EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted. Green numbers along left margin indicate location on the printed bill (e.g., 5-15 indicates page 5, line 15).

1-1 Section 1. Title 57 of NRS is hereby amended by adding thereto a

1-3 inclusive, of this act.

1-4 Sec. 2. As used in this chapter, unless the context otherwise requires,

1-5 the words and terms defined in sections 3 to 10, inclusive, of this act have

1-6 the meanings ascribed to them in those sections.

1-7 Sec. 3. "Administrator" means a person with whom a provider

1-8 contracts to carry out the terms of service contracts issued by the

1-9 provider, including, without limitation, issuing service contracts,

1-10 collecting premiums, adjusting claims and performing the duties of the

1-11 provider under the service contract.

1-12 Sec. 4. "Consumer" means a person who purchases, other than for

1-13 resale, goods used primarily for personal, family or household purposes

1-14 and not for business or research purposes.

1-15 Sec. 5. "Goods" means all tangible personal property, whether

1-16 movable at the time of purchase or a fixture, that is used primarily for

1-17 personal, family or household purposes.

2-1 Sec. 6. "Holder" means a resident of this state who:

2-2 1. Purchases a service contract; or

2-3 2. Is legally in possession of a service contract and is entitled to

2-4 enforce the rights of the original purchaser of the service contract.

2-5 Sec. 7. "Issue" means to transfer, sell or offer to sell a service

2-6 contract.

2-7 Sec. 8. "Liability insurance policy" means a policy of insurance that

2-8 is issued to reimburse a provider or to pay on behalf of a provider any

2-9 money the provider has an obligation to pay under a service contract.

2-10 Sec. 9. "Provider" means a person who is obligated to a holder

2-11 pursuant to the terms of a service contract to repair, replace or perform

2-12 maintenance on, or to indemnify the holder for the costs of repairing,

2-13 replacing or performing maintenance on, goods owned by the holder.

2-14 Sec. 10. "Service contract" means a contract pursuant to which a

2-15 provider, in exchange for consideration, is obligated for a specified

2-16 period to a holder to repair, replace or perform maintenance on, or

2-17 indemnify or reimburse the holder for the costs of repairing, replacing or

2-18 performing maintenance on, goods that are described in the service

2-19 contract.

2-20 Sec. 11. 1. The provisions of this chapter do not apply to:

2-21 (a) A warranty;

2-22 (b) A maintenance agreement;

2-23 (c) A service contract provided by a public utility if the service

2-24 contract is regulated by the public utilities commission of Nevada;

2-25 (d) A service contract sold or offered for sale to a person who is not a

2-26 consumer; or

2-27 (e) A service contract for goods if the purchase price of the goods is

2-28 less than $350.

2-29 2. The sale of a service contract pursuant to this chapter does not

2-30 constitute the business of insurance for the purposes of 18 U.S.C. §§

2-31 1033 and 1034.

2-32 3. As used in this section:

2-33 (a) "Maintenance agreement" means a contract for a limited period

2-34 that provides only for scheduled maintenance.

2-35 (b) "Warranty" means a warranty provided by a manufacturer,

2-36 importer or seller of goods for which the manufacturer, importer or seller

2-37 did not receive separate consideration and that:

2-38 (1) Is not negotiated or separated from the sale of the goods;

2-39 (2) Is incidental to the sale of the goods; and

2-40 (3) Guarantees to indemnify the consumer for defective parts,

2-41 mechanical or electrical failure, labor or other remedial measures

2-42 required to repair or replace the goods.

3-1 Sec. 12. A provider shall not issue service contracts in this state

3-2 unless he has been issued a certificate of registration pursuant to the

3-3 provisions of this chapter.

3-4 Sec. 13. 1. A provider who wishes to issue service contracts in this

3-5 state must submit to the commissioner:

3-6 (a) An application on a form prescribed by the commissioner;

3-7 (b) Proof that he has complied with the requirements for security set

3-8 forth in section 14 of this act;

3-9 (c) A copy of each type of service contract he proposes to issue;

3-10 (d) The name, address and telephone number of each administrator

3-11 with whom the provider intends to contract; and

3-12 (e) A fee of $500.

