SB492, s. 3
1Section 3. Subchapter III of chapter 616 [precedes 616.50] of the statutes is
2created to read:
SB492,5,43 SUBchapter III
4 property service contracts
SB492,5,5 5616.50 Definitions. In this subchapter:
SB492,5,7 6(1) "Administration" includes any of the following activities performed on
7behalf of a provider:
SB492,5,98 (a) Approving or disapproving claims, paying claims, or controlling the claims
9adjustment process.
SB492,5,1110 (b) Arranging for or controlling the purchase of insurance associated with the
11offering of service contracts.
SB492,5,1312 (c) Maintaining records or submitting filings required under this subchapter
13on behalf of a provider.
SB492,5,1514 (d) Collecting provider fees from service contract sellers and remitting the
15provider fees to the provider.
SB492,5,18 16(2) "Administrator" means a person appointed by a provider under s. 616.54
17(1) to be responsible for any or all of the administration of service contracts and
18compliance with this subchapter.
SB492,5,19 19(3) "Commissioner" means the commissioner of insurance.
SB492,5,23 20(4) "Consumer" means an individual who buys other than for purposes of resale
21any tangible personal property that is distributed in commerce and that is normally
22used for personal, family, or household purposes and not for business or research
23purposes.
SB492,5,25 24(5) "Maintenance agreement" means a contract of a specified duration that
25provides for scheduled maintenance only and does not include repair or replacement.
SB492,6,2
1(6) "Motor vehicle manufacturer" means a person that does or satisfies any of
2the following:
SB492,6,43 (a) Manufactures or produces motor vehicles and sells motor vehicles under its
4own name or label.
SB492,6,55 (b) Is a subsidiary of the person that manufactures or produces motor vehicles.
SB492,6,76 (c) Is a corporation that owns 100 percent of the person that manufactures or
7produces motor vehicles.
SB492,6,98 (d) Manufactures or produces motor vehicles and sells motor vehicles under the
9trade name or label of another person that manufactures or produces motor vehicles.
SB492,6,1310 (e) Does not manufacture or produce motor vehicles but, pursuant to a written
11contract, licenses the use of its trade name or label to another person that
12manufactures or produces motor vehicles and that sells motor vehicles under the
13licensor's trade name or label.
SB492,6,15 14(7) "Nonoriginal manufacturer's parts" means replacement parts for property
15that are not made for or by the original manufacturer of the property.
SB492,6,17 16(8) "Provider" means a person that is contractually obligated to a service
17contract holder under the terms of a service contract.
SB492,6,18 18(9) "Provider fee" means the consideration paid for a service contract.
SB492,6,19 19(10) "Reimbursement insurance policy" means any of the following:
SB492,6,2420 (a) A policy of insurance issued to a provider under the terms of the insured
21service contracts issued or sold by the provider that, in the event of the provider's or
22administrator's nonperformance, will pay or perform on behalf of the provider or
23administrator all covered contractual obligations or services under the terms of the
24insured service contracts issued or sold by the provider.
SB492,7,2
1(b) A policy of insurance issued to a provider that provides the coverage
2specified in par. (a) and additional coverage that does not conflict with par. (a).
SB492,7,11 3(11) "Service contract" means a contract or agreement for a separately stated
4consideration for a specific duration to perform the repair, replacement, or
5maintenance of property, or to provide indemnification for the repair, replacement,
6or maintenance of property, for the operational or structural failure of property, due
7to a defect in materials or workmanship, accidental damage from handling, or
8normal wear and tear, with or without additional provisions for incidental payment
9of indemnity under limited circumstances, including towing, rental, and emergency
10road service and road hazard protection. "Service contract" includes a contract or
11agreement that provides for any of the following:
SB492,7,1412 (a) The repair, replacement, or maintenance of property or indemnification for
13the repair, replacement, or maintenance of property for damage resulting from a
14power surge or interruption.
SB492,7,1815 (b) The repair or replacement or indemnification for the repair or replacement
16of a motor vehicle for the operational or structural failure of one or more parts or
17systems of the motor vehicle brought about by the failure of an additive product to
18perform as represented.
