Senate Bill sb2102er

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    2002 Legislature                 CS for SB 2102, 1st Engrossed



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  2         An act relating to service agreements; amending

  3         s. 634.011, F.S.; revising the definition of

  4         "motor vehicle service agreement"; amending s.

  5         634.041, F.S.; revising the definition of

  6         "corporation"; requiring service agreement

  7         companies to maintain contractual liability

  8         insurance and limiting those to whom vehicle

  9         protection products may be sold; amending s.

10         634.121, F.S.; providing service agreement form

11         requirements; amending s. 634.191, F.S.;

12         revising the definition of unfair competition

13         or unfair or deceptive acts or practices for

14         purposes of disciplinary actions against a

15         salesperson; amending s. 634.406, F.S.;

16         revising the financial requirements for

17         warranty associations to qualify for

18         contractual liability policies covering claims

19         exposure under contracts delivered in this

20         state; providing an effective date.

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22  Be It Enacted by the Legislature of the State of Florida:

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24         Section 1.  Subsection (8) of section 634.011, Florida

25  Statutes, is amended to read:

26         634.011  Definitions.--As used in this part, the term:

27         (8)  "Motor vehicle service agreement" or "service

28  agreement" means any contract or agreement indemnifying the

29  service agreement holder for the motor vehicle listed on the

30  service agreement and arising out of the ownership, operation,

31  and use of the motor vehicle against loss caused by failure of


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    2002 Legislature                 CS for SB 2102, 1st Engrossed



  1  any mechanical or other component part, or any mechanical or

  2  other component part that does not function as it was

  3  originally intended; however, nothing in this part shall

  4  prohibit or affect the giving, free of charge, of the usual

  5  performance guarantees by manufacturers or dealers in

  6  connection with the sale of motor vehicles.; and provided

  7  further, however, Transactions exempt under s. 624.125 are

  8  shall be expressly excluded from this definition and are

  9  exempt from the provisions of this part. The term "motor

10  vehicle service agreement" includes any contract or agreement

11  that which provides:

12         (a)  For the coverage or protection defined in this

13  subsection and which is issued or provided in conjunction with

14  an additive product applied to the motor vehicle that which is

15  the subject of such contract or agreement; or.

16         (b)  For payment of vehicle protection expenses.

17         1.a.  "Vehicle protection expenses" means expenses

18  incurred by the service agreement holder for loss or damage to

19  a covered vehicle, including, but not limited to, applicable

20  deductibles under a motor vehicle insurance policy; temporary

21  vehicle rental expenses; expenses for a replacement vehicle

22  that is at least the same year, make, and model of the stolen

23  motor vehicle; sales taxes or registration fees for a

24  replacement vehicle that is at least the same year, make, and

25  model of the stolen vehicle; or other incidental expenses

26  specified in the agreement.

27         b.  "Vehicle protection product" means a product or

28  system installed or applied to a motor vehicle or designed to

29  prevent the theft of the motor vehicle or assist in the

30  recovery of the stolen motor vehicle.

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    2002 Legislature                 CS for SB 2102, 1st Engrossed



  1         2.  Vehicle protection expenses shall be payable in the

  2  event of loss or damage to the vehicle as a result of the

  3  failure of the vehicle protection product to prevent the theft

  4  of the motor vehicle or to assist in the recovery of the

  5  stolen motor vehicle.  Vehicle protection expenses covered

  6  under the agreement shall be clearly stated in the service

  7  agreement form.

  8         3.  Motor vehicle service agreements providing for the

  9  payment of vehicle protection expenses shall:

10         a.  Reimburse a service agreement holder for the

11  following expenses, at a minimum:  deductibles applicable to

12  comprehensive coverage under the service agreement holder's

13  motor vehicle insurance policy; temporary vehicle rental

14  expenses; sales taxes and registration fees on a replacement

15  vehicle that is at least the same year, make, and model of the

16  stolen motor vehicle; and the difference between the benefits

17  paid to the service agreement holder for the stolen vehicle

18  under the service agreement holder's comprehensive coverage

19  and the actual cost of a replacement vehicle that is at least

20  the same year, make, and model of the stolen motor vehicle; or

21         b.  Pay a preestablished flat amount to the service

22  agreement holder.

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24  Payments shall not duplicate any benefits or expenses paid to

25  the service agreement holder by the insurer providing

26  comprehensive coverage under a motor vehicle insurance policy

27  covering the stolen motor vehicle.

28         Section 2.  Subsection (1) of section 634.041, Florida

29  Statutes, is amended, and subsection (11) is added to that

30  section, to read:

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    2002 Legislature                 CS for SB 2102, 1st Engrossed



  1         634.041  Qualifications for license.--To qualify for

  2  and hold a license to issue service agreements in this state,

  3  a service agreement company must be in compliance with this

  4  part, with applicable rules of the department, with related

  5  sections of the Florida Insurance Code, and with its charter

  6  powers and must comply with the following:

  7         (1)  Any service agreement company applying for a

  8  license must be a solvent corporation formed under the laws of

  9  this state or of another state or district of the United

10  States and must meet minimum requirements under this section.

11         (11)  A service agreement company offering service

12  agreements providing vehicle protection expenses may meet the

13  requirements for this part only by maintaining contractual

14  liability insurance in accordance with paragraph (8)(b), which

15  insurance must be issued by an insurance company not

16  affiliated with the service agreement company, unless the

17  insurance company had issued a contractual liability insurance

18  policy to a service agreement company on or before January 1,

19  2002.  Service agreements providing vehicle protection

20  expenses may be sold only to a service agreement holder that

21  has in-force comprehensive motor vehicle insurance coverage

22  for the vehicle to be covered by the service agreement.

