Service contracts

AN ACT Relating to regulating service contracts and protection 1
product guarantees; and amending RCW 48.110.020, 48.110.050, 2
48.110.055, 48.110.060, 48.110.073, 48.110.075, 48.110.110, and 3
48.110.140. 4
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:5
Sec. 1. RCW 48.110.020 and 2014 c 82 s 1 are each amended to 6
read as follows: 7
The definitions in this section apply throughout this chapter.8
(1) "Administrator" means the person who is responsible for the 9
administration of the service contracts, the service contracts plan, 10
or the protection product guarantees. 11
(2) "Commissioner" means the insurance commissioner of this 12
state. 13
(3) "Consumer" means an individual who buys any tangible personal 14
property that is primarily for personal, family, or household use.15
(4) "Home heating fuel service contract" means a contract or 16
agreement for a separately stated consideration for a specific 17
duration to perform the repair, replacement, or maintenance of a home 18
heating fuel supply system including the fuel tank and all visible 19
pipes, caps, lines, and associated parts or the indemnification for 20
repair, replacement, or maintenance for operational or structural 21
H-0059.1
HOUSE BILL 1006
State of Washington 69th Legislature 2025 Regular Session
By Representatives Ryu, McClintock, and Reeves
Prefiled 12/03/24. Read first time 01/13/25. Referred to Committee
on Consumer Protection & Business.
p. 1 HB 1006
failure due to a defect in materials or workmanship, or normal wear 1
and tear. 2
(5) "Incidental costs" means expenses specified in the guarantee 3
incurred by the protection product guarantee holder related to 4
damages to other property caused by the failure of the protection 5
product to perform as provided in the guarantee. "Incidental costs" 6
may include, without limitation, insurance policy deductibles, rental 7
vehicle charges, the difference between the actual value of the 8
stolen vehicle at the time of theft and the cost of a replacement 9
vehicle, sales taxes, registration fees, transaction fees, and 10
mechanical inspection fees. Incidental costs may be paid under the 11
provisions of the protection product guarantee in either a fixed 12
amount specified in the protection product guarantee or sales 13
agreement, or by the use of a formula itemizing specific incidental 14
costs incurred by the protection product guarantee holder to be paid.15
(6) "Maintenance agreement" means a contract of limited duration 16
that provides for scheduled maintenance only. 17
(7) "Motor vehicle" means any vehicle subject to registration 18
under chapter 46.16A RCW. 19
(8) "Person" means an individual, partnership, corporation, 20
incorporated or unincorporated association, joint stock company, 21
reciprocal insurer, syndicate, or any similar entity or combination 22
of entities acting in concert. 23
(9) "Premium" means the consideration paid to an insurer for a 24
reimbursement insurance policy. 25
(10) "Protection product" means any protective chemical, 26
substance, device, or system offered or sold with a guarantee to 27
repair or replace another product or pay incidental costs upon the 28
failure of the product to perform pursuant to the terms of the 29
protection product guarantee. Protection product does not include 30
fuel additives, oil additives, or other chemical products applied to 31
the engine, transmission, or fuel system of a motor vehicle.32
(11) "Protection product guarantee" means a written agreement by 33
a protection product guarantee provider to repair or replace another 34
product or pay incidental costs upon the failure of the protection 35
product to perform pursuant to the terms of the protection product 36
guarantee. The reimbursement of incidental costs promised under a 37
protection product guarantee must be tied to the purchase of a 38
physical product that is formulated or designed to make the specified 39
loss or damage from a specific cause less likely to occur.40
p. 2 HB 1006
(12) "Protection product guarantee holder" means a person who is 1
the purchaser or permitted transferee of a protection product 2
guarantee. 3
(13) "Protection product guarantee provider" means a person who 4
is contractually obligated to the protection product guarantee holder 5
under the terms of the protection product guarantee. Protection 6
product guarantee provider does not include an authorized insurer 7
providing a reimbursement insurance policy. 8
(14) "Protection product seller" means the person who sells the 9
protection product to the consumer. 10
(15) "Provider fee" means the consideration paid by a consumer 11
for a service contract. 12
(16) "Reimbursement insurance policy" means a policy of insurance 13
that is issued to a service contract provider or a protection product 14
guarantee provider to provide reimbursement to the service contract 15
provider or the protection product guarantee provider or to pay on 16
behalf of the service contract provider or the protection product 17