SB492,7,2119 (c) The repair or replacement of tires or wheels on a motor vehicle damaged as
20a result of coming into contact with road hazards including potholes, rocks, wood
21debris, metal parts, glass, plastic, curbs, or composite scraps.
SB492,7,2522 (d) The removal of dents, dings, or creases on a motor vehicle that can be
23repaired using the process of paintless dent removal without affecting the existing
24paint finish and without replacing vehicle body panels, sanding, bonding, or
25painting.
SB492,8,2
1(e) The repair of motor vehicle windshield chips or cracks, but does not include
2the replacement of the entire windshield.
SB492,8,53 (f) The repair of damage to the interior components of a motor vehicle caused
4by wear and tear, but does not include the replacement of any part or component of
5a motor vehicle's interior.
SB492,8,7 6(12) "Service contract holder" means a person who is the purchaser or holder
7of a service contract.
SB492,8,10 8(13) "Service contract seller" means a person, including a real estate agent, who
9is engaged only in the selling or soliciting of a service contract, but who is not acting
10as a provider or involved in the administration of service contracts.
SB492,8,16 11(14) "Warranty" means a warranty made solely by the manufacturer, importer,
12or seller of property or services without consideration, that is not negotiated or
13separated from the sale of the product or services, that is incidental to the sale of the
14product or services, and that guarantees indemnity for defective parts, mechanical
15or electrical breakdown, labor, or other remedial measures, such as repair or
16replacement of the property or repetition of services.
SB492,8,18 17616.52 Applicability. (1) This subchapter does not apply to any of the
18following:
SB492,8,1919 (a) Warranties as defined in s. 616.50 (14) or s. 100.203 (1) (g) or 100.205 (1) (g).
SB492,8,2020 (b) Maintenance agreements.
SB492,8,2321 (c) Service contracts offered by public utilities on their devices for the
22transmission of public utility service to customers to the extent such service
23contracts are regulated by the public service commission.
SB492,8,2424 (d) Service contracts sold or offered for sale to persons other than consumers.
SB492,9,3
1(e) Service contracts for inside wire protection plans associated with the
2offering of telecommunications service, as defined in 196.01 (9m), video service, as
3defined in 66.0420 (2) (y), or Internet access service.
SB492,9,8 4(2) Motor vehicle manufacturer's service contracts on the motor vehicle
5manufacturer's products are exempt from this subchapter, except for ss. 616.56 (1)
6to (3) and (6) to (16), 616.58, and 616.62, and motor vehicle manufacturers offering
7service contracts on the motor vehicle manufacturer's products are exempt from
8licensure under s. 616.54 (4).
SB492,9,10 9(3) A person who holds a valid certificate of authority under s. Ins 15.01, Wis.
10Adm. Code may elect to do one of the following:
SB492,9,1311 (a) Continue to operate in this state under the certificate of authority. If the
12person makes such an election, s. Ins 15.01, Wis. Adm. Code shall continue to apply
13to the person and this section shall not apply to the person.
SB492,9,1614 (b) Apply for a license as a provider pursuant to s. 616.54 (4). If the person is
15licensed, this subchapter shall apply to the person and s. Ins 15.01, Wis. Adm. Code
16shall not apply to the person for any service contracts issued subsequent to licensure.
SB492,9,25 17616.54 Requirements for doing business. (1) Appointment of
18administrator.
A provider may, but is not required to, appoint an administrator to
19be responsible for any or all of the administration of service contracts and compliance
20with this subchapter. Except as provided in s. 616.58 (2) (b), a provider shall be liable
21for the acts of an administrator appointed by the provider to assist with the
22administration of the provider's service contracts to the extent such acts relate to the
23provider's service contracts offered in or from this state. No person may act as an
24administrator of service contracts sold in this state unless the person registers with
25the commissioner by providing the following information:
SB492,10,4
1(a) The name, business address, and other information required by the
2commissioner for an employee or officer of the administrator that is designated by
3the applicant as the person responsible for the administration of service contracts in
4this state.
SB492,10,55 (b) The location of the administrator's home office.
SB492,10,76 (c) The names of the service contract providers for whom the administrator
7performs administration.
