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2015 Regular Session
SENATE BILL NO. 152
BY SENATOR LONG
Prefiled pursuant to Article III, Section 2(A)(4)(b)(i) of the Constitution of Louisiana.
CONTRACTORS. Moves the regulation of home service contract providers from the
Department of Insurance to the State Licensing Board for Contractors. (8/1/15)
1 AN ACT
2 To enact Chapter 24-B of Title 37 of the Louisiana Revised Status of 1950, to be comprised
3 of R.S. 37: 2195.1 through 2195.6, and to repeal R.S. 22:821(B)(30) and Part X of
4 Chapter 5 of Title 22 of the Louisiana Revised Statutes of 1950, comprised of R.S.
5 22:1806.1 through 1806.9, relative to home service contract providers; to provide for
6 definitions; to provide for requirements of home service contract providers; to
7 provide for fees; to provide for home service contract disclosures; to provide for
8 certain prohibited acts; to provide certain terms, conditions, and procedures; and to
9 provide for related matters.
10 Be it enacted by the Legislature of Louisiana:
11 Section 1. Chapter 24-B of Title 37 of the Louisiana Revised Statutes of 1950,
12 comprised of R.S. 37:2195.1 through 2195.6, is hereby enacted to read as follows:
13 CHAPTER 24-B. HOME SERVICE CONTRACT P ROVIDERS
14 §2195.1. Scope and purpose
15 A. The purposes of this Part are the following:
16 (1) To create a registration and assurance mechanism for home service
17 contract providers in this state.
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1 (2) To encourage innovation in the marketing and development of more
2 economical and effective means of providing services under home service
3 contracts while placing the risk of innovation on the providers rather than on
4 consumers.
5 (3) To permit and encourage fair and effective competition among
6 different systems of providing and paying for these services.
7 B. The following shall be exempt from this Chapter:
8 (1) Warranties as defined in this Chapter.
9 (2) Maintenance only agreements as defined in this Chapter.
10 (3) Service contracts sold or offered for sale to persons other than
11 consumers.
12 (4) Contracts sold or offered for sale on a single new item of property at
13 the time of the sale of the property or within one year of the date of the sale
14 which guarantees the performance of the service, repair, replacement, or
15 maintenance of the property or guarantees to indemnify for the service, repair,
16 replacement, or maintenance of a single item of residential property.
17 §2195.2. Definitions
18 As used in this Chapter, unless the context otherwise requires, the
19 following words and phrases shall be defined as follows:
20 (1) "Administrator" means the person who is responsible for the
21 administration of the home service contract or the home service contract plan
22 or who is responsible for any submission required by this Chapter.
23 (2) "Board" means the State Licensing Board for Contractors.
24 (3) "Consumer" means a natural person who buys, other than for
25 purposes of resale, any tangible personal property that is distributed in
26 commerce and that is normally used for personal, family, or household purposes
27 and not for business or research purposes.
28 (4) "Home service contract" means a contract or agreement for a
29 separately stated consideration for any duration to perform the service, repair,
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1 replacement, or maintenance of property or indemnification for service, repair,
2 replacement, or maintenance, for the operational or structural failure of any
3 residential property due to a defect in materials, workmanship, inherent defect,
4 or normal wear and tear, with or without additional provisions for incidental
5 payment or indemnity under limited circumstances. A home service contract
6 may provide for the service, repair, replacement, or maintenance of property
7 for damage resulting from power surges or interruption and accidental damage
8 from handling and may provide for leak or repair coverage to house roofing
9 systems. A home service contract is not insurance in this state or otherwise
10 regulated under any provision of the Louisiana Insurance Code.
11 (5) "Maintenance only agreement" means a contract of limited duration
12 that provides only for scheduled maintenance and does not include repair or
13 replacement.
14 (6) "Person" means an individual, partnership, corporation,
15 incorporated or unincorporated association, joint stock company, reciprocal,
16 syndicate, or any similar entity or combination of entities acting in concert.
17 (7) "Provider" means a person who is contractually obligated to provide
18 the services or indemnification under a home service contract.
19 (8) "Provider fee" means the consideration paid for a home service
20 contract.
21 (9) "Service contract holder" or "contract holder" means a person who
22 is the purchaser or holder of a home service contract.
23 (10) "Warranty" means a warranty made solely by the manufacturer,
24 importer, or seller of property or services, including builders on new home
25 construction, without consideration, that is not negotiated or separated from the
26 sale of the product and is incidental to the sale of the product, that guarantees
27 indemnity for defective parts, mechanical or electrical breakdown, labor, or
28 other remedial measures, such as repair or replacement of the property, or
29 repetition of services.
