FILED SENATE
May 2, 2024
GENERAL ASSEMBLY OF NORTH CAROLINA
S.B. 857
SESSION 2023 PRINCIPAL CLERK
S D
SENATE BILL DRS15407-NHa-151A
Short Title: Home Warranty Regulatory Reform. (Public)
Sponsors: Senator Mohammed (Primary Sponsor).
Referred to:
1 A BILL TO BE ENTITLED
2 AN ACT TO PLACE CONSUMER PROTECTIONS AROUND HOME SERVICE
3 AGREEMENTS.
4 The General Assembly of North Carolina enacts:
5 SECTION 1. G.S. 66-371 reads as rewritten:
6 "§ 66-371. Home appliance service agreement companies.agreements.
7 (a) This section Article applies to all home appliance service agreement companies
8 soliciting business agreements in use in this State, but it State. For the purposes of this section, a
9 "home service agreement" is a service agreement for a set list of appliances and systems in a
10 residence, regardless of whether the agreement is titled as a contract, home warranty, extended
11 home warranty, home appliance warranty, or other.
12 (a1) In addition to the requirements of G.S. 66-369.2, home service agreements shall
13 contain the following:
14 (1) A list of covered items that is referenced each time the agreement is discussing
15 coverage.
16 (2) A detailed description of the types of loss or damage the agreement covers.
17 (3) A detailed description of what is excluded from the agreement, in a prominent
18 location in the agreement and in bold face type.
19 (4) A statement of the purchaser's rights under G.S. 66-369.2(d)(2), in immediate
20 proximity to the space reserved for the signature of the purchaser of the
21 agreement, in bold face type of a minimum size of 10 points, in substantially
22 the following form:
23 "You, the purchaser of this service agreement, may cancel this contract at
24 anytime after purchase and receive a pro rata refund less any claims paid on
25 the agreement and a reasonable administrative fee, not to exceed ten percent
26 (10%) of the amount of the pro rata refund."
27 (a2) Home service agreement companies shall do all of the following:
28 (1) At the time of signing the agreement, provide either an electronic or paper
29 copy of the agreement to the purchasing consumer. The company shall also
30 have versions of the agreement available in formats that are accessible to
31 people with disabilities.
32 (2) Maintain a list of company-approved vendors available to perform services
33 under the agreement and allow customers the option to use an approved
34 vendor. The vendor list shall be updated regularly to remove vendors that are
35 unresponsive or have declined to work with the company on a routine basis.
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1 (3) Ensure that the repair, replacement, or maintenance requested under the
2 agreement is completed or scheduled for completion within five business days
3 of a consumer's claim for any covered item that is necessary for heating,
4 air-conditioning, or the functioning of a bathroom if there is only one
5 bathroom in the residence. If the company cannot have the claim completed
6 or scheduled for completion within five days, the company shall pay to have
7 an out-of-network vendor complete the service.
8 (a3) This Article does not apply to any of the following:
9 (1) performance Performance guarantees or warranties made by manufacturers in
10 connection with the sale of new home appliances.
11 (2) This section does not apply to any Any home appliance dealer licensed to do
12 business in this State (i) whose primary business is the retail sale and service
13 of home appliances; (ii) who that makes and administers its own service
14 agreements without association with any other entity; and (iii) whose service
15 agreements cover primarily appliances sold by the dealer to its retail
16 customers, provided that customers so long as the dealer complies with
17 G.S. 66-372 G.S. 66-369.2 and G.S. 66-373.G.S. 66-369.3.
18 (3) This section does not apply to any A warranty made by a builder or seller of
19 real property relating to home appliances that are sold along with real
20 property.
21 (4) This section does not apply to any An issuer of credit cards or charge cards
22 that markets home appliance service agreements as an ancillary part of its
23 business; provided, however, that such business so long as the issuer maintains
24 insurance in accordance with G.S. 66-373.G.S. 66-369.3.
25 (b) The following definitions apply in this section:
26 (1) "Home appliance" means a clothes washing machine or dryer; kitchen
27 appliance; vacuum cleaner; sewing machine; home audio or video electronic
28 equipment; home electronic data processing equipment; home exercise and
29 fitness equipment; home health care equipment; power tools; heater or air
30 conditioner, other than a permanently installed unit using internal ductwork;
31 or other personal consumer goods.