SB492,10,10 8(2) Receipt and copy of contract. A service contract may not be issued, sold,
9or offered for sale in this state unless the provider of the service contract has done
10all of the following:
SB492,10,1211 (a) Provided a receipt for, or other written evidence of, the purchase of the
12service contract to the service contract holder.
SB492,10,1413 (b) Provided a copy of the service contract to the service contract holder within
14a reasonable period of time from the date of purchase.
SB492,10,20 15(3) Sample contract. A provider shall provide a consumer with a complete
16sample copy of the service contract terms and conditions prior to the time of sale upon
17a request for the same by the consumer. A provider may comply with this subsection
18by providing the consumer with a complete sample copy of the terms and conditions
19or by directing the consumer to an Internet Web site containing a complete sample
20of the terms and conditions of the service contract.
SB492,10,22 21(4) Licensure. (a) No person may act as a provider in this state unless the
22commissioner issues a license to the person under par. (c).
SB492,10,2423 (b) A person seeking to act as a provider in this state shall submit an application
24for licensure with the commissioner consisting of all of the following:
SB492,10,2525 1. The applicant's name.
SB492,11,1
12. The applicant's full business address.
SB492,11,22 3. The applicant's telephone number.
SB492,11,43 4. The name and full business address of a person in this state designated for
4service of process.
SB492,11,65 5. A copy of the service contracts proposed to be sold in this state that comply
6with s. 616.56.
SB492,11,77 6. Documentation of compliance with sub. (5).
SB492,11,98 7. The names of any administrator appointed by the applicant to assist with
9the administration of the provider's service contract business in this state.
SB492,11,1010 8. An initial licensure fee in the amount specified in s. 601.31 (1) (kr).
SB492,11,1211 (c) Upon receipt of an application that complies with par. (b) as determined by
12the commissioner, the commissioner shall issue a license to the applicant.
SB492,11,1513 (d) The information submitted with an applicant's application for licensure
14need only be updated by written notification to the commissioner if material changes
15occur in the license application on file with the commissioner.
SB492,11,1716 (e) By March 31 of each year after issuance of a license under par. (c), a provider
17shall pay the commissioner an annual fee in the amount specified in s. 601.31 (1) (kr).
SB492,11,20 18(5) Assurance of performance; in general . In order to assure the faithful
19performance of a provider's obligations to its service contract holders, each provider
20shall be responsible for complying with the requirements specified in sub. (6) or (7).
SB492,11,25 21(6) Assurance of performance; insurance. (a) A provider may satisfy sub. (5)
22by insuring all service contracts under a reimbursement insurance policy that has
23been filed with and approved by the commissioner under s. 631.20, that is issued by
24an insurer authorized to do business in this state, and that satisfies, at a minimum,
25all of the following:
SB492,12,6
11. The policy states that, if the provider covered under the policy does not
2provide, or reimburse or pay for, a service that is covered under a service contract
3insured under the policy within 60 days after a service contract holder provides proof
4of loss, or in the event of the provider's insolvency or other financial impairment, the
5service contract holder may file a claim with the insurer issuing the reimbursement
6insurance policy for reimbursement, payment, or provision of the service.
SB492,12,107 2. The policy states that the insurer issuing the policy shall assume full
8responsibility for administering and paying claims and other obligations under
9service contracts insured under the policy if the provider or designated
10administrator fails to do so.
SB492,12,1411 3. The policy states that the insurer issuing the policy may not terminate or
12refuse to renew the policy unless the insurer has provided a written notice of
13termination or nonrenewal to the commissioner at least 60 days before the date of
14the termination or, in the case of nonrenewal, the expiration of the policy.
SB492,12,1815 (b) If a reimbursement insurance policy by which a provider is satisfying this
16subsection is terminated, cancelled, or not renewed for any reason, or if the insurer
17issuing the policy is not in compliance with applicable financial standards, all of the
18following apply:
SB492,12,2019 1. The provider shall immediately notify the commissioner of the termination,
20cancellation, or nonrenewal of the policy, if applicable.
