Alabama 2025 Regular Session

Alabama House Bill HB466 Compare Versions

Only one version of the bill is available at this time.

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1	1	HB466INTRODUCED
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3	3	HB466
4	4	CXX1GJJ-1
5	5	By Representative McCampbell
6	6	RFD: Commerce and Small Business
7	7	First Read: 20-Mar-25
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12	12	5 CXX1GJJ-1 03/13/2025 ZAK (L)ZAK 2025-920
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14	14	First Read: 20-Mar-25
15	15	SYNOPSIS:
16	16	Generally, pursuant to the terms of a service
17	17	contract, a provider agrees to repair, replace, or
18	18	provide a refund for covered property that is
19	19	operationally or functionally failing.
20	20	This bill would require that when advertising a
21	21	service contract, the advertisement must disclose any
22	22	right to refund a contract holder in an amount less
23	23	than the provider's cost to repair or replace covered
24	24	property.
25	25	This bill would further provide for the
26	26	limitations, exceptions, and exclusions of service
27	27	contracts that must be disclosed.
28	28	This bill would also make nonsubstantive,
29	29	technical revisions to update the existing code
30	30	language to current style.
31	31	A BILL
32	32	TO BE ENTITLED
33	33	AN ACT
34	34	Relating to service contracts; to amend Sections
35	35	8-32-2, 8-32-3, and 8-32-5, Code of Alabama 1975, to require
36	36	certain disclosure when advertising contracts; to further
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66	66	certain disclosure when advertising contracts; to further
67	67	provide for the limitations, exceptions, and exclusions of
68	68	contracts that must be disclosed; and to make nonsubstantive,
69	69	technical revisions to update the existing code language to
70	70	current style.
71	71	BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
72	72	Section 1. Sections 8-32-2, 8-32-3, and 8-32-5, Code of
73	73	Alabama 1975, are amended to read as follows:
74	74	"§8-32-2
75	75	As used in this chapter, the following terms shall have
76	76	the following meanings:
77	77	(1) ADMINISTRATOR. The person designated by a provider
78	78	to be responsible for the administration of service contracts
79	79	or the service contracts plan or to make the filings required
80	80	by this chapter.
81	81	(2) COMMISSIONER. The Commissioner of Insurance of this
82	82	state.
83	83	(3) CONSUMER. A natural person who buys, primarily for
84	84	personal, family, or household purposes, and not for resale,
85	85	any tangible personal property normally used for personal,
86	86	family, or household purposes and not for commercial or
87	87	research purposes.
88	88	(4) MAINTENANCE AGREEMENT. A contract of limited
89	89	duration that provides for scheduled maintenance only.
90	90	(5) MANUFACTURER. A person that is one of the
91	91	following:
92	92	a. A manufacturer or producer of property that sells
93	93	the property under its own name or label.
94	94	b. A subsidiary of the person who manufactures or
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124	124	b. A subsidiary of the person who manufactures or
125	125	produces the property.
126	126	c. A corporation which that owns at least 80 percent of
127	127	the person who that manufactures or produces the property.
128	128	d. A person who that manufactures or produces the
129	129	property even though the property is sold under the trade name
130	130	or label of another person.
131	131	(6) MECHANICAL BREAKDOWN INSURANCE. For purposes of
132	132	this chapter, a policy, contract, or agreement issued by an
133	133	authorized insurance company directly to a consumer or other
134	134	owner of property that provides for, among other coverages,
135	135	the repair, replacement, or maintenance of property or
136	136	indemnification for repair, replacement, or maintenance, for
137	137	the operational or structural failure of the property due to a
138	138	defect in materials or workmanship or due to normal wear and
139	139	tear.
140	140	(7) NON-ORIGINAL MANUFACTURER'S PARTS. Replacement
141	141	parts not made for or by the original manufacturer of the
142	142	property, commonly referred to as "after market parts."
143	143	(8) PERSON. An individual, partnership, corporation,
144	144	incorporated or unincorporated association, joint stock
145	145	company, reciprocal, syndicate, or any other entity, or
146	146	combination of persons acting in concert.
147	147	(9) PREMIUM. The consideration paid to an insurer for a
148	148	reimbursement insurance policy.
149	149	(10) PROVIDER. A person who administers, makes,
150	150	provides, sells, or offers to sell a service contract, who is
151	151	contractually obligated to provide service under a service
152	152	contract.
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182	182	contract.
