Arkansas 2023 Regular Session

Arkansas House Bill HB1770 Compare Versions

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

Old	New	Differences
1	1	Stricken language would be deleted from and underlined language would be added to present law.
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3	3
4	4	State of Arkansas 1
5	5	94th General Assembly A Bill 2
6	6	Regular Session, 2023 HOUSE BILL 1770 3
7	7	4
8	8	By: Representative G. Hodges 5
9	9	6
10	10	For An Act To Be Entitled 7
11	11	AN ACT TO REPEAL THE SERVIC E CONTRACTS ACT; TO 8
12	12	TRANSFER THE DUTIES OF REGULATION OF SER VICE 9
13	13	CONTRACTS TO THE INS URANCE COMMISSIONER; TO ESTABLISH 10
14	14	THE ARKANSAS SERVICE CONTRACTS ACT; TO RE QUIRE THE 11
15	15	INSURANCE COMMISSION ER TO REVIEW AND APP ROVE SERVICE 12
16	16	CONTRACTS OFFERED IN THIS STATE; TO REGULATE SERVICE 13
17	17	CONTRACTS; AND FOR O THER PURPOSES. 14
18	18	15
19	19	16
20	20	Subtitle 17
21	21	TO REPEAL THE SERVICE CONTRACTS ACT; TO 18
22	22	TRANSFER THE DUTIES OF REGULATION OF 19
23	23	SERVICE CONTRACTS TO THE INSURANCE 20
24	24	COMMISSIONER; TO ESTABLISH THE ARKANSAS 21
25	25	SERVICE CONTRACTS ACT; AND TO REGULATE 22
26	26	SERVICE CONTRACTS. 23
27	27	24
28	28	25
29	29	BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 26
30	30	27
31	31	SECTION 1. Arkansas Code Title 4, Chapter 114, is repealed. 28
32	32	CHAPTER 114 — SERVICE CONTRACTS ACT 29
33	33	30
34	34	4-114-101. Title. 31
35	35	This chapter shall be known and may be cited as the “Service Contracts 32
36	36	Act”. 33
37	37	34
38	38	4-114-102. Scope and purpose. 35
39	39	(a) The purpose of this chapter is to: 36 HB1770
40	40
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42	42
43	43
44	44	(1) Create a legal framework within which service contracts are 1
45	45	defined, may be sold, and are regulated in this state; 2
46	46	(2) Add significant consumer protections; and 3
47	47	(3) Eliminate unnecessary administration. 4
48	48	(b) A service contract under § 4 -114-103 is not insurance and is not 5
49	49	subject to the Arkansas Insurance Code. 6
50	50	(c) This chapter does not apply to: 7
51	51	(1) Warranties; 8
52	52	(2) Maintenance agreements; 9
53	53	(3) Commercial transactions; 10
54	54	(4) A person or entity or the affiliate of a person or entity 11
55	55	licensed or certificated by the Arkansas Public Service Commission or the 12
56	56	Federal Communications Commission with respect to war ranties, service 13
57	57	contracts, or maintenance agreements covering wiring, transmission devices, 14
58	58	equipment, or services offered or provided by the person, entity, or 15
59	59	affiliate to its customers; 16
60	60	(5) Service contracts sold or offered for sale to persons other 17
61	61	than consumers; 18
62	62	(6) Motor vehicle service contracts as defined in and regulated 19
63	63	pursuant to the Motor Vehicle Service Contract Act, § 4 -90-501 et seq.; or 20
64	64	(7) Mechanical breakdown insurance. 21
65	65	(d) Manufacturer's service contracts on the manufacturer's products 22
66	66	are subject only to §§ 4 -114-106(a), 4-114-106(d)-(g), 4-114-107, and 4-114-23
67	67	111. 24
68	68	(e) Other than mechanical breakdown insurance, the types of agreements 25
69	69	referred to in subsections (c) and (d) of this section and service contracts 26
70	70	governed under this chapter are not insurance and are not subject to 27
71	71	compliance with any provision of the insurance laws of this state. 28
72	72	29
73	73	4-114-103. Definitions. 30
74	74	As used in this chapter: 31
75	75	(1) “Administrator” means the person who is responsible for the 32
76	76	administration of a service contract; 33
77	77	(2) “Consumer” means an individual who buys other than for 34
78	78	purposes of resale any tangible personal property that is distributed in 35
79	79	commerce and that is normally used for personal, family, or household 36 HB1770
80	80
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82	82
83	83
84	84	purposes and not for business or resale purposes; 1
85	85	(3) “Maintenance agreement” means a contract of limited duration 2
86	86	that provides for scheduled maintenance only; 3
87	87	(4) “Manufacturer” means a person that: 4
88	88	(A) Manufactures or produces property and sells the 5
89	89	property under its own name or label; 6
90	90	(B) Is a wholly owned subsidiary of the person that 7
91	91	manufactures or produces that property; 8
92	92	(C) Is a corporation that owns one hundred percent (100%) 9
93	93	of the person that manufactures or produces the property; 10
94	94	(D) Does not manufacture or produce the property, but the 11
95	95	property is sold under its trade name label; 12
96	96	(E) Manufactures or produces the property, and the 13
97	97	property is sold under the trade name or label of another person; or 14
98	98	(F) Does not manufacture or p roduce the property but 15
99	99	licenses the use of its trade name or label under a written contract with 16
100	100	another person that sells the property under the licensor's trade name or 17
101	101	label; 18
102	102	(5) “Mechanical breakdown insurance” means a policy, a contract, 19
103	103	or an agreement issued by an authorized insurer that provides for the repair, 20
104	104	replacement, or maintenance of property or indemnification for repair, 21
105	105	replacement, or service for the operations or structural failure of the 22
106	106	property due to a defect in materials or wor kmanship or to normal wear and 23
107	107	tear; 24
108	108	(6) “Nonoriginal manufacturer's parts” means replacement parts 25
109	109	not made for or by the original manufacturer of the property, commonly 26
110	110	referred to as “after market parts”; 27
111	111	(7) “Person” means an individual, a partne rship, a corporation, 28
112	112	an incorporated or unincorporated association, a joint stock company, a 29
113	113	reciprocal, a syndicate, or any similar entity or combination of entities 30
114	114	acting in concert; 31
115	115	(8) “Premium” means the consideration paid to an insurer for a 32
116	116	reimbursement insurance policy; 33
117	117	(9) “Provider” means a person that is contractually obligated to 34
118	118	the service contract holder under the terms of the service contract; 35
119	119	(10) “Provider fee” means the consideration paid for a service 36 HB1770
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123	123
124	124	contract; 1
125	125	(11) “Reimbursement insurance policy” means a policy of insurance 2
126	126	issued to a provider to either: 3
127	127	(A) Provide reimbursement to the provider under the terms 4
128	128	of the insured service contracts issued or sold by the provider; or 5
129	129	(B) In the event of the provider's n onperformance, to pay 6
130	130	on behalf of the provider all covered contractual obligations incurred by the 7
131	131	provider under the terms of the insured service contracts issued or sold by 8
132	132	the provider; 9
133	133	(12)(A) “Service contract” means a contract or an 10
134	134	agreement for a separately stated consideration and for a specific duration 11
135	135	to perform the service, repair, replacement, or maintenance of property or 12
136	136	indemnification for service, repair, replacement, or maintenance for the 13
137	137	operational or structural failure of propert y due to a defect in materials, 14
138	138	workmanship, or normal wear and tear, with or without additional provision 15
139	139	for incidental payment of indemnity under limited circumstances, including 16
140	140	without limitation unavailability of parts, obsolescence, food spoilage, 17
141	141	rental, or shipping. 18
