2023 California Code › Insurance Code - INS › DIVISION 2 - CLASSES OF INSURANCE › PART 8 - SERVICE CONTRACTS › Section 12865.

12865. A promise to refund some or all of the purchase price of a service contract if the purchaser does not file any claims, files a limited number of claims, or files claims the dollar amount of which does not exceed a set amount or percentage, shall constitute insurance, unless subdivisions (a) and (b) are satisfied. If conditions (a) and (b) are satisfied, the promise shall constitute a refund agreement.
(a) The promise is offered without separate consideration, and the promisor complies with subdivisions (a)(1), (a)(2) or (a)(3).
(1) The promisor is a service contract obligor, the promise is contained within a service contract, and the obligor has complied with all provisions of this part.
(2) The promisor is a seller, the refund agreement provides no benefits other than the refund of some or all of the purchase price, and the promisor utilizes a refund agreement administrator.
(3) The promisor is neither a seller nor a service contract obligor. Such a person shall be deemed a refund agreement obligor, and shall comply with subdivisions (c)(1), (c)(2) and (c)(3).
(b) A person other than the seller who performs or arranges, directly or indirectly, the collection, maintenance, or disbursement of moneys to compensate any party under a refund agreement, and who also provides sellers with refund agreement forms and participates in the adjustment of refund agreement claims, shall be deemed a refund agreement administrator, and shall comply with subdivision (b)(2).
(1) The sections enumerated in subdivision (b)(2) shall apply to refund agreements and refund agreement administrators. In applying those sections, the terms vehicle service contract administrator, administrator and obligor shall instead mean refund agreement administrator, the word sold shall instead mean provided and the terms vehicle service contract and service contract shall instead mean refund agreement. The sections enumerated in subdivision (b)(2) shall be construed in accordance with the nature of refund agreement forms, refund agreement administrators, and the refund agreement business.
(2) The following sections shall apply and be interpreted pursuant to subdivision (b)(1): 12815(b); 12820(a), (b)(1), (b)(2), (b)(3)(A), (b)(3)(B), 12830(a), (a)(1), (a)(2), (b), (c), (d), (e); 12835; 12840; 12845; 12850; 12855.
(c) (1) The sections enumerated in subdivision (c)(2) shall apply to refund agreements and refund agreement obligors. In applying those sections, the terms vehicle service contract obligor and obligor shall instead mean refund agreement obligor, the word sold shall instead mean provided and the terms vehicle service contract and service contract shall instead mean refund agreement. The sections enumerated in subdivision (c)(2) shall be construed in accordance with the nature of refund agreement forms, refund agreement obligors, and the refund agreement business.
(2) The following sections shall apply and be interpreted pursuant to subdivision (c)(1): 12810(b); 12815(a); 12820(a), (b)(1), (b)(2), (3)(A), (3)(B); 12830(a), (a)(1), (a)(2), (b), (c), (d), (e); 12835; 12840; 12845; 12850; 12855.
(3) A refund agreement obligor may not promise any benefit other than a refund of some or all of the purchase price of a service contract if the purchaser does not file any claims, files a limited number of claims, or files claims the dollar amount of which does not exceed a set amount or percentage.
(4) No person other than a seller shall provide or offer to provide a refund agreement to a purchaser.
(Added by Stats. 2003, Ch. 439, Sec. 5. Effective January 1, 2004. Operative July 1, 2004, by Sec. 7 of Ch. 439.)