183	183	(11) PROVIDER FEE. The total purchase price paid for a
184	184	service contract. In cases where a reimbursement insurance
185	185	policy is issued to a provider, the "provider fee" is the
186	186	total purchase price paid for a service contract net of the
187	187	premium.
188	188	(12) REFUND. To refund the price of covered property or
189	189	a component thereof, less reasonable depreciation, if:
190	190	a. The replacement or repair of the property is not
191	191	commercially practicable; or
192	192	b. The contract holder agrees to accept a refund in
193	193	place of the replacement or repair.
194	194	(12)(13) REIMBURSEMENT INSURANCE POLICY. A policy of
195	195	insurance issued to a provider pursuant to which the insurer
196	196	agrees, for the benefit of the service contract holders, to
197	197	discharge the obligations of the provider under the terms of
198	198	the service contracts in the event of non-performance
199	199	nonperformance by the provider.
200	200	(14) REPAIR. The restoration of operationally or
201	201	functionally failing covered property to sound or good
202	202	condition.
203	203	(15) REPLACE. The replacement of property or a
204	204	component thereof with a new and identical or equivalent
205	205	product or component.
206	206	(13)(16) ROAD HAZARD. A hazard that is encountered
207	207	while driving a motor vehicle, including, but not limited to,
208	208	potholes, rocks, wood debris, metal parts, glass, plastic,
209	209	curbs, or composite scraps.
210	210	(14)(17) SERVICE CONTRACT. A contract or agreement for
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240	240	(14)(17) SERVICE CONTRACT. A contract or agreement for
241	241	a separately stated consideration for a specific duration to
242	242	perform the repair, replacement, or maintenance of property or
243	243	indemnification for repair, replacement, or maintenance, for
244	244	the operational or structural failure due to a defect in
245	245	materials or workmanship, or normal wear and tear, with or
246	246	without additional provision for incidental payment or
247	247	indemnity under limited circumstances, for related expenses,
248	248	including, but not limited to, towing, rental, and emergency
249	249	road service. Service contracts may provide for the repair,
250	250	replacement, or maintenance of property for damage resulting
251	251	from power surges and accidental damage from handling.
252	252	"Service contract" The term does not include warranties,
253	253	mechanical breakdown insurance, or maintenance agreements. A
254	254	service contract is not insurance for any purpose, including,
255	255	but not limited to, compliance with the Alabama Insurance
256	256	Code, other than for the purpose of a service contract
257	257	holder's claim against a service contract provider for failure
258	258	to comply with the provisions of the service contract if so
259	259	provided by other law. Service contract services include, but
260	260	are not limited to, the following:
261	261	a. The repair or replacement of tires or wheels, or
262	262	both, on a motor vehicle damaged as a result of coming into
263	263	contact with a road hazard.
264	264	b. The removal of dents, dings, or creases on a motor
265	265	vehicle that may be repaired using the process of paintless
266	266	dent removal without affecting the existing paint finish and
267	267	without replacing vehicle body panels, sanding, bonding, or
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298	298	painting.
299	299	c. The repair of chips or cracks in or the replacement
300	300	of a motor vehicle windshield as a result of damage caused by
301	301	a road hazard that is primary to the coverage offered by the
302	302	motor vehicle owner's motor vehicle insurance policy.
303	303	d. The replacement of a motor vehicle key or key-fob if
304	304	the key or key-fob becomes inoperable, lost, or stolen.
305	305	e. Other services which that may be approved by the
306	306	commissioner, if not inconsistent with this chapter.
307	307	(15)(18) SERVICE CONTRACT HOLDER or CONTRACT HOLDER. A
308	308	person who is the purchaser or holder of a service contract.
309	309	(16)(19) WARRANTY. A warranty made by the manufacturer,
310	310	importer, distributor, or seller of property or services
311	311	without consideration stated separately from the price of the
312	312	property or services sold, that is not negotiated separate
313	313	from the sale of the product and is incidental to the sale of
314	314	the product, that guarantees repair or replacement, or
315	315	indemnity for repair or replacement, for defective parts,
316	316	mechanical or electrical breakdown, labor or other remedial
317	317	measures, such as repair or replacement of the property or
318	318	repetition of services."
319	319	"§8-32-3
320	320	(a) Either the provider or its designee shall provide
321	321	both of the following to a contract holder :
322	322	(1) Provide a A receipt for, or other written evidence
323	323	of, the purchase of the service contract to the contract
324	324	holder.
