093_HB3626

 
                                     LRB093 10864 JLS 11514 b

 1        AN ACT concerning vehicle protection products.

 2        Be it enacted by the People of  the  State  of  Illinois,
 3    represented in the General Assembly:

 4        Section  1.  Short  title.  This  Act may be cited as the
 5    Vehicle Protection Product Act.

 6        Section 5.  Definitions.
 7        "Administrator"  means  a  third  party  other  than  the
 8    warrantor  who  is  designated  by  the   warrantor   to   be
 9    responsible  for  the  administration  of  vehicle protection
10    product warranties.
11        "Department" means the Department of Insurance.
12        "Director" means the Director of Insurance.
13        "Service contract"  means  a  contract  or  agreement  as
14    defined under Section 5 of the Service Contract Act.
15        "Incidental   costs"  means  expenses  specified  in  the
16    warranty incurred by  the  warranty  holder  related  to  the
17    failure  of  the  vehicle  protection  product  to perform as
18    provided in  the  warranty.  Incidental  costs  may  include,
19    without  limitation,  insurance  policy  deductibles,  rental
20    vehicle  charges,  the difference between the actual value of
21    the stolen vehicle at the time of theft and  the  cost  of  a
22    replacement   vehicle,   sales   taxes,   registration  fees,
23    transaction fees, and mechanical inspection fees.
24        "Vehicle protection product" means a  vehicle  protection
25    device,  system,  or  service  that  is  (i)  installed on or
26    applied to a vehicle, (ii) is designed  to  prevent  loss  or
27    damage to a vehicle from a specific cause, and (iii) includes
28    a  written  warranty.  For purposes of this Section, the term
29    vehicle protection product shall include, without limitation,
30    alarm systems, body part marking  products,  steering  locks,
31    window  etch  products,  pedal  and  ignition locks, fuel and
 
                            -2-      LRB093 10864 JLS 11514 b
 1    ignition kill switches, and electronic, radio, and  satellite
 2    tracking devices.
 3        "Warranty" or "vehicle protection product warranty" means
 4    a  written  agreement  by  a  warrantor  that provides if the
 5    vehicle protection product fails to prevent loss or damage to
 6    a vehicle from a specific cause,  that  the  warranty  holder
 7    shall  be paid specified incidental costs by the warrantor as
 8    a result of the failure of the vehicle protection product  to
 9    perform pursuant to the terms of the warranty.
10        "Warranty  holder"  means  the  person  who  purchases  a
11    vehicle protection product or who is a permitted transferee.
12        "Warrantor" means a person who is contractually obligated
13    to  the  warranty  holder  under  the  terms  of  the vehicle
14    protection product warranty agreement. A warrantor  does  not
15    include an insurer.
16        "Warranty  reimbursement insurance policy" means a policy
17    of insurance that is issued to the vehicle protection product
18    warrantor to provide reimbursement to the warrantor or to pay
19    on  behalf  of  the   warrantor   all   covered   contractual
20    obligations  incurred  by  the  warrantor under the terms and
21    conditions  of  the  insured   vehicle   protection   product
22    warranties sold by the warrantor.

23        Section 10.  Exemptions.
24        (a)  Vehicle  protection  product  warrantors and related
25    vehicle   protection    product    sellers    and    warranty
26    administrators  complying  with  this Act are not required to
27    comply with and are not  subject  to  any  provision  of  the
28    Illinois Insurance Code or the Service Contract Act.
29        (b)  Service  contract  providers who do not sell vehicle
30    protection products are not subject to  the  requirements  of
31    this Act.

32        Section    15.  Financial    requirements.   No   vehicle
 
                            -3-      LRB093 10864 JLS 11514 b
 1    protection product shall be sold, or offered for sale in this
 2    State unless one of the following conditions is satisfied:
 3             (1) (A)  The vehicle protection product warrantor is
 4        insured under a warranty reimbursement  insurance  policy
 5        issued  by  an  insurer authorized to do business in this
 6        State and providing that the insurer will pay to,  or  on
 7        behalf  of,  the  warrantor  100%  of  all  sums that the
 8        warrantor is legally obligated to pay  according  to  the
 9        warrantor's contractual obligations under the warrantor's
10        vehicle protection product warranty;
11             (B)  a   true  and  correct  copy  of  the  warranty
12        reimbursement insurance policy has been  filed  with  the
13        Director by the warrantor;
14             (C)  the  vehicle protection product warranty states
15        that the obligations of the  warrantor  to  the  warranty
16        holder   are   covered  under  a  warranty  reimbursement
17        insurance policy; and
18             (D)  the vehicle protection product warranty  states
19        the  name  and  address  of  the  issuer  of the warranty
20        reimbursement insurance policy and  states  that  in  the
21        event  payment due under the terms of the warranty is not
22        provided by the warrantor within 60 days after  proof  of
23        loss  has  been  filed  according  to  the  terms  of the
24        warranty by the warranty holder, the warranty holder  may
25        file  directly  with the warranty reimbursement insurance
26        company for reimbursement.
27             (2) (A)  The vehicle  protection  product  warrantor
28        maintains  a  funded  reserve account for its obligations
29        under  its  vehicle   protection   products   sold   with
30        warranties  still outstanding in this State. The reserves
31        shall not be less than 40%  of  the  gross  consideration
32        received,  less  claims  paid, for all vehicle protection
33        products sold with warranties still then in force;
34             (B)  the warrantor places in trust with the Director
 