SB492,12,2521 2. The provider shall cease selling service contracts in this state until the
22provider either files with the commissioner a new reimbursement insurance policy
23that covers its obligations under service contracts sold in the state and that satisfies
24the requirements under par. (a) or provides a deposit or irrevocable letter of credit
25in accordance with sub. (7).
SB492,13,4
13. If the commissioner so requests, the provider shall file with the
2commissioner copies of its audited financial statements or financial statements that
3are certified as accurate by a corporate officer of the provider if the provider does not
4have audited financial statements.
SB492,13,75 (c) An insurer issuing a reimbursement insurance policy to a provider is
6considered to have received the premium for that insurance policy upon payment by
7a consumer of the fee for a service contract issued by the insured provider.
SB492,13,118 (d) The termination or nonrenewal of a provider's reimbursement insurance
9policy does not reduce the insurer's responsibility with respect to service contracts
10issued by the provider before the date of the termination or, in the case of
11nonrenewal, the expiration of the policy.
SB492,13,1612 (e) Nothing in this subsection prevents, or limits the right of, an insurer that
13issued a reimbursement insurance policy to seek indemnification from or
14subrogation against a provider if the insurer pays or is obligated to pay the service
15contract holder any amount that the provider was obligated to pay under the service
16contract.
SB492,13,21 17(7) Assurance of performance; deposit or irrevocable letter of credit. (a)
18A provider may satisfy sub. (5) by providing security to compensate any service
19contract holder who sustains a loss due to the failure of the provider to perform its
20obligations under a service contract as a result of insolvency or other financial
21impairment. The commissioner shall approve the amount and form of the security.
SB492,13,2322 (b) The security under this subsection shall be in one or a combination of the
23following forms:
SB492,13,2424 1. A deposit of securities under s. 601.13 for the benefit of Wisconsin consumers.
SB492,14,12
12. An irrevocable letter of credit that is from a bank properly chartered by the
2federal government or any state, that is acceptable to the commissioner, and that is
3issued for a term of at least 5 years with provision for renewal 2 years before
4termination. The letter of credit shall be payable to the commissioner or the
5commissioner's designee for the benefit of Wisconsin consumers upon a finding by
6the commissioner that a provider is insolvent or financially impaired and unable to
7meet its obligations under service contracts issued in Wisconsin. The provider shall
8notify the commissioner in writing of the nonrenewal of a letter of credit within 30
9days after receiving a notice of nonrenewal. No provider whose letter of credit has
10been nonrenewed may offer or sell or renew any service contract on or after the date
11of nonrenewal until the provider obtains security satisfying the requirements of this
12subsection or satisfies the requirements of sub. (6).
SB492,14,1413 (c) The security under this subsection shall be not less than $50,000 plus one
14of the following:
SB492,14,1715 1. If the provider has not appointed an administrator under s. 616.54 (1), 15
16percent of the provider fees collected from service contract holders for all unexpired
17service contracts in force in Wisconsin on January 1 of each year.
SB492,14,2018 2. If the provider has appointed an administrator under s. 616.54 (1), 22.5
19percent of the provider fees collected from service contract holders for all unexpired
20service contracts in Wisconsin on January 1 of each year.
SB492,14,2321 (d) The security under this subsection shall continue until released by the
22commissioner pursuant to a finding that it is not necessary for the reasonable
23protection of Wisconsin consumers.
SB492,15,4 24(8) Financial statements. A provider using a deposit or irrevocable letter of
25credit as specified in sub. (7) to satisfy sub. (5) shall, by the end of the 5th month

1following the end of each fiscal year of the provider, submit financial statements for
2the fiscal year to the commissioner that are prepared on an accrual basis in
3accordance with generally accepted accounting principles and that are audited by an
4independent certified public accountant.
SB492,15,7 5(9) Commissioner limitation. Except for the requirements specified in sub. (5),
6no other financial security requirements shall be required by the commissioner for
7providers.
SB492,15,9 8(10) Payment of claims. A provider shall be subject to and shall pay claims
9under a service contract in accordance with s. 628.46 (1) and (2).
SB492,15,11 10(11) Service contract sellers. A service contract seller is not subject to
11licensure or registration under this subchapter.
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