142	142	(B) “Service contract” does not include mechanical 19
143	143	breakdown insurance or maintenance agreements. 20
144	144	(C) A service contract may provide for the repair, 21
145	145	replacement, or maintenance of property for damage resulting from power 22
146	146	surges or accidental damage from handling. 23
147	147	(D) A service contract is not insurance in this state or 24
148	148	otherwise regulated under the Arkansas Insurance Code; 25
149	149	(13) “Service contract holder” means a person that is the 26
150	150	purchaser or holder of a service contract; and 27
151	151	(14) “Warranty” means a warranty made solely by the 28
152	152	manufacturer, importer, or seller of property or services without charge 29
153	153	that: 30
154	154	(A) Is not negotiated or separated from the sale of the 31
155	155	product; 32
156	156	(B) Is incidental to the sale of the product; and 33
157	157	(C) Guarantees indemnity for defective parts, mechanical 34
158	158	breakdown, or electrical breakdown and labor or other remedial measures, such 35
159	159	as repair or replacement of the property or repetition of services. 36 HB1770
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164	164	1
165	165	4-114-104. Requirements for doing business. 2
166	166	(a) A provider may appoint an administrator or other designee to be 3
167	167	responsible for all or part of the administration of service contracts and 4
168	168	compliance with this chapter. 5
169	169	(b) Service contracts shall not be issued, sold, or offered for sale 6
170	170	in this state unless the provider or its designee has: 7
171	171	(1) Provided a receipt or other written evidence of the purchase 8
172	172	of the service contract to the contract holder; 9
173	173	(2) Provided a copy of the service contract to the service 10
174	174	contract holder within a reasonable period of time from the date of purchase; 11
175	175	and 12
176	176	(3) Complied with this chapter. 13
177	177	(c)(1) Each provider of service contracts sold in this state shall 14
178	178	file a registration with the Insurance Commissioner consisting of its name, 15
179	179	full corporate address, telephone number and contact person, evidence of 16
180	180	compliance with subsection (d) of this section, a designation of a person in 17
181	181	this state for service of process, and any other information required to be 18
182	182	submitted by rule of the Insurance Commissioner . 19
183	183	(2) Each provider shall pay to the commissioner a fee in the 20
184	184	amount of two hundred dollars ($200) upon initial registration and every year 21
185	185	thereafter. 22
186	186	(3) The registration shall be updated by written notification to 23
187	187	the commissioner if material cha nges occur in the registration. 24
188	188	(d) In order to assure the faithful performance of a provider's 25
189	189	obligations to its contract holders, each provider that is contractually 26
190	190	obligated to provide service under a service contract shall: 27
191	191	(1) Insure all servic e contracts under a reimbursement insurance 28
192	192	policy issued by an insurer licensed, registered, or authorized to transact 29
193	193	insurance in this state or a surplus lines insurer that is authorized under § 30
194	194	23-65-310 and maintains statutory capital and surplus of a t least fifteen 31
195	195	million dollars ($15,000,000) at all times while the reimbursement insurance 32
196	196	policy is in force; 33
197	197	(2) Do both of the following: 34
198	198	(A)(i) Maintain a funded reserve account for its 35
199	199	obligations under its contracts issued and outstanding in this state. 36 HB1770
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204	204	(ii) The reserves shall not be less than forty 1
205	205	percent (40%) of gross consideration received less claims paid on the sale of 2
206	206	all unexpired service contracts. 3
207	207	(iii) The reserve account shall be subject to 4
208	208	examination and review by the c ommissioner; and 5
209	209	(B) Place in trust with the commissioner a financial 6
210	210	security deposit having a value of not less than five percent (5%) of the 7
211	211	gross consideration received less claims paid on the sale of all unexpired 8
212	212	service contracts, but not less t han twenty-five thousand dollars ($25,000), 9
213	213	consisting of a surety bond issued by an authorized surety; or 10
214	214	(3)(A) Maintain a net worth of one hundred million dollars 11
215	215	($100,000,000) on its own or together with its parent company if the parent 12
216	216	company executes a parental guarantee in a form acceptable to the 13
217	217	commissioner. 14
218	218	(B) Upon request, the provider shall provide the 15
219	219	commissioner with a copy of the provider's financial statements or, if the 16
220	220	provider's financial statements are consolidated with those of its parent 17
221	221	company, the provider's parent company's most recent Form 10 -K or Form 20-F 18
222	222	filed with the United States Securities and Exchange Commission within the 19
223	223	last calendar year, or if the company does not file with the United States 20
224	224	Securities and Exchange Commission, a copy of the company's audited financial 21
225	225	statements, which shows an independent net worth of the provider or its 22
226	226	parent company of at least one hundred million dollars ($100,000,000). 23
227	227	(C) If the provider's parent company's Form 10 -K, Form 20-24
228	228	F, or audited financial statements are filed to meet the provider's financial 25
229	229	stability requirement, then the parent company shall agree to guarantee the 26
230	230	obligations of the obligor relating to service contracts sold by the provider 27
231	231	in this state. 28
232	232	(e) Except for the requirements specified in subsection (d) of this 29
233	233	section, no other financial security requirements shall be required by the 30
234	234	commissioner for a provider. 31
235	235	(f)(1) Provider fees collected on service contracts shall not be 32
236	236	subject to premium taxes. 33
237	237	(2) Premiums for reimbursement insurance policies shall be 34
238	238	subject to applicable taxes. 35
239	239	(g) Except for the registration requirements in subsection (c) of this 36 HB1770
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243	243
244	244	section, persons marketing, selling, or offering to sell service contracts 1
245	245	for providers that comply with this chapter are exempt from this state's 2
246	246	licensing requirements. 3
247	247	(h) Providers complying with this chapter are not required to comply 4
248	248	with other provisions of the Arkansas Insurance Code. 5
249	249	6
250	250	4-114-105. Required disclosures — Reimbursement insurance policy. 7
251	251	(a) Reimbursement insurance policies insuring service contracts 8
252	252	issued, sold, or offered for sale in this state shall state that the insurer 9
253	253	that issued the reimbursement insurance policy shall: 10
254	254	(1) Reimburse or pay on behalf of the provider any covered sums 11
255	255	the provider is legally obligated to pay; or 12
256	256	(2) In the event of the provider's nonperformance, shall provide 13
257	257	the service that the provider is legally obligated to perform according to 14
258	258	the provider's contractual o bligations under the service contracts issued or 15
259	259	sold by the provider. 16
260	260	(b) In the event covered service is not provided by the provider 17
261	261	within sixty (60) days of proof of loss by the service contract holder, the 18
262	262	service contract holder is entitled to app ly directly to the reimbursement 19
