Vehicle Protection Product Warrantors
Creates a new chapter to regulate warrantors of vehicle protection products.
HOUSE OF REPRESENTATIVES
TWENTY-FIRST LEGISLATURE, 2002
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO THE REGULATION OF WARRANTORS OF VEHICLE PROTECTION PRODUCTS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:
VEHICLE PROTECTION PRODUCT WARRANTORS
§ -1 This chapter may be cited as the Vehicle Protection Product Regulatory Act.
§ -2 Definitions. In this chapter:
"Commissioner" means the insurance commissioner.
"Consumer" means a person in this state who purchases or otherwise possesses a vehicle protection product.
"Department" means the department of commerce and consumer affairs.
"Person" means an individual or a partnership, company, corporation, association, or other group, however organized.
"Reimbursement insurance policy" means a policy of insurance issued to a warrantor to:
(1) Provide reimbursement to the warrantor under the terms of the insured vehicle protection product issued or sold by the warrantor; and
(2) Pay on behalf of the warrantor, in the event of the warrantor's nonperformance, all covered obligations incurred by the warrantor under the terms of the insured vehicle protection product issued or sold by the warrantor.
"Seller" means a person engaged in the business of offering a vehicle protection product for sale to a consumer.
"Vehicle protection product" means a product or system that includes a written warranty that is:
(1) Installed or applied to a vehicle;
(2) Designed to prevent loss or damage to a vehicle from a specific cause; and
(3) Subject to the limitations of Section 3 of this chapter.
"Warrantor" means a person named under the terms of a vehicle protection product warranty as the contractual obligor to the consumer.
§ -3 Applicability. (a) This chapter applies only to a vehicle protection product that fails to perform as represented in the warranty and causes loss of or damage to the vehicle, and requires the warrantor, to the extent agreed on as part of the warranty, to pay expenses to the consumer for the loss of or damage to the vehicle.
(b) Expenses incurred by the warrantor as a result of loss of or damage to the vehicle under subsection (a) of this section may also include unreimbursed incidental expenses, including expenses for a replacement vehicle, temporary vehicle rental expenses, and registration expenses for replacement vehicles.
§ -4 Powers and duties of the commissioner. (a) The commissioner may adopt rules pursuant to chapter 91 necessary to implement this chapter.
(b) The commissioner may conduct investigations of warrantors or other persons as reasonably necessary to enforce this chapter and to protect consumers in this state. Upon the commissioner's request, a warrantor shall make the records maintained under section -9 available to the department to enable the department to reasonably determine compliance with this chapter.
§ -5 Registration requirements. (a) Before conducting business in this state or issuing any warranty, a warrantor shall:
(1) Register with the commissioner on a form prescribed by the commissioner; and
(2) Pay a fee to the commissioner as provided under section 431:7-101.
A person who sells or solicits a vehicle protection product, but is not a warrantor, is not required to register with the commissioner as a warrantor.
(b) Warrantor registration records shall be updated annually and shall contain the following information:
(1) The address of the principal office of the warrantor;
(2) The name and address of the warrantor’s agent for the service of process in this state if other than the provider;
(3) The identities of the warrantor’s executive officer or officers directly responsible for the warrantor’s vehicle protection product business;
(4) The name, address, and telephone number of any administrators designated by the warrantor to be responsible for the administration of vehicle protection product warranties in this state;
(5) A copy of each warranty form the warrantor proposes to use in this state; and
(6) A statement that the warrantor is in compliance with the financial responsibility requirements of section
–6, and proof of compliance with the requirements.
(c) The marketing, selling, offering for sale, issuing, making, proposing to make, and administering of vehicle protection products are exempt from:
(2) The insurance laws of this state.
(d) The following contracts and agreements are exempt from this chapter and are only subject to other statutes and laws that specifically apply to them:
(1) Warranties or guarantees, other than those provided as part of a vehicle protection product; and
(2) Service contracts regulated by chapter 481X.
