Source: https://code.dccouncil.us/dc/council/code/titles/31/chapters/23M/
Timestamp: 2019-04-20 22:38:06+00:00

Document:
D.C. Law Library - Chapter 23M. Service Contract Regulation.
↪ Chapter 23M. Service Contract Regulation.
§ 31–2351.03. Requirements for doing business.
§ 31–2351.04. Required disclosures – reimbursement insurance policy.
§ 31–2351.05. Required disclosure – service contracts.
§ 31–2351.07. Record keeping requirements.
§ 31–2351.08. Cancellation of reimbursement insurance policy.
§ 31–2351.09. Obligation of reimbursement insurance policy insurers.
§ 31–2351.11. Provider's conditional right to continue doing business.
(1) "Administrator" means the person who is responsible for the administration of the service contracts or the service contracts plan or responsible for submissions required by this chapter.
(2) "Commissioner" means the Commissioner of the Department of Insurance, Securities, and Banking, as established by subchapter I of Chapter 1 of this title.
(3) "Consumer" means a natural person who buys, other than for purposes of resale, any 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) "Maintenance agreement" means a contract of limited duration that provides for scheduled maintenance only and does not include repair or replacement.
(F) Does not manufacture or produce motor vehicles but, pursuant to a written contract, licenses the use of its trade name or label to another person who manufactures or produces motor vehicles that sells motor vehicles under the licensor's trade name or label.
(7) "Provider" means a person that is contractually obligated to the service contract holder under the terms of the service contract.
(8) "Provider fee" means the consideration paid for a service contract.
(9) "Reimbursement insurance policy" means a policy of insurance issued to a provider to either provide reimbursement to the provider under the terms of the insured service contracts issued or sold by the provider or, in the event of the provider's non-performance, to pay on behalf of the provider all covered contractual obligations incurred by the provider under the terms of the insured service contracts issued or sold by the provider.
(vii) Other services or products that may be approved by the Commissioner.
(B) The term "service contract" does not include insurance as regulated under subchapter I of Chapter 1 of this title, except as addressed in § 31-2351.10.
(11) "Service contract holder" or "contract holder" means a person who is the purchaser or holder of a service contract.
(12) "Warranty" means a warranty made solely by the manufacturer, importer, or seller of property or services 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 remedial measures, such as repair or replacement of the property or repetition of services.
(5) Service contracts on tangible property where the tangible property for which the service contract is sold has a purchase price of $100 or less, exclusive of sales tax.
(b) Motor vehicle manufacturer's service contracts on the motor vehicle manufacturer's products need only comply with §§ 31-2351.03(h)(1), 31-2351.04(a), 31-2351.05(d) through (l), 31-2351.06, and 31-2351.10, as applicable. Motor vehicle manufacturers are exempt from the registration requirement of § 31-2351.03(d).
(c) The types of agreements referred to in this section and service contracts governed pursuant to this chapter are not insurance.
(a) A provider may, but shall not be required to, appoint an administrator or other designee to be responsible for any or all of the administration of service contracts and compliance with this chapter.
(2) Provided a copy of the service contract to the service contract holder within a reasonable period of time from the date of purchase.
(c)(1) A provider shall provide a consumer with a complete sample copy of the service contract terms and conditions before the time of sale upon a request by the consumer.
(2) A provider shall be in compliance with this subsection by providing the consumer with a complete sample copy of the terms and conditions or by directing the consumer to a website containing a complete sample of the terms and conditions of the service contract.
(B) Designate a person in the District for service of process.
(2) A provider shall pay to the Commissioner a fee in the amount of $200 upon initial registration and every year thereafter.
(3) A provider shall update its registration by written notification to the Commissioner when material changes occur in the registration on file.
(B)(i) Upon request, provide the Commissioner with a copy of the provider's, or the provider's parent company's, most recent Form 10-K or Form 20-F filed with the Securities and Exchange Commission ("SEC") within the last calendar year, or, if the company does not file with the SEC, a copy of the company's audited financial statement that shows a net worth of the provider or its parent company of at least $100 million.
(ii) If the provider's parent company's Form 10-K, Form 20-F, or audited financial statement is filed to meet the provider's financial stability requirement, then the parent company shall agree to guarantee the obligations of the provider relating to service contracts sold by the provider in the District.
(f) Except for the requirements specified in subsections (d) and (e) of this section, no other financial security requirements shall be required by the Commissioner for service contract providers.
(g)(1)(A) Service contracts shall require the provider to permit the service contract holder to return the service contract within 30 days of the date the service contract was mailed to the service contract holder, or the date of delivery if the service contract is delivered to the service contract holder at the time of sale, or within a longer time period permitted under the service contract.
