Bill Text: AZ SB1039 | 2020 | Fifty-fourth Legislature 2nd Regular | Engrossed
Bill Title: Home service warranty contracts
Spectrum: Partisan Bill (Republican 1-0)
Status: (Engrossed - Dead) 2020-03-02 - House RA Committee action: Held, voting: (0-0-0-0-0-0) [SB1039 Detail]
Download: Arizona-2020-SB1039-Engrossed.html
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Senate Engrossed |
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State of Arizona Senate Fifty-fourth Legislature Second Regular Session 2020
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SENATE BILL 1039 |
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AN ACT
amending sections 20-1095, 20-1095.02 and 20-1095.06, Arizona Revised Statutes; relating to home service warranty contracts.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 20-1095, Arizona Revised Statutes, is amended to read:
20-1095. Definitions
In this article, unless the context otherwise requires:
1. "Consumer":
(a) Means a buyer other than for purposes of resale of any consumer product, any person to whom the product is transferred during the duration of an implied or written warranty or service contract applicable to the product and any other person who is entitled by the terms of the warranty or service contract or under applicable federal or state law to enforce against the warrantor or service company the obligations of the warranty or service contract. Consumer also means the
(b) Includes a buyer, owner, lessor, lessee or seller of residential property.
2. "Consumer product" means any tangible personal property that is distributed in commerce, and that is normally used solely for personal, family or household purposes, including any such property intended to be attached to or installed in any real property without regard to whether it is so attached or installed, and that becomes part of the intended usefulness of real property or that is typically transferred with real property as an integral functioning utility appliance or system.
3. "Home warranty or home protection contract" means a service contract as defined in paragraph 7, subdivision (b), item (i) of this section.
4. "Mechanical reimbursement insurance" means an insurance policy issued to an obligor to either provide reimbursement to the obligor under the terms of the insured service contracts issued or sold by the obligor or, in the event of the obligor's nonperformance, to pay on behalf of the obligor all covered contractual obligations incurred by the obligor under the terms of the insured service contracts issued or sold by the obligor.
5. "Residential property" means a house, townhouse, condominium or other habitable structure that is used principally as a residence.
6. "Service company" or "obligor" means any person that is contractually obligated to the contract holder under the terms of the service contract. Service company does not include a service contract administration administrator or seller if the person is not contractually obligated to the contract holder under the terms of the service contract.
7. "Service contract":
(a) Means a written contract or agreement for a separately stated consideration for any duration to perform, in whole or in part, the repair, replacement or maintenance of a consumer product, or indemnification for repair, replacement or maintenance, for the operational or structural failure of a consumer product due to a defect in materials, workmanship, accidental damage from handling, a power surge or interruption or normal wear and tear, with or without additional provisions for incidental payment of indemnity under limited circumstances, including towing, rental and emergency road service, and road hazard protection or roof leak.
(b) Includes a contract or agreement that is sold for a separately stated consideration for any duration and that provides for any of the following:
(i) The service, maintenance or repair, including replacement, of all or any part of structural components, appliances, electrical, plumbing, heating, cooling or air conditioning systems of residential property or indemnification for the service, maintenance, repair or replacement.
(ii) The repair or replacement of tires or wheels on a motor vehicle damaged as a result of coming into contact with road hazards including potholes, rocks, wood debris, metal parts, glass, plastic, curbs or composite scraps.
(iii) 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.
(iv) The replacement of a motor vehicle key or key fob in the event that if the key or key fob becomes inoperable or is lost or stolen.
(v) Other services or products approved by the director.
8. "Service contract administrator" means a person who is responsible for the administration of the service contracts or the service contracts plan or who is responsible for any submission required under this article.
9. "Warranty" means:
(a) Any written affirmation by a manufacturer or seller of fact or written promise made in connection with the sale of a consumer product that relates to the nature of the material or workmanship and affirms or promises that the material or workmanship is free of defects or will meet a specified level of performance over a specified period of time.
(b) Any undertaking by a manufacturer or seller in writing in connection with the sale of a consumer product to refund, repair, replace or take other remedial action with respect to such a product if the product fails to meet the specifications set forth in the undertaking, which written affirmation, promise or undertaking becomes part of the basis of the bargain for purposes other than resale of such product and if there is no separate identifiable charge to the consumer.
Sec. 2. Section 20-1095.02, Arizona Revised Statutes, is amended to read:
20-1095.02. Exemptions; definition
A. This article, except for section 20‑1095.09, does not apply to the following:
1. Warranties issued by manufacturers, builders or sellers on the actual items, structures or improvements that they manufacture, build or sell.
2. Service contract programs if a motor vehicle manufacturer or motor vehicle dealer has financial responsibility for performance.
3. Warranties and service contracts issued by a corporation other than a manufacturer or seller in connection with consumer products that are distributed by the corporation if the issuing corporation:
(a) Is an affiliate of a consumer products manufacturer.
(b) By March 1 of each year submits to the director an independently audited A financial statement in which at least one officer of the issuing corporation attests and a certified public accountant certifies that the issuing corporation has and maintains a net worth in excess of one hundred million dollars $25,000,000. Any information, documents and copies that are obtained by or disclosed to the director or any other person pursuant to this subdivision are not available for public inspection, except that the director may use this information in any proceeding relating to this article.
4. A service company that issues a service contract to persons other than a consumer.
5. A service company that is in the business of selling or servicing any one of the following, if the service contract only covers the actual item the service company sells:
(a) Appliances or electronic equipment, or both.
