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 9, inclusive, of this act have

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

1-7 Sec. 3. "Administrator" means a person who is responsible for

1-8 administering a service contract that is issued, sold or offered for sale by

1-9 a provider.

1-10 Sec. 4. "Consumer" means a person who purchases, other than for

1-11 resale, goods used primarily for personal, family or household purposes

1-12 and not for business or research purposes.

1-13 Sec. 5. "Contractual liability insurance policy" means a policy of

1-14 insurance that is issued to a provider to either:

1-15 1. Reimburse the provider under the terms of a service contract

1-16 issued or sold by the provider; or

2-1 2. If the provider does not satisfy his obligation under a service

2-2 contract, pay on behalf of the provider any money the provider has an

2-3 obligation to pay under the service contract.

2-4 Sec. 6. "Goods" means all tangible personal property, whether

2-5 movable at the time of purchase or a fixture, that is used primarily for

2-6 personal, family or household purposes.

2-7 Sec. 7. "Holder" means a resident of this state who:

2-8 1. Purchases a service contract; or

2-9 2. Is legally in possession of a service contract and is entitled to

2-10 enforce the rights of the original purchaser of the service contract.

2-11 Sec. 8. "Provider" means a person who is obligated to a holder

2-12 pursuant to the terms of a service contract to repair, replace or perform

2-13 maintenance on, or to indemnify the holder for the costs of repairing,

2-14 replacing or performing maintenance on, goods.

2-15 Sec. 9. "Service contract" means a contract pursuant to which a

2-16 provider, in exchange for separately stated consideration, is obligated for

2-17 a specified period to a holder to repair, replace or perform maintenance

2-18 on, or indemnify or reimburse the holder for the costs of repairing,

2-19 replacing or performing maintenance on, goods that are described in the

2-20 service contract and which have an operational or structural failure as a

2-21 result of a defect in materials, workmanship or normal wear and tear,

2-22 including, without limitation:

2-23 1. A contract that includes a provision for incidental payment of

2-24 indemnity under limited circumstances, including, without limitation,

2-25 towing, rental and emergency road service; and

2-26 2. A contract that provides for the repair, replacement or

2-27 maintenance of goods for damages that result from power surges or

2-28 accidental damage from handling.

2-29 Sec. 10. 1. The provisions of this Title do not apply to:

2-30 (a) A warranty;

2-31 (b) A maintenance agreement;

2-32 (c) A service contract provided by a public utility on its transmission

2-33 device if the service contract is regulated by the public utilities

2-34 commission of Nevada;

2-35 (d) A service contract sold or offered for sale to a person who is not a

2-36 consumer; or

2-37 (e) A service contract for goods if the purchase price of the goods is

2-38 less than $350.

2-39 2. The sale of a service contract pursuant to this chapter does not

2-40 constitute the business of insurance for the purposes of 18 U.S.C. §§

2-41 1033 and 1034.

2-42 3. As used in this section:

3-1 (a) "Maintenance agreement" means a contract for a limited period

3-2 that provides only for scheduled maintenance.

3-3 (b) "Warranty" means a warranty provided solely by a manufacturer,

3-4 importer or seller of goods for which the manufacturer, importer or

3-5 seller did not receive separate consideration and that:

3-6 (1) Is not negotiated or separated from the sale of the goods;

3-7 (2) Is incidental to the sale of the goods; and

3-8 (3) Guarantees to indemnify the consumer for defective parts,

3-9 mechanical or electrical failure, labor or other remedial measures

3-10 required to repair or replace the goods.

3-11 Sec. 11. A provider shall not issue, sell or offer for sale service

3-12 contracts in this state unless he has been issued a certificate of

3-13 registration pursuant to the provisions of this chapter.

3-14 Sec. 12. 1. A provider who wishes to issue, sell or offer for sale

3-15 service contracts in this state must submit to the commissioner:

3-16 (a) A registration application on a form prescribed by the

3-17 commissioner;

3-18 (b) Proof that he has complied with the requirements for security set

3-19 forth in section 13 of this act;

3-20 (c) A copy of each type of service contract he proposes to issue, sell or

3-21 offer for sale;

3-22 (d) The name, address and telephone number of each administrator

3-23 with whom the provider intends to contract; and

3-24 (e) A fee of $500.