(B) Upon return of the service contract to the provider within the applicable time period, if no claim has been made under the service contract prior to its return to the provider, the service contract shall be 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 service contract.
(C) The right to void the service contract provided by this subsection shall not be transferable and shall apply only to the original service contract purchaser and only if no claim has been made prior to its return to the provider.
(D) A 10% penalty per month shall be added to a refund that is not paid or credited within 45 days after return of the service contract to the provider.
(2)(A) Subsequent to the time period specified in paragraph (1) of this subsection or if a claim has been made under the service contract within that time period, a service contract holder may cancel the service contract and the provider shall refund to the contract holder 100% of the unearned pro rata provider fee, less any claims paid and administrative fee charged, as authorized by subparagraph (B) of this paragraph.
(B) A reasonable administrative fee may be charged by the provider not to exceed 10% of the gross provider fee paid by the service contract holder.
(h)(1) Provider fees collected on service contracts shall not be subject to premium taxes.
(2) Premiums for reimbursement insurance policies shall be subject to applicable taxes.
(i) Except for the registration requirements in subsection (d)(1) of this section, providers and related service contract sellers, administrators, and other persons marketing, selling, or offering to sell service contracts shall be exempt from any licensing requirements of the District.
(a) Reimbursement insurance policies insuring service contracts issued, sold, or offered for sale shall state that the insurer that issued the reimbursement insurance policy shall reimburse or pay on behalf of the provider any covered sums the provider is obligated to pay or, in the event of the provider's non-performance, shall provide the service that the provider is legally obligated to perform according to the provider's contractual obligations under the service contracts issued or sold by the provider.
(b) If covered service is not provided by the service contract provider within 60 days of proof of loss by the service contract holder, the contract holder shall be entitled to apply directly to the reimbursement insurance company.
(a) Service contracts marketed, sold, offered for sale, issued, or made or proposed to be made, or administered in the District shall be written, printed, or typed in eight-point type size, or larger and shall disclose the requirements set forth in this section, as applicable.
"Obligations of the provider under this service contract are insured under a service contract reimbursement insurance policy.".
(2) The service contract shall also state the name and address of the insurer.
"Obligations of the provider under this service contract are backed by the full faith and credit of the provider.".
(d) Service contracts shall state the name and address of the provider and shall identify the administrator, if different from the provider, the service contract seller, and the service contract holder to the extent that the name of the service contract holder has been furnished by the service contract holder. The identities of these parties are not required to be preprinted on the service contract and may be added to the service contract at the time of sale.
(e) Service contracts shall state the total purchase price and the terms under which the service contract is sold. The purchase price is not required to be pre-printed on the service contract and may be negotiated at the time of sale with the service contract holder.
(f) Service contracts shall state the existence of any deductible amount.
(g) Service contracts shall specify the merchandise and services to be provided and any limitations, exceptions, or exclusions.
(h) Service contracts covering motor vehicles shall state whether the use of non-original manufacturers' parts is allowed.
(i) Service contracts shall state any restrictions governing the transferability of the service contract.
(j)(1) Service contracts shall state the terms, restrictions, and conditions governing cancellation of the service contract prior to the termination or expiration date of the service contract by either the provider or the service contract holder.
(2) The provider of the service contract shall mail a written notice to the contract holder at the last known address of the service contract holder contained in the records of the provider at least 5 days before cancellation by the provider; except, that prior notice shall not be required if the reason for cancellation is nonpayment of the provider fee, a material misrepresentation by the service contract holder to the provider, or a substantial breach of duties by the service contract holder relating to the covered product or its use.
(3)(A) The notice required by this subsection shall state the effective date of the cancellation and the reason for the cancellation.
(B) If a service contract is cancelled by the provider for a reason other than nonpayment of the provider fee, the provider shall refund to the contract holder 100% of the unearned pro rata provider fee, less any claims paid.
(C) A reasonable administrative fee may be charged by the provider not to exceed 10% of the gross provider fee paid by the service contract holder.
(k) Service contracts shall set forth all of the obligations and duties of the service contract holder, such as the duty to protect against any further damage and any requirement to follow an owner's manual.
(l) Service contracts shall state whether or not the service contract provides for or excludes consequential damages or pre-existing conditions. Service contracts may, but shall not be required to, cover damage resulting from rust, corrosion, or damage caused by a non-covered part or system.
(a)(1) 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, casualty, or surety organization, or to the name of any other provider. The word "guaranty" or similar word may be used by a provider.
"This agreement is not an insurance contract.".
(b) A provider or its representative shall not in its 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.
(c) A person, such as a bank, savings and loan association, lending institution, manufacturer, or seller of any product, shall not require the purchase of a service contract as a condition of a loan or a condition for the sale of any property.