3-13 2. In addition to the fee required by subsection 1, a provider must

3-14 pay a fee of $25 for each type of service contract he files with the

3-15 commissioner for review.

3-16 3. A certificate of registration is valid for 1 year after the date the

3-17 commissioner issues the certificate to the provider. A provider may renew

3-18 his certificate of registration if, before the certificate expires, he submits

3-19 to the commissioner an application on a form prescribed by the

3-20 commissioner and a fee of $500.

3-21 Sec. 14. To be issued a certificate of registration, a provider must

3-22 comply with one of the following:

3-23 1. Purchase a liability insurance policy for each service contract the

3-24 provider issues. The liability insurance policy must be issued by an

3-25 insurer authorized to transact insurance in this state or pursuant to the

3-26 provisions of chapter 685A of NRS.

3-27 2. Maintain a reserve account and deposit with the commissioner

3-28 security as provided in this subsection. The reserve account must contain

3-29 at all times an amount of money equal to at least 40 percent of the gross

3-30 consideration received by the provider for any unexpired service

3-31 contracts, less any claims paid on those unexpired service contracts. The

3-32 commissioner may examine the reserve account at any time. The

3-33 provider shall also deposit with the commissioner security in an amount

3-34 that is equal to $25,000 or 5 percent of the gross consideration received

3-35 by the provider for any unexpired service contracts, less any claims paid

3-36 on the unexpired service contracts, whichever is greater. The security

3-37 must be:

3-38 (a) A surety bond issued by a surety company authorized to do

3-39 business in this state;

3-40 (b) Securities of the type eligible for deposit pursuant to NRS

3-41 682B.030;

3-42 (c) Cash;

4-1 (d) An irrevocable letter of credit issued by a financial institution

4-2 approved by the commissioner; or

4-3 (e) In any other form prescribed by the commissioner.

4-4 3. Maintain, or be a subsidiary of a parent company that maintains,

4-5 a net worth or stockholders’ equity of at least $100,000,000. Upon

4-6 request, a provider shall provide to the commissioner a copy of the most

4-7 recent Form 10-K report or Form 20-F report filed by the provider or

4-8 parent company of the provider with the Securities and Exchange

4-9 Commission within the previous year. If the provider or parent company

4-10 is not required to file those reports with the Securities and Exchange

4-11 Commission, the provider shall provide to the commissioner a copy of the

4-12 most recently audited financial statements of the provider or parent

4-13 company. If the net worth or stockholders’ equity of the parent company

4-14 of the provider is used to comply with the requirements of this subsection,

4-15 the parent company must guarantee to carry out the duties of the

4-16 provider under any service contract issued by the provider.

4-17 Sec. 15. The tax imposed pursuant to NRS 680B.027 does not apply

4-18 to any business transacted pursuant to the provisions of this chapter.

4-19 Sec. 16. 1. Except as otherwise provided in this chapter, a provider

4-20 or an administrator is not required to comply with the provisions of Title

4-21 57 of NRS, except for the provisions of:

4-22 (a) NRS 679B.020 to 679B.157, inclusive;

4-23 (b) NRS 679B.159 to 679B.300, inclusive,

4-24 (c) NRS 679B.310 to 679B.370, inclusive;

4-25 (d) NRS 685B.090 to 685B.190, inclusive;

4-26 (e) NRS 686A.010 to 686A.095, inclusive;

4-27 (f) NRS 686A.160 to 686A.187, inclusive; and

4-28 (g) NRS 686A.260, 686A.270, 686A.280, 686A.300 and 686A.310.

4-29 2. A provider or administrator is not required to obtain a certificate

4-30 of authority from the commissioner pursuant to chapter 680A of NRS to

4-31 issue or administer service contracts.

