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HF 933

as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am

KEY: stricken = removed, old language.
underscored = added, new language.
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A bill for an act
relating to commerce; regulating vehicle protection products; establishing
registration and oversight requirements; requiring certain disclosures; providing
remedies and penalties; proposing coding for new law as Minnesota Statutes,
chapter 59C.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [59C.01] SHORT TITLE.
new text end

new text begin This chapter may be cited as the Vehicle Protection Product Act.
new text end

Sec. 2.

new text begin [59C.02] DEFINITIONS.
new text end

new text begin Subdivision 1. new text end

new text begin Terms. new text end

new text begin For purposes of this chapter, the terms defined in subdivisions
2 to 11 have the meanings given them.
new text end

new text begin Subd. 2. new text end

new text begin Administrator. new text end

new text begin "Administrator" means a third party other than the
warrantor who is designated by the warrantor to be responsible for the administration
of vehicle protection product warranties.
new text end

new text begin Subd. 3. new text end

new text begin Commissioner. new text end

new text begin "Commissioner" means the commissioner of commerce.
new text end

new text begin Subd. 4. new text end

new text begin Department. new text end

new text begin "Department" means the Department of Commerce.
new text end

new text begin Subd. 5. new text end

new text begin Incidental costs. new text end

new text begin "Incidental costs" means expenses specified in the
warranty incurred by the warranty holder related to the failure of the vehicle protection
product to perform as provided in the warranty. Incidental costs may include, without
limitation, insurance policy deductibles, rental vehicle charges, the difference between the
actual value of the stolen vehicle at the time of theft and the cost of a replacement vehicle,
sales taxes, registration fees, transaction fees, and mechanical inspection fees.
new text end

new text begin Subd. 6. new text end

new text begin Service contract. new text end

new text begin "Service contract" means a contract or agreement as
regulated under chapter 59B.
new text end

new text begin Subd. 7. new text end

new text begin Vehicle protection product. new text end

new text begin "Vehicle protection product" means a vehicle
protection device, system, or service that:
new text end

new text begin (1) is installed on or applied to a vehicle;
new text end

new text begin (2) is designed to prevent loss or damage to a vehicle from a specific cause; and
new text end

new text begin (3) includes a written warranty.
new text end

new text begin For purposes of this section, vehicle protection product includes, without limitation,
alarm systems; body part marking products; steering locks; window etch products; pedal
and ignition locks; fuel and ignition kill switches; and electronic, radio, and satellite
tracking devices.
new text end

new text begin Subd. 8. new text end

new text begin Vehicle protection product warranty or warranty. new text end

new text begin "Vehicle protection
product warranty" or "warranty" means, for the purposes of this chapter, a written
agreement by a warrantor that provides if the vehicle protection product fails to prevent
loss or damage to a vehicle from a specific cause, that the warranty holder must be
paid specified incidental costs by the warrantor as a result of the failure of the vehicle
protection product to perform pursuant to the terms of the warranty.
new text end

new text begin Subd. 9. new text end

new text begin Vehicle protection product warrantor or warrantor. new text end

new text begin "Vehicle protection
product warrantor" or "warrantor," for the purposes of this chapter, means a person who is
contractually obligated to the warranty holder under the terms of the vehicle protection
product warranty agreement. Warrantor does not include an authorized insurer providing a
warranty reimbursement insurance policy.
new text end

new text begin Subd. 10. new text end

new text begin Warranty holder. new text end

new text begin "Warranty holder," for the purposes of this chapter,
means the person who purchases a vehicle protection product or who is a permitted
transferee.
new text end

new text begin Subd. 11. new text end

new text begin Warranty reimbursement insurance policy. new text end

new text begin "Warranty reimbursement
insurance policy" means a policy of insurance that is issued to the vehicle protection
product warrantor to provide reimbursement to, or to pay on behalf of, the warrantor all
covered contractual obligations incurred by the warrantor under the terms and conditions
of the insured vehicle protection product warranties sold by the warrantor.
new text end

Sec. 3.

new text begin [59C.03] SCOPE AND EXEMPTIONS.
new text end

new text begin (a) No vehicle protection product may be sold or offered for sale in this state unless
the seller, warrantor, and administrator, if any, comply with the provisions of this chapter.
new text end

new text begin (b) Vehicle protection product warrantors and related vehicle protection product
sellers and warranty administrators complying with this chapter are not required to comply
with and are not subject to any other provision of chapters 59B to 72A.
new text end

new text begin (c) Service contract providers who do not sell vehicle protection products are not
subject to the requirements of this chapter and sales of vehicle protection products are
exempt from the requirements of chapter 59B.
new text end

new text begin (d) Warranties, indemnity agreements, and guarantees that are not provided as a part
of a vehicle protection product are not subject to the provisions of this chapter.
new text end