32 (2) "Home appliance service agreement" means any contract or agreement
33 indemnifying the home appliance service agreement holder against loss
34 caused by damage or failure, arising out of a power surge or the ownership,
35 operation, use, or accidental damage from handling of a home appliance, of a
36 mechanical or other component part of the home appliance that is listed in the
37 agreement. The term does not include a contract or agreement that reimburses
38 the home appliance service agreement holder for damage occurring during
39 delivery or installation of a home appliance.
40 (3) "Home appliance service agreement company" means any person that issues
41 home appliance service agreements and that is not a licensed insurer.
42 …."
43 SECTION 2.(a) Subsection (b) of G.S. 66-372 is recodified as G.S. 66-369.1 (to be
44 entitled "Definitions") and reads as rewritten:
45 "§ 66-369.1. Definitions.
46 The following definitions apply in this section and in G.S. 66-373:Article:
47 (1) Consumer. – The purchaser or beneficiary of a service agreement.
48 (2) Covered items. – The list of items in a service agreement that are subject to
49 the agreement, with each item identified in detail by brand, location, or other
50 feature of the consumer's specific item.
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1 (1)(3) Service agreement. – Includes motor vehicle service agreements and home
2 appliance agreements.An agreement between a consumer and a service
3 agreement company in which a consumer agrees to pay a set fee or premium,
4 and may agree to pay a deductible, in exchange for a service provider
5 promising to repair, replace, or maintain a set list of covered items. This term
6 includes agreements where the service provider facilitates but does not
7 actually perform the repair, replacement, or maintenance of a covered item
8 and agreements where a service provider reimburses the consumer for
9 obtaining their own repair, replacement, or maintenance.
10 (2)(4) Service agreement company. – Includes motor vehicle service agreement
11 companies and home appliance service agreement companies.A person, other
12 than an insurer licensed to write liability insurance under Article 7 or 16 of
13 Chapter 58 of the General Statutes, that issues service agreements."
14 SECTION 2.(b) G.S. 66-372(e)(2) is recodified as G.S. 66-370(a2). Subsections (a),
15 (c), (d), the remainder of (e), (f), (h), (i), (j), and (l) of G.S. 66-372 are recodified as subsections
16 (a), (b), (c), (d), (e), (f), (g), (h), and (i), respectively, of G.S. 66-369.2 (to be entitled
17 "Miscellaneous requirements for service agreements") and read as rewritten:
18 "§ 66-369.2. Miscellaneous requirements for service agreements.
19 (a) The provisions of this section and G.S. 66-373 apply to companies specified in G.S.
20 66-370 and G.S. 66-371.apply to all service agreements subject to this Article.
21 (b) Before the sale of any service agreement, the service agreement company shall give
22 written notice to the customer clearly disclosing that the purchase of the agreement is not required
23 either to purchase or to obtain financing for the purchase of a motor vehicle or home appliance,
24 as the case may be.good.
25 (c) No service agreement may be A service agreement used in this State by any service
26 agreement company if the agreement:violates this Article if it does any of the following:
27 (1) In any respect violates, or does not comply with, the laws of this State;State.
28 (2) Contains, or incorporates by reference when incorporation is otherwise
29 permissible, any inconsistent, ambiguous, or misleading clauses or any
30 exceptions and conditions that deceptively affect the risk purported to be
31 assumed in the general coverage of the agreement;agreement.
32 (3) Has any title, heading, or other indication of its provisions that is misleading;
33 ormisleading.
34 (4) Is printed or otherwise reproduced in a manner that renders any material
35 provision of the agreement substantially illegible.
36 (5) Contains provisions that allow the company to cancel the agreement in its
37 discretion other than for nonpayment of premiums or for a direct violation of
38 the agreement by the consumer where the service agreement states that
39 violation of the agreement would subject the agreement to cancellation.
40 (d) All service agreements used in this State by a service agreement company shall:shall
41 satisfy both of the following requirements:
42 (1) Not contain provisions that allow the company to cancel the agreement in its
43 discretion other than for nonpayment of premiums or for a direct violation of
44 the agreement by the consumer where the service agreement states that
45 violation of the agreement would subject the agreement to cancellation;
46 (3)(1) Contain a cancellation provision allowing the consumer to cancel at any time
47 after purchase and receive a pro rata refund less any claims paid on the
48 agreement and a reasonable administrative fee, not to exceed ten percent
49 (10%) of the amount of the pro rata refund.