                            -4-      LRB093 10864 JLS 11514 b
 1        a financial security deposit, having a value of not  less
 2        than  5% of the gross consideration received, less claims
 3        paid, for  all  vehicle  protection  products  sold  with
 4        warranties  then  in  force,  but  not less than $25,000,
 5        consisting of securities of the type eligible for deposit
 6        by authorized insurers in this State and;
 7             (C)  The warrantor provides  the  Director  with  an
 8        audited  financial  statement  annually  of  the  vehicle
 9        protection product revenues and claims.
10             (3) (A)  The  vehicle  protection product warrantor,
11        or its parent  company  in  accordance  with  subdivision
12        (3)(B),  maintains a net worth or stockholders' equity of
13        $50,000,000; and
14             (B)  the warrantor provides the Director with a copy
15        of the warrantor's or the  warrantor's  parent  company's
16        most  recent  Form  10-K  or  Form  20-F  filed  with the
17        Securities  and  Exchange  Commission  within  the   last
18        calendar year or, if the warrantor does not file with the
19        Securities   and  Exchange  Commission,  a  copy  of  the
20        warrantor's or the warrantor's parent  company's  audited
21        financial  statements  that  shows  a  net  worth  of the
22        warrantor or its parent company of at least  $50,000,000.
23        If the warrantor's parent company's Form 10-K, Form 20-F,
24        or  audited  financial  statements  are filed to meet the
25        warrantor's financial  stability  requirement,  then  the
26        parent  company  shall agree to guarantee the obligations
27        of the warrantor relating to  warranties  issued  by  the
28        warrantor in this State.

29        Section 20.  Reimbursement policy; required provisions.
30        (a)  No  warranty reimbursement insurance policy shall be
31    issued, sold, or offered for sale in this  State  unless  the
32    policy states that the issuer of the policy will reimburse or
33    pay on behalf of the vehicle protection product warrantor all
 
                            -5-      LRB093 10864 JLS 11514 b
 1    covered  sums which the warrantor is legally obligated to pay
 2    or will provide the service that  the  warrantor  is  legally
 3    obligated to perform according to the warrantor's contractual
 4    obligations  under  the  provisions of the insured warranties
 5    sold by the warrantor.
 6        (b)  If services or payment due under the  terms  of  the
 7    warranty  is  not  provided  by  the warrantor within 60 days
 8    after proof of loss has been filed according to the terms  of
 9    the  warranty by the warranty holder, the warranty holder may
10    file directly with the insurance company writing the warranty
11    reimbursement insurance policy for reimbursement.
12        (c)  A  warranty  reimbursement  insurance  company  that
13    insures a warranty shall be deemed to have  received  payment
14    of  the  premium  if the warranty holder paid for the vehicle
15    protection product.

16        Section 25.  Registration requirements for warrantors.
17        (a)  No vehicle protection product shall be sold in  this
18    State  until  the following information has been submitted to
19    the Department:
20             (1)  the name  of  the  vehicle  protection  product
21        warrantor;
22             (2)  a  list  identifying  the warrantor's executive
23        officer  or  officers  directly   responsible   for   the
24        warrantor's warranty business;
25             (3)  the  name  and address of the warrantor's agent
26        for service of process in this State, if other  than  the
27        warrantor;
28             (4)  a  true  and accurate copy of all warranties to
29        be used in this State; and
30             (5)  a statement indicating under which provision of
31        Section 15 the warrantor qualifies to do business in this
32        State as a warrantor.
33        (b)  The  warranty  provider   shall   pay   an   initial
 
                            -6-      LRB093 10864 JLS 11514 b
 1    registration  fee  of $200 and a renewal fee of $75 each year
 2    thereafter. All fees and penalties collected under  this  Act
 3    shall  be paid to the Director and deposited in the Insurance
 4    Financial Regulation Fund.