Sec. 4.

new text begin [59C.04] REGISTRATION AND FILING REQUIREMENTS OF
WARRANTORS.
new text end

new text begin Subdivision 1. new text end

new text begin General requirement. new text end

new text begin A person may not operate as a warrantor or
represent to the public that the person is a warrantor unless the person is registered with
the department on a form prescribed by the commissioner.
new text end

new text begin Subd. 2. new text end

new text begin Registration records. new text end

new text begin A registrant shall file a warrantor registration
record annually and shall update it within 30 days of any change. A registration record
must contain the following information:
new text end

new text begin (1) the warrantor's name, any fictitious names under which the warrantor does
business in the state, principal office address, and telephone number;
new text end

new text begin (2) the name and address of the warrantor's agent for service of process in the state if
other than the warrantor;
new text end

new text begin (3) the names of the warrantor's executive officer or officers directly responsible for
the warrantor's vehicle protection product business;
new text end

new text begin (4) the name, address, and telephone number of any administrators designated by
the warrantor to be responsible for the administration of vehicle protection product
warranties in this state;
new text end

new text begin (5) a copy of the warranty reimbursement insurance policy or policies or other
financial information required by section 59C.05;
new text end

new text begin (6) a copy of each warranty the warrantor proposes to use in this state; and
new text end

new text begin (7) a statement indicating under which provision of section 59C.05 the warrantor
qualifies to do business in this state as a warrantor.
new text end

new text begin Subd. 3. new text end

new text begin Registration fee. new text end

new text begin The commissioner may charge each registrant a
reasonable fee to offset the cost of processing the registration and maintaining the records
in an amount not to exceed $250 annually. The information in subdivision 2, clauses (1)
and (2), must be made available to the public.
new text end

new text begin Subd. 4. new text end

new text begin Renewal. new text end

new text begin If a registrant fails to register by the renewal deadline, the
commissioner shall give them written notice of the failure and the registrant will have 30
days to complete the renewal of the registration before the commissioner suspends the
registration.
new text end

new text begin Subd. 5. new text end

new text begin Exception. new text end

new text begin An administrator or person who sells or solicits a sale of a
vehicle protection product but who is not a warrantor shall not be required to register as a
warrantor or be licensed under the insurance laws of this state to sell vehicle protection
products.
new text end

Sec. 5.

new text begin [59C.05] FINANCIAL RESPONSIBILITY.
new text end

new text begin Subdivision 1. new text end

new text begin General requirements. new text end

new text begin No vehicle protection product may be sold,
or offered for sale in this state unless the warrantor meets one of the conditions in this
section in order to ensure adequate performance under the warranty. No other financial
security requirements or financial standards for warrantors is required.
new text end

new text begin Subd. 2. new text end

new text begin Warranty reimbursement insurance policy. new text end

new text begin The vehicle protection
product warrantor shall be insured under a warranty reimbursement insurance policy
issued by an insurer authorized to do business in this state which provides that:
new text end

new text begin (1) the insurer will pay to, or on behalf of the warrantor, 100 percent of all sums
that the warrantor is legally obligated to pay according to the warrantor's contractual
obligations under the warrantor's vehicle protection product warranty;
new text end

new text begin (2) a true and correct copy of the warranty reimbursement insurance policy has been
filed with the commissioner by the warrantor; and
new text end

new text begin (3) the policy contains the provision required in section 59C.06.
new text end

new text begin Subd. 3. new text end

new text begin Network or stockholder's equity. new text end

new text begin (1) The vehicle protection product
warrantor, or its parent company in accordance with clause (2), shall maintain a net worth
or stockholders' equity of $50,000,000; and
new text end

new text begin (2) the warrantor shall provide the commissioner with a copy of the warrantor's or
the warrantor's parent company's most recent Form 10-K or Form 20-F filed with the
Securities and Exchange Commission within the last calendar year or, if the warrantor
does not file with the Securities and Exchange Commission, a copy of the warrantor or
the warrantor's parent company's audited financial statements that shows a net worth of
the warrantor or its parent company of at least $50,000,000. If the warrantor's parent
company's Form 10-K, Form 20-F, or audited financial statements are filed to meet
the warrantor's financial stability requirement, then the parent company shall agree to
guarantee the obligations of the warrantor relating to warranties issued by the warrantor in
this state. The financial information filed under this paragraph is confidential as a trade
secret of the entity filing the information and is not subject to public disclosure.
new text end