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1 §2195.3. Requirements for doing business
2 A. Home service contracts shall not be issued, sold, or offered for sale in
3 this state unless the provider has done each of the following:
4 (1) Registered with the board and remains in good standing with the
5 board.
6 (2) Provided a receipt for or other written evidence of the purchase of the
7 home service contract to the contract holder.
8 (3) Provided a copy of the home service contract to the service contract
9 holder within a reasonable period of time from the date of purchase.
10 B. Each provider of a home service contract sold in this state shall file a
11 registration with the board consisting of his name, address, telephone number,
12 and contact person, designating a person in this state for service of process, and
13 providing a listing of all officers, all directors, and all owners of ten percent or
14 more of the business. Additionally, the provider shall file a copy of its basic
15 organizational documents, including articles of incorporation, articles of
16 organization, articles of association, or a partnership agreement. Each
17 application for registration shall be accompanied by a fee not to exceed six
18 hundred dollars. All fees shall be paid into the account of the State Licensing
19 Board for Contractors.
20 C.(1) A registration shall be effective for two years, unless the
21 registration is denied, renewed, suspended, or revoked. Ninety days prior to the
22 expiration of a registration, a provider shall submit a renewal application on a
23 form prescribed by the board and a renewal fee not to exceed two hundred fifty
24 dollars. All fees shall be paid into the account of the State Licensing Board for
25 Contractors.
26 (2) Any provider who applies for and is denied a registration by the
27 board, or whose registration has been revoked, rescinded, or suspended, may
28 within six months after the action of the board denying, revoking, rescinding,
29 or suspending the registration, apply to the Nineteenth Judicial District Court
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1 in and for the parish of East Baton Rouge, state of Louisiana, and there have
2 determined whether or not the board has abused its discretion and judgment
3 in failing to abide by the intent of this Chapter, and have rendered such
4 judgment as will do justice between the parties.
5 D. Each registrant shall notify the board of any material change in the
6 registration information within sixty days of the effective date of such change.
7 The notice shall be accompanied by supporting documentation.
8 E. In order to assure the faithful performance of a provider's obligations
9 to its contract holders and to insure its outstanding obligations, each provider
10 shall obtain and file with the board a surety bond issued by a company licensed
11 to do business in Louisiana in the amount of fifty thousand dollars.
12 F. Except for the registration requirements of this Section, providers,
13 administrators, and persons marketing, selling, or offering to sell home service
14 contracts are exempt from any licensing requirements of this state and shall not
15 be subject to other registration information or security requirements.
16 G. The marketing, sale, offering for sale, issuance, making, proposing to
17 make, and administration of home service contracts by providers and related
18 service contract sellers, administrators, and other persons is not insurance and
19 shall be exempt from all provisions of the Louisiana Insurance Code.
20 §2195.4. Required disclosures; service contracts
21 A. Each home service contract marketed, sold, offered for sale, issued,
22 made, proposed to be made, or administered in this state shall be written,
23 printed, or typed in clear, understandable language that is easy to read and
24 shall disclose the requirements set forth in this Section, as applicable.
25 B. Every home service contract shall contain all the following
26 information:
27 (1) The name and address of the provider and shall identify any
28 administrator if different from the provider.
29 (2) The name of the service contract seller and name of the service
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1 contract holder to the extent that the name of the service contract holder has
2 been furnished to the service contract provider. The identities of parties are not
3 required to be preprinted on the service contract and may be added to the
4 service contract at the time of sale.
5 (3) The total purchase price and the terms under which the service
6 contract is sold. The purchase price is not required to be preprinted on the
7 service contract and may be negotiated at the time of sale with the service
8 contract holder.
9 (4) The existence of any deductible amount, if applicable.
10 (5) The goods and services to be provided and any limitations,
11 exceptions, or exclusions.
12 (6) Any restrictions governing the transferability of the service contract,
13 if applicable.
14 (7) The terms, restrictions, or conditions governing cancellation of the
15 service contract prior to the termination or expiration date of the service
16 contract by either the provider or the service contract holder. The provider of
17 the service contract shall mail a written notice to the contract holder at the last
18 known address of the service contract holder contained in the records of the
19 provider at least fifteen days prior to cancellation by the provider. Prior notice
20 is not required if the reason for cancellation is nonpayment of the provider fee,
21 a material misrepresentation by the service contract holder to the provider, or
22 a substantial breach of duties by the service contract holder relating to the
23 covered product or its use. The notice shall state the effective date of the
24 cancellation and the reason for the cancellation.
