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HB419 INTRODUCED
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HB419
11SPTZZ-1
By Representatives McCampbell, Ellis
RFD: Insurance
First Read: 10-Feb-26
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11SPTZZ-1 01/28/2026 KMS (L)ccr 2026-535
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First Read: 10-Feb-26
SYNOPSIS:
Under existing law, service contract providers,
who administer or sell contracts to cover the repair,
maintenance, or replacement of a purchased good, are
required to register with the Commissioner of Insurance
and their registration fees are paid into the State
Treasury to the credit of the Service Contract
Revolving Fund.
This bill would require all service contract
provider registration fees to be paid into the State
Treasury to the credit of the Special Examination
Revolving Fund.
This bill would clarify that any adjustment in
the service contract provider registration fee is in
accordance with changes in the Consumer Price Index
under existing law.
This bill would also require any unencumbered
and unexpended balance remaining in the Service
Contract Revolving Fund to be transferred to the credit
of the Special Examination Revolving Fund.
A BILL
TO BE ENTITLED
AN ACT
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AN ACT
Relating to insurance; to amend Section 8-32-3, Code of
Alabama 1975; to require all service contract provider
registration fees to be paid into the State Treasury to the
credit of the Special Examination Revolving Fund in lieu of
the Service Contract Revolving Fund; to clarify any service
contract provider registration fee adjustment is in accordance
with changes in the Consumer Price Index under existing law;
to require any unencumbered and unexpended balance remaining
in the Service Contract Revolving Fund to be transferred to
the credit of the Special Examination Revolving Fund; and to
amend Sections 8-32-1 and 8-32-5, Code of Alabama 1975, to
make conforming changes.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Section 8-32-3, Code of Alabama 1975, is
amended to read as follows:
"§8-32-3
(a) Either the provider or its designee shall:
(1) Provide a receipt for, or other written evidence
of, the purchase of the service contract to the contract
holder.
(2) Provide a copy of the service contract to the
service contract holder within a reasonable period of time
from the date of purchase.
(b) A provider may, but is not required to, appoint an
administrator or other designee to be responsible for any or
all of the administration of service contracts and compliance
with this chapter.
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with this chapter.
(c) Each provider of service contracts sold in this
state shall file a registration with the commissioner on a
form prescribed by the commissioner. Each provider shall pay
to the commissioner a fee in the amount of two hundred dollars
($200) annually , or as otherwise adjusted pursuant to Section
41-1-11 . All fees collected shall be paid into a special
revolving fund to be set up by the State Treasurer referred to
as the "Service Contract deposited into the State Treasury to
the credit of the Special Examination Revolving Fund. " The
Service Contract Revolving Fund shall be used in the
supervision and examination of providers and otherwise in the
administration of this chapter; provided however, that nothing
in this section shall be construed to mean that all of the
expenses of supervision and examination of providers and in
the administration of this chapter incurred by the State
Insurance Department shall come from the Service Contract
Revolving Fund.
(d) All funds now or hereafter deposited in the State
Treasury to the credit of the Service Contract Revolving Fund
shall not be expended for any purpose whatsoever unless the
same shall have been allotted and budgeted in accordance with
the provisions of Sections 41-4-80 to 41-4-96, inclusive, and
41-19-1 to 41-19-12, inclusive, and only in the amounts and
for the purposes provided by the Legislature in the general
appropriation bill, other appropriations bills or this
chapter.
(e) There is hereby appropriated for the fiscal year
ending September 30, 1998, from the Service Contract Revolving
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ending September 30, 1998, from the Service Contract Revolving
Fund to the State Department of Insurance those amounts as
deemed necessary to carry out the provisions of this chapter
as determined by the Commissioner of Insurance.
(f)(d) In order to assure the faithful performance of a
provider's obligations to its service contract holders, each
provider shall be responsible for complying with the
requirements of one of the following subdivisions:
(1) Insure all service contracts under a reimbursement
insurance policy issued by an insurer authorized to transact
insurance in this state or issued pursuant to Chapter 10,
Title 27.
(2) Do both of the following:
a. Maintain a funded reserve account for its
obligations under its service contracts sold and outstanding
in this state. The reserves shall be based on the loss
experience of the provider as certified by an actuary or, at
the election of the provider, the reserves shall be 30 percent
of the aggregate provider fees for all service contracts sold
and then in force. The reserve account shall be subject to
examination and review by the commissioner.
b. Place in trust with the commissioner a financial
security deposit, having a value of not less than five percent
of the aggregate provider fees, less claims paid, for all
service contracts sold and then in force, but not less than
twenty-five thousand dollars ($25,000) consisting of one of
the following:
(i)1. A surety bond issued by an authorized surety.