guarantee provider all contractual obligations incurred by the 18
service contract provider or the protection product guarantee 19
provider under the terms of the insured service contracts or 20
protection product guarantees issued or sold by the service contract 21
provider or the protection product guarantee provider , or to pay on 22
behalf of the service contract provider or the protection product 23
guarantee provider each contractual obligation incurred by the 24
service contract provider or the protection product guarantee 25
provider in the event of nonperformance by the provider or the 26
provider is unable to fulfill its contractual obligations to the 27
consumer. A service contract provider or protection product guarantee 28
provider may have more than one reimbursement insurance policy 29
concurrently in force. 30
(17) "Road hazard" means a hazard that is encountered while 31
driving a motor vehicle. Road hazards may include but are not limited 32
to potholes, rocks, wood debris, metal parts, glass, plastic, curbs, 33
or composite scraps. 34
(18)(a) "Service contract" means a contract or agreement entered 35
into at any time for consideration over and above the lease or 36
purchase price of the property for any specific duration to perform 37
the repair, replacement, or maintenance of property or the 38
indemnification for repair, replacement, or maintenance for 39
operational or structural failure due to a defect in materials or 40
p. 3 HB 1006
workmanship or normal wear and tear. Service contracts may provide 1
for the repair, replacement, or maintenance of property for damage 2
resulting from power surges and accidental damage from handling, with 3
or without additional provision for incidental payment of indemnity 4
under limited circumstances, including towing, rental, emergency road 5
services, or other expenses relating to the failure of the product or 6
of a component part thereof. 7
(b) "Service contract" also includes a contract or agreement sold 8
for separately stated consideration for a specific duration to 9
perform any one or more of the following services:10
(i) The repair or replacement of tires and/or wheels damaged as a 11
result of coming into contact with road hazards. However, a contract 12
or agreement meeting the definition under this subsection (18)(b) in 13
which the party obligated to perform is either a tire or wheel 14
manufacturer or a motor vehicle manufacturer is exempt from the 15
requirements of this chapter; 16
(ii) The removal of dents, dings, or creases on a motor vehicle 17
that can be repaired using the process of paintless dent removal 18
without affecting the existing paint finish and without replacing 19
vehicle body panels, sanding, bonding, or painting;20
(iii) The repair of chips or cracks in, or the replacement of, 21
motor vehicle windshields as a result of damage caused by road 22
hazards; 23
(iv) The replacement of a motor vehicle key or key fob in the 24
event that the key or key fob becomes inoperable or is lost or 25
stolen; 26
(v) Services provided pursuant to a protection product guarantee; 27
and 28
(vi) Other services approved by rule of the commissioner that are 29
not inconsistent with the provisions of this chapter.30
(c) "Service contract" does not include coverage for:31
(i) Repair or replacement due to damage to the interior surfaces 32
or to the exterior paint or finish of a vehicle. However, coverage 33
for these types of damage may be offered in connection with the sale 34
of a protection product as defined in this section; or35
(ii) Fuel additives, oil additives, or other chemical products 36
applied to the engine, transmission, or fuel system of a motor 37
vehicle. 38
(19) "Service contract holder" or "contract holder" means a 39
person who is the purchaser or holder of a service contract.40
p. 4 HB 1006
(20) "Service contract provider" means a person who is 1
contractually obligated to the service contract holder under the 2
terms of the service contract. 3
(21) "Service contract seller" means the person who sells the 4
service contract to the consumer. 5
(22) "Warranty" means a warranty made solely by the manufacturer, 6
importer, or seller of property or services without consideration; 7
that is not negotiated or separated from the sale of the product and 8
is incidental to the sale of the product; and that guarantees 9
indemnity for defective parts, mechanical or electrical breakdown, 10
labor, or other remedial measures, such as repair or replacement of 11
the property or repetition of services. 12
Sec. 2. RCW 48.110.050 and 2016 c 224 s 3 are each amended to 13
read as follows: 14
(1) Service contracts shall not be issued, sold, or offered for 15
sale in this state or sold to consumers in this state unless the 16
service contract provider has: 17
(a) Provided a receipt for, or other written evidence of, the 18
purchase of the service contract to the contract holder; and19
(b) Provided a copy of the service contract to the service 20