25 (8) The obligations and duties of the service contract holder, including
26 but not limited to the duty to protect against any further damage and any
27 requirement to follow an owner's manual.
28 (9) Whether or not the service contract provides for or excludes
29 consequential damages or preexisting conditions, if applicable. Service contracts
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1 may, but are not required to, cover damage resulting from rust, corrosion, or
2 damage caused by a noncovered part or system.
3 (10) If prior approval of repair work is required, the procedure for
4 obtaining prior approval and for making a claim, including a toll-free telephone
5 number for claim service and a procedure for obtaining emergency repairs
6 performed outside of normal business hours.
7 §2195.5. Consumer's right to cancel
8 A home service contract shall require every provider to permit the
9 service contract holder to return the home service contract within twenty days
10 of the date the home service contract was mailed to the service contract holder
11 or within ten days of delivery if the home service contract is delivered to the
12 service contract holder at the time of sale or within a longer time period
13 permitted under the home service contract. Upon return of the home service
14 contract to the provider within the applicable time period, if no claim has been
15 made under the home service contract prior to its return to the provider, the
16 home service contract is void and the provider shall refund to the service
17 contract holder, or credit the account of the service contract holder, with the
18 full purchase price of the home service contract. The right to void the home
19 service contract provided is not transferable and shall apply only to the original
20 service contract holder and only if no claim has been made prior to its return
21 to the provider. A ten percent penalty per month shall be added to a refund that
22 is not paid or credited within forty-five days after return of the home service
23 contract to the provider.
24 §2195.6. Prohibited acts
25 A. A provider shall not use in its name the words "insurance",
26 "casualty", "surety", "mutual", or any other words descriptive of the
27 insurance, casualty, or surety business or a name deceptively similar to the
28 name or description of any insurance or surety corporation, or to the name of
29 any other provider. The word "guaranty" or similar word may be used by a
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1 provider. A provider shall include in its home service contracts a statement in
2 substantially the following form: "This agreement is not an insurance
3 contract."
4 B. A provider or its representative shall not in its home service contracts
5 or literature make, permit, or cause to be made any false or misleading
6 statement, or deliberately omit any material statement that would be considered
7 misleading if omitted.
8 Section 2. R.S. 22:821(B)(30) and Part X of Chapter 5 of Title 22 of the Louisiana
9 Revised Statutes of 1950, comprised of R.S. 22:1806.1 through 1806.9, is hereby repealed.
The original instrument and the following digest, which constitutes no part
of the legislative instrument, were prepared by Michelle Ducharme.
DIGEST
SB 152 Original 2015 Regular Session Long
Present law provides that the Dept. of Insurance regulates home service contract providers
("providers").
Proposed law moves the regulation of providers from the Dept. of Insurance to the State
Licensing Board for Contractors ("board").
Proposed law provides that warranties, maintenance only agreements, service contracts sold
or offered for sale to persons other than consumers, and contracts sold or offered for sale on
a single new item of property at the time of the sale of the property or within one year of the
date of the sale which guarantees the performance of the service, repair, replacement, or
maintenance of the property or guarantees to indemnify for the service, repair, replacement,
or maintenance of a single item of residential property are not subject to the regulations in
proposed law.
Proposed law defines the following terms:
(1)"Administrator" means the person who is responsible for the administration of the
home service contract or the home service contract plan or who is responsible for any
submission required by this proposed law.
(2) "Board" means the State Licensing Board for Contractors.
(3) "Consumer" means a natural person who buys other than for purposes of resale any
tangible personal property that is distributed in commerce and that is normally used
for personal, family, or household purposes and not for business or research
purposes.
(4) "Home service contract" means a contract or agreement for a separately stated
consideration for any duration to perform the service, repair, replacement, or
maintenance of property or indemnification for service, repair, replacement, or
maintenance, for the operational or structural failure of any residential property due
to a defect in materials, workmanship, inherent defect, or normal wear and tear, with
or without additional provisions for incidental payment or indemnity under limited
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circumstances. A home service contract may provide for the service, repair,
replacement, or maintenance of property for damage resulting from power surges or
interruption and accidental damage from handling and may provide for leak or repair
coverage to house roofing systems. A home service contract is not insurance in this
state or otherwise regulated under any provision of the La. Insurance Code.
(5) "Maintenance only agreement" means a contract of limited duration that provides
only for scheduled maintenance and does not include repair or replacement.
