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;

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

2-38 less than $250; or

2-39 (f) A service contract issued, sold or offered for sale by a vehicle

2-40 dealer on vehicles sold by the dealer, if the dealer is licensed pursuant to

2-41 NRS 482.325 and the service contract obligates either the dealer or the

2-42 manufacturer of the vehicle, or an affiliate of the dealer or

2-43 manufacturer, to provide all services under the service contract.

3-1 2. The sale of a service contract pursuant to this chapter does not

3-2 constitute the business of insurance for the purposes of 18 U.S.C. §§

3-3 1033 and 1034.

3-4 3. As used in this section:

3-5 (a) "Maintenance agreement" means a contract for a limited period

3-6 that provides only for scheduled maintenance.

3-7 (b) "Warranty" means a warranty provided solely by a manufacturer,

3-8 importer or seller of goods for which the manufacturer, importer or

3-9 seller did not receive separate consideration and that:

3-10 (1) Is not negotiated or separated from the sale of the goods;

3-11 (2) Is incidental to the sale of the goods; and

3-12 (3) Guarantees to indemnify the consumer for defective parts,

3-13 mechanical or electrical failure, labor or other remedial measures

3-14 required to repair or replace the goods.

3-15 Sec. 11. A provider shall not issue, sell or offer for sale service

3-16 contracts in this state unless he has been issued a certificate of

3-17 registration pursuant to the provisions of this chapter.

3-18 Sec. 12. 1. A provider who wishes to issue, sell or offer for sale

3-19 service contracts in this state must submit to the commissioner:

3-20 (a) A registration application on a form prescribed by the

3-21 commissioner;

3-22 (b) Proof that he has complied with the requirements for security set

3-23 forth in section 13 of this act;

3-24 (c) A copy of each type of service contract he proposes to issue, sell or

3-25 offer for sale;

3-26 (d) The name, address and telephone number of each administrator

3-27 with whom the provider intends to contract; and

3-28 (e) A fee of $1,000.

3-29 2. In addition to the fee required by subsection 1, a provider must

3-30 pay a fee of $25 for each type of service contract he files with the

3-31 commissioner.

3-32 3. A certificate of registration is valid for 1 year after the date the

3-33 commissioner issues the certificate to the provider. A provider may renew

3-34 his certificate of registration if, before the certificate expires, he submits

3-35 to the commissioner an application on a form prescribed by the

3-36 commissioner and a fee of $500.

3-37 Sec. 13. To be issued a certificate of registration, a provider must

3-38 comply with one of the following:

3-39 1. Purchase a contractual liability insurance policy which insures the

3-40 obligations of each service contract the provider issues, sells or offers for

3-41 sale. The contractual liability insurance policy must be issued by an

3-42 insurer authorized to transact insurance in this state or pursuant to the

3-43 provisions of chapter 685A of NRS.

4-1 2. Maintain a reserve account and deposit with the commissioner

4-2 security as provided in this subsection. The reserve account must contain

4-3 at all times an amount of money equal to at least 40 percent of the gross

4-4 consideration received by the provider for any unexpired service

4-5 contracts, less any claims paid on those unexpired service contracts. The

4-6 commissioner may examine the reserve account at any time. The

4-7 provider shall also deposit with the commissioner security in an amount

4-8 that is equal to $25,000 or 5 percent of the gross consideration received

4-9 by the provider for any unexpired service contracts, less any claims paid

4-10 on the unexpired service contracts, whichever is greater. The security

4-11 must be:

4-12 (a) A surety bond issued by a surety company authorized to do

4-13 business in this state;

4-14 (b) Securities of the type eligible for deposit pursuant to NRS

4-15 682B.030;

4-16 (c) Cash;

4-17 (d) An irrevocable letter of credit issued by a financial institution

4-18 approved by the commissioner; or

4-19 (e) In any other form prescribed by the commissioner.

4-20 3. Maintain, or be a subsidiary of a parent company that maintains,

4-21 a net worth or stockholders’ equity of at least $100,000,000. Upon

4-22 request, a provider shall provide to the commissioner a copy of the most

4-23 recent Form 10-K report or Form 20-F report filed by the provider or

4-24 parent company of the provider with the Securities and Exchange

4-25 Commission within the previous year. If the provider or parent company

4-26 is not required to