(e) A seller is not a warrantor unless, in addition to acting as a seller, the person is named under the terms of a vehicle protection product warranty as the contractual obligor to the consumer.
§ -6 Financial security requirements. (a) To ensure the adequate performance of a warrantor's obligations to a consumer, each warrantor shall comply with financial security requirements by insuring its vehicle protection products under:
(1) A reimbursement insurance policy issued by an insurer authorized to engage in the business of insurance in this state; or
(2) A surplus lines insurance policy issued by an insurer authorized to place coverage in this state.
(b) The department may not require any other financial security requirements or financial standards for warrantors. Warrantors shall not be subject to any other financial security requirements under State law.
§ -7 Reimbursement insurance policy. (a) In order for a warrantor to comply with section -6(a) of this chapter, the warrantor's insurance policy must state that:
(1) The insurer that issued the policy shall reimburse or pay on behalf of the warrantor any covered amounts the warrantor is legally obligated to pay or shall provide the service that the warrantor is legally obligated to perform according to the warrantor's obligations under the insured vehicle protection product issued or sold by the warrantor; and
(2) If the covered amounts are not paid or the covered service is not provided by the warrantor to a consumer before the sixty-first day after the date the consumer provides proof of loss, payment shall be made or the service shall be provided directly from the reimbursement insurer to the consumer.
(b) An insurer that issues a reimbursement insurance policy under this chapter may not cancel the policy until the insurer delivers to the warrantor a written notice of cancellation that complies with the requirements adopted under the insurance laws of this state. The warrantor shall forward a copy of the cancellation notice to the department before the fifteenth business day after the date the notice is delivered to the warrantor.
(c) The cancellation of a reimbursement insurance policy does not reduce the insurer's responsibility for vehicle protection products issued by the warrantor and insured under the policy before the date of the cancellation.
(d) For purposes of this section, a warrantor is considered to be the representative of the insurer who issues the reimbursement insurance policy for purposes of obligating the insurer to consumers in accordance with the vehicle protection product and this chapter.
§ -8 General warrantor operation requirements. (a) A warrantor may appoint a designee to be responsible for any or all of the administration of vehicle protection products and for compliance with this chapter.
(b) A vehicle protection product may not be issued, sold, or offered for sale in this state unless the warrantor provides to the consumer at the time of sale:
(1) A copy of the vehicle protection product warranty; or
(2) A receipt for, or other written evidence of, the purchase of the vehicle protection product.
(c) A warrantor who complies with subsection (b)(2) shall provide to the consumer a copy of the vehicle protection product warranty within a reasonable time after the date of purchase.
(d) A warrantor shall indemnify a seller who pays or is obligated to pay a consumer any money the warrantor is obligated to pay under the terms of the vehicle protection product warranty, including damages, reasonable attorney's fees, and costs.
§ -9 Warrantor records. (a) Each warrantor shall maintain accurate accounts, books, and other records regarding transactions regulated under this chapter. The warrantor's records must include:
(1) A copy of the warranty for each unique form of vehicle protection product sold;
(2) The name and address of each consumer;
(3) A list of the locations where the warrantor's vehicle protection products are marketed, sold, or offered for sale; and
(4) Files that contain at least the dates and descriptions of payments to consumers related to the vehicle protection product.
(b) Except as provided by subsection (d), each warrantor shall retain all records required under subsection (a) until at least one year after the expiration date of the obligations under the vehicle protection product warranty.
(c) The records required to be maintained under this section may be maintained using an electronic medium or through other recordkeeping methods. If a record is maintained in a format other than paper, the warrantor must be able to reformat the record into a legible paper copy at the request of the department.
(d) A warrantor who discontinues business in this state shall maintain the warrantor's records until the date the warrantor provides the department with proof satisfactory to the department that the warrantor has discharged all obligations to consumers in this state.
§ -10 Required disclosures. (a) Each vehicle protection product warranty marketed, sold, offered for sale, issued, made, proposed to be made, or administered in this state must be written, printed, or typed, in clear, understandable, and easy to read language, and must disclose the applicable requirements set forth in this section.
