56:12-90 Assurance of faithful performance required to sell service contracts.
4. a. A person shall not issue, offer to sell, or sell service contracts in this State unless the provider complies with one or more of the following means of assuring faithful performance to its contract holders:
(1) each service contract shall be insured under a reimbursement insurance policy issued by an insurer licensed, registered, or otherwise authorized to transact the business of insurance in this State, and which complies with the provisions of section 6 of this act;
(2) a funded reserve account shall be established and maintained for its obligations under each contract issued and outstanding in this State, with reserves calculated at not less than 40% of gross consideration received, then less the amount of claims paid under those contracts. If those reserves fall below the minimum required, the provider has 90 days to come into compliance without violating this section. The reserve account shall be subject to examination and review by the director pursuant to section 10 of this act; or
(3) alone or together with the provider's parent or other affiliated corporation, the provider shall maintain a net worth or stockholders' equity of not less than $100,000,000. Upon request by the director, the provider shall provide the director with a copy of the provider's or its parent's or other affiliated corporation's most recent Form 10-K or Form 20-F, or successor form containing substantially the same information, filed with the Securities and Exchange Commission within the last 12-month period, or if the provider, or parent or other affiliated corporation, does not file this form with the Securities and Exchange Commission, a copy of the entity's audited financial statements, which show a net worth of the provider, or parent or other affiliated corporation, of not less than $100,000,000. If the provider's parent's or other affiliated corporation's form or financial statements are filed to meet the provider's means of assuring faithful performance to its contract holders, the parent or other affiliated corporation shall agree to guarantee the obligations of the provider.
b.Except for the requirements set forth in subsection a. of this section, the provider shall not be subject to any additional financial security requirements by the director in order to issue, offer, or sell service contracts in this State.
c.In addition to any applicable damages and penalties pursuant to subsection a. of section 10 of P.L.2013, c.197 (C.56:12-96), a person who sells a service contract that is not in compliance with P.L.2013, c.197 (C.56:12-87 et al.) or that is issued by a provider that is not in compliance with P.L.2013, c.197 (C.56:12-87 et al.) shall be jointly and severally liable for all covered contractual obligations arising under the terms of such contract or any service contract sold at a time when the provider of the contract is non-compliant.
L.2013, c.197, s.4.
Section: Previous 56-12-83 56-12-84 56-12-85 56-12-86 56-12-87 56-12-88 56-12-89 56-12-90 56-12-91 56-12-92 56-12-93 56-12-94 56-12-95 56-12-96 56-13-1 Next
Last modified: October 11, 2016