325	325	(2) Provide a A copy of the service contract to the
326	326	service contract holder within a reasonable period of time
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356	356	service contract holder within a reasonable period of time
357	357	from the date of purchase.
358	358	(b) A provider may , but is not required to, appoint an
359	359	administrator or other designee to be responsible for any or
360	360	all of the administration of service contracts and compliance
361	361	with this chapter.
362	362	(c) Each provider of service contracts sold in this
363	363	state shall file a registration with the commissioner on a
364	364	form prescribed by the commissioner. Each provider shall pay
365	365	to the commissioner a fee in the amount of two hundred dollars
366	366	($200) annually. All fees collected shall be paid into a
367	367	special revolving fund to be set up by the State Treasurer
368	368	referred to as the "Service Contract Revolving Fund." The
369	369	Service Contract Revolving Fund shall be used in the
370	370	supervision and examination of providers and otherwise in the
371	371	administration of this chapter; provided , however, that
372	372	nothing in this section shall be construed to mean that all of
373	373	the expenses of supervision and examination of providers and
374	374	in the administration of this chapter incurred by the State
375	375	Insurance Department shall come from the Service Contract
376	376	Revolving Fund.
377	377	(d) All funds now or hereafter deposited in the State
378	378	Treasury to the credit of the Service Contract Revolving Fund
379	379	shall may not be expended for any purpose whatsoever unless
380	380	the same shall have been allotted and budgeted in accordance
381	381	with the provisions of Sections 41-4-80 to 41-4-96, inclusive,
382	382	and 41-19-1 to 41-19-12, inclusive, and only in the amounts
383	383	and for the purposes provided by the Legislature in the
384	384	general appropriation bill, other appropriations bills , or
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414	414	general appropriation bill, other appropriations bills , or
415	415	this chapter.
416	416	(e) There is hereby appropriated for the fiscal year
417	417	ending September 30, 1998, from the Service Contract Revolving
418	418	Fund to the State Department of Insurance those amounts as
419	419	deemed necessary to carry out the provisions of this chapter
420	420	as determined by the Commissioner of Insurance.
421	421	(f) In order to assure the faithful performance of a
422	422	provider's obligations to its service contract holders, each
423	423	provider shall be responsible for complying with the
424	424	requirements of one of the following subdivisions:
425	425	(1) Insure all service contracts under a reimbursement
426	426	insurance policy issued by an insurer authorized to transact
427	427	insurance in this state or issued pursuant to Chapter 10,
428	428	Title 27.
429	429	(2) Do both of the following:
430	430	a. Maintain a funded reserve account for its
431	431	obligations under its service contracts sold and outstanding
432	432	in this state. The reserves shall be based on the loss
433	433	experience of the provider as certified by an actuary or, at
434	434	the election of the provider, the reserves shall be 30 percent
435	435	of the aggregate provider fees for all service contracts sold
436	436	and then in force. The reserve account shall be subject to
437	437	examination and review by the commissioner.
438	438	b. Place in trust with the commissioner a financial
439	439	security deposit, having a value of not less than five percent
440	440	of the aggregate provider fees, less claims paid, for all
441	441	service contracts sold and then in force, but not less than
442	442	twenty-five thousand dollars ($25,000) consisting of one of
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472	472	twenty-five thousand dollars ($25,000) consisting of one of
473	473	the following:
474	474	(i)1. A surety bond issued by an authorized surety.
475	475	(ii)2. Securities of the type eligible for deposit by
476	476	authorized insurers in this state.
477	477	(iii)3. Cash.
478	478	(iv)4. A letter of credit issued by a qualified
479	479	financial institution.
480	480	(v)5. Another form of security prescribed by
481	481	regulations issued by the commissioner.
482	482	(3) Do both of the following:
483	483	a. Maintain a net worth or stockholders' equity of one
484	484	hundred million dollars ($100,000,000).
