20-1095.06. Required service contract disclosures

A. Each service company holding a service company permit shall submit all service contract forms to the director for 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 more than thirty days.

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

1. The service contract may be canceled or voided due to acts or omissions of the service company or its assignees or subcontractors for their failure to provide correct information or their failure to perform the services or repairs provided in a timely, competent and workmanlike manner.

2. Parts or components repaired or replaced under the service contract are excluded.

3. The service contract may be canceled or voided by the service company or its representatives for any of the following reasons:

(a) Preexisting conditions that were known or that reasonably should have been known by the service company or the person selling the service contract on the service company's behalf.

(b) Prior use or unlawful acts relating to the product.

(c) Misrepresentation by either the service company or the person selling the service contract on the service company's behalf.

C. Service contracts may not be issued, sold or offered for sale in this state unless the service company has provided both:

1. A receipt for or other written evidence of the purchase of the service contract to the contract holder.

2. A copy of the service contract to the service contract holder within a reasonable period of time from the date of purchase.

D. Service contracts that are marketed, sold, offered for sale, issued, made, proposed to be made or administered in this state shall be written, printed or typed in clear, understandable language that is easy to read and shall disclose the following, as applicable:

1. Service contracts that are insured under a mechanical reimbursement insurance policy pursuant to section 20-1095.03, subsection A, paragraph 3, subdivision (b) shall state the name and address of the insurer and contain a statement in substantially the following form: " Obligations of the obligor under this service contract are insured under a mechanical service contract reimbursement insurance policy" .

2. Service contracts that are not insured under a reimbursement insurance policy pursuant to section 20-1095.03, subsection A, paragraph 3, subdivision (b) shall contain a statement in substantially the following form: " Obligations of the obligor under this service contract are backed by the full faith and credit of the obligor" .

3. Service contracts shall state the name and address of the obligor and shall identify an administrator if different from the obligor, the service contract seller and the service contract holder to the extent that the name of the service contract holder has been furnished by the service contract holder. The identities of these parties are not required to be preprinted on the service contract and may be added to the service contract at the time of sale.

4. Service contracts shall state the total purchase price of the service contract. The purchase price is not required to be preprinted on the service contract and may be negotiated at the time of sale with the service contract holder.

5. Service contracts shall state the existence of a deductible amount, if applicable.

6. Service contracts shall specify the merchandise and services to be provided and any limits, exceptions or exclusions. Exclusions from coverage shall be in bold-faced type. Service contracts may, but are not required to, cover damage resulting from rust, corrosion or damage caused by a noncovered part or system.

7. Service contracts covering automobiles shall state whether the use of nonoriginal manufacturers' parts is allowed.

8. Service contracts shall state any restrictions governing the transferability of the service contract, if applicable.

9. Service contracts shall state the terms, restrictions or conditions governing cancellation of the service contract before the termination or expiration date of the service contract by either the service company or the service contract holder. At a minimum, a service contract shall provide for a pro rata refund after deducting for benefits paid and administrative expenses associated with the cancellation. The administrative expenses may not exceed ten percent of the gross amount paid by the service contract holder for the service contract.

10. Service contracts shall set forth all of the obligations and duties of the service contract holder, including the duty to protect against any further damage and any requirement to follow owner's manual.

11. Service contracts shall disclose the material acts or omissions of the contract holder that cancel or void coverage, if any.

12. A service contract may not exclude preexisting conditions if such conditions were known or should reasonably have been known by the service company or the person selling the service contract on the service company's behalf.

E. Brochures and other advertising or marketing materials are not required to be filed with or approved by the director.