. An application for a license as a service company shall be filed with the commissioner, include all information as described in the bill, and be accompanied by a $500 license fee. A license as a service company is valid for one year and must be renewed annually on or before August 31 of each year following the date of issuance. A licensee must apply for renewal at least 90 days prior to the license expiration date. An application for license renewal shall include the information required for an initial license, a list of each service contract form, any additional information requested by the commissioner to verify the information in the renewal application, and the information and fees as described in the bill. If the renewal application meets the requirements, the commissioner shall renew the license unless otherwise denied, in which case the denial shall be in writing. If a service company fails to renew their license on or before the end of the license period, the company’s license may be deemed expired. If a service company submits an application or renewal application after the license has expired, the service company shall file a service company license renewal application, including payment of applicable fees. A service contract shall not be issued, sold, or offered for sale unless the service company complies with the requirements of the bill. A service contract issued, sold, or offered for sale in the state shall comply with all requirements described in the bill. The requirements for a residential service contract that relates to goods that are essential to the health and safety of the service contract holder are detailed in the bill. A service company may continue to use a noncompliant service contract form until January 1, 2028, provided no changes are made to the form, and the service contract form was filed with the division before January 1, 2027. The commissioner may, at the commissioner’s discretion and without advanced notice or hearing, immediately suspend a service company’s license if the commissioner finds that any of the circumstances detailed in the bill are true. The commissioner may suspend or revoke the license of, deny an application for license from, or refuse to renew the license of a service company, or may levy a civil penalty against a service company, as described in the bill, and shall notify the service company in writing of the reason for the suspension, revocation, nonrenewal, or denial. The licensee or applicant may request a hearing. A service company that offers service contracts for sale, or the service company’s support services, shall not represent in any manner a false, deceptive, or misleading statement with respect to the service company’s affiliation with a motor vehicle manufacturer or importer, the validity or expiration of a warranty, or a motor vehicle service contract holder’s coverage under a motor vehicle service contract, and shall not describe the service contract as a policy. A service company shall not engage in a prohibited act or practice as detailed in the bill. The commissioner may adopt rules regulating service contracts to prohibit misrepresentation, false advertising, defamation, boycotts, coercion, intimidation, false statements and entries, and unfair discrimination or practices. After a hearing, if the commissioner finds that a person has violated the bill or rules adopted under the bill, the commissioner may order the person to cease and desist from the violation and may order the person to pay a civil penalty. A violation of the bill constitutes an unlawful practice. A service contract issued or sold by a service company that was not licensed at the time the service contract was issued or sold shall be void and unenforceable. A written explanation to a service contract holder of a denial of a claim or offer of a settlement shall include the information detailed in the bill. The duties of the commissioner during an investigation, proceeding, examination, or inquiry are detailed in the bill. The commissioner shall maintain the confidentiality of information submitted to the division or obtained by the division in the course of an investigation, examination, or inquiry, including all notes, work papers, or other documents and the information as described in the bill. The commissioner may disclose or release information that is otherwise confidential in the circumstances detailed in the bill. The bill takes effect on January 1, 2027.