Raised Bill No. 322 proposes amendments to the current law regarding extended warranties for motor vehicles. The bill expands the definition of "extended warranty" to include coverage for various types of vehicle damage, such as those caused by road hazards, dents and dings that do not affect paint finish, and the repair or replacement of windshields, keys, or key fobs. It also introduces coverage for excess wear and use for leased vehicles. The bill defines new terms such as "vehicle theft protection product" and its associated warranties, which cover certain costs if the product fails to prevent theft. The bill outlines the obligations of warranty providers, including the services and parts to be provided, the contents of warranty contracts, and the conditions under which warranties can be issued, such as the requirement for providers to be insured or to demonstrate financial reserves for claims. These changes are set to take effect on October 1, 2024.

Furthermore, the bill sets financial requirements for extended warranty providers, such as maintaining reserves at least equal to half of the provider's net worth and holding excess reserves in trust. Insurers issuing extended warranty reimbursement insurance policies must meet specific financial criteria, including maintaining a minimum surplus and capital, and a favorable premiums to surplus ratio. They are also required to file annual financial statements and actuarial certifications. The bill mandates that warranty providers submit warranty forms and insurance policy forms to the Insurance Commissioner or provide a certification of reserve adequacy. It also requires insurers to give advance notice before refusing to renew a policy and tasks the Insurance Commissioner with developing an arbitration process for disputes. The bill clarifies that offering extended warranties or vehicle theft protection product warranties does not constitute engaging in the business of insurance in the state. The proposed changes, indicated by underlining for insertions and brackets for deletions, will amend section 42-260 and are scheduled to become effective on October 1, 2024.

Statutes affected:
Raised Bill: 42-260