Sec. 6.

new text begin [59C.06] WARRANTY REIMBURSEMENT POLICY REQUIREMENTS.
new text end

new text begin No warranty reimbursement insurance policy may be issued, sold, or offered for sale
in this state unless the policy meets the following conditions:
new text end

new text begin (1) the policy states that the issuer of the policy will reimburse, or pay on behalf of
the vehicle protection product warrantor, all covered sums that the warrantor is legally
obligated to pay, or will provide all service that the warrantor is legally obligated to
perform according to the warrantor's contractual obligations under the provisions of the
insured warranties sold by the warrantor;
new text end

new text begin (2) the policy states that in the event payment due under the terms of the warranty is
not provided by the warrantor within 60 days after proof of loss has been filed according
to the terms of the warranty by the warranty holder, the warranty holder may file directly
with the warranty reimbursement insurance company for reimbursement;
new text end

new text begin (3) the policy provides that a warranty reimbursement insurance company that
insures a warranty is deemed to have received payment of the premium if the warranty
holder paid for the vehicle protection product and the insurer's liability under the policy
shall not be reduced or relieved by a failure of the warrantor, for any reason, to report the
issuance of a warranty to the insurer; and
new text end

new text begin (4) the policy has the following provisions regarding cancellation of the policy:
new text end

new text begin (i) the issuer of a reimbursement insurance policy shall not cancel the policy until a
notice of cancellation in writing has been mailed or delivered to the commissioner and
each insured warrantor;
new text end

new text begin (ii) the cancellation of a reimbursement insurance policy shall not reduce the issuer's
responsibility for vehicle protection products sold prior to the date of cancellation; and
new text end

new text begin (iii) in the event an insurer cancels a policy that a warrantor has filed with the
commissioner, the warrantor shall do either of the following:
new text end

new text begin (A) file a copy of a new policy with the commissioner, before the termination of
the prior policy, providing no lapse in coverage following the termination of the prior
policy; or
new text end

new text begin (B) discontinue offering warranties as of the termination date of the policy until a
new policy becomes effective and is accepted by the commissioner.
new text end

Sec. 7.

new text begin [59C.07] DISCLOSURE TO WARRANTY HOLDER.
new text end

new text begin A vehicle protection product warranty must not be sold or offered for sale in this
state unless the warranty:
new text end

new text begin (1) states, "The obligations of the warrantor to the warranty holder are guaranteed
under a warranty reimbursement insurance policy" if the warrantor elects to meet its
financial responsibility obligations under section 59C.05, subdivision 2, or states "The
obligations of the warrantor under this warranty are backed by the full faith and credit
of the warrantor" if the warrantor elects to meet its financial responsibility obligations
under section 59C.05, subdivision 3;
new text end

new text begin (2) states that in the event a warranty holder must make a claim against a party other
than the warranty reimbursement insurance policy issuer, the warranty holder is entitled to
make a direct claim against the insurer upon the failure of the warrantor to pay any claim
or meet any obligation under the terms of the warranty within 60 days after proof of loss
has been filed with the warrantor, if the warrantor elects to meet its financial responsibility
obligations under section 59C.05, subdivision 2;
new text end

new text begin (3) states the name and address of the issuer of the warranty reimbursement
insurance policy, and this information need not be preprinted on the warranty form, but
may be added to or stamped on the warranty, if the warrantor elects to meet its financial
responsibility obligations under section 59C.05, subdivision 2;
new text end

new text begin (4) identifies the warrantor, the seller, and the warranty holder;
new text end

new text begin (5) sets forth the total purchase price and the terms under which it is to be paid,
however, the purchase price is not required to be preprinted on the vehicle protection
product warranty and may be negotiated with the consumer at the time of sale;
new text end

new text begin (6) sets forth the procedure for making a claim, including a telephone number;
new text end

new text begin (7) specifies the payments or performance to be provided under the warranty
including payments for incidental costs expressed as either a fixed amount specified in the
warranty or sales agreement or by the use of a formula itemizing specific incidental costs
incurred by the warranty holder, the manner of calculation or determination of payments
or performance, and any limitations, exceptions, or exclusions;
new text end

new text begin (8) sets forth all of the obligations and duties of the warranty holder such as the duty
to protect against any further damage to the vehicle, the obligation to notify the warrantor
in advance of any repair, or other similar requirements, if any;
new text end

new text begin (9) sets forth any terms, restrictions, or conditions governing transferability and
cancellation of the warranty, if any; and
new text end

new text begin (10) contains a disclosure that reads substantially as follows: "This agreement is a
product warranty and is not insurance."
new text end