263	263	insurance company. 20
264	264	21
265	265	4-114-106. Required disclosure — Service contracts. 22
266	266	(a) A service contract issued, sold, or offered for sale in this state 23
267	267	shall: 24
268	268	(1) Be written in clear, understandable language that is easy to 25
269	269	read; and 26
270	270	(2) Conspicuously disclose the applicable requirements of this 27
271	271	section. 28
272	272	(b)(1) A service contract insured under a reimbursement insurance 29
273	273	policy under § 4-114-104(d)(1) shall contain the name and address of the 30
274	274	insurer and a statement in subst antially the following form: “Obligations of 31
275	275	the provider under this service contract are guaranteed under a service 32
276	276	contract reimbursement insurance policy. If the provider fails to pay or 33
277	277	provide service on a claim within sixty (60) days after proof of l oss has 34
278	278	been filed, the service contract holder is entitled to make a claim directly 35
279	279	against the insurance company.” 36 HB1770
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283	283
284	284	(2) A claim against the provider may include a claim for return 1
285	285	of the unearned provider fee. 2
286	286	(c)(1) A service contract not insured un der a reimbursement insurance 3
287	287	policy under § 4-114-104(d)(1) shall conspicuously state the name and address 4
288	288	of the provider and contain a statement in substantially the following form: 5
289	289	“Obligations of the provider under this service contract are backed onl y by 6
290	290	the full faith and credit of the provider (issuer) and are not guaranteed 7
291	291	under a service contract reimbursement insurance policy.” 8
292	292	(2) A claim against the provider shall also include a claim for 9
293	293	return of the unearned provider fee. 10
294	294	(d) A service contract shall identify the administrator, the provider 11
295	295	obligated to perform the service under the contract, the service contract 12
296	296	seller, and the service contract holder to the extent that the name and 13
297	297	address of the service contract holder have been furn ished by the service 14
298	298	contract holder. 15
299	299	(e)(1) A service contract or a service contract holder's receipt shall 16
300	300	state the total purchase price and the terms under which the service contract 17
301	301	is sold. 18
302	302	(2) The purchase price is not required to be preprinted on the 19
303	303	service contract and may be negotiated at the time of sale with the service 20
304	304	contract holder. 21
305	305	(f) If prior approval of repair work is required, a service contract 22
306	306	shall state the procedure for obtaining prior approval and for making a 23
307	307	claim, including a toll-free telephone number for claim service and a 24
308	308	procedure for obtaining emergency repairs performed outside of normal 25
309	309	business hours. 26
310	310	(g) A service contract shall: 27
311	311	(1) Disclose the deductible amount; 28
312	312	(2) Specify the merchandise and services to be provided and any 29
313	313	limitations, exceptions, or exclusions; 30
314	314	(3)(A) State the conditions upon which the use of the 31
315	315	nonoriginal manufacturer's parts or substitute service may be allowed. 32
316	316	(B) Conditions stated shall comply with applicable s tate 33
317	317	and federal laws; 34
318	318	(4) State any terms, restrictions, or conditions governing the 35
319	319	transferability of the service contract; 36 HB1770
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323	323
324	324	(5)(A) State the terms, restrictions, or conditions governing 1
325	325	termination of the service contract by the service contract h older. 2
326	326	(B)(i) The provider of the service contract shall mail a 3
327	327	written notice to the contract holder within fifteen (15) days of the date of 4
328	328	termination in the event the provider terminates the service contract. 5
329	329	(ii) Prior notice is not required i f the reason for 6
330	330	cancellation is nonpayment of the provider fee, a material misrepresentation 7
331	331	by the service contract holder to the provider, or a substantial breach of 8
332	332	duties by the service contract holder relating to the covered product or its 9
333	333	use. 10
334	334	(C) The notice shall state the effective date of the 11
335	335	cancellation and the reason for the cancellation. 12
336	336	(D) A pro rata refund of the unearned portion of the 13
337	337	provider fee less the amount or value of any claims paid shall accompany the 14
338	338	notice unless cancel lation is for nonpayment; 15
339	339	(6)(A) Require every provider to permit the service contract 16
340	340	holder to return the contract within no less than twenty (20) days of the 17
341	341	date of mailing of the service contract or no less than ten (10) days if the 18
342	342	service contract is delivered at the time of sale or within a longer time 19
343	343	period permitted under the service contract. 20
344	344	(B) If no claim has been made under the service contract, 21
345	345	the service contract is void and the provider shall refund to the service 22
346	346	contract holder the full purchase price of the service contract. 23
347	347	(C) A ten percent (10%) penalty per month shall be added 24
348	348	to a refund that is not paid within forty -five (45) days of return of the 25
349	349	service contract to the provider. 26
350	350	(D) The applicable free -look time period on service 27
351	351	contracts shall only apply to the original service contract purchaser and 28
352	352	only if no claim has been made prior to its return to the provider; 29
353	353	(7) Set forth all of the obligations and duties of the service 30
354	354	contract holder, such a s the duty to protect against any further damage and 31
355	355	the requirement for certain service and maintenance; and 32
356	356	(8) Clearly state whether or not the service contract provides 33
357	357	for or excludes consequential damages or preexisting conditions. 34
358	358	35
359	359	4-114-107. Prohibited acts. 36 HB1770
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363	363
364	364	(a)(1) A provider shall not use a name: 1
365	365	(A) With the words “insurance”, “casualty”, “surety”, 2
366	366	“mutual”, or any other words descriptive of the insurance, casualty, or 3
367	367	surety business; or 4
368	368	(B) Deceptively similar to the name or descri ption of any 5
369	369	insurance or surety corporation or any other provider. 6
370	370	(2)(A) This subsection shall not apply to a company that was 7
371	371	using any of the prohibited language in its name prior to October 1, 2007. 8
372	372	(B) However, a company using the prohibited l anguage in 9
373	373	its name shall conspicuously disclose in its service contracts that the 10
374	374	service contract is not an insurance contract. 11
375	375	(b) A provider or its representative shall not in its service 12
376	376	contracts or literature make or permit or cause to be made any false or 13
377	377	misleading statement or deliberately omit any material statement that would 14
378	378	be considered misleading if omitted in connection with the sale, offer to 15
379	379	sell, or advertisement of a service contract. 16
380	380	(c) A person, including without limitation a bank, savings and loan 17
381	381	association, lending institution, manufacturer, or seller of any product 18
382	382	shall not require the purchase of a service contract as a condition of a loan 19
383	383	or a condition for the sale of any property. 20
384	384	21