(4) A requirement that a motor vehicle owner register for a new motor vehicle service contract with the provider in order to maintain coverage under the motor vehicle owner's current motor vehicle service contract or manufacturer's original equipment warranty.
(B) In the case of telephonic sales, on a recorded call, which shall be made available to the Department of Insurance, Securities, and Banking at its request, discloses the terms of the automatic renewal provision in a clear and conspicuous manner in temporal proximity to the request for consent to the automatic renewal provision and the consumer consents to the terms of the automatic renewal provision.
(2) For the purposes of this subsection, "automatic renewal provision" means a provision under which a service contract is renewed for a specified period of more than one month if the renewal causes the service contract to be in effect more than 6 months after the day of the initiation of the service contract and such renewal is effective unless the consumer gives notice to the provider or administrator of the consumer's intention to terminate the service contract.
(4) Written claims files that shall contain, at a minimum, the dates and description of claims related to the service contracts.
(b) Except as provided in subsection (d) of this section, the provider shall retain all records required to be maintained by this section for at least one year after the specified period of coverage has expired.
(c) The records required under this chapter may be, but shall not be required to be, maintained on a computer disk or other record-keeping technology; provided, that if the records are maintained in other than hard copy, the records shall be capable of duplication to legible hard copy at the request of the Commissioner.
(d) A provider discontinuing business in the District shall maintain its records until it furnishes the Commissioner satisfactory proof that it has discharged all obligations to contract holders in the District.
An insurer that issued a reimbursement insurance policy shall not terminate the policy until a notice of termination in accordance with § 31-404, has been mailed or delivered to the Commissioner. The termination of a reimbursement insurance policy shall not reduce the issuer's responsibility for service contracts issued by providers prior to the date of the termination.
(a) Insurers issuing reimbursement insurance to providers are deemed to have received the premiums for the insurance upon the payment of provider fees by consumers for service contracts issued by the insured providers.
(b) This chapter shall not prevent or limit the right of an insurer that issued a reimbursement insurance policy to seek indemnification or subrogation against a provider if the issuer pays or is obligated to pay the service contract holder sums that the provider was obligated to pay pursuant to the provisions of the service contract.
(a) The Commissioner may conduct examinations of providers, administrators, insurers, or other persons to enforce the provisions of this chapter and protect service contract holders in the District. Upon request of the Commissioner, the provider shall make all accounts, books, and records concerning a service contract sold by the provider available to the Commissioner that the Commissioner considers necessary to enable the Commissioner to reasonably determine compliance or noncompliance with this chapter.
(b)(1) The Commissioner may take action that is necessary or appropriate to enforce the provisions of this chapter and regulations and orders issued pursuant to this chapter, and to protect service contract holders in the District.
(C) Imposes a civil penalty on the provider.
(c)(1) A person aggrieved by a Commissioner's order issued pursuant to this subsection may request a hearing before the Commissioner; provided, that the request for a hearing shall be filed with the Commissioner within 20 days after the effective date of the Commissioner's order.
(2) If a hearing is timely requested, the order at issue shall be suspended until completion of the hearing and a final decision of the Commissioner.
(3)(A) At the hearing, the burden shall be on the Commissioner to show why the order issued pursuant to this subsection is justified.
(B) The hearing shall be conducted according to the rules established in Subtitle A of Chapter 38 of Title 26 of the District of Columbia Municipal Rules (26 DCMR A3800 et seq.).
(d) The Commissioner may bring an action in any court of competent jurisdiction for an injunction or other appropriate relief for a violation of this chapter or a regulation or order issued pursuant to this chapter. An action filed under this section may also seek restitution on behalf of a person aggrieved by a violation of this chapter or a regulation or order issued pursuant to this chapter.
(e)(1) A person who is found to have violated this chapter or a regulation or order issued pursuant to this chapter may be assessed a civil penalty in an amount determined by the Commissioner of not more than $500 per violation and no more than $10,000 in the aggregate for all violations of a similar nature.
(2) For purposes of this subsection, violations are of a similar nature if the violation consists of the same or similar course of conduct, action, or practice.
A person engaged in the service contract business, as a provider or otherwise, in the District on or before the applicability date of this chapter that submits an application for registration as a provider pursuant to this chapter within 30 days after the Commissioner makes the application available, may continue to engage in business as a provider in the District until final agency action is taken by the Commissioner regarding the registration application and all rights to administrative judicial review have been exhausted or expired.
The Mayor, pursuant to Chapter 5 of Title 2, may issue rules to implement the provisions of this chapter.
This chapter shall apply 180 days after February 22, 2019.

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