4-32 Sec. 17. 1. A service contract is void and a provider shall refund to

4-33 the holder the purchase price of the service contract if the holder has not

4-34 made a claim under the service contract and the holder returns the

4-35 service contract to the provider:

4-36 (a) Within 20 days after the date the provider mails a copy of the

4-37 service contract to the holder;

4-38 (b) Within 10 days after the purchaser receives a copy of the service

4-39 contract if the provider furnishes the holder with the copy at the time the

4-40 contract is purchased; or

4-41 (c) Within a longer period specified in the service contract.

4-42 2. The right of a holder to return a service contract pursuant to this

4-43 section applies only to the original purchaser of the service contract.

5-1 3. A service contract must include a provision that clearly states the

5-2 right of a holder to return a service contract pursuant to this section.

5-3 4. The provider shall refund to the holder the purchase price of the

5-4 service contract within 45 days after a service contract is returned

5-5 pursuant to subsection 1. If the provider fails to refund the purchase

5-6 price within that time, the provider shall pay the holder a penalty of 10

5-7 percent of the purchase price for each 30-day period or portion thereof

5-8 that the refund and any accrued penalties remain unpaid.

5-9 Sec. 18. 1. A liability insurance policy issued in this state must

5-10 provide that the issuer of the policy shall:

5-11 (a) Reimburse or pay on behalf of the provider any money the

5-12 provider has a duty to pay under a service contract; or

5-13 (b) Otherwise provide for the performance of the duties of the

5-14 provider under a service contract.

5-15 2. If a provider fails to perform his duties under a service contract

5-16 within 60 days after receiving notice from the holder that the goods

5-17 described in the contract are defective, the holder may apply to the issuer

5-18 of the liability insurance policy for performance of the duties of the

5-19 provider under the service contract.

5-20 Sec. 19. 1. A service contract must:

5-21 (a) Be written in language that is understandable and printed in a

5-22 typeface that is easy to read.

5-23 (b) Indicate that it is insured by a liability insurance policy if it is so

5-24 insured, and include the name and address of the issuer of the policy.

5-25 (c) Include the amount of any deductible that the holder is required to

5-26 pay.

5-27 (d) Include the name and address of the provider, the holder, and, if

5-28 applicable, the administrator.

5-29 (e) Include the purchase price of the service contract.

5-30 (f) Include a description of the goods for which the service contract is

5-31 issued.

5-32 (g) Specify the duties of the provider and any limitations, exceptions

5-33 or exclusions.

5-34 (h) If the service contract is issued for a motor vehicle, indicate

5-35 whether replacement parts that are not made for or by the original

5-36 manufacturer of the motor vehicle may be used to comply with the terms

5-37 of the service contract.

5-38 (i) Include any restrictions on transferring or renewing the service

5-39 contract.

5-40 (j) Include the terms, restrictions or conditions for canceling the

5-41 service contract before it expires and the procedure for canceling the

5-42 service contract. Except as otherwise provided in this paragraph, a

5-43 provider shall mail a written notice to the holder at his last known

6-1 address as indicated in the records of the provider at least 5 days before

6-2 canceling a service contract. The notice must state the date of and reason

6-3 for the cancellation. A provider is not required to provide such notice if

6-4 he is canceling the service contract because of the nonpayment of the

6-5 purchase price of the service contract, a material misrepresentation

6-6 related to the service contract made by the holder or any other act by the

6-7 holder constituting a breach of a duty under the service contract.

6-8 (k) Include the duties of the holder under the contract, including,

6-9 without limitation, the duty to protect against damage to the goods

6-10 covered by the service contract or to comply with any instructions

6-11 included in the owner’s manual for the goods.

6-12 (l) Indicate whether the service contract authorizes the holder to

6-13 recover consequential damages.

6-14 (m) Indicate whether any defect in the goods for which the service

6-15 contract is issued existing on the date the contract is purchased is not

6-16 covered under the service contract.

6-17 2. A provider shall not allow, make or cause to be made a false or

6-18 misleading statement in any of his service contracts or intentionally omit

6-19 a material statement that causes a service contract to be misleading. The

6-20 commissioner may require the provider to amend any service contract

6-21 that the commissioner determines is false or misleading.