3-25 2. In addition to the fee required by subsection 1, a provider must

3-26 pay a fee of $25 for each type of service contract he files with the

3-27 commissioner.

3-28 3. A certificate of registration is valid for 1 year after the date the

3-29 commissioner issues the certificate to the provider. A provider may renew

3-30 his certificate of registration if, before the certificate expires, he submits

3-31 to the commissioner an application on a form prescribed by the

3-32 commissioner and a fee of $500.

3-33 Sec. 13. To be issued a certificate of registration, a provider must

3-34 comply with one of the following:

3-35 1. Purchase a contractual liability insurance policy which insures the

3-36 obligations of each service contract the provider issues, sells or offers for

3-37 sale. The contractual liability insurance policy must be issued by an

3-38 insurer authorized to transact insurance in this state or pursuant to the

3-39 provisions of chapter 685A of NRS.

3-40 2. Maintain a reserve account and deposit with the commissioner

3-41 security as provided in this subsection. The reserve account must contain

3-42 at all times an amount of money equal to at least 40 percent of the gross

3-43 consideration received by the provider for any unexpired service

4-1 contracts, less any claims paid on those unexpired service contracts. The

4-2 commissioner may examine the reserve account at any time. The

4-3 provider shall also deposit with the commissioner security in an amount

4-4 that is equal to $25,000 or 5 percent of the gross consideration received

4-5 by the provider for any unexpired service contracts, less any claims paid

4-6 on the unexpired service contracts, whichever is greater. The security

4-7 must be:

4-8 (a) A surety bond issued by a surety company authorized to do

4-9 business in this state;

4-10 (b) Securities of the type eligible for deposit pursuant to NRS

4-11 682B.030;

4-12 (c) Cash;

4-13 (d) An irrevocable letter of credit issued by a financial institution

4-14 approved by the commissioner; or

4-15 (e) In any other form prescribed by the commissioner.

4-16 3. Maintain, or be a subsidiary of a parent company that maintains,

4-17 a net worth or stockholders’ equity of at least $100,000,000. Upon

4-18 request, a provider shall provide to the commissioner a copy of the most

4-19 recent Form 10-K report or Form 20-F report filed by the provider or

4-20 parent company of the provider with the Securities and Exchange

4-21 Commission within the previous year. If the provider or parent company

4-22 is not required to file those reports with the Securities and Exchange

4-23 Commission, the provider shall provide to the commissioner a copy of the

4-24 most recently audited financial statements of the provider or parent

4-25 company. If the net worth or stockholders’ equity of the parent company

4-26 of the provider is used to comply with the requirements of this subsection,

4-27 the parent company must guarantee to carry out the duties of the

4-28 provider under any service contract issued or sold by the provider.

4-29 Sec. 14. The tax imposed pursuant to NRS 680B.027 does not apply

4-30 to any business transacted pursuant to the provisions of this chapter.

4-31 Sec. 15. 1. Except as otherwise provided in this chapter, the

4-32 marketing, issuance, sale, offering for sale, making, proposing to make

4-33 and administration of service contracts are not subject to the provisions

4-34 of Title 57 of NRS, except for the provisions of:

4-35 (a) NRS 679B.020 to 679B.157, inclusive;

4-36 (b) NRS 679B.159 to 679B.300, inclusive;

4-37 (c) NRS 679B.310 to 679B.370, inclusive;

4-38 (d) NRS 685B.090 to 685B.190, inclusive;

4-39 (e) NRS 686A.010 to 686A.095, inclusive;

4-40 (f) NRS 686A.160 to 686A.187, inclusive; and

4-41 (g) NRS 686A.260, 686A.270, 686A.280, 686A.300 and 686A.310.

5-1 2. A provider, person who sells service contracts, administrator or

5-2 any other person is not required to obtain a certificate of authority from

5-3 the commissioner pursuant to chapter 680A of NRS to issue, sell, offer

5-4 for sale or administer service contracts.

5-5 Sec. 16. 1. A service contract is void and a provider shall refund to

5-6 the holder the purchase price of the service contract if the holder has not

5-7 made a claim under the service contract and the holder returns the

5-8 service contract to the provider:

5-9 (a) Within 20 days after the date the provider mails a copy of the

5-10 service contract to the holder;

5-11 (b) Within 10 days after the purchaser receives a copy of the service

5-12 contract if the provider furnishes the holder with the copy at the time the

5-13 contract is purchased; or

5-14 (c) Within a longer period specified in the service contract.