50 (2) Contain a list of covered items.
51 …."
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1 SECTION 2.(c) G.S. 66-373 is recodified as G.S. 66-369.3 and reads as rewritten:
2 "§ 66-369.3. Insurance policy requirements.
3 (a) Each company or person subject to this section Article shall maintain contractual
4 liability insurance or service agreement reimbursement insurance with an authorized insurer
5 authorized to write liability insurance under Article 7, 16, 21, or 22 of Chapter 58 of the General
6 Statutes for one hundred percent (100%) of claims exposure, including reported and incurred but
7 not reported claims and claims expenses, on business written in this State unless the company or
8 person complies with all of the following:
9 …
10 (e) Persons and companies subject to G.S. 58-1-15, 58-1-20, 66-370, 66-371, and 66-374
11 G.S. 58-1-20, and this Article are subject to and shall comply with this section."
12 SECTION 2.(d) G.S. 66-370, as amended by subsection (b) of this section, reads as
13 rewritten:
14 "§ 66-370. Motor vehicle service agreement companies.agreements.
15 (a) For purposes of this section, "motor vehicle" is as defined in G.S. 20-4.01(23) and
16 includes mopeds as defined in G.S. 20-4.01(27)j.
17 (a1) This section Article applies to all motor vehicle service agreement companies
18 soliciting business agreements in use in this State, State. A motor vehicle service agreement is
19 either of the following:
20 (1) Any contract or agreement (i) indemnifying a consumer against loss caused
21 by a motor vehicle failure that is listed in the agreement or (ii) providing for
22 the repair of a motor vehicle failure that is listed in the agreement. For
23 purposes of this subsection, "motor vehicle failure" is the failure of a
24 mechanical or other component part of the motor vehicle arising out of the
25 ownership, operation, or use of the vehicle.
26 (2) A contract or agreement to perform or to indemnify a consumer for
27 performance of any of the following services:
28 a. The repair or replacement of tires or wheels on a motor vehicle
29 damaged as a result of coming into contact with road hazards.
30 b. The removal of dents, dings, or creases on a motor vehicle that can be
31 repaired using the process of paintless dent removal without affecting
32 the existing paint or finish and without replacing vehicle body panels,
33 sanding, bonding, or painting.
34 c. The repair of chips or cracks in or the replacement of motor vehicle
35 windshields as a result of damage caused by road hazards.
36 d. The replacement of a motor vehicle key or key fob in the event that
37 the key or key fob becomes inoperable or is lost or stolen.
38 e. Other services that may be approved by the Commissioner of
39 Insurance, if not inconsistent with other provisions of this Article.
40 (a2) With respect to a motor vehicle service agreement as defined in G.S. 66-370, In
41 addition to the requirements of G.S. 66-369.2, motor vehicle service agreements shall provide
42 for a right of assignability by the consumer to a subsequent purchaser before expiration of
43 coverage if the subsequent purchaser meets the same criteria for motor vehicle service agreement
44 acceptability as the original purchaser; andpurchaser.
45 (a3) but it This Article does not apply to any of the following:
46 (1) maintenance Maintenance agreements, performance guarantees, warranties,
47 or motor vehicle service agreements made byby any of the following:
48 (1)a. A manufacturer,manufacturer.
49 (2)b. A distributor, ordistributor.
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1 (3)c. A subsidiary or affiliate of a manufacturer or a distributor, where
2 fifty-one percent (51%) or more of the subsidiary or affiliate is owned
3 directly or indirectly byby any of the following:
4 a.1. The manufacturer,manufacturer.
5 b.2. The distributor, ordistributor.
6 c.3. The common owner of fifty-one percent (51%) or more of the
7 manufacturer or distributor in connection with the sale of
8 motor vehicles.
9 (2) This section does not apply to any A motor vehicle dealer licensed to do
10 business in this State (i) whose primary business is the retail sale and service
11 of motor vehicles; (ii) who that makes and administers its own service
12 agreements with or without association with a third-party administrator or
13 who that ma