385	385	4-114-108. Recordkeeping requiremen ts. 22
386	386	(a)(1) A provider shall keep accurate accounts, books, and records 23
387	387	concerning transactions regulated under this chapter. 24
388	388	(2) A provider's accounts, books, and records shall include: 25
389	389	(A) A copy of each type of service contract issued; 26
390	390	(B) The name and address of each service contract holder 27
391	391	to the extent that the name and address have been furnished by the service 28
392	392	contract holder; 29
393	393	(C) A list of the provider locations where service 30
394	394	contracts are marketed, sold, or offered for sale; and 31
395	395	(D) Claims files containing at a minimum the dates, 32
396	396	amounts, and description of all receipts, claims, and expenditures related to 33
397	397	the service contracts. 34
398	398	(3) Except as provided in subsection (b) of this section, a 35
399	399	provider shall retain all records pert aining to each service contract holder 36 HB1770
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403	403
404	404	for at least three (3) years after the specified period of coverage has 1
405	405	expired. 2
406	406	(4)(A) A provider may keep all records required under this 3
407	407	chapter on a computer disk or other similar technology. 4
408	408	(B) If a provider maintains records in other than hard 5
409	409	copy, records shall be accessible from a computer terminal available to the 6
410	410	Insurance Commissioner and be capable of duplication to legible hard copy. 7
411	411	(b) A provider discontinuing business in this state shall main tain its 8
412	412	records until it furnishes the commissioner satisfactory proof that it has 9
413	413	discharged all obligations to service contract holders in this state. 10
414	414	(c) A provider shall make all accounts, books, and records concerning 11
415	415	transactions regulated under t his chapter or other pertinent laws available 12
416	416	to the commissioner upon request. 13
417	417	(d) The books and records requirement of this section may be delegated 14
418	418	by the provider to its administrator or other designee, but such delegation 15
419	419	shall not relieve the provider of its obligations to have the books and 16
420	420	records maintained and produced upon the commissioner's request. 17
421	421	18
422	422	4-114-109. Cancellation of reimbursement insurance policy. 19
423	423	(a) An insurer that issued a reimbursement insurance policy shall not 20
424	424	terminate the policy until at least sixty (60) days' notice of termination 21
425	425	has been mailed or delivered to the Insurance Commissioner and in accordance 22
426	426	with any other applicable law. 23
427	427	(b) The termination of a reimbursement insurance policy shall not 24
428	428	reduce the insurer's responsibility for service contracts issued by providers 25
429	429	prior to the date of the termination. 26
430	430	27
431	431	4-114-110. Obligation of reimbursement insurance policy insurers. 28
432	432	(a)(1) A provider is considered to be the agent of the insurer that 29
433	433	issued a reimbursement insurance policy for the purpose of obligating an 30
434	434	insurer for the acts of its agents, including the collection of moneys not 31
435	435	forwarded. 32
436	436	(2) If a provider is acting as an administrator and enlists 33
437	437	other providers, the provider acting as the admi nistrator shall notify the 34
438	438	insurer of the existence and identities of the other providers. 35
439	439	(b) This chapter shall not prevent or limit the right of an insurer 36 HB1770
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442	442
443	443
444	444	that issued a reimbursement insurance policy to seek indemnification or 1
445	445	subrogation against a p rovider if the insurer pays or is obligated to pay a 2
446	446	service contract holder sums that the provider was obligated to pay pursuant 3
447	447	to the provisions of the service contract or under a contractual agreement. 4
448	448	5
449	449	4-114-111. Enforcement provisions. 6
450	450	(a) The Insurance Commissioner may conduct investigations or 7
451	451	examinations of providers, administrators, insurers, or other persons to 8
452	452	enforce the provisions of this chapter and protect service contract holders 9
453	453	in this state. 10
454	454	(b)(1) The commissioner may take any action that is necessary or 11
455	455	appropriate to enforce the provisions of this chapter and the commissioner's 12
456	456	rules and orders to protect service contract holders in this state. 13
457	457	(2) The commissioner may order a provider to cease and desist 14
458	458	from committing violations of this chapter or the commissioner's rules or 15
459	459	orders, may issue an order prohibiting a provider from selling or offering a 16
460	460	service contract for sale, or may issue an order imposing a civil penalty, or 17
461	461	any combination of these, if the provider has violated this chapter or the 18
462	462	commissioner's rules or orders. 19
463	463	(3)(A) A person aggrieved by an order issued under this 20
464	464	subsection may request a hearing before the commissioner by filing a request 21
465	465	with the commissioner within twenty (20) days of the commi ssioner's order. 22
466	466	(B) Pending the hearing and the decision by the 23
467	467	commissioner, the commissioner shall suspend the effective date of the order. 24
468	468	(C)(i) At the hearing, the burden shall be on the 25
469	469	commissioner to show why the order is justified. 26
470	470	(ii) The provisions of § 23 -61-301 et seq. shall 27
471	471	apply to a hearing requested under this subsection. 28
472	472	(4)(A) The commissioner may bring an action in the Pulaski 29
473	473	County Circuit Court for an injunction or other appropriate relief for 30
474	474	threatened or existing violations of this chapter or of the commissioner's 31
475	475	rules or orders. 32
476	476	(B) An action filed under subdivision (b)(3)(A) of this 33
477	477	section may also seek restitution on behalf of persons aggrieved by a 34
478	478	violation of this chapter or a rule or an order of the co mmissioner. 35
479	479	(5)(A) A person in violation of this chapter or a rule or an 36 HB1770
480	480
481	481	13 3/29/2023 12:48:34 PM ANS268
482	482
483	483
484	484	order of the commissioner may be assessed a civil penalty not to exceed five 1
485	485	hundred dollars ($500) per violation and no more than ten thousand dollars 2
486	486	($10,000) in the aggregate f or all violations of a similar nature. 3
487	487	(B) For purposes of this subdivision (b)(5), violations 4
488	488	shall be of a similar nature if the violation consists of the same or similar 5
489	489	course of conduct, action, or practice, irrespective of the number of times 6
490	490	the act, conduct, or practice that is determined to be a violation of this 7
491	491	chapter has occurred. 8
492	492	(c) The authority of the commissioner under this section is in 9
493	493	addition to other authorities of the commissioner. 10
494	494	11
495	495	4-114-112. Rules. 12
496	496	The Insurance Commission er may promulgate rules necessary to effectuate 13
497	497	this chapter. 14
498	498	15
499	499	SECTION 2. Arkansas Code Title 23, Chapter 66, is amended to add an 16
500	500	additional subchapter to read as follows: 17
501	501	Subchapter 8 — Arkansas Service Contracts Act 18
502	502	19
503	503	23-66-801. Title. 20
504	504	This subchapter shall be known and may be cited as the "Arkansas 21
505	505	Service Contracts Act". 22
506	506	23
507	507	23-66-802. Scope and purpose. 24
508	508	(a) The purpose of this subchapter is to: 25
