Arkansas Administrative Code › Agency 054 - Arkansas Insurance Department › Rule 054.00.07-007 - Rule 91: Creating a Legal Framework within which Service Contracts are Defined, Sold and Regulated

Current through Register Vol. 49, No. 6, June, 2024
Section 1.
Authority
This rule is promulgated by the Arkansas Commissioner of
			 Insurance pursuant to Ark. Code Ann. §
								23-61-108, Ark.
			 Code Ann. §§
								25-15-201,
et seq
., and the Service Contracts Act, codified at Ark. Code
			 Ann. §§
								4-114-101,
et
			 seq
.
Section 2.
Purpose and Scope
The purposes of this rule are to create a legal framework within
			 which service contracts are defined, may be sold, and are regulated in this
			 state, to add significant consumer protections, and to eliminate unnecessary
			 administration.
A service contract, as defined in the Service Contracts Act and
			 this rule, is not insurance and is not subject to the Arkansas Insurance Code.
			 The Service Contracts Act and this rule do not apply to the agreements and
			 transactions set forth in Ark. Code Ann. §
								4-114-102(c).
Section 3.
Definitions
A. "Administrator" means the person who is
		  responsible for the administration of a service contract;
B. "Commissioner" means the Insurance
		  Commissioner of the State of Arkansas;
C. "Consumer" means an individual 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 resale purposes;
D. "Person" means an individual, a
		  partnership, a corporation, an incorporated or unincorporated association, a
		  joint stock company, a reciprocal, a syndicate, or any similar entity or
		  combination of entities acting in concert;
E. "Premium" means the consideration paid to
		  an insurer for a reimbursement insurance policy;
F. "Provider" means a person who is
		  contractually obligated to the service contract holder under the terms of the
		  service contract;
G. "Provider fee"
		  means the consideration paid for a service contract;
H. "Reimbursement insurance policy" means a
		  policy of insurance issued to a provider to either:
(i) Provide reimbursement to the provider
		  under the terms of the insured service contracts issued or sold by the
		  provider; or
(ii) In the event of
		  the provider's nonperformance, 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;
I. "Service contract" means a contract or an
		  agreement for a separately stated consideration and for a specific 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 property due to a defect in materials,
		  workmanship, or normal wear and tear, with or without additional provision for
		  incidental payment of indemnity under limited circumstances, including without
		  limitation, unavailability of parts, obsolescence, food spoilage, rental, or
		  shipping.
(i) "Service contract" does not
		  include mechanical breakdown insurance or maintenance agreements.
(ii) A service contract may provide for the
		  repair, replacement, or maintenance of property for damage resulting from power
		  surges or accidental damage from handling.
(iii) A service contract is not insurance in
		  this state or otherwise regulated under the Arkansas Insurance Code;
		  and
J. "Service contract
		  holder" means a person who is the purchaser or holder of a service
		  contract.