6-22 Sec. 20. 1. A provider shall provide to a holder at the time he

6-23 purchases a service contract, a receipt for, or other written evidence of,

6-24 the purchase of the service contract.

6-25 2. The provider shall furnish a copy of the service contract to the

6-26 holder within 15 days after the contract is purchased.

6-27 Sec. 21. 1. Except as otherwise provided in this section, a provider

6-28 shall not include in the name of his business:

6-29 (a) The words "insurance," "casualty," "surety," "mutual" or any

6-30 other word or term that implies that he is engaged in the business of

6-31 transacting insurance or is a surety company; or

6-32 (b) A name that is deceptively similar to the name or description of an

6-33 insurer or surety company or the name of another provider.

6-34 2. A provider may include the word "guaranty" or a similar word in

6-35 the name of his business.

6-36 3. This section does not apply to a provider who, before January 1,

6-37 2000, includes in the name of his business a name that does not comply

6-38 with the provisions of subsection 1. Such a provider shall include in each

6-39 service contract he issues a statement that the service contract is not a

6-40 contract of insurance.

6-41 Sec. 22. No person may require the purchase of a service contract as

6-42 a condition for the approval of a loan or the purchasing of goods.

7-1 Sec. 23. 1. A provider shall maintain records of the transactions

7-2 governed by this chapter. The records of a provider must include:

7-3 (a) A copy of each type of service contract that the provider issues;

7-4 (b) The name and address of each holder who possesses a service

7-5 contract under which the provider has a duty to perform, to the extent

7-6 that the provider knows the name and address of each holder;

7-7 (c) A list that includes each location where the provider issues service

7-8 contracts; and

7-9 (d) The date and a description of each claim made by a holder under a

7-10 service contract.

7-11 2. Except as otherwise provided in this subsection, a provider shall

7-12 retain all records relating to a service contract for at least 1 year after the

7-13 contract has expired. A provider who intends to discontinue doing

7-14 business in this state shall provide the commissioner with satisfactory

7-15 proof that he has discharged his duties to the holders in this state and

7-16 shall not destroy his records without the prior approval of the

7-17 commissioner.

7-18 3. The records required to be maintained pursuant to this section

7-19 may be stored on a computer disk or other storage device for a computer

7-20 from which the records can be readily printed.

7-21 Sec. 24. 1. The commissioner shall conduct examinations to

7-22 enforce the provisions of this chapter pursuant to the provisions of NRS

7-23 679B.230 to 679B.300, inclusive, at such times as he deems necessary.

7-24 2. A provider shall, upon the request of the commissioner, make any

7-25 accounts, books and records concerning any service contract issued by

7-26 the provider available to the commissioner for inspection.

7-27 Sec. 25. A person who violates any provision of this chapter or an

7-28 order or regulation of the commissioner issued or adopted pursuant

7-29 thereto may be assessed a civil penalty by the commissioner of not more

7-30 than $500 for each act or violation, not to exceed an aggregate amount

7-31 of $10,000 for violations of a similar nature. For the purposes of this

7-32 section, violations shall be deemed to be of a similar nature if the

7-33 violations consist of the same or similar conduct, regardless of the

7-34 number of times the conduct occurred.

7-35 Sec. 26. The commissioner may adopt such regulations as are

7-36 necessary to carry out the provisions of this chapter.

7-37 Sec. 27. NRS 680B.027 is hereby amended to read as follows:

7-38 680B.027 1. Except as otherwise provided in NRS 680B.033 and

7-42 the rate of 3.5 percent.

8-1 2. The tax must be paid in the manner required by NRS 680B.030 and

8-2 680B.032.

8-3 3. The commissioner or the executive director of the department of

8-4 taxation may require at any time verified supplemental statements with

8-5 reference to any matter pertinent to the proper assessment of the tax.

8-6 4. For the purposes of this section, "insurer" includes the state

8-7 industrial insurance system.

8-8 Sec. 28. The provisions of this act do not apply to service contracts

8-9 issued or renewed before January 1, 2000.

8-10 Sec. 29. This act becomes effective on January 1, 2000.