Sec. 8.

new text begin [59C.08] PROHIBITED ACTS.
new text end

new text begin (a) Unless licensed as an insurance company, a vehicle protection product warrantor
shall not use in its name, contracts, or literature, any of the words "insurance," "casualty,"
"surety," "mutual," or any other words descriptive of the insurance, casualty, or surety
business or deceptively similar to the name or description of any insurance or surety
corporation, or any other vehicle protection product warrantor. A warrantor may use the
term "guaranty" or similar word in the warrantor's name.
new text end

new text begin (b) A vehicle protection product seller or warrantor may not require as a condition of
financing that a retail purchaser of a motor vehicle purchase a vehicle protection product.
new text end

Sec. 9.

new text begin [59C.09] RECORD KEEPING.
new text end

new text begin (a) All vehicle protection product warrantors shall keep accurate accounts, books,
and records concerning transactions regulated under this chapter.
new text end

new text begin (b) A vehicle protection product warrantor's accounts, books, and records must
include:
new text end

new text begin (1) copies of all vehicle protection product warranties;
new text end

new text begin (2) the name and address of each warranty holder; and
new text end

new text begin (3) the dates, amounts, and descriptions of all receipts, claims, and expenditures.
new text end

new text begin (c) A vehicle protection product warrantor shall retain all required accounts, books,
and records pertaining to each warranty holder for at least two years after the specified
period of coverage has expired. A warrantor discontinuing business in this state shall
maintain its records until it furnishes the commissioner satisfactory proof that it has
discharged all obligations to warranty holders in this state.
new text end

new text begin (d) Vehicle protection product warrantors shall make all accounts, books, and
records concerning transactions regulated under this chapter available to the commissioner
for examination.
new text end

Sec. 10.

new text begin [59C.10] COMMISSIONER'S POWERS AND DUTIES.
new text end

new text begin Subdivision 1. new text end

new text begin EXAMINATION AND COMPLIANCE POWERS. new text end

new text begin The
commissioner may conduct examinations of warrantors, administrators, or other persons
to enforce this chapter and protect warranty holders in this state. Upon request of the
commissioner, a warrantor shall make available to the commissioner all accounts,
books, and records concerning vehicle protection products sold by the warrantor that
are necessary to enable the commissioner to reasonably determine compliance or
noncompliance with this chapter.
new text end

new text begin Subd. 2. new text end

new text begin Enforcement authority. new text end

new text begin The commissioner may take action that is
necessary or appropriate to enforce the provisions of this chapter and the commissioner's
rules and orders and to protect warranty holders in this state. The commissioner has the
enforcement authority in chapter 45 available to enforce the provisions of the chapter and
the rules adopted pursuant to it.
new text end

Sec. 11.

new text begin [59C.11] RULEMAKING POWER.
new text end

new text begin The commissioner may adopt rules consistent with the provisions of this chapter
as are necessary to implement them. The rules must include disclosures for the benefit
of the warranty holder, record keeping, and procedures for public complaints. The rules
must also include the conditions under which surplus lines insurers may be rejected for the
purpose of underwriting vehicle protection product warranty agreements.
new text end

Sec. 12.

new text begin [59C.12] APPLICABILITY.
new text end

new text begin This chapter applies to all vehicle protection products sold or offered for sale on
or after the effective date of this chapter. The failure of any person to comply with this
chapter before its effective date is not admissible in any court proceeding, administrative
proceeding, arbitration, or alternative dispute resolution proceeding and may not otherwise
be used to prove that the action of any person or the affected vehicle protection product
was unlawful or otherwise improper. The adoption of this chapter does not imply that
a vehicle protection product warranty was insurance before the effective date of this
chapter. Nothing in this section may be construed to require the application of the penalty
provisions where this section is not applicable.
new text end

Sec. 13. new text beginEFFECTIVE DATE.
new text end

new text begin This act is effective January 1, 2008.
new text end