(b) The obligations of a vehicle protection product warranty that are insured under a reimbursement insurance policy must contain a statement substantially similar to the following:
"OBLIGATIONS OF THE WARRANTOR UNDER THIS VEHICLE PROTECTION PRODUCT ARE INSURED UNDER A REIMBURSEMENT INSURANCE POLICY."
(c) The vehicle protection product warranty must state:
(1) The name and address of the insurer; and
(2) The consumer may apply for reimbursement directly to the vehicle protection product's reimbursement insurance company if a covered service is not provided by the warrantor before the sixty-first day after the date the consumer provides proof of loss.
(d) Each vehicle protection product warranty must state the name, address, and phone number of the warrantor. All warrantors shall report to the department before the thirty-first day after the date of any change in the information required to be provided in this subsection.
(e) Each vehicle protection product warranty must identify any administrator, if different from the warrantor, the vehicle protection product seller, and the consumer, if the name of the consumer has been provided. The identities of those persons are not required to be preprinted on the warranty and may be added to the warranty at the time of sale.
(f) Each vehicle protection product warranty must state the product's purchase price, or the warrantor's suggested purchase price, and the terms under which the product is sold. The purchase price is not required to be preprinted on the vehicle protection product warranty and may be negotiated with the consumer at the time of sale.
(g) Each vehicle protection product warranty must:
(1) Specify the products and services to be provided and any limitations, exceptions, or exclusions;
(2) Specify any restrictions governing the transferability of the vehicle protection product;
(3) State the duties of the consumer, including any duty to protect against any further damage and any requirement to follow the warranty's instructions;
(4) State the name, mailing address, and telephone number of the department; and
(5) Include a statement that unresolved complaints concerning a registered warrantor or questions concerning the regulation of a warrantor may be addressed to the department.
(h) The requirements of subsection (g)(4) and (5) may be stamped on the vehicle protection product warranty.
§ -11 Cancellation of warranty. (a) Each vehicle protection product warranty must state the terms, restrictions, or conditions, if any, governing cancellation of the warranty by the warrantor before the expiration date of the warranty. Cancellation may only occur under this section for:
(1) Nonpayment by the consumer for the vehicle protection product;
(2) A material misrepresentation by the consumer to the seller or warrantor;
(3) Fraud by the consumer; or
(4) A substantial breach of duties by the consumer relating to the warranty.
(b) A warrantor shall mail written notice of cancellation to the consumer at the last address of the consumer contained in the records of the warrantor before the fifth day preceding the effective date of the cancellation. The notice must state the effective date of the cancellation and the reason for the cancellation.
§ -12 Limitations on use of warrantor's name. (a) A warrantor may not use:
(1) "Casualty," "surety," "insurance," "mutual," or any other word descriptive of the casualty, insurance, or surety business in its name; or
(2) A name deceptively similar to the name or description of any insurance company, surety corporation, or other warrantor.
(b) A warrantor may use the word "guaranty" or a similar word in the warrantor's name.
§ -13 Prohibited acts. (a) The warrantor's vehicle protection product warranty, advertisement, or literature for the warranty may not:
(1) Make, permit, or cause to be made any false or misleading statement; or
(2) Deliberately omit a material statement that would be considered misleading if omitted.
(b) A warrantor may not require as a condition of sale or financing that a retail purchaser of a motor vehicle purchase a vehicle protection product that is not installed on the motor vehicle at the time of sale.
§ -14 Enforcement. (a) The commissioner may take any action necessary or appropriate to enforce this chapter. The commissioner may conduct investigations and examinations of warrantors, administrators, insurers, or other persons. If a warrantor has violated this chapter, or rules or orders under this chapter, the commissioner may issue an order:
(1) Requiring a person to cease and desist from violating this chapter, rules, or orders under this chapter;
(2) Prohibiting a person from selling or offering for sale vehicle protection product warranties in violation of this chapter; or
(3) Imposing a civil penalty on a person, or any combination of the foregoing, as applicable.