(6) "Person" means an individual, partnership, corporation, incorporated or
unincorporated association, joint stock company, reciprocal, syndicate, or any similar
entity or combination of entities acting in concert.
(7) "Provider" means a person who is contractually obligated to provide the services or
indemnification under a home service contract.
(8) "Provider fee" means the consideration paid for a home service contract.
(9) "Service contract holder" or "contract holder" means a person who is the purchaser
or holder of a home service contract.
(10) "Warranty" means a warranty made solely by the manufacturer, importer, or seller
of property or services, including builders on new home construction, without
consideration, that is not negotiated or separated from the sale of the product and is
incidental to the sale of the product, that guarantees indemnity for defective parts,
mechanical or electrical breakdown, labor, or other remedial measures, such as repair
or replacement of the property, or repetition of services.
Proposed law provides that home service contracts shall not be issued, sold, or offered for
sale in this state unless the provider has done each of the following:
(1)Registered with the board and remains in good standing with the board.
(2) Provided a receipt for or other written evidence of the purchase of the home service
contract to the contract holder.
(3) Provided a copy of the home service contract to the service contract holder within
a reasonable period of time from the date of purchase.
Proposed law provides that each provider of a home service contract sold in this state shall
file a registration with the board consisting of his name, address, telephone number, and
contact person, designating a person in this state for service of process, and providing a
listing of all officers, all directors, and all owners of 10 percent or more of the business.
Proposed law requires the provider shall file a copy of its basic organizational documents,
including articles of incorporation, articles of organization, articles of association, or a
partnership agreement.
Proposed law provides that each application for registration shall be accompanied by a fee
not to exceed $600.
Proposed law provides that a registration is effective for two years, unless it is denied,
renewed, suspended, or revoked.
Proposed law provides that 90 days prior to the expiration of a registration, a provider shall
submit a renewal application on a form prescribed by the board and a renewal fee not to
exceed $250.
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Proposed law provides that all fees must be paid into the account of the board.
Proposed law provides that any provider who applies for and is denied a registration by the
board, or whose registration has been revoked, rescinded, or suspended, may within 6
months after the action of the board denying, revoking, rescinding, or suspending the
registration, apply to the 19th Judicial District Court in and for the parish of East Baton
Rouge and there have determined whether or not the board has abused its discretion and
judgment in failing to abide by the intent of proposed law, and have rendered such judgment
as will do justice between the parties.
Proposed law provides that each registrant shall notify the board of any material change in
the registration information within 60 days of the effective date of such change. The notice
shall be accompanied by supporting documentation.
Proposed law provides that each provider shall file with the board a surety bond in the
amount of $50,000.
Proposed law provides that the marketing, sale, offering for sale, issuance, making,
proposing to make, and administration of home service contracts by providers and related
service contract sellers, administrators, and other persons is not insurance and shall be
exempt from all provisions of the La. Insurance Code.
Proposed law provides that each home service contract 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 certain
information.
Proposed law provides that a home service contract shall require every provider to permit
the service contract holder to return the home service contract within 20 days of the date the
home service contract was mailed to the service contract holder or within 10 days of delivery
if the home service contract is delivered to the service contract holder at the time of sale or
within a longer time period permitted under the home service contract. Upon return of the
home service contract to the provider within the applicable time period, if no claim has been
made under the home service contract prior to its return to the provider, the home service
contract is void and the provider shall refund to the service contract holder, or credit the
account of the service contract holder, with the full purchase price of the home service
contract.
Proposed law provides that the right to void the home service contract is not transferable and
shall apply only to the original service contract holder and only if no claim has been made
prior to its return to the provider. In addition, a 10 percent penalty per month shall be added
to a refund that is not paid or credited within 45 days after return of the home service
contract to the provider.
Proposed law provides that a provider shall not use in its name the words "insurance",
"casualty", "surety", "mutual", or any other words descriptive of the insurance, casualty, or
surety business or a name deceptively similar to the name or description of any insurance
or surety corporation, or to the name of any other provider.
Proposed law allows the use of the word "guaranty" or similar word by a provider and
provides that the provider shall include in the contract a statement in substantially the
following form: "This agreement is not an insurance contract."
Proposed law provides that a provider or its representative shall not in its home service
contracts or literature make, permit, or cause to be made any false or misleading statement,
or deliberately omit any material statement that would be considered misleading if omitted.
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Effective August 1, 2015.
(Adds R.S. 37:2195.1-2195.6; repeals R.S. 22:1806.1-1806.9)
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