485	485	b. Upon request, provide the commissioner with a copy
486	486	of the financial statement of the provider included in its
487	487	most recent annual report on Form 10-K or Form 20-F filed with
488	488	the Securities and Exchange Commission (SEC) within the last
489	489	calendar year, or if the provider does not file with the SEC,
490	490	a copy of the audited financial statements of the provider,
491	491	which shows a net worth of the provider of at least one
492	492	hundred million dollars ($100,000,000). A consolidated Form
493	493	10-K, Form 20-F, or audited financial statements shall meet
494	494	the requirements of this chapter for the provider if it shows
495	495	a net worth or stockholders' equity of the provider of at
496	496	least one hundred million dollars ($100,000,000) and there
497	497	shall be no requirement of a parent company guarantee,
498	498	reimbursement insurance, or other form of financial stability
499	499	requirement. However, if the Form 10-K, Form 20-F , or audited
500	500	financial statements of the parent company of the provider are
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530	530	financial statements of the parent company of the provider are
531	531	filed to meet the provider's financial stability requirement
532	532	because the provider's net worth or stockholders' equity of
533	533	the provider is not at least one hundred million dollars
534	534	($100,000,000), or because the net worth or stockholders'
535	535	equity is not determinable from the consolidated Form 10-K,
536	536	Form 20-F, or audited financial statements of the parent
537	537	company, then the parent company shall agree to guarantee the
538	538	obligations of the provider relating to service contracts sold
539	539	by the provider in this state.
540	540	(g) Service contracts shall require the provider to
541	541	permit the service contract holder to return the service
542	542	contract within no less than 20 days of the date the service
543	543	contract was mailed to the service contract holder or within
544	544	no less than 10 days of delivery if the service contract is
545	545	delivered to the service contract holder at the time of sale.
546	546	Upon return of the service contract to the provider within the
547	547	applicable time period, if no claim has been made under the
548	548	service contract prior to its return to the provider, the
549	549	service contract is void and the provider shall refund to the
550	550	service contract holder the full purchase price of the service
551	551	contract including any premium paid for any applicable
552	552	reimbursement insurance policy. Any refund due a service
553	553	contract holder may be credited to any outstanding balance of
554	554	the account of the service contract holder, and the excess, if
555	555	any, shall be refunded to the service contract holder. The
556	556	right to void the service contract provided in this subsection
557	557	(g) is not transferable and shall apply only to the original
558	558	service contract purchaser, and only if no claim has been made
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588	588	service contract purchaser, and only if no claim has been made
589	589	prior to its return to the provider. A 10 percent penalty per
590	590	month shall be added to a refund that is not paid or credited
591	591	within 45 days after return of the service contract to the
592	592	provider.
593	593	(h) In the event the original service contract holder
594	594	makes a written demand for cancellation of a service contract
595	595	pursuant to the terms of the service contract, the provider
596	596	shall refund to the service contract holder the unearned
597	597	portion of the full purchase price of the service contract
598	598	including the unearned portion of any premium paid for any
599	599	applicable reimbursement insurance policy. Any refund due a
600	600	service contract holder may be credited to any outstanding
601	601	balance of the account of the service contract holder, and the
602	602	excess, if any, shall be refunded to the service contract
603	603	holder. If the original contract purchaser or a contract
604	604	holder elects cancellation, the provider may retain an
605	605	administrative fee of up to twenty-five dollars ($25) for
606	606	issuance of the service contract if such the fee is provided
607	607	for in the service contract; however, this amount may not be
608	608	deducted in the event the service contract is terminated
609	609	pursuant to the provisions of subsection (g).
610	610	(i)(1) Provider fees are not subject to premium taxes.
611	611	(2) Premiums for reimbursement insurance policies are
612	612	subject to applicable taxes.
613	613	(j) Except for the registration requirement in
614	614	subsection (c), providers, administrators, and other persons
615	615	marketing, selling, or offering to sell service contracts for
616	616	providers are exempt from any licensing requirements of this
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646	646	providers are exempt from any licensing requirements of this
647	647	state.
648	648	(k) Providers are not required to comply with any
649	649	provision of Title 27.
650	650	(l) A provider shall disclose in an advertisement for a
651	651	service contract, in boldface print larger than the body of
652	652	the advertisement, any right of the provider to refund a
653	653	contract holder in an amount less than the provider's cost for
654	654	repair or replacement of covered property. "
655	655	"§8-32-5
656	656	(a) Service contracts sold or offered for sale in this
657	657	state, in their entirety, shall be written, printed, or typed
658	658	in eight point type size , or larger, and shall comply with the
659	659	requirements set forth in this section, as applicable .
660	660	(b)(1) Service contracts insured under a reimbursement
661	661	insurance policy pursuant to subdivision (1) of subsection (f)
662	662	of Section 8-32-3 8-32-3(f)(1) shall contain a statement in
663	663	substantially the following form:
664	664	"Obligations of the provider under this service
665	665	contract are guaranteed under a service contract reimbursement
666	666	insurance policy."