(b) Residential heating, cooling or air conditioning systems.
(c) Mechanical equipment, other than motor vehicles or their components.
6. A service company only to the extent that it is in the business of selling or servicing directly, or through other retailers, cell phones and other electronic personal communications devices and accessories.
7. Any person licensed pursuant to title 32, chapter 10, or not required to be licensed because exempt pursuant to section 32‑1121, subsection A, paragraph 13 whose service contract only covers the actual items, structures or improvements that the person installs, constructs or builds.
8. A maintenance agreement of limited duration that provides for scheduled maintenance only and does not include repair or replacement.
B. The director may employ independent examiners pursuant to section 20‑156 to review and analyze the financial statements that are submitted pursuant to subsection A, paragraph 3 of this section.
C. The types of agreements referred to in subsection A of this section are not insurance and are not required to comply with the insurance laws of this state unless a provision is made expressly applicable in this article.
D. For the purposes of this section, "affiliate" means a corporation that is owned or controlled by or is under common control with a manufacturer.
Sec. 3. Section 20-1095.06, Arizona Revised Statutes, is amended to read:
20-1095.06. Required service contract disclosures
A. Each service company holding a service company permit shall submit all service contract forms to the director for approval at least thirty days before the proposed effective date of the form. A form may not be used until it is approved by the director or has been on file with the director for more than thirty days.
B. The director may not approve a service contract if:
1. The service contract may be canceled or voided due to acts or omissions of the service company or its assignees or subcontractors for their failure to provide correct information or their failure to perform the services or repairs provided in a timely, competent and workmanlike manner.
2. Parts or components repaired or replaced under the service contract are excluded.
3. The service contract may be canceled or voided by the service company or its representatives for any of the following reasons:
(a) The service contract fails to state the extent to which preexisting conditions that were known or that reasonably should have been known by the service company or the person selling the service contract on the service company's behalf.
(b) Prior use or unlawful acts relating to the product. will or will not be covered.
(c) (b) Misrepresentation by either the service company or the person selling the service contract on the service company's behalf.
C. Service contracts may not be issued, sold or offered for sale in this state unless the service company has provided both:
1. A receipt for or other written evidence of the purchase of the service contract to the contract holder.
2. A copy of the service contract to the service contract holder within a reasonable period of time from after the date of purchase.
D. Service contracts that are marketed, sold, offered for sale, issued, made, proposed to be made or administered in this state shall be written, printed or typed in clear, understandable language that is easy to read and shall disclose the following, as applicable:
1. Service contracts that are insured under a mechanical reimbursement insurance policy pursuant to section 20‑1095.03, subsection A, paragraph 3, subdivision (b) shall state the name and address of the insurer and contain a statement in substantially the following form: "Obligations of the obligor under this service contract are insured under a mechanical service contract reimbursement insurance policy".
2. Service contracts that are not insured under a reimbursement insurance policy pursuant to section 20‑1095.03, subsection A, paragraph 3, subdivision (b) shall contain a statement in substantially the following form: "Obligations of the obligor under this service contract are backed by the full faith and credit of the obligor".
3. Service contracts shall state the name and address of the obligor and shall identify an administrator if different from the obligor, the service contract seller and the service contract holder to the extent that the name of the service contract holder has been furnished by the service contract holder. The identities of these parties are not required to be preprinted on the service contract and may be added to the service contract at the time of sale.
4. Service contracts shall state the total purchase price of the service contract. The purchase price is not required to be preprinted on the service contract and may be negotiated at the time of sale with the service contract holder.
5. Service contracts shall state the existence of a deductible amount, if applicable.
6. Service contracts shall specify the merchandise and services to be provided and any limits, exceptions or exclusions. Exclusions from coverage shall be in bold‑faced type. Service contracts may, but are not required to, cover damage resulting from rust, corrosion or damage caused by a noncovered part or system.
7. Service contracts covering automobiles motor vehicles shall state whether the use of nonoriginal manufacturers' parts is allowed.
8. Service contracts shall state any restrictions governing the transferability of the service contract, if applicable.
9. Service contracts shall state the terms, restrictions or conditions governing cancellation of the service contract before the termination or expiration date of the service contract by either the service company or the service contract holder. At a minimum, a service contract shall provide for a pro rata refund after deducting for benefits paid and administrative expenses associated with the cancellation. The administrative expenses may not exceed $75 OR ten percent of the gross amount paid by the service contract holder for purchase price of the service contract, whichever is less. Any administrative expense assessed may not exceed the amount of the refund due to the service contract holder.
10. Service contracts shall set forth all of the obligations and duties of the service contract holder, including the duty to protect against any further damage and any requirement to follow the owner's manual.
11. Service contracts shall disclose the material acts or omissions of the contract holder that cancel or void coverage, if any, and may include:
(a) Fraudulent or unlawful acts by the contract holder arising out of or relating to the service contract.
(b) The contract holder's use of a covered consumer product in a manner other than as intended by the manufacturer that is likely to increase the likelihood that the consumer product will be damaged or require repairs.
12. A service contract may not exclude preexisting conditions if such conditions were known or should reasonably have been known by the service company or the person selling the service contract on the service company's behalf.
12. Service contracts shall disclose whether the contracts cover or exclude preexisting conditions. Service contracts may not exclude preexisting conditions that were not known and would not have been reasonably known by a visual inspection, operation of the system or appliance and a mechanical test.
E. Brochures and other advertising or marketing materials are not required to be filed with or approved by the director.