contract holder within a reasonable period of time from the date of 21
purchase. 22
(2) In order to either demonstrate its financial responsibility 23
or assure the faithful performance of the service contract provider's 24
or protection product guarantee provider's obligations to its service 25
contract holders or protection product guarantee holders , every 26
service contract provider or protection product guarantee provider 27
shall comply with the requirements of one of the following:28
(a) Insure ((all)) each service ((contracts)) contract or 29
protection product guarantee under a reimbursement insurance policy 30
issued by an insurer holding a certificate of authority from the 31
commissioner or a risk retention group, as defined in 15 U.S.C. Sec. 32
3901(a)(4), as long as that risk retention group is in full 33
compliance with the federal liability risk retention act of 1986 (15 34
U.S.C. Sec. 3901 et seq.), is in good standing in its domiciliary 35
jurisdiction, and is properly registered with the commissioner under 36
chapter 48.92 RCW. The insurance required by this subsection must 37
meet the following requirements: 38
p. 5 HB 1006
(i) The insurer or risk retention group must, at the time the 1
policy is filed with the commissioner, and continuously thereafter, 2
maintain surplus as to policyholders and paid-in capital of at least 3
((fifteen million dollars )) $15,000,000 and annually file audited 4
financial statements with the commissioner; and 5
(ii) The commissioner may authorize an insurer or risk retention 6
group that has surplus as to policyholders and paid-in capital of 7
less than ((fifteen million dollars)) $15,000,000, but at least equal 8
to ((ten million dollars )) $10,000,000, to issue the insurance 9
required by this subsection if the insurer or risk retention group 10
demonstrates to the satisfaction of the commissioner that the company 11
maintains a ratio of direct written premiums, wherever written, to 12
surplus as to policyholders and paid-in capital of not more than 13
three to one; 14
(b)(i) Maintain a funded reserve account for its obligations 15
under its service contracts or protection product guarantees issued 16
and outstanding in this state. The reserves shall not be less than 17
((forty)) 40 percent of the gross consideration received, less claims 18
paid, on the sale of the service contract or protection product for 19
all in-force contracts or protection product guarantees . The reserve 20
account shall be subject to examination and review by the 21
commissioner; and 22
(ii) Place in trust with the commissioner a financial security 23
deposit, having a value of not less than five percent of the gross 24
consideration received, less claims paid, on the sale of the service 25
contract or protection product for all service contracts or 26
protection product guarantees issued and in force, but not less than 27
((twenty-five thousand dollars )) $25,000, consisting of one of the 28
following: 29
(A) A surety bond issued by an insurer holding a certificate of 30
authority from the commissioner; 31
(B) Securities of the type eligible for deposit by authorized 32
insurers in this state; 33
(C) Cash; 34
(D) An irrevocable evergreen letter of credit issued by a 35
qualified financial institution; or 36
(E) Another form of security prescribed by rule by the 37
commissioner; or 38
p. 6 HB 1006
(c)(i) Maintain, or its parent company maintain, a net worth or 1
stockholder's equity of at least ((one hundred million dollars )) 2
$100,000,000; and 3
(ii) Upon request, provide the commissioner with a copy of the 4
service contract provider's or protection product guarantee 5
provider's or, if using the net worth or stockholder's equity of its 6
parent company to satisfy the ((one hundred million dollar )) 7
$100,000,000 requirement, the service contract provider's or 8
protection product guarantee provider's parent company's most recent 9
form 10-K or form 20-F filed with the securities and exchange 10
commission within the last calendar year, or if the company does not 11
file with the securities and exchange commission, a copy of the 12
service contract provider's or protection product guarantee 13
provider's or, if using the net worth or stockholder's equity of its 14
parent company to satisfy the ((one hundred million dollar )) 15
$100,000,000 requirement, the service contract provider's or 16
protection product guarantee provider's parent company's most recent 17
audited financial statements, which shows a net worth of the service 18
contract provider or protection product guarantee provider or its 19
parent company of at least ((one hundred million dollars )) 20
$100,000,000. If the service contract provider's parent company's 21
form 10-K, form 20-F, or audited financial statements are filed with 22
the commissioner to meet the service contract provider's or 23
protection product guarantee provider's financial stability 24
requirement, then the parent company shall agree to guarantee the 25