509	509	(1) Create a legal framework within which service contracts are 26
510	510	defined, may be sold, and are regulated in this state; 27
511	511	(2) Add significant consumer protections; and 28
512	512	(3) Eliminate unnecessary administration. 29
513	513	(b) A service contract under § 23 -66-803 is not insurance but is 30
514	514	subject to regulation by the Insurance Commissioner. 31
515	515	(c) This subchapter does not apply to: 32
516	516	(1) Warranties; 33
517	517	(2) Maintenance agreements; 34
518	518	(3) Commercial transactions; 35
519	519	(4) A person or entity or the affiliate of a person or entity 36 HB1770
520	520
521	521	14 3/29/2023 12:48:34 PM ANS268
522	522
523	523
524	524	licensed or certificated by the Arkansas Public Service Commission or the 1
525	525	Federal Communications Commission with respect to warranties, service 2
526	526	contracts, or maintenance agreements covering wiring, transmission devices, 3
527	527	equipment, or services offered or provided by the person, entity, or 4
528	528	affiliate to its customers; 5
529	529	(5) Service contracts sold or offered for sale to persons other 6
530	530	than consumers; 7
531	531	(6) Motor vehicle service contracts as defined in and regulated 8
532	532	pursuant to the Motor Vehicle Service Contract Act, § 4 -90-501 et seq.; or 9
533	533	(7) Mechanical breakdown insurance. 10
534	534	(d) Manufacturer's service contracts on the manufacturer's products 11
535	535	are subject only to § 23 -66-806(a), § 23-66-806(d)-(g), § 23-66-807, and § 12
536	536	23-66-811. 13
537	537	14
538	538	23-66-803. Definitions. 15
539	539	As used in this subchapter: 16
540	540	(1) "Administrator" means a person who is responsible for the 17
541	541	administration of a service contract; 18
542	542	(2) "Consumer" means an individual who buys, other than for 19
543	543	purposes of resale, any tangible personal property that is: 20
544	544	(A) Distributed in commerce; and 21
545	545	(B) Normally used for personal, family, or household 22
546	546	purposes and not for business or resale purposes; 23
547	547	(3) "Maintenance agreement" means a contract of limited duration 24
548	548	that provides for scheduled maintenance only; 25
549	549	(4) "Manufacturer" means a person that: 26
550	550	(A) Manufactures or produces proper ty and sells the 27
551	551	property under the manufacturer's own name or label; 28
552	552	(B) Is a wholly owned subsidiary of the person that 29
553	553	manufactures or produces that property; 30
554	554	(C) Is a corporation that owns one hundred percent (100%) 31
555	555	of the person that manufactu res or produces the property; 32
556	556	(D) Does not manufacture or produce the property, but the 33
557	557	property is sold under the manufacturer's trade name label; 34
558	558	(E) Manufactures or produces the property, and the 35
559	559	property is sold under the trade name or label of another person; or 36 HB1770
560	560
561	561	15 3/29/2023 12:48:34 PM ANS268
562	562
563	563
564	564	(F) Does not manufacture or produce the property but 1
565	565	licenses the use of manufacturer's trade name or label under a written 2
566	566	contract with another person that sells the property under the licensor's 3
567	567	trade name or label; 4
568	568	(5) "Mechanical breakdown insurance" means a policy, a contract, 5
569	569	or an agreement issued by an authorized insurer that provides for the repair, 6
570	570	replacement, or maintenance of property or indemnification for repair, 7
571	571	replacement, or service for the operations or struct ural failure of the 8
572	572	property due to a defect in materials or workmanship or to normal wear and 9
573	573	tear; 10
574	574	(6) "Nonoriginal manufacturer's parts" means aftermarket or 11
575	575	replacement parts not made for or by the original manufacturer of the 12
576	576	property; 13
577	577	(7) "Person" means: 14
578	578	(A) An individual; 15
579	579	(B) A partnership; 16
580	580	(C) A corporation; 17
581	581	(D) An incorporated or unincorporated association; 18
582	582	(E) A joint stock company; 19
583	583	(F) A reciprocal; 20
584	584	(G) A syndicate; or 21
585	585	(H) Any similar entity or combination o f entities acting 22
586	586	in concert; 23
587	587	(8) "Premium" means the consideration paid to an insurer for a 24
588	588	reimbursement insurance policy; 25
589	589	(9) "Provider" means a person that is contractually obligated to 26
590	590	the service contract holder under the terms of the service c ontract; 27
591	591	(10) "Provider fee" means the consideration paid for a service 28
592	592	contract; 29
593	593	(11) "Reimbursement insurance policy" means a policy of 30
594	594	insurance issued to a provider to either: 31
595	595	(A) Provide reimbursement to the provider under the terms 32
596	596	of the insured service contracts issued or sold by the provider; or 33
597	597	(B) In the event of the provider's nonperformance, to pay 34
598	598	on behalf of the provider all covered contractual obligations incurred by the 35
599	599	provider under the terms of the insured service contract s issued or sold by 36 HB1770
600	600
601	601	16 3/29/2023 12:48:34 PM ANS268
602	602
603	603
604	604	the provider; 1
605	605	(12)(A) "Service contract" means a contract or an 2
606	606	agreement: 3
607	607	(i) For a separately stated consideration; 4
608	608	(ii) For a specific duration to perform the service, 5
609	609	repair, replacement, or maintenance of property or indemnification for 6
610	610	service, repair, replacement, or maintenance for the operational or 7
611	611	structural failure of property due to a defect in materials, workmanship, or 8
612	612	normal wear and tear; and 9
613	613	(iii) With or without additional provision for 10
614	614	incidental payment of indemnity under limited circumstances, including 11
615	615	without limitation unavailability of parts, obsolescence, food spoilage, 12
616	616	rental, or shipping. 13
617	617	(B) "Service contract" does not include mechanical 14
618	618	breakdown insurance or maintenance agreements. 15
619	619	(C) A service contract may provide for the repair, 16
620	620	replacement, or maintenance of property for damage resulting from power 17
621	621	surges or accidental damage from handling. 18
622	622	(D) A service contract is not insurance; 19
623	623	(13) "Service contract holder" means a p erson that is the 20
624	624	purchaser or holder of a service contract; and 21
625	625	(14) "Warranty" means a warranty made solely by the 22
626	626	manufacturer, importer, or seller of property or services without charge 23
627	627	that: 24
628	628	(A) Is not negotiated or separated from the sale of t he 25
629	629	product; 26
630	630	(B) Is incidental to the sale of the product; and 27
631	631	(C) Guarantees indemnity for defective parts, mechanical 28
632	632	breakdown, or electrical breakdown and labor or other remedial measures, 29
633	633	including the repair or replacement of the property or repetition of 30
634	634	services. 31
635	635	32
636	636	23-66-804. Requirements for doing business. 33
637	637	(a) A provider may appoint an administrator or other designee to be 34
638	638	responsible for the administration of service contracts and compliance with 35
639	639	this subchapter. 36 HB1770
640	640
641	641	17 3/29/2023 12:48:34 PM ANS268
642	642
643	643
644	644	(b) A service contra ct shall not be issued, sold, or offered for sale 1
645	645	in this state unless the provider or the provider's designee has: 2
646	646	(1) Provided a receipt or other written evidence of the purchase 3
647	647	of the service contract to the service contract holder; 4