(b) A person aggrieved by an order under this section may request a hearing in accordance to chapter 91. The hearing request shall be filed with the commissioner within twenty days of the effective date of the commissioner’s order. Upon filing of a hearing request, the order shall be suspended from its effective date, until completion of the hearing and final decision of the commissioner. At the hearing, the commissioner shall have the burden of proof to show that the order is justified.
(c) The commissioner may bring an action in any court of competent jurisdiction for an injunction or other appropriate relief to remedy threatened or existing violations of this chapter, rules established pursuant to this chapter, or orders of the commissioner. An action filed under this section may also seek restitution on behalf of persons aggrieved by a violation of this chapter, rules established pursuant to this chapter, or orders of the commissioner."
SECTION 2. Section 431:7-101, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:
"(a) The commissioner shall collect in advance the following fees:
(1) Certificate of authority: Issuance................$900
(2) Organization of domestic insurers and affiliated corporations:
(A) Application and all other papers required for issuance of solicitation permit, filing....$1,500
(B) Issuance of solicitation permit..............$150
(3) General agent's license:
(A) Issuance, regular license.....................$75
(B) Issuance, temporary license...................$75
(4) Subagent's license:
(A) Issuance, regular license.....................$75
(B) Issuance, temporary license...................$75
(5) Nonresident agent's or broker's license: Issuance..$60
(6) Solicitor's license: Issuance......................$60
(7) Independent adjuster's license: Issuance...........$60
(8) Public adjuster's license: Issuance................$60
(9) Workers' compensation claims adjuster's limited license: Issuance.................................$60
(10) Independent bill reviewer's license: Issuance......$80
(11) Limited license issued pursuant to section 431:9-214(c): Issuance.............................$60
(12) Managing general agent's license: Issuance........$75
(13) Reinsurance intermediary's license: Issuance......$75
(14) Surplus line broker's license: Issuance..........$150
(15) Service contract provider's registration:
(16) Approved course provider certificate: Issuance....$100
(17) Approved continuing education course certificate: Issuance...........................................$30
(18) Examination for license: For each examination, a fee to be established by the commissioner.
(19) Vehicle protection product warrantor's registration: Issuance.........................................$
(b) The fees for services of the department of commerce and consumer affairs subsequent to the issuance of a certificate of authority, license, or other certificate are as follows:
(1) $600 per year for all services (including extension of the certificate of authority) for an authorized insurer;
(2) $75 per year for all services (including extension of the license) for a regularly licensed general agent;
(3) $75 per year for all services (including extension of the license) for a regularly licensed subagent;
(4) $45 per year for all services (including extension of the license) for a regularly licensed nonresident agent or broker;
(5) $30 per year for all services (including extension of the license) for a regularly licensed solicitor;
(6) $45 per year for all services (including extension of the license) for a regularly licensed independent adjuster;
(7) $45 per year for all services (including extension of the license) for a regularly licensed public adjuster;
(8) $45 per year for all services (including extension of the license) for a regularly limited licensed workers' compensation claims adjuster;
(9) $60 per year for all services (including extension of the license) for a regularly licensed independent bill reviewer;
(10) $45 per year for all services (including extension of the license) for a limited license issued pursuant to section 431:9-214(c);
(11) $75 per year for all services (including extension of the license) for a regularly licensed managing general agent;
(12) $75 per year for all services (including extension of the license) for a regularly licensed reinsurance intermediary;
(13) $45 per year for all services (including extension of the license) for a licensed surplus line broker;
(14) $75 per year for all services (including renewal of registration) for a service contract provider;
(15) $65 per year for all services (including extension of the certificate) for an approved course provider; [
(16) $20 per year for all services (including extension of the certificate) for an approved continuing education course[
(17) $ per year for all services (including renewal of registration) for a vehicle protection product warrantor.
The services referred to in paragraphs (1) to [
(16)](17) shall not include services in connection with examinations, investigations, hearings, appeals, and deposits with a depository other than the department of commerce and consumer affairs."
SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 4. This Act shall take effect on January 1, 2003.