obligations of the service contract provider or protection product 26
guarantee provider relating to service contracts or protection 27
products sold by the service contract provider or protection product 28
guarantee provider in this state. A copy of the guarantee shall be 29
filed with the commissioner. The guarantee shall be irrevocable as 30
long as there is in force in this state any contract or any 31
obligation arising from service contracts or protection product 32
guarantees guaranteed, unless the parent company has made 33
arrangements approved by the commissioner to satisfy its obligations 34
under the guarantee. 35
(3) Service contracts shall require the service contract provider 36
to permit the service contract holder to return the service contract 37
within ((twenty)) 20 days of the date the service contract was mailed 38
to the service contract holder or within ((ten)) 10 days of delivery 39
if the service contract is delivered to the service contract holder 40
p. 7 HB 1006
at the time of sale, or within a longer time period permitted under 1
the service contract. Upon return of the service contract to the 2
service contract provider within the applicable period, if no claim 3
has been made under the service contract prior to the return to the 4
service contract provider, the service contract is void and the 5
service contract provider shall refund to the service contract 6
holder, or credit the account of the service contract holder with the 7
full purchase price of the service contract. The right to void the 8
service contract provided in this subsection is not transferable and 9
shall apply only to the original service contract purchaser. A 10
((ten)) 10 percent penalty per month shall be added to a refund of 11
the purchase price that is not paid or credited within ((thirty)) 30 12
days after return of the service contract to the service contract 13
provider. 14
(((4) This section does not apply to service contracts on motor 15
vehicles or to protection product guarantees. )) This subsection (3) 16
does not apply to service contracts on motor vehicles.17
Sec. 3. RCW 48.110.055 and 2019 c 16 s 3 are each amended to 18
read as follows: 19
(1) This section applies to protection product guarantee 20
providers. 21
(2) A person must not act as, or offer to act as, or hold himself 22
or herself out to be a protection product guarantee provider in this 23
state, nor may a protection product be sold to a consumer in this 24
state, unless the protection product guarantee provider has:25
(a) A valid registration as a protection product guarantee 26
provider issued by the commissioner; and 27
(b) Either demonstrated its financial responsibility or assured 28
the faithful performance of the protection product guarantee 29
provider's obligations to its protection product guarantee holders by 30
((insuring all protection product guarantees under a reimbursement 31
insurance policy issued by an insurer holding a certificate of 32
authority from the commissioner or a risk retention group, as defined 33
in 15 U.S.C. Sec. 3901 (a)(4), as long as that risk retention group is 34
in full compliance with the federal liability risk retention act of 35
1986 (15 U.S.C. Sec. 3901 et seq.), is in good standing in its 36
domiciliary jurisdiction, and properly registered with the 37
commissioner under chapter 48.92 RCW. The insurance required by this 38
subsection must meet the following requirements:39
p. 8 HB 1006
(i) The insurer or risk retention group must, at the time the 1
policy is filed with the commissioner, and continuously thereafter, 2
maintain surplus as to policyholders and paid-in capital of at least 3
fifteen million dollars and annually file audited financial 4
statements with the commissioner; and5
(ii) The commissioner may authorize an insurer or risk retention 6
group that has surplus as to policyholders and paid-in capital of 7
less than fifteen million dollars, but at least equal to ten million 8
dollars, to issue the insurance required by this subsection if the 9
insurer or risk retention group demonstrates to the satisfaction of 10
the commissioner that the company maintains a ratio of direct written 11
premiums, wherever written, to surplus as to policyholders and paid-12
in capital of not more than three to one )) satisfying one of the 13
requirements of demonstrating financial responsibility or assuring 14
faithful performance in accordance with RCW 48.110.050.15
(3) Applicants to be a protection product guarantee provider must 16
make an application to the commissioner upon a form to be furnished 17
by the commissioner. The application must include or be accompanied 18
by the following information and documents: 19
(a) The names of the protection product guarantee provider's 20
executive officer or officers directly responsible for the protection 21
product guarantee provider's protection product guarantee business 22
and their biographical affidavits on a form prescribed by the 23
commissioner; 24