5-15 2. The right of a holder to return a service contract pursuant to this

5-16 section applies only to the original purchaser of the service contract.

5-17 3. A service contract must include a provision that clearly states the

5-18 right of a holder to return a service contract pursuant to this section.

5-19 4. The provider shall refund to the holder the purchase price of the

5-20 service contract within 45 days after a service contract is returned

5-21 pursuant to subsection 1. If the provider fails to refund the purchase

5-22 price within that time, the provider shall pay the holder a penalty of 10

5-23 percent of the purchase price for each 30-day period or portion thereof

5-24 that the refund and any accrued penalties remain unpaid.

5-25 Sec. 17. 1. A contractual liability insurance policy issued in this

5-26 state must provide that the issuer of the policy shall:

5-27 (a) Reimburse or pay on behalf of the provider any money the

5-28 provider has a duty to pay under a service contract; or

5-29 (b) Otherwise provide for the performance of the duties of the

5-30 provider under a service contract.

5-31 2. If a provider fails to perform his duties under a service contract

5-32 within 60 days after receiving notice from the holder that the goods

5-33 described in the contract are defective, the holder may apply to the issuer

5-34 of the contractual liability insurance policy for performance of the duties

5-35 of the provider under the service contract.

5-36 Sec. 18. 1. A service contract must:

5-37 (a) Be written in language that is understandable and printed in a

5-38 typeface that is easy to read.

5-39 (b) Indicate that it is insured by a contractual liability insurance

5-40 policy if it is so insured, and include the name and address of the issuer

5-41 of the policy or that it is backed by the full faith and credit of the provider

5-42 if the service contract is not insured by a contractual liability insurance

5-43 policy.

6-1 (c) Include the amount of any deductible that the holder is required to

6-2 pay.

6-3 (d) Include the name and address of the provider, the holder, if

6-4 provided by the holder and, if applicable, the administrator. The names

6-5 and addresses of such persons are not required to be preprinted on the

6-6 service contract and may be added to the service contract at the time of

6-7 the sale.

6-8 (e) Include the purchase price of the service contract. The purchase

6-9 price must be determined pursuant to a schedule of fees established by

6-10 the provider.

6-11 (f) Include a description of the goods covered by the service contract.

6-12 (g) Specify the duties of the provider and any limitations, exceptions

6-13 or exclusions.

6-14 (h) If the service contract covers a motor vehicle, indicate whether

6-15 replacement parts that are not made for or by the original manufacturer

6-16 of the motor vehicle may be used to comply with the terms of the service

6-17 contract.

6-18 (i) Include any restrictions on transferring or renewing the service

6-19 contract.

6-20 (j) Include the terms, restrictions or conditions for canceling the

6-21 service contract before it expires and the procedure for canceling the

6-22 service contract. The conditions for canceling the service contract must

6-23 include, without limitation, the provisions of NRS 687B.320.

6-24 (k) Include the duties of the holder under the contract, including,

6-25 without limitation, the duty to protect against damage to the goods

6-26 covered by the service contract or to comply with any instructions

6-27 included in the owner’s manual for the goods.

6-28 (l) Indicate whether the service contract authorizes the holder to

6-29 recover consequential damages.

6-30 (m) Indicate whether any defect in the goods covered by the service

6-31 contract existing on the date the contract is purchased is not covered

6-32 under the service contract.

6-33 2. A provider shall not allow, make or cause to be made a false or

6-34 misleading statement in any of his service contracts or intentionally omit

6-35 a material statement that causes a service contract to be misleading. The

6-36 commissioner may require the provider to amend any service contract

6-37 that the commissioner determines is false or misleading.

6-38 Sec. 19. 1. A provider shall provide a receipt for, or other written

6-39 evidence of, the purchase of a service contract.

6-40 2. The provider shall furnish a copy of the service contract to the

6-41 holder within a reasonable time after the contract is purchased.