(ii)2. Securities of the type eligible for deposit by
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(ii)2. Securities of the type eligible for deposit by
authorized insurers in this state.
(iii)3. Cash.
(iv)4. A letter of credit issued by a qualified
financial institution.
(v)5. Another form of security prescribed by
regulations issued by the commissioner.
(3) Do both of the following:
a. Maintain a net worth or stockholders' equity of one
hundred million dollars ($100,000,000).
b. Upon request, provide the commissioner with a copy
of the financial statement of the provider included in its
most recent annual report on Form 10-K or Form 20-F filed with
the Securities and Exchange Commission (SEC) within the last
calendar year, or if the provider does not file with the SEC,
a copy of the audited financial statements of the provider,
which shows a net worth of the provider of at least one
hundred million dollars ($100,000,000). A consolidated Form
10-K, Form 20-F , or audited financial statements shall meet
the requirements of this chapter for the provider if it shows
a net worth or stockholders' equity of the provider of at
least one hundred million dollars ($100,000,000) and there
shall be no requirement of a parent company guarantee,
reimbursement insurance, or other form of financial stability
requirement. However, if the Form 10-K, Form 20-F , or audited
financial statements of the parent company of the provider are
filed to meet the provider's financial stability requirement
because the provider's net worth or stockholders' equity of
the provider is not at least one hundred million dollars
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the provider is not at least one hundred million dollars
($100,000,000) , or because the net worth or stockholders'
equity is not determinable from the consolidated Form 10-K,
Form 20-F , or audited financial statements of the parent
company, then the parent company shall agree to guarantee the
obligations of the provider relating to service contracts sold
by the provider in this state.
(g)(e) Service contracts shall require the provider to
permit the service contract holder to return the service
contract within no less than 20 days of the date the service
contract was mailed to the service contract holder or within
no less than 10 days of delivery if the service contract is
delivered to the service contract holder at the time of sale.
Upon return of the service contract to the provider within the
applicable time period, if no claim has been made under the
service contract prior to its return to the provider, the
service contract is void and the provider shall refund to the
service contract holder the full purchase price of the service
contract including any premium paid for any applicable
reimbursement insurance policy. Any refund due a service
contract holder may be credited to any outstanding balance of
the account of the service contract holder, and the excess, if
any, shall be refunded to the service contract holder. The
right to void the service contract provided in this subsection
(g) is not transferable and shall apply only to the original
service contract purchaser, and only if no claim has been made
prior to its return to the provider. A 10 percent penalty per
month shall be added to a refund that is not paid or credited
within 45 days after return of the service contract to the
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within 45 days after return of the service contract to the
provider.
(h) In the event (f) If the original service contract
holder makes a written demand for cancellation of a service
contract pursuant to the terms of the service contract, the
provider shall refund to the service contract holder the
unearned portion of the full purchase price of the service
contract , including the unearned portion of any premium paid
for any applicable reimbursement insurance policy. Any refund
due a service contract holder may be credited to any
outstanding balance of the account of the service contract
holder, and the excess, if any, shall be refunded to the
service contract holder. If the original contract purchaser or
a contract holder elects cancellation, the provider may retain
an administrative fee of up to twenty-five dollars ($25) for
issuance of the service contract if such the fee is provided
for in the service contract; however, this amount may not be
deducted in the event if the service contract is terminated
pursuant to the provisions of subsection (g) (e).
(i)(g)(1) Provider fees are not subject to premium
taxes.
(2) Premiums for reimbursement insurance policies are
subject to applicable taxes.
(j)(h) Except for the registration requirement in
subsection (c), providers, administrators, and other persons
marketing, selling, or offering to sell service contracts for
providers are exempt from any licensing requirements of this
state.
(k)(i) Providers are not required to comply with any
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(k)(i) Providers are not required to comply with any
provision of Title 27."
Section 2. Any unencumbered and unexpended balance
remaining in the Service Contract Revolving Fund on October 1,
2026, shall be transferred to the credit of the Special
Examination Revolving Fund.
Section 3. Sections 8-32-1 and 8-32-5 of the Code of
Alabama 1975, are amended to make conforming changes to read
as follows:
"§8-32-1
(a) The purpose of this chapter is to create a
framework to regulate service contracts sold to consumers in
this state.
(b) The following are exempt from Sections 8-32-2 to
8-32-12, inclusive, of this chapter:
(1) Warranties.
(2) Maintenance agreements.
(3) Warranties, service contracts, or maintenance
agreements offered by electric, gas, water, or telephone
utilities on their transmission devices.