(b) The name, address, and telephone number of any administrators 25
designated by the protection product guarantee provider to be 26
responsible for the administration of protection product guarantees 27
in this state; 28
(c) ((A)) If a protection product guarantee provider is using a 29
reimbursement insurance policy in accordance with RCW 30
48.110.050(2)(a) to demonstrate financial responsibility or assure 31
faithful performance of its obligations to protection product 32
guarantee holders, a copy of the protection product guarantee 33
reimbursement insurance policy or policies; 34
(d) A copy of each protection product guarantee the protection 35
product guarantee provider proposes to use in this state;36
(e) The most recent annual financial statements, if available, or 37
the most recent financial statements certified as accurate by two or 38
more officers of the applicant which prove that the applicant has and 39
maintains a minimum net worth or stockholder's equity of ((two 40
p. 9 HB 1006
hundred thousand dollars )) $200,000 or more calculated in accordance 1
with RCW 48.110.078 and the ability to pay its debts when debts 2
become due; and 3
(f) A nonrefundable application fee of ((two hundred fifty 4
dollars)) $250. 5
(4) Each registered protection product guarantee provider must 6
appoint the commissioner as the protection product guarantee 7
provider's attorney to receive service of legal process issued 8
against the protection product guarantee provider in this state upon 9
causes of action arising within this state. Service upon the 10
commissioner as attorney constitutes effective legal service upon the 11
protection product guarantee provider. 12
(a) With the appointment the protection product guarantee 13
provider must designate the person to whom the commissioner must 14
forward legal process so served upon him or her. 15
(b) The appointment is irrevocable, binds any successor in 16
interest or to the assets or liabilities of the protection product 17
guarantee provider, and remains in effect for as long as there could 18
be any cause of action against the protection product guarantee 19
provider arising out of any of the protection product guarantee 20
provider's contracts or obligations in this state.21
(c) The service of process must be accomplished and processed in 22
the manner prescribed under RCW 48.02.200. 23
(5) The commissioner may refuse to issue a registration if the 24
commissioner determines that the protection product guarantee 25
provider, or any individual responsible for the conduct of the 26
affairs of the protection product guarantee provider under subsection 27
(3)(a) of this section, is not competent, trustworthy, cannot 28
demonstrate a minimum net worth or stockholder's equity in accordance 29
with the applicable requirements of subsection (3)(e) of this section 30
and the ability to pay its debts when debts become due, or has had a 31
license as a protection product guarantee provider or similar license 32
denied or revoked for cause by any state. 33
(6) A registration issued under this section is valid, unless 34
surrendered, suspended, or revoked by the commissioner, or not 35
renewed for so long as the protection product guarantee provider 36
continues in business in this state and remains in compliance with 37
this chapter. A registration is subject to renewal annually on the 38
first day of July upon application of the protection product 39
guarantee provider and payment of a fee of ((two hundred fifty 40
p. 10 HB 1006
dollars)) $250. If not so renewed, the registration expires on the 1
June 30th next preceding. 2
(7) A protection product guarantee provider must keep current the 3
information required to be disclosed in its registration under this 4
section by reporting all material changes or additions within thirty 5
days after the end of the month in which the change or addition 6
occurs. 7
Sec. 4. RCW 48.110.060 and 2006 c 274 s 7 are each amended to 8
read as follows: 9
(1) Reimbursement insurance policies insuring service contracts 10
or protection product guarantees issued, sold, or offered for sale in 11
this state or issued or sold to consumers in this state shall state 12
that the insurer that issued the reimbursement insurance policy shall 13
either reimburse ((or)) the provider, or in the event of 14
nonperformance by the provider or the provider is unable to fulfill 15
its contractual obligations to the consumer, shall pay on behalf of 16
the service contract provider or the protection product guarantee 17
provider all sums the service contract provider or the protection 18
product guarantee provider is legally obligated to pay, including but 19
not limited to the refund of the full purchase price of the service 20
contract to the service contract holder or shall provide the service 21
which the service contract provider or the protection product 22
guarantee provider is legally obligated to perform according to the 23
service contract provider's or protection product guarantee 24