667	667	(2) If the provider fails to pay or to provide service
668	668	on a claim within 60 days after proof of loss has been filed,
669	669	the service contract holder is entitled to may make a claim
670	670	directly against the reimbursement insurance company. The
671	671	service contract shall state the name and address of the
672	672	reimbursement insurance company.
673	673	(c) Service contracts not insured under a reimbursement
674	674	insurance policy pursuant to subdivision (1) of subsection (f)
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704	704	insurance policy pursuant to subdivision (1) of subsection (f)
705	705	of Section 8-32-3 8-32-3(f)(1) shall contain a statement in
706	706	substantially the following form:
707	707	"Obligations of the provider under this service
708	708	contract are backed by the full faith and credit of the
709	709	provider."
710	710	(d) Service contracts shall state the name and address
711	711	of the provider, and shall identify any administrator, the
712	712	service contract seller, and the service contract holder to
713	713	the extent that the name and address of the service contract
714	714	holder has been furnished by the service contract holder.
715	715	Neither the name of the service contract seller nor other
716	716	provisions are The information described in this subsection is
717	717	not required to be preprinted on the service contract and may
718	718	be added to the service contract at the time of sale.
719	719	(e) Service contracts shall state the purchase price of
720	720	the service contract, the term of the service contract , and
721	721	any applicable renewal provisions. Neither the purchase price
722	722	nor any other provisions are The information described in this
723	723	subsection is not required to be pre-printed preprinted on the
724	724	service contract and may be negotiated at the time of sale
725	725	with the service contract holder.
726	726	(f) If the provider will reimburse the contract holder
727	727	for repair work performed by third parties and if prior
728	728	approval of repair work is required ,: (i) the service contract
729	729	shall state the procedure for obtaining prior approval and for
730	730	making a claim, including a toll-free telephone number for
731	731	claim service; and (ii) if the service contract provides
732	732	services essential to public health, safety, or welfare, the
733	733	337
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762	762	services essential to public health, safety, or welfare, the
763	763	service contract shall either provide for 24-hour telephone
764	764	assistance, or state the procedure for obtaining emergency
765	765	repairs performed outside of normal business hours.
766	766	(g) Service contracts shall state the existence of any
767	767	deductible amount.
768	768	(h) Service contracts shall describe the property upon
769	769	which the services are to be provided, the services to be
770	770	provided, and, in boldface print larger than the body of the
771	771	contract, any limitations, exceptions, or exclusions to the
772	772	services to be provided , including both of the following:
773	773	(1) Any limit on the repair, replacement, or refund of
774	774	covered property.
775	775	(2) Any right of the provider to refund a contract
776	776	holder in an amount less than the provider's cost for repair
777	777	or replacement of the property .
778	778	(i) Service contracts shall state whether the use of
779	779	non-original manufacturer's parts is allowed.
780	780	(j) Service contracts shall state any restrictions
781	781	governing the transferability of the service contract.
782	782	(k) Service contracts shall state the terms,
783	783	restrictions, or conditions governing cancellation of the
784	784	service contract prior to the termination or expiration date
785	785	of the service contract by either the provider or by the
786	786	service contract holder. The provider of the service contract
787	787	shall mail a written notice to the service contract holder at
788	788	the last known address of the service contract holder
789	789	contained in the records of the provider at least five days
790	790	prior to cancellation by the provider. Prior notice is not
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819	819	Page 15
820	820	prior to cancellation by the provider. Prior notice is not
821	821	required if the reason for cancellation is nonpayment of the
822	822	provider fee or a material misrepresentation by the service
823	823	contract holder to the provider relating to the covered
824	824	property or its use. The notice shall state the effective date
825	825	of the cancellation and the reason for the cancellation.
826	826	(l) Service contracts shall set forth the obligations
827	827	and duties of the service contract holder relating to the
828	828	property covered by the service contract.
829	829	(m) Service contracts shall state whether or not the
830	830	service contract provides for or excludes consequential
831	831	damages or preexisting conditions, to the extent applicable.
832	832	(n) Service contracts may contain other provisions as
833	833	determined by the provider.
834	834	(o) Service contracts shall provide, in boldface print
835	835	larger than the body of the contract, the procedures that a
836	836	contract holder shall take to receive the repair, replacement,
837	837	or refund of operationally or structurally failing covered
838	838	property."
839	839	Section 2. This act shall become effective on October
840	840	1, 2025.
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