806 KAR 5:060.
Registration of service contracts for consumer products.
RELATES TO: KRS
304.5-070
STATUTORY AUTHORITY:
KRS 304.5-070
NECESSITY, FUNCTION,
AND CONFORMITY: KRS 304.5-070 requires that makers of service contracts who
repair, or maintain consumer products register with and maintain registration
with the office to be exempt from the definition of
casualty insurance. This administrative regulation sets forth the filing
requirements for that registration.
Section 1.
Definitions. "Maker of service contract" or "maker" is the
entity contractually obligated under the terms of the service contract.
Section 2. A maker
of a service contract shall register with the office by
providing the name and address of its principal office and the other required
information or documentation pursuant to Section 3 of this administrative
regulation.
Section 3. Service
contracts to repair, replace, or maintain consumer products shall not be
considered casualty insurance if the maker of the service contract meets one
(1) of the following requirements:
(1)(a) Maintains a
net worth of at least 100 million dollars and registers with the executive
director by providing the following:
1. Its current
annual report;
2. A copy of its 10K
or 20F form as filed with Securities Exchange Commission; or
3. A financial
statement audited by an independent certified public accountant in conformity
with generally accepted accounting practices;
(b) Immediately
notifies the office in writing of any change that would
decrease the net worth of the maker below 100 million dollars;
(2)(a) Maintains an
insurance policy or performance bond that:
1. Assures
performance of the duties of the maker for all service contracts issued in Kentucky;
2. Shall not be
terminated unless at least thirty (30) days prior written notice is given to
the executive director; and
3. Shall state that
the holder of the service contract shall be entitled to make a direct claim
against the insurer upon the failure of the maker to pay any claim within sixty
(60) days after the claim has been filed with the maker; and
(b) Provide a copy
of the insurance policy or performance bond; or
(3)(a) Maintain an
insurance policy or performance bond that:
1. Is written for an
amount of $50,000 or twenty-five (25) percent of the maker's annual revenues
from the service contracts issued in Kentucky, whichever is greater;
2. Shall not be
terminated unless at least thirty (30) days prior written notice is given to
the executive director; and
3. Shall state that
the holder of the service contract shall be entitled to make a direct claim
against the insurer upon the failure of the maker to pay any claim within sixty
(60) days after the claim has been filed with the maker; and
(b) Register with
the executive director by providing the
following:
1. A copy of the
insurance policy or performance bond;
2. The amount of
annual revenues from the sales of service contracts in Kentucky for the
previous year ending December 31; and
3. A projection of
the revenue from service contracts to be sold in Kentucky for the current year;
(c) The document
giving the required information shall be signed and certified under oath by an
officer of the company.
Section 4. (1) If
the initial registration has not been affirmatively accepted or rejected by the
executive director within thirty (30) days of filing, then the registration
requirements shall be deemed met.
(2)(a) After the
initial registration, each maker of a service contract shall annually, on or
before March 1, file a report that sets forth or is accompanied by the
information required in Section 3 of this administrative regulation;
(b) If a maker
ceases issuing service contracts, annual reports shall continue to be filed
through the duration of all outstanding service contracts;
(3) If at any time,
the maker fails to demonstrate compliance with Section 3 of this administrative
regulation, the executive director may revoke the maker's
registration. Upon revocation of registration, the maker shall immediately
cease issuing service contracts.
Section 5. (1) Each
service contract shall conspicuously state the name and address of the maker of
the service contract; and
(2) If the maker of
the service contract has an insurance policy or performance bond to assure
contractual duties, the following must be stated in the service contract:
(a) Name and address
of authorized underwriting insurer issuing insurance policy or performance
bond; and
(b) A statement that
the holder of the service contract shall be entitled to make a direct claim against
the insurer upon the failure of the maker to pay any claim within sixty (60)
days after the claim has been filed with the maker. (23 Ky.R. 2368; eff.
2-10-97; TAm eff. 8-9-2007.)