provider's contractual obligations under the service contracts or 25
protection product guarantees issued or sold by the service contract 26
provider or the protection product guarantee provider.27
(2) The reimbursement insurance policy or policies shall either 28
fully insure the obligations of the service contract provider or 29
protection product guarantee provider ((, rather than partially 30
insure,)) or insure only in the event of service contract provider or 31
protection product guarantee provider default or failure to perform.32
(3) The reimbursement insurance policy or policies shall state 33
that the service contract holder or protection product guarantee 34
holder is entitled to apply directly to the reimbursement insurance 35
company for payment or performance due. 36
(4) If a reimbursement insurance policy only pays or provides 37
benefits in the event of nonperformance by the provider or when the 38
provider is unable to fulfill its contractual obligations, then the 39
p. 11 HB 1006
policy must also state that in the event a covered service or product 1
is not provided by the service contract provider or protection 2
product guarantee provider within 30 days of proof of loss by the 3
service contract holder or protection product guarantee holder the 4
service contract holder or protection product guarantee holder is 5
entitled to apply directly to the reimbursement insurance company for 6
payment or performance due. If the service contract provider or 7
protection product guarantee provider has ceased operation, the 8
service contract holder or protection product guarantee holder may 9
apply directly to the reimbursement insurance company for payment or 10
performance due without waiting 30 days. 11
Sec. 5. RCW 48.110.073 and 2006 c 274 s 20 are each amended to 12
read as follows: 13
(1) If the service contract provider or protection product 14
guarantee provider is using (([the])) one or more reimbursement 15
insurance policy or policies to satisfy the requirements of RCW 16
48.110.050(2)(a), ((48.110.055(2)(b), or 48.110.075(2)(a),)) then 17
((the)) each reimbursement insurance policy shall be filed with and 18
approved by the commissioner in accordance with and pursuant to the 19
requirements of chapter 48.18 RCW. 20
(2) All service contracts forms covering motor vehicles must be 21
filed with and approved by the commissioner prior to the service 22
contract forms being used, issued, delivered, sold, or marketed in 23
this state or to residents of this state. 24
(3) All service contracts forms covering motor vehicles being 25
used, issued, delivered, sold, or marketed in this state or to 26
residents of this state by motor vehicle manufacturers or import 27
distributors or wholly owned subsidiaries thereof must be filed with 28
the commissioner for approval within sixty days after the motor 29
vehicle manufacturer or import distributor or wholly owned subsidiary 30
thereof begins using the service contracts forms. 31
(4) The commissioner shall disapprove any motor vehicle service 32
contract form if: 33
(a) The form is in any respect in violation of, or does not 34
comply with, this chapter or any applicable order or regulation of 35
the commissioner issued under this chapter; 36
(b) The form contains or incorporates by reference any 37
inconsistent, ambiguous, or misleading clauses, or exceptions and 38
conditions; 39
p. 12 HB 1006
(c) The form has any title, heading, or other indication of its 1
provisions that is misleading; or 2
(d) The purchase of the contract is being solicited by deceptive 3
advertising. 4
Sec. 6. RCW 48.110.075 and 2006 c 274 s 18 are each amended to 5
read as follows: 6
(1) This section applies to service contracts on motor vehicles.7
(2) Service contracts shall not be issued, sold, or offered for 8
sale in this state or sold to consumers in this state unless:9
(a) The service contract provider has either demonstrated its 10
financial responsibility or assured the faithful performance of the 11
service contract provider's obligations to its service contract 12
holders by ((insuring all service contracts under a reimbursement 13
insurance policy issued by an insurer holding a certificate of 14
authority from the commissioner or a risk retention group, as defined 15
in 15 U.S.C. Sec. 3901 (a)(4), as long as that risk retention group is 16
in full compliance with the federal liability risk retention act of 17
1986 (15 U.S.C. Sec. 3901 et seq.), is in good standing in its 18
domiciliary jurisdiction, and properly registered with the 19
commissioner under chapter 48.92 RCW. The insurance required by this 20
subsection must meet the following requirements:21
(i) The insurer or risk retention group must, at the time the 22
policy is filed with the commissioner, and continuously thereafter, 23
maintain surplus as to policyholders and paid-in capital of at least 24
fifteen million dollars and annually file audited financial 25
statements with the commissioner; and26
