HB 2403 — service contracts; refunds; administrative expenses

HB2403 - 542R - S-Finance-ProposedH Ver   Fifty-fourth  Legislature                                                   FinanceHouse Engrossed         State of Arizona House of Representatives Fifty-fourth Legislature Second Regular Session                                                 Session H.B.        HOUSE BILL 2403       AN ACT   amending section 20‑1095.06, Arizona Revised Statutes;

 relating PROPOSEDto SENATEservice AMENDMENTScontracts. TO H.B.

2403  (Reference  to(TEXT HouseOF engrossedBILL bill)BEGINS  ON NEXT PAGE)   PageBe 1,it betweenenacted linesby 1the andLegislature 2,of insert:the State of Arizona:

"Section 1.  SectionSection 1.  Section 20-1095,20-1095.06, Arizona Revised Statutes, is amended to read:

START_STATUTE20-1095.  DefinitionsSTART_STATUTE20-1095.06.  Required Inservice thiscontract article,disclosures unlessA.  Each service company holding a service company permit shall submit all service contract forms to the contextdirector otherwisefor requires:approval at least thirty days before the proposed effective date of the form.  A form may not be used until it is approved by the director or has been on file with the director for more than thirty days.

1.  "Consumer":B.  The director may not approve a service contract if:

(a)  Means1.  The aservice buyercontract othermay thanbe forcanceled purposesor ofvoided resaledue of any consumer product, any person to whomacts the product is transferred during the duration of an implied or writtenomissions warranty or service contract applicable to the product and any other person who is entitled by the terms of the warranty or service contractcompany or underits applicableassignees federal or statesubcontractors lawfor totheir enforcefailure againstto theprovide warrantorcorrect information or servicetheir companyfailure theto obligationsperform of the warrantyservices or servicerepairs contract.  Consumerprovided alsoin means the (b)  Includes a buyer,timely, owner,competent lessor,and lesseeworkmanlike ormanner. seller of residential property.

2.  "Consumer2.  Parts product" means any tangible personal property that is distributed in commerce, and that is normally used solely for personal, family or householdcomponents purposes,repaired including any such property intended to be attached to or installedreplaced inunder any real property without regard to whether it is so attached or installed, and that becomes part of the intendedservice usefulnesscontract ofare realexcluded. property or that is typically transferred with real property as an integral functioning utility appliance or system.

3.  "Home3.  The warrantyservice orcontract homemay protectionbe contract"canceled meansor avoided serviceby contractthe asservice definedcompany inor paragraphits 7,representatives subdivisionfor (b),any item (i) of thisthe section.following reasons:

4.  "Mechanical(a)  Preexisting reimbursementconditions insurance"that meanswere anknown insuranceor policythat issuedreasonably toshould anhave obligorbeen toknown eitherby provide reimbursement to the obligor under the terms of the insured service contractscompany issued or sold by the obligorperson or,selling in the eventservice ofcontract the obligor's nonperformance, to pay on behalf of the obligor all covered contractual obligations incurred by the obligor under the terms of the insured service contractscompany's issuedbehalf. or sold by the obligor.

5.  "Residential property" means a house, townhouse, condominium or other habitable structure that is used principally as a residence.

6.  "Service company" or "obligor" means any person that is contractually obligated to the contract holder under the terms of the service contract.  Service company does not include a service contract administration administrator or seller if the person is not contractually obligated to the contract holder under the terms of the service contract.

7.  "Service contract":

(a)  Means a written contract or agreement for a separately stated consideration for any duration to perform, in whole or in part, the repair, replacement or maintenance of a consumer product, or indemnification for repair, replacement or maintenance, for the operational or structural failure of a consumer product due to a defect in materials, workmanship, accidental damage from handling, a power surge or interruption or normal wear and tear, with or without additional provisions for incidental payment of indemnity under limited circumstances, including towing, rental and emergency road service, and road hazard protection or roof leak.

(b)  Includes a contract or agreement that is sold for a separately stated consideration for any duration and that provides for any of the following:

(i)  The service, maintenance or repair, including replacement, of all or any part of structural components, appliances, electrical, plumbing, heating, cooling or air conditioning systems of residential property or indemnification for the service, maintenance, repair or replacement.

(ii)  The repair or replacement of tires or wheels on a motor vehicle damaged as a result of coming into contact with road hazards including potholes, rocks, wood debris, metal parts, glass, plastic, curbs or composite scraps.

(iii)  The removal of dents, dings or creases on a motor vehicle that can be repaired using the process of paintless dent removal without affecting the existing paint finish and without replacing vehicle body panels, sanding, bonding or painting.

(iv)  The replacement of a motor vehicle key or key fob in the event that if the key or key fob becomes inoperable or is lost or stolen.

(v)  Other services or products approved by the director.

8.  "Service contract administrator" means a person who is responsible for the administration of the service contracts or the service contracts plan or who is responsible for any submission required under this article.

9.  "Warranty" means:

(a)  Any written affirmation by a manufacturer or seller of fact or written promise made in connection with the sale of a consumer product that relates to the nature of the material or workmanship and affirms or promises that the material or workmanship is free of defects or will meet a specified level of performance over a specified period of time.

(b)  Any undertaking by a manufacturer or seller in writing in connection with the sale of a consumer product to refund, repair, replace or take other remedial action with respect to such a product if the product fails to meet the specifications set forth in the undertaking, which written affirmation, promise or undertaking becomes part of the basis of the bargain for purposes other than resale of such product and if there is no separate identifiable charge to the consumer.

END_STATUTE Sec. 2.  Section 20-1095.02, Arizona Revised Statutes, is amended to read:

START_STATUTE20-1095.02.  Exemptions;

definition A.  This article, except for section 20‑1095.09, does not apply to the following:

1.  Warranties issued by manufacturers, builders or sellers on the actual items, structures or improvements that they manufacture, build or sell.

2.  Service contract programs if a motor vehicle manufacturer or motor vehicle dealer has financial responsibility for performance.

3.  Warranties and service contracts issued by a corporation other than a manufacturer or seller in connection with consumer products that are distributed by the corporation if the issuing corporation:

(a)  Is an affiliate of a consumer products manufacturer.

(b)  By March 1 of each year submits to the director an independently audited A financial statement in which at least one officer of the issuing corporation attests and a certified public accountant certifies that the issuing corporation has and maintains a net worth in excess of one hundred million dollars $25,000,000.  Any information, documents and copies that are obtained by or disclosed to the director or any other person pursuant to this subdivision are not available for public inspection, except that the director may use this information in any proceeding relating to this article.

4.  A service company that issues a service contract to persons other than a consumer.

5.  A service company that is in the business of selling or servicing any one of the following, if the service contract only covers the actual item the service company sells:

(a)  Appliances or electronic equipment, or both.

(b)  Residential heating, cooling or air conditioning systems.

(c)  Mechanical equipment, other than motor vehicles or their components.

6.  A service company only to the extent that it is in the business of selling or servicing directly, or through other retailers, cell phones and other electronic personal communications devices and accessories.

7.  Any person licensed pursuant to title 32, chapter 10, or not required to be licensed because exempt pursuant to section 32‑1121, subsection A, paragraph 13 whose service contract only covers the actual items, structures or improvements that the person installs, constructs or builds.

8.  A maintenance agreement of limited duration that provides for scheduled maintenance only and does not include repair or replacement.