6-42 Sec. 20. 1. Except as otherwise provided in this section, a provider

6-43 shall not include in the name of his business:

7-1 (a) The words "insurance," "casualty," "surety," "mutual" or any

7-2 other word or term that implies that he is engaged in the business of

7-3 transacting insurance or is a surety company; or

7-4 (b) A name that is deceptively similar to the name or description of an

7-5 insurer or surety company or the name of another provider.

7-6 2. A provider may include the word "guaranty" or a similar word in

7-7 the name of his business.

7-8 3. This section does not apply to a provider who, before January 1,

7-9 2000, includes in the name of his business a name that does not comply

7-10 with the provisions of subsection 1. Such a provider shall include in each

7-11 service contract he issues, sells or offers for sale a statement that the

7-12 service contract is not a contract of insurance.

7-13 Sec. 21. No person may require the purchase of a service contract as

7-14 a condition for the approval of a loan or the purchasing of goods.

7-15 Sec. 22. 1. A provider shall maintain records of the transactions

7-16 governed by this chapter. The records of a provider must include:

7-17 (a) A copy of each type of service contract that the provider issues,

7-18 sells or offers for sale;

7-19 (b) The name and address of each holder who possesses a service

7-20 contract under which the provider has a duty to perform, to the extent

7-21 that the provider knows the name and address of each holder;

7-22 (c) A list that includes each location where the provider issues, sells or

7-23 offers for sale service contracts; and

7-24 (d) The date and a description of each claim made by a holder under a

7-25 service contract.

7-26 2. Except as otherwise provided in this subsection, a provider shall

7-27 retain all records relating to a service contract for at least 1 year after the

7-28 contract has expired. A provider who intends to discontinue doing

7-29 business in this state shall provide the commissioner with satisfactory

7-30 proof that he has discharged his duties to the holders in this state and

7-31 shall not destroy his records without the prior approval of the

7-32 commissioner.

7-33 3. The records required to be maintained pursuant to this section

7-34 may be stored on a computer disk or other storage device for a computer

7-35 from which the records can be readily printed.

7-36 Sec. 23. 1. Except as otherwise provided in this subsection, the

7-37 commissioner may conduct examinations to enforce the provisions of

7-38 this chapter pursuant to the provisions of NRS 679B.230 to 679B.300,

7-39 inclusive, at such times as he deems necessary. The commissioner is not

7-40 required to comply with the requirement in NRS 679B.230 that insurers

7-41 be examined not less frequently than every 5 years in the enforcement of

7-42 this chapter.

8-1 2. A provider shall, upon the request of the commissioner, make

8-2 available to the commissioner for inspection any accounts, books and

8-3 records concerning any service contract issued, sold or offered for sale by

8-4 the provider which are reasonably necessary to enable the commissioner

8-5 to determine whether the provider is in compliance with the provisions of

8-6 this chapter.

8-7 Sec. 24. A person who violates any provision of this chapter or an

8-8 order or regulation of the commissioner issued or adopted pursuant

8-9 thereto may be assessed a civil penalty by the commissioner of not more

8-10 than $500 for each act or violation, not to exceed an aggregate amount

8-11 of $10,000 for violations of a similar nature. For the purposes of this

8-12 section, violations shall be deemed to be of a similar nature if the

8-13 violations consist of the same or similar conduct, regardless of the

8-14 number of times the conduct occurred.

8-15 Sec. 25. The commissioner may adopt such regulations as are

8-16 necessary to carry out the provisions of this chapter.

8-17 Sec. 26. NRS 680B.027 is hereby amended to read as follows:

8-18 680B.027 1. Except as otherwise provided in NRS 680B.033 and

8-29 industrial insurance system.

8-30 Sec. 27. 1. The provisions of this act do not apply to service

8-31 contracts issued or renewed before January 1, 2000.

8-32 2. The failure of a provider or other person to comply with the

8-33 provisions of this act or to administer a service contract in the manner set

8-34 forth in this act before January 1, 2000, is not admissible in any court,

8-35 arbitration or alternative dispute resolution proceeding, and may not

8-36 otherwise be used to prove that the action of any person or any provision of

8-37 the service contract was unlawful or otherwise improper.

8-38 Sec. 28. This act becomes effective upon passage and approval for the

8-39 purpose of adopting regulations and on January 1, 2000, for all other

8-40 purposes.