(ii) The commissioner may authorize an insurer or risk retention 27
group that has surplus as to policyholders and paid-in capital of 28
less than fifteen million dollars, but at least equal to ten million 29
dollars, to issue the insurance required by this subsection if the 30
insurer or risk retention group demonstrates to the satisfaction of 31
the commissioner that the company maintains a ratio of direct written 32
premiums, wherever written, to surplus as to policyholders and paid-33
in capital of not more than three to one )) satisfying one of the 34
requirements of demonstrating financial responsibility or assuring 35
faithful performance in accordance with RCW 48.110.050;36
(b)(i) The service contract conspicuously states that the 37
obligations of the provider to the service contract holder are 38
guaranteed under the reimbursement insurance policy, the name and 39
p. 13 HB 1006
address of the issuer of the reimbursement insurance policy, the 1
applicable policy number, and the means by which a service contract 2
holder may file a claim under the policy; 3
(ii) A service contract not insured under a reimbursement 4
insurance policy under RCW 48.110.050(2)(a) and 48.110.060 shall 5
contain a statement in substantially the following form: "Obligations 6
of the service contract provider under this contract are backed by 7
the full faith and credit of the service contract provider";8
(c) The service contract conspicuously and unambiguously states 9
the name and address of the service contract provider and identifies 10
any administrator if different from the service contract provider, 11
the service contract seller, and the service contract holder. The 12
identity of the service contract seller and the service contract 13
holder are not required to be preprinted on the service contract and 14
may be added to the service contract at the time of sale;15
(d) The service contract states the purchase price of the service 16
contract and the terms under which the service contract is sold. The 17
purchase price is not required to be preprinted on the service 18
contract and may be negotiated at the time of sale;19
(e) The contract contains a conspicuous statement that has been 20
initialed by the service contract holder and discloses:21
(i) Any material conditions that the service contract holder must 22
meet to maintain coverage under the contract including, but not 23
limited to, any maintenance schedule to which the service contract 24
holder must adhere, any requirement placed on the service contract 25
holder for documenting repair or maintenance work, any duty to 26
protect against any further damage, and any procedure to which the 27
service contract holder must adhere for filing claims;28
(ii) The work and parts covered by the contract;29
(iii) Any time or mileage limitations; 30
(iv) That the implied warranty of merchantability on the motor 31
vehicle is not waived if the contract has been purchased within 32
((ninety)) 90 days of the purchase date of the motor vehicle from a 33
provider or service contract seller who also sold the motor vehicle 34
covered by the contract; 35
(v) Any exclusions of coverage; and 36
(vi) The contract holder's right to return the contract for a 37
refund, which right can be no more restrictive than provided for in 38
subsection (4) of this section; 39
p. 14 HB 1006
(f) The service contract states the procedure to obtain service 1
or to file a claim, including but not limited to the procedures for 2
obtaining prior approval for repair work, the toll-free telephone 3
number if prior approval is necessary for service, and the procedure 4
for obtaining emergency repairs performed outside of normal business 5
hours or for obtaining ((twenty-four-hour)) 24-hour telephone 6
assistance; 7
(g) The service contract states the existence of any deductible 8
amount, if applicable; 9
(h) The service contract states any restrictions governing the 10
transferability of the service contract, if applicable; and11
(i) The service contract states whether or not the service 12
contract provides for or excludes consequential damages or 13
preexisting conditions. 14
(3) Service contracts shall not contain a provision which 15
requires that any civil action brought in connection with the service 16
contract must be brought in the courts of a jurisdiction other than 17
this state. Service contracts that authorize binding arbitration to 18
resolve claims or disputes must allow for arbitration proceedings to 19
be held at a location in closest proximity to the service contract 20
holder's permanent residence. 21
(4)(a) At a minimum, every provider shall permit the service 22
contract holder to return the contract within ((thirty)) 30 days of 23
its purchase if no claim has been made under the contract, and shall 24
refund to the holder the full purchase price of the contract unless 25
the service contract holder returns the contract ((ten)) 10 or more 26
days after its purchase, in which case the provider may charge a 27
