BILL NUMBER: S8920
SPONSOR: COONEY
 
TITLE OF BILL:
An act to amend the insurance law, in relation to service contracts for
accidental damages from handling
 
PURPOSE:
This bill amends the definition of "service contract" to confirm that
coverage for power surges and accidental damage from handling is not
incidental coverage and may be offered separately from other service
contract coverage and therefore protect the consumer beginning on the
date their covered device is purchased.
 
SUMMARY OF PROVISIONS:
Section one: the bill amends section 7902(k) of the insurance law to
confirm that service contract coverage for power surges and accidental
damage from handling is primary coverage that may begin on the date a
covered device is purchased.
Section two: is the effective date.
 
JUSTIFICATION:
Primary service contract coverage offers benefits comparable to a
manufacturer's limited warranty (i.e. coverage for defects in materials
and workmanship or wear and tear). Service contract coverage is supple-
mental to a manufacturer's warranty. To avoid unintentionally selling
duplicative coverage, primary service contract coverage may not begin
until the manufacturer's warranty expires.
Service contracts often also provide protection against power surges and
accidental damage from handling, but manufacturers' warranties usually
do not provide such coverage. Currently, the NYS Department of Financial
Services interprets Insurance Law § 7902(k) to state that coverage for
power surges and accidental damage from handling is only permissible as
incidental coverage and therefore, it must share the primary coverage's
term length (effective and expiration dates). Since a manufacturer's
warranty does not provide protection against power surges and accidental
damage from handling, and since a service contract's protection against
these perils may not begin until the manufacturer's warranty expires,
consumers are often left exposed and without coverage against these
perils during the term of the manufacturer's warranty.
This bill amends the Insurance Law to clarify that coverage for power
surges and accidental damage from handling are not incidental coverage,
and such coverage may be offered commencing on the date of purchase of a
covered device and may run concurrently with the manufacturer's warran-
ty. This change will provide substantial protection to consumers who
might otherwise end up paying the full replacement cost for a covered
device due to a power surge or accidental damage from handling during
the term of the manufacturer's warranty.
 
LEGISLATIVE HISTORY:
New Bill
 
FISCAL IMPLICATIONS:
None
 
EFFECTIVE DATE:
This act shall take effect immediately