648	648	(2) Provided a copy of the service contract to the service 5
649	649	contract holder within a reasonable period of time from the date of purchase; 6
650	650	(3) Established a business location in this state and submitted 7
651	651	to the Insurance Commissioner for review and approval the name an d contact 8
652	652	information for a representative of the provider or the provider's designee 9
653	653	who is located in this state; 10
654	654	(4) Obtained approval from the commissioner of the business 11
655	655	location and any service contract offered in this state; and 12
656	656	(5) Complied with this subchapter. 13
657	657	(c)(1) A provider of service contracts sold in this state shall file a 14
658	658	registration with the commissioner. 15
659	659	(2) The registration required under subdivision (c)(1) of this 16
660	660	section shall include: 17
661	661	(A) The name of the provider; 18
662	662	(B) The full corporate address of the provider; 19
663	663	(C) Telephone number and contact person of the provider at 20
664	664	the corporate office; 21
665	665	(D) The physical address and mailing address of the 22
666	666	business location in this state; 23
667	667	(E) The contact information of a representative of the 24
668	668	provider who resides and operates in this state, including without limitation 25
669	669	the telephone number and electronic mail; 26
670	670	(F) Evidence of compliance with subsection (d) of this 27
671	671	section; 28
672	672	(G) A designation of a person in thi s state for service of 29
673	673	process; and 30
674	674	(H) Any other information required to be submitted by rule 31
675	675	of the commissioner. 32
676	676	(2) A provider shall pay to the commissioner a fee in the amount 33
677	677	of two hundred dollars ($200) upon initial registration and annually 34
678	678	thereafter. 35
679	679	(3) The registration shall be updated by written notification to 36 HB1770
680	680
681	681	18 3/29/2023 12:48:34 PM ANS268
682	682
683	683
684	684	the commissioner if material changes occur in the registration. 1
685	685	(d) In order to assure the faithful performance of a provider's 2
686	686	obligations to the provider's service contrac t holders, the provider that is 3
687	687	contractually obligated to provide service under a service contract shall: 4
688	688	(1) Insure all service contracts under a reimbursement insurance 5
689	689	policy issued by an insurer licensed, registered, or authorized to transact 6
690	690	insurance in this state or a surplus lines insurer that is authorized under § 7
691	691	23-65-310 and maintains statutory capital and surplus of at least fifteen 8
692	692	million dollars ($15,000,000) at all times while the reimbursement insurance 9
693	693	policy is in force; 10
694	694	(2) Do both of the following: 11
695	695	(A)(i) Maintain a funded reserve account for the 12
696	696	provider's obligations under the provider's service contracts issued and 13
697	697	outstanding in this state. 14
698	698	(ii) The reserves shall not be less than forty 15
699	699	percent (40%) of gross conside ration received less claims paid on the sale of 16
700	700	all unexpired service contracts. 17
701	701	(iii) The reserve account is subject to examination 18
702	702	and review by the commissioner; and 19
703	703	(B) Place in trust with the commissioner a financial 20
704	704	security deposit having a value of not less than five percent (5%) of the 21
705	705	gross consideration received less claims paid on the sale of all unexpired 22
706	706	service contracts, but not less than twenty -five thousand dollars ($25,000), 23
707	707	consisting of a surety bond issued by an authorized sur ety; or 24
708	708	(3)(A) Maintain a net worth of one hundred million dollars 25
709	709	($100,000,000) on its own or together with the provider's parent company if 26
710	710	the parent company executes a parental guarantee in a form acceptable to the 27
711	711	commissioner. 28
712	712	(B) Upon request, the provider shall provide the 29
713	713	commissioner with a copy of the provider's financial statements or, if the 30
714	714	provider's financial statements are consolidated with those of its parent 31
715	715	company, the provider's parent company's most recent Form 10 -K or Form 20-F 32
716	716	filed with the United States Securities and Exchange Commission within the 33
717	717	last calendar year, or if the company does not file with the United States 34
718	718	Securities and Exchange Commission, a copy of the company's audited financial 35
719	719	statements, which shows a n independent net worth of the provider or its 36 HB1770
720	720
721	721	19 3/29/2023 12:48:34 PM ANS268
722	722
723	723
724	724	parent company of at least one hundred million dollars ($100,000,000). 1
725	725	(C) If the provider's parent company's Form 10 -K, Form 20-2
726	726	F, or audited financial statements are filed to meet the provider's financial 3
727	727	stability requirement, then the parent company shall agree to guarantee the 4
728	728	obligations of the obligor relating to service contracts sold by the provider 5
729	729	in this state. 6
730	730	(e) Except for the requirements under subsection (d) of this section, 7
731	731	no other financial security requirements shall be required by the 8
732	732	commissioner for a provider. 9
733	733	(f)(1) Provider fees collected on service contracts shall not be 10
734	734	subject to premium taxes. 11
735	735	(2) Premiums for reimbursement insurance policies shall be 12
736	736	subject to applicable taxes. 13
737	737	(g) Except for the registration requirements under subsection (c) of 14
738	738	this section, persons marketing, selling, or offering to sell service 15
739	739	contracts for providers that comply with this subchapter are exempt from this 16
740	740	state's licensing requirements. 17
741	741	(h) The commissioner may examine the books and records of a provider 18
742	742	as necessary to ensure compliance with this subchapter. 19
743	743	20
744	744	23-66-805. Required disclosures — Reimbursement insurance policy. 21
745	745	(a) A reimbursement insurance policy insuring service contracts 22
746	746	issued, sold, or offered for sale in this state shall state that the insurer 23
747	747	that issued the reimbursement insurance policy shall: 24
748	748	(1) Reimburse or pay on behalf of the provider any covered sums 25
749	749	the provider is legally obligated to pa y; or 26
750	750	(2) In the event of the provider's nonperformance, shall provide 27
751	751	the service that the provider is legally obligated to perform according to 28
752	752	the provider's contractual obligations under the service contracts issued or 29
753	753	sold by the provider. 30
754	754	(b) If covered service is not provided by the provider within sixty 31
755	755	(60) days of proof of loss by the service contract holder, the service 32
756	756	contract holder is entitled to apply directly to the reimbursement insurance 33
757	757	company. 34
758	758	35
759	759	23-66-806. Required disclosure — Service contracts. 36 HB1770
760	760
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762	762
763	763
764	764	(a) A service contract issued, sold, or offered for sale in this state 1
765	765	shall: 2
766	766	(1) Be written in clear, understandable language that is easy to 3
767	767	read; and 4
768	768	(2) Conspicuously disclose the applicable requirements of this 5
769	769	section. 6
770	770	(b)(1) A service contract insured under a reimbursement insurance 7
771	771	policy under § 23-66-804(d)(1) shall contain the name and address of the 8