cancellation fee not exceeding ((twenty-five dollars)) $25.28
(b) If no claim has been made and a contract holder returns the 29
contract after ((thirty)) 30 days, the provider shall refund the 30
purchase price pro rata based upon either elapsed time or mileage 31
computed from the date the contract was purchased and the mileage on 32
that date, less a cancellation fee not exceeding ((twenty-five 33
dollars)) $25. 34
(c) A ((ten)) 10 percent penalty shall be added to any refund 35
that is not paid within ((thirty)) 30 days of return of the contract 36
to the provider. 37
(d) If a contract holder returns the contract under this 38
subsection, the contract is void from the beginning and the parties 39
are in the same position as if no contract had been issued.40
p. 15 HB 1006
(e) If a service contract holder returns the contract in 1
accordance with this section, the insurer issuing the reimbursement 2
insurance policy covering the contract shall refund to the provider 3
the full premium by the provider for the contract if canceled within 4
((thirty)) 30 days or a pro rata refund if canceled after ((thirty)) 5
30 days. 6
(5) A service contract provider shall not deny a claim for 7
coverage based upon the service contract holder's failure to properly 8
maintain the vehicle, unless the failure to maintain the vehicle 9
involved the failed part or parts. 10
(6) A contract provider has only ((sixty)) 60 days from the date 11
of the sale of the service contract to the holder to determine 12
whether or not the vehicle qualifies under the provider's program for 13
that vehicle. After ((sixty)) 60 days the vehicle qualifies for the 14
service contract that was issued and the service contract provider 15
may not cancel the contract and is fully obligated under the terms of 16
the contract sold to the service contract holder. 17
Sec. 7. RCW 48.110.110 and 2006 c 274 s 12 are each amended to 18
read as follows: 19
(1) Service contract providers or protection product guarantee 20
providers are considered to be the agent of ((the)) each insurer 21
which issued the reimbursement insurance policy or policies for 22
purposes of obligating the insurer to service contract holders or 23
protection product guarantee holders in accordance with the service 24
contract holders or protection product guarantee holders and this 25
chapter. Payment of the provider fee by the consumer to the service 26
contract seller, service contract provider, or administrator or 27
payment of consideration for the protection product to the protection 28
product seller constitutes payment by the consumer to the service 29
contract provider or protection product guarantee provider and to 30
((the)) each insurer which issued the reimbursement insurance policy 31
or policies. In cases where a service contract provider or protection 32
product guarantee provider is acting as an administrator and enlists 33
other service contract providers or protection product guarantee 34
providers, the service contract provider or protection product 35
guarantee provider acting as the administrator shall notify ((the)) 36
each insurer of the existence and identities of the other service 37
contract providers or protection product guarantee providers.38
p. 16 HB 1006
(2) This chapter does not prevent or limit the right of an 1
insurer which issued a reimbursement insurance policy to seek 2
indemnification or subrogation against a service contract provider or 3
protection product guarantee provider if the issuer pays or is 4
obligated to pay the service contract holder or protection product 5
guarantee holder sums that the service contract provider or 6
protection product guarantee provider was obligated to pay under the 7
provisions of the service contract or protection product guarantee.8
Sec. 8. RCW 48.110.140 and 2006 c 274 s 15 are each amended to 9
read as follows: 10
The legislature finds that the practices covered by this chapter 11
are matters vitally affecting the public interest for the purpose of 12
applying the consumer protection act, chapter 19.86 RCW. Violations 13
of this chapter are not reasonable in relation to the development and 14
preservation of business. A violation of this chapter is an unfair or 15
deceptive act or practice in the conduct of trade or commerce and an 16
unfair method of competition, as specifically contemplated by RCW 17
19.86.020, and is a violation of the consumer protection act, chapter 18
19.86 RCW. Any service contract holder or protection product 19
guarantee holder injured as a result of a violation of a provision of 20
this chapter shall be entitled to maintain an action pursuant to 21
chapter 19.86 RCW against the service contract provider or protection 22
product guarantee provider and ((the)) each insurer issuing the 23
applicable service contract or protection product guarantee 24
reimbursement insurance policy or policies and shall be entitled to 25
all of the rights and remedies afforded by that chapter.26
--- END ---
p. 17 HB 1006