 5        Section 30.  Required warranty disclosures.  All  vehicle
 6    protection  product  warranties  used  in  this  State  shall
 7    contain all of the following disclosures written in clear and
 8    understandable language:
 9             (1)  the name and address of the warrantor;
10             (2)  the   total   consideration   for  the  vehicle
11        protection product paid by the purchaser of  the  vehicle
12        protection  product and the terms under which the vehicle
13        protection product is sold; however, the  purchase  price
14        is   not   required  to  be  preprinted  on  the  vehicle
15        protection product warranty and may  be  negotiated  with
16        the product purchaser at the time of sale;
17             (3)  the  conditions  and  procedures  for  making a
18        claim under the warranty, including  the  name,  address,
19        and  local or toll-free telephone number of the person or
20        office where  such  claim  must  be  filed  or  approvals
21        obtained;
22             (4)  the  existence  and  amount of a deductible, if
23        any;
24             (5)  the details of the warrantor's duties,  payment
25        obligations,  or  performance  to  be  provided under the
26        terms of the warranty and any limitations, exceptions, or
27        exclusions;
28             (6)  the   terms,   conditions,   and   restrictions
29        governing transferability of the warranty, if any;
30             (7)  the  provisions  governing   cancellation   and
31        refunds in accordance with Section 35 of this Act;
32             (8)  whether  or  not  the  warranty  covers failure
33        resulting from normal wear and tear;
 
                            -7-      LRB093 10864 JLS 11514 b
 1             (9)  the    requirements     concerning     warranty
 2        reimbursement  insurance disclosure in subdivision (1)(C)
 3        of Section 15 of this Act, if required, which information
 4        may be stamped or printed on the  form  at  the  time  of
 5        sale; and
 6             (10)  the  duties, if any, of the warranty holder to
 7        protect against any further damage and  any  requirements
 8        to follow the warranty's instructions.

 9        Section 35.  Cancellation and refunds.
10        (a)  No vehicle protection product may be sold or offered
11    for  sale in this State unless the vehicle protection product
12    warranty clearly states the terms  and  conditions  governing
13    the cancellation of the sale and warranty, if any.
14        (b)  The  warrantor  may  only cancel the warranty if the
15    warranty holder:
16             (1)  fails  to  pay  for  the   vehicle   protection
17        product;
18             (2)  makes  a  material misrepresentation of fact to
19        the seller or warrantor;
20             (3)  commits fraud; or
21             (4)  substantially breaches  the  warranty  holder's
22        duties under the warranty.
23        (c)  A  warrantor canceling a warranty shall mail written
24    notice of cancellation to the warranty  holder  at  the  last
25    address  of the warranty holder in the warrantor's records at
26    least  30  days  prior  to  the   effective   date   of   the
27    cancellation.  The  notice  shall state the effective date of
28    the cancellation and the reason for the cancellation.

29        Section 40.  Incidental benefits.  A  vehicle  protection
30    product  warranty  may  provide full or partial reimbursement
31    for other expenses such as incidental costs incurred  by  the
32    warranty  holder  as  a  direct  and  proximate result of the
 
                            -8-      LRB093 10864 JLS 11514 b
 1    failure of the  vehicle  protection  product  to  perform  as
 2    provided in the warranty. The warranty shall clearly describe
 3    the manner for the calculation of payment.

 4        Section 45.  Record keeping requirements.
 5        (a)  The  vehicle protection product warrantor shall keep
 6    accurate accounts, books, and records concerning transactions
 7    regulated under this Act.
 8        (b)  The warrantor's accounts, books, and  records  shall
 9    include the following:
10             (1)  copies of each type of warranty sold;
11             (2)  the  name  and address of each warranty holder,
12        to  the  extent  that  the  name  and  address  has  been
13        furnished by the warranty holder;
14             (3)  a  list  of   the   locations   where   vehicle
15        protection  products  are  marketed, sold, or offered for
16        sale; and
17             (4)  written claims files  which  shall  contain  at
18        least  the  date and description of claims related to the
19        vehicle protection product warranties.
20        (c)  Except  as  provided  in  subsection  (e)  of   this
21    Section,  the  warrantor shall retain all records required to
22    be maintained by this Section for at least 3 years after  the
23    specified term of a warranty has expired.
24        (d)  The  records required under this Act may be, but are
25    not required to be, maintained on a computer  disk  or  other
26    record  keeping  technology. If the records are maintained in
27    other than  hard  copy,  the  records  shall  be  capable  of
28    duplication  to  legible  hard  copy  at  the  request of the
29    Director.
30        (e)  A warrantor discontinuing  business  in  this  State
31    shall  maintain  its  records until it furnishes the Director
32    satisfactory proof that it has discharged all obligations  to
33    warranty holders in this State.
 
