806 KAR 5:060. Registration of service contracts for consumer products

Link to law: http://www.lrc.ky.gov/kar/806/005/060.htm
Published: 2015

Subscribe to a Global-Regulation Premium Membership Today!

Key Benefits:

Subscribe Now
      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.)