772	772	insurer and a statement in substantially the following form: 9
773	773	"Obligations of the provider under this service contract ar e guaranteed under 10
774	774	a service contract reimbursement insurance policy. If the provider fails to 11
775	775	pay or provide service on a claim within sixty (60) days after proof of loss 12
776	776	has been filed, the service contract holder is entitled to make a claim 13
777	777	directly against the insurance company." 14
778	778	(2) A claim against the provider may include a claim for return 15
779	779	of the unearned provider fee. 16
780	780	(c)(1) A service contract not insured under a reimbursement insurance 17
781	781	policy under § 23-66-804(d)(1) shall conspicuously state t he name and address 18
782	782	of the provider and contain a statement in substantially the following form: 19
783	783	"Obligations of the provider under this service contract are backed only by 20
784	784	the full faith and credit of the provider (issuer) and are not guaranteed 21
785	785	under a service contract reimbursement insurance policy." 22
786	786	(2) A claim against the provider shall also include a claim for 23
787	787	return of the unearned provider fee. 24
788	788	(d) A service contract shall identify the administrator, the provider 25
789	789	obligated to perform the servic e under the contract, the service contract 26
790	790	seller, and the service contract holder to the extent that the name and 27
791	791	address of the service contract holder have been furnished by the service 28
792	792	contract holder. 29
793	793	(e)(1) A service contract or a service contract holder's receipt shall 30
794	794	state the total purchase price and the terms under which the service contract 31
795	795	is sold. 32
796	796	(2) The purchase price is not required to be preprinted on the 33
797	797	service contract and may be negotiated at the time of sale with the service 34
798	798	contract holder. 35
799	799	(f) If prior approval of repair work is required, a service contract 36 HB1770
800	800
801	801	21 3/29/2023 12:48:34 PM ANS268
802	802
803	803
804	804	shall state the procedure for obtaining prior approval and for making a 1
805	805	claim, including a toll -free telephone number for claim service and a 2
806	806	procedure for obtaining emerge ncy repairs performed outside of normal 3
807	807	business hours. 4
808	808	(g) A service contract shall: 5
809	809	(1) Disclose the deductible amount; 6
810	810	(2) Specify the merchandise and services to be provided and any 7
811	811	limitations, exceptions, or exclusions; 8
812	812	(3)(A) State the conditions upon which the use of the 9
813	813	nonoriginal manufacturer's parts or substitute service may be allowed. 10
814	814	(B) Conditions stated shall comply with applicable state 11
815	815	and federal laws; 12
816	816	(4) State any terms, restrictions, or conditions governing the 13
817	817	transferability of the service contract; 14
818	818	(5)(A) State the terms, restrictions, or conditions governing 15
819	819	termination of the service contract by the service contract holder. 16
820	820	(B)(i) The provider of the service contract shall mail a 17
821	821	written notice to the se rvice contract holder within fifteen (15) days of the 18
822	822	date of termination if the provider terminates the service contract. 19
823	823	(ii) Prior notice is not required if the reason for 20
824	824	cancellation is nonpayment of the provider fee, a material misrepresentation 21
825	825	by the service contract holder to the provider, or a substantial breach of 22
826	826	duties by the service contract holder relating to the covered product or its 23
827	827	use. 24
828	828	(C) The notice shall state the effective date of the 25
829	829	cancellation and the reason for the cancellation. 26
830	830	(D) A pro rata refund of the unearned portion of the 27
831	831	provider fee less the amount or value of any claims paid shall accompany the 28
832	832	notice unless cancellation is for nonpayment; 29
833	833	(6)(A) Contain a provision under which every provider is 30
834	834	required to permit the service contract holder to return the contract within 31
835	835	no less than twenty (20) days of the date of mailing of the service contract 32
836	836	or no less than ten (10) days if the service contract is delivered at the 33
837	837	time of sale or within a longe r time period permitted under the service 34
838	838	contract. 35
839	839	(B) If no claim has been made under the service contract, 36 HB1770
840	840
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842	842
843	843
844	844	the service contract is void, and the provider shall refund to the service 1
845	845	contract holder the full purchase price of the service contract. 2
846	846	(C) A penalty of ten percent (10%) per month shall be 3
847	847	added to a refund that is not paid within forty -five (45) days of return of 4
848	848	the service contract to the provider. 5
849	849	(D) The applicable free -look time period on service 6
850	850	contracts shall apply only to the original service contract purchaser and 7
851	851	only if no claim has been made before its return to the provider; 8
852	852	(7) State all of the obligations and duties of the service 9
853	853	contract holder, including the duty to protect against any further damage and 10
854	854	the requirement for certain service and maintenance; and 11
855	855	(8) Clearly state whether or not the service contract provides 12
856	856	for or excludes consequential damages or preexisting conditions. 13
857	857	14
858	858	23-66-807. Prohibited acts. 15
859	859	(a)(1) A provider shall not use a name: 16
860	860	(A) With the words "insurance", "casualty", "surety", 17
861	861	"mutual", or any other words descriptive of the insurance, casualty, or 18
862	862	surety business; or 19
863	863	(B) Deceptively similar to the name or description of any 20
864	864	insurance or surety corporation or any other provider. 21
865	865	(2)(A) This subsection does not apply to a company that was 22
866	866	using any of the prohibited language in its name before October 1, 2007. 23
867	867	(B) However, a company using the prohibited language in 24
868	868	its name shall conspicuously disclose in its servi ce contracts that the 25
869	869	service contract is not an insurance contract. 26
870	870	(b) A provider or its representative shall not in its service 27
871	871	contracts or literature make or permit or cause to be made any false or 28
872	872	misleading statement or deliberately omit any mater ial statement that would 29
873	873	be considered misleading if omitted in connection with the sale, offer to 30
874	874	sell, or advertisement of a service contract. 31
875	875	(c) A person, including without limitation a bank, savings and loan 32
876	876	association, lending institution, manufac turer, or seller of any product, 33
877	877	shall not require the purchase of a service contract as a condition of a loan 34
878	878	or a condition for the sale of any property. 35
879	879	36 HB1770
880	880
881	881	23 3/29/2023 12:48:34 PM ANS268
882	882
883	883
884	884	23-66-808. Recordkeeping requirements. 1
885	885	(a)(1) A provider shall keep accurate accounts, books, and records 2
886	886	concerning transactions regulated under this subchapter. 3
887	887	(2) A provider's accounts, books, and records shall include: 4
888	888	(A) A copy of each type of service contract issued; 5
889	889	(B) The name and address of each service contract holder, 6
890	890	to the extent that the name and address have been furnished by the service 7
891	891	contract holder; 8