                            -9-      LRB093 10864 JLS 11514 b
 1        Section 50.  Examinations and enforcement provisions.
 2        (a)  The Director may conduct examinations of warrantors,
 3    administrators,  or  other  persons  to  enforce this Act and
 4    protect warranty holders in this State. Upon request  of  the
 5    Director,  a  warrantor  shall make available to the Director
 6    all  accounts,  books,   and   records   concerning   vehicle
 7    protection  products sold by the warrantor that are necessary
 8    to enable the Director to reasonably determine compliance  or
 9    noncompliance with this Act.
10        (b)  The  Director  may  take action that is necessary or
11    appropriate to enforce the provisions of  this  Act  and  the
12    Director's  rules  and orders and to protect warranty holders
13    in this State.  If  a  warrantor  engages  in  a  pattern  or
14    practice  of  conduct  that  violates  this  Act and that the
15    Director  reasonably  believes  threatens   to   render   the
16    warrantor  insolvent  or  cause irreparable loss or injury to
17    the property or business of any person or company located  in
18    this State, the Director may:
19             (1)  issue  an  order  directed to that warrantor to
20        cease  and  desist  from  engaging   in   further   acts,
21        practices, or transactions that are causing the conduct;
22             (2)  issue  an order prohibiting that warrantor from
23        selling  or  offering  for  sale  service  contracts   in
24        violation of this Act;
25             (3)  issue an order imposing a civil penalty on that
26        warrantor; or
27             (4)  issue  any  combination  of  the  foregoing, as
28        applicable.
29        Prior to the effective date of any order issued  pursuant
30    to  this subsection, the Director must provide written notice
31    of the order to the  warrantor  and  the  opportunity  for  a
32    hearing  to  be held within 10 business days after receipt of
33    the notice, except prior notice  and  hearing  shall  not  be
34    required   if  the  Director  reasonably  believes  that  the
 
                            -10-     LRB093 10864 JLS 11514 b
 1    warrantor has become, or is about to become, insolvent.
 2        A person aggrieved by an order issued under this  Section
 3    may  request  a  hearing  before  the  Director.  The hearing
 4    request shall be filed with the Director within 20 days after
 5    the date the Director's order is effective, and the  Director
 6    must  hold such a hearing within 15 days after receipt of the
 7    hearing request.
 8        (c)  At the hearing, the burden shall be on the  Director
 9    to  show  why  the  order  issued pursuant to this Section is
10    justified. The provisions of Section 10-25  of  the  Illinois
11    Administrative Procedure Act shall apply to a hearing request
12    under this Section.
13        (d)  The  Director  may  bring  an action in any court of
14    competent jurisdiction for an injunction or other appropriate
15    relief to enjoin threatened or existing  violations  of  this
16    Act  or  of  the  Director's orders or rules. An action filed
17    under this Section also may seek  restitution  on  behalf  of
18    persons  aggrieved  by  a  violation of this Act or orders or
19    rules of the Director.
20        (e)  A person who is found to have violated this  Act  or
21    orders  or rules of the Director may be ordered to pay to the
22    Director a civil penalty in  an  amount,  determined  by  the
23    Director,  of  not  more than $500 per violation and not more
24    than $10,000 in the aggregate for all violations of a similar
25    nature. For purposes of this Section, violations shall be  of
26    a  similar  nature  if  the violation consists of the same or
27    similar course of conduct, action, or practice,  irrespective
28    of  the number of times the conduct, action, or practice that
29    is determined to be a violation of this Act occurred.

30        Section 55.  Rulemaking power.  The  Director  may  adopt
31    such  administrative  rules consistent with the provisions of
32    this Act as are necessary to implement them.
 
                            -11-     LRB093 10864 JLS 11514 b
 1        Section  60.  Applicability.  This  Act  applies  to  all
 2    vehicle protection products sold or offered for  sale  on  or
 3    after  the  effective  date  of  this Act. The failure of any
 4    person to comply with this Act prior to  its  effective  date
 5    shall   not   be   admissible   in   any   court  proceeding,
 6    administrative  proceeding,   arbitration,   or   alternative
 7    dispute  resolution  proceeding and may not otherwise be used
 8    to prove that the  action  of  any  person  or  the  affected
 9    vehicle   protection   product   was  unlawful  or  otherwise
10    improper.

11        Section 99.  Effective date. This  Act  takes  effect  on
12    January 1, 2004.