23         Section 3.  Paragraph (c) is added to subsection (1) of

24  section 634.121, Florida Statutes, to read:

25         634.121  Filing of forms, required procedures,

26  provisions.--

27         (1)  A service agreement form or related form may not

28  be issued or used in this state unless it has been filed with

29  and approved by the department.  Upon application for a

30  license, the department shall require the applicant to submit

31  for approval each brochure, pamphlet, circular, form letter,


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    2002 Legislature                 CS for SB 2102, 1st Engrossed



  1  advertisement, or other sales literature or advertising

  2  communication addressed or intended for distribution. The

  3  department shall disapprove any document which is untrue,

  4  deceptive, or misleading or which contains misrepresentations

  5  or omissions of material facts.

  6         (c)  The department shall disapprove any service

  7  agreement form providing vehicle protection expenses which

  8  does not clearly indicate the method for calculating the

  9  benefit to be paid or provided to the service agreement

10  holder. All service agreement forms providing vehicle

11  protection expenses shall clearly indicate the term of the

12  service agreement, whether new or used cars are eligible for

13  the vehicle protection product, and that the service agreement

14  holder may not make any claim against the Florida Insurance

15  Guarantee Association for vehicle protection expenses.  The

16  service agreement shall be provided to a service agreement

17  holder on a form that provides only vehicle protection

18  expenses. A service agreement form providing vehicle

19  protection expenses must state that the service agreement

20  holder must have in force at the time of loss comprehensive

21  motor vehicle insurance coverage as a condition precedent to

22  requesting payment of vehicle protection expenses.

23         Section 4.  Subsection (5) of section 634.191, Florida

24  Statutes, is amended to read:

25         634.191  Grounds for discretionary refusal, suspension,

26  or revocation of license or appointment of salespersons.--The

27  department may, in its discretion, deny, suspend, revoke, or

28  refuse to renew or continue the license or appointment of any

29  salesperson if it finds that as to the salesperson any one or

30  more of the following applicable grounds exist under

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    2002 Legislature                 CS for SB 2102, 1st Engrossed



  1  circumstances for which such denial, suspension, revocation,

  2  or refusal is not mandatory under s. 634.181:

  3         (5)  If, in the conduct of business under the license

  4  or appointment, the salesperson has engaged in unfair methods

  5  of competition or in unfair or deceptive acts or practices, as

  6  such methods, acts, or practices are or may be defined under

  7  this part IX of chapter 626, or has otherwise shown herself or

  8  himself to be a source of injury or loss to the public or

  9  detrimental to the public interest.

10         Section 5.  Subsection (7) of section 634.406, Florida

11  Statutes, is amended to read:

12         634.406  Financial requirements.--

13         (7)  The department shall require that a contractual

14  liability policy insure 100 percent of an association's claims

15  exposure under all of the association's service warranty

16  contracts, wherever written, unless all of the following are

17  satisfied:

18         (a)  The contractual liability policy contains a clause

19  that specifically names the service warranty contract holders

20  as sole beneficiaries of the contractual liability policy and

21  claims are paid directly to the person making a claim under

22  the contract;

23         (b)  The contractual liability policy meets all other

24  requirements of this part, including subsection (3) of this

25  section, which are not inconsistent with this subsection;

26         (c)  The association has been in existence for at least

27  5 years or the association is a wholly-owned subsidiary of a

28  corporation that has been in existence and has been licensed

29  as a service warranty association in the state for at least 5

30  years, and:

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    2002 Legislature                 CS for SB 2102, 1st Engrossed



  1         1.  Is listed and traded on a recognized stock

  2  exchange; is listed in NASDAQ (National Association of

  3  Security Dealers Automated Quotation system) and publicly

  4  traded in the over-the-counter securities market; is required

  5  to file either of Forms 10-K, 100, or 20-G with the United

  6  States Securities and Exchange Commission; or has American

  7  Depository Receipts listed on a recognized stock exchange and

  8  publicly traded or is the wholly-owned subsidiary of a

  9  corporation that is listed and traded on a recognized stock

10  exchange; is listed in NASDAQ (National Association of

11  Security Dealers Automated Quotation system) and publicly

12  traded in the over-the-counter securities market; is required

13  to file Form 10-K, Form 100, or Form 20-G with the United

14  States Securities and Exchange Commission; or has American

15  Depository Receipts listed on a recognized stock exchange and

16  is publicly traded;

17         2.  Maintains outstanding debt obligations, if any,

18  rated in the top four rating categories by a recognized rating

19  service;

20         3.  Has and maintains at all times a minimum net worth

21  of not less than $10 million as evidenced by audited financial

22  statements prepared by an independent certified public

23  accountant in accordance with generally accepted accounting

24  principles and submitted to the department annually; and

25         4.  Is authorized to do business in this state; and

26         (d)  The insurer issuing the contractual liability

27  policy:

28         1.  Maintains and has maintained for the preceding 5

29  years, policyholder surplus of at least $100 million and is

30  rated "A" or higher by A.M. Best Company or has an equivalent

31  rating by another rating company acceptable to the department;


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    2002 Legislature                 CS for SB 2102, 1st Engrossed



  1         2.  Holds a certificate of authority to do business in

  2  this state and is approved to write this type of coverage; and

  3         3.  Acknowledges to the department quarterly that it

  4  insures all of the association's claims exposure under

  5  contracts delivered in this state.

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  7  If all the preceding conditions are satisfied, then the scope

  8  of coverage under a contractual liability policy shall not be

  9  required to exceed an association's claims exposure under

10  service warranty contracts delivered in this state.

11         Section 6.  This act shall take effect upon becoming a

12  law.

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