892	892	(C) A list of the provider locations where service 9
893	893	contracts are marketed, sold, or offered for sale; and 10
894	894	(D) Claims files containing at a minimum the dates, 11
895	895	amounts, and description of all receipts, claims, and expenditures related to 12
896	896	the service contracts. 13
897	897	(3) Except as provided in subsection (b) of this section, a 14
898	898	provider shall retain all records pertaining to each service contract holder 15
899	899	for at least three (3) years after the specified period of coverage has 16
900	900	expired. 17
901	901	(4)(A) A provider may keep all records required under this 18
902	902	subchapter on a computer disk or other similar technology. 19
903	903	(B) If a provider maintains records in other than hard 20
904	904	copy, records shall be accessible from a computer terminal available to the 21
905	905	Insurance Commissioner and be capable of duplication to legible hard copy. 22
906	906	(b) A provider discontinuing business in this state shall maintain its 23
907	907	records until it furnishes the commissioner s atisfactory proof that it has 24
908	908	discharged all obligations to service contract holders in this state. 25
909	909	(c) A provider shall make all accounts, books, and records concerning 26
910	910	transactions regulated under this subchapter or other pertinent laws 27
911	911	available to the commissioner upon request. 28
912	912	(d) The books and records requirement under this section may be 29
913	913	delegated by the provider to its administrator or other designee, but the 30
914	914	delegation shall not relieve the provider of its obligations to have the 31
915	915	books and records maintained and produced upon the commissioner's request. 32
916	916	33
917	917	23-66-809. Cancellation of reimbursement insurance policy. 34
918	918	(a) An insurer that issued a reimbursement insurance policy shall not 35
919	919	terminate the policy until at least sixty (60) days' notice o f termination 36 HB1770
920	920
921	921	24 3/29/2023 12:48:34 PM ANS268
922	922
923	923
924	924	has been mailed or delivered to the Insurance Commissioner and according to 1
925	925	any applicable law. 2
926	926	(b) The termination of a reimbursement insurance policy shall not 3
927	927	reduce the insurer's responsibility for service contracts issued by providers 4
928	928	before the date of the termination. 5
929	929	6
930	930	23-66-810. Obligation of reimbursement insurance policy insurers. 7
931	931	(a)(1) A provider is considered to be the agent of the insurer that 8
932	932	issued a reimbursement insurance policy for the purpose of obligating an 9
933	933	insurer for the acts of its agents, including without limitation the 10
934	934	collection of moneys not forwarded. 11
935	935	(2) If a provider is acting as an administrator and enlists 12
936	936	other providers, the provider acting as the administrator shall notify the 13
937	937	insurer of the existe nce and identities of the other providers. 14
938	938	(b) This subchapter does not prevent or limit the right of an insurer 15
939	939	that issued a reimbursement insurance policy to seek indemnification or 16
940	940	subrogation against a provider if the insurer pays or is obligated to pay a 17
941	941	service contract holder sums that the provider was obligated to pay pursuant 18
942	942	to the service contract or under a contractual agreement. 19
943	943	20
944	944	23-66-811. Enforcement. 21
945	945	(a) The Insurance Commissioner shall enforce this subchapter. 22
946	946	(b) The commissioner may: 23
947	947	(1) Examine or audit the books and records of a provider 24
948	948	offering service contracts in this state; 25
949	949	(2) Conduct investigations of providers, administrators, 26
950	950	insurers, or other persons to: 27
951	951	(A) Enforce this subchapter; 28
952	952	(B) Protect service c ontract holders in this state; and 29
953	953	(C) Determine if the provider is in compliance with this 30
954	954	subchapter. 31
955	955	(c)(1) The commissioner may take any action that is necessary or 32
956	956	appropriate to enforce this subchapter and the commissioner's rules and 33
957	957	orders to protect service contract holders in this state. 34
958	958	(2) The commissioner may: 35
959	959	(A) Order a provider to cease and desist from committing 36 HB1770
960	960
961	961	25 3/29/2023 12:48:34 PM ANS268
962	962
963	963
964	964	violations of this subchapter or the commissioner's rules or orders; 1
965	965	(B) Issue an order prohibiting a provider from selling or 2
966	966	offering a service contract for sale; 3
967	967	(C) Issue an order imposing a civil penalty; or 4
968	968	(D) Issue an order to impose any combination of the 5
969	969	actions described under subdivision (c)(2)(A) -(C) of this section, if the 6
970	970	provider has violated this subchapter or the commissioner's rules or orders. 7
971	971	(d)(1) After notice and opportunity for hearing, the commissioner may 8
972	972	impose a penalty of up to five hundred dollars ($500) per violation against a 9
973	973	provider if the commissioner finds that the provider has violated this 10
974	974	subchapter. 11
975	975	(2)(A) The penalty under subdivision (d)(1) of this section 12
976	976	shall be no more than ten thousand dollars ($10,000) in the aggregate for all 13
977	977	violations of a similar nature. 14
978	978	(B) For purposes of this subdivision (d)(2), violations 15
979	979	shall be of a similar nature if the violation consists of the same or similar 16
980	980	course of conduct, action, or practice, irrespective of the number of times 17
981	981	the act, conduct, or practice that is determine d to be a violation of this 18
982	982	subchapter has occurred. 19
983	983	(e)(1) A person aggrieved by an order issued under this section may 20
984	984	request a hearing before the commissioner by filing a request with the 21
985	985	commissioner within twenty (20) days of the commissioner's ord er. 22
986	986	(2) Pending the hearing and the decision by the commissioner, 23
987	987	the commissioner shall suspend the effective date of the order. 24
988	988	(3)(A) At the hearing, the burden shall be on the commissioner 25
989	989	to show why the order is justified. 26
990	990	(B) Section 23-61-301 et seq. shall apply to a hearing 27
991	991	requested under this subsection. 28
992	992	(4)(A) The commissioner may bring an action in the Pulaski 29
993	993	County Circuit Court for an injunction or other appropriate relief for 30
994	994	threatened or existing violations of this subchapter or of the commissioner's 31
995	995	rules or orders. 32
996	996	(B) An action filed under subdivision (e)(3)(A) of this 33
997	997	section may also seek restitution on behalf of persons aggrieved by a 34
998	998	violation of this subchapter or a rule or an order of the commissioner. 35
999	999	(c) The authority of the commissioner under this section is in 36 HB1770
1000	1000
1001	1001	26 3/29/2023 12:48:34 PM ANS268
1002	1002
1003	1003
1004	1004	addition to other authorities of the commissioner. 1
1005	1005	2
1006	1006	23-66-812. Rules. 3
1007	1007	The Insurance Commissioner may promulgate rules necessary to implement 4
1008	1008	and administer this subchapter. 5
1009	1009	6
1010	1010	7
1011	1011	8
1012	1012	9
1013	1013	10
1014	1014	11
1015	1015	12
1016	1016	13
1017	1017	14
1018	1018	15
1019	1019	16
1020	1020	17
1021	1021	18
1022	1022	19
1023	1023	20
1024	1024	21
1025	1025	22
1026	1026	23
1027	1027	24
1028	1028	25
1029	1029	26
1030	1030	27
1031	1031	28
1032	1032	29
1033	1033	30
1034	1034	31
1035	1035	32
1036	1036	33
1037	1037	34
1038	1038	35
1039	1039	36