(4) Service contracts sold or offered for sale in
commercial transactions.
(5) Service contracts sold or offered for sale to
persons other than consumers.
(6) Service contracts sold at the point of sale, or
within 60 days of the original purchase date of the property,
which cover tangible property where the tangible property for
which the service contract is sold, has a purchase price of
two hundred and fifty dollars ($250) or less, exclusive of
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two hundred and fifty dollars ($250) or less, exclusive of
sales tax.
(c) Manufacturer's service contracts on the
manufacturer's products and service contracts sold or offered
for sale by Alabama electric cooperatives, and their
subsidiaries and affiliates, including without limitation,
affiliates managed or controlled by electric cooperatives, are
required to comply only with Section 8-32-3(a), Section
8-32-3 (g)(e), Section 8-32-5(a), Section 8-32-5(d) to through
(n), inclusive , Section 8-32-6, Section 8-32-10(a), and
Section 8-32-10(c) to through (f), inclusive , as applicable,
of this chapter.
(d) The types of agreements referred to in subsections
(b) and (c) are not insurance for any purpose including,
without limitation, compliance with the Alabama Insurance
Code."
"§8-32-5
(a) Service contracts sold or offered for sale in this
state, in their entirety, shall be written, printed, or typed
in eight point type size, or larger, and shall comply with the
requirements set forth in this section, as applicable.
(b) Service contracts insured under a reimbursement
insurance policy pursuant to subdivision (1) of subsection (f)
of Section 8-32-3 (d)(1) shall contain a statement in
substantially the following form:
"Obligations of the provider under this service
contract are guaranteed under a service contract reimbursement
insurance policy."
If the provider fails to pay or to provide service on a
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If the provider fails to pay or to provide service on a
claim within 60 days after proof of loss has been filed, the
service contract holder is entitled to make a claim directly
against the reimbursement insurance company. The service
contract shall state the name and address of the reimbursement
insurance company.
(c) Service contracts not insured under a reimbursement
insurance policy pursuant to subdivision (1) of subsection (f)
of Section 8-32-3 (d)(1) shall contain a statement in
substantially the following form:
"Obligations of the provider under this service
contract are backed by the full faith and credit of the
provider."
(d) Service contracts shall state the name and address
of the provider , and shall identify any administrator, the
service contract seller, and the service contract holder to
the extent that the name and address of the service contract
holder has been furnished by the service contract holder.
Neither the name of the service contract seller nor other
provisions are required to be preprinted on the service
contract and may be added to the service contract at the time
of sale.
(e) Service contracts shall state the purchase price of
the service contract, the term of the service contract and any
applicable renewal provisions. Neither the purchase price nor
any other provisions are required to be pre-printed on the
service contract and may be negotiated at the time of sale
with the service contract holder.
(f) If the provider will reimburse the contract holder
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(f) If the provider will reimburse the contract holder
for repair work performed by third parties and if prior
approval of repair work is required ,: (i) the service contract
shall state the procedure for obtaining prior approval and for
making a claim, including a toll-free telephone number for
claim service ; and (ii) if the service contract provides
services essential to public health, safety, or welfare, the
service contract shall either provide for 24-hour telephone
assistance, or state the procedure for obtaining emergency
repairs performed outside of normal business hours.
(g) Service contracts shall state the existence of any
deductible amount.
(h) Service contracts shall describe the property upon
which the services are to be provided, the services to be
provided , and any limitations, exceptions, or exclusions to
the services to be provided.
(i) Service contracts shall state whether the use of
non-original manufacturer's parts is allowed.
(j) Service contracts shall state any restrictions
governing the transferability of the service contract.
(k) Service contracts A service contract shall state
the terms, restrictions, or conditions governing cancellation
of the service contract prior to the termination or expiration
date of the service contract by either the provider or by the
service contract holder. The provider of the service contract
shall mail a written notice to the service contract holder at
the last known address of the service contract holder
contained in the records of the provider at least five days
prior to cancellation by the provider. Prior notice is not
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prior to cancellation by the provider. Prior notice is not
required if the reason for cancellation is nonpayment of the
provider fee or a material misrepresentation by the service
contract holder to the provider relating to the covered
property or its use. The notice shall state the effective date
of the cancellation and the reason for the cancellation.
(l) Service contracts shall set forth the obligations
and duties of the service contract holder relating to the
property covered by the service contract.
(m) Service contracts shall state whether or not the
service contract provides for or excludes consequential
damages or preexisting conditions, to the extent applicable.
(n) Service contracts may contain other provisions as
determined by the provider."
Section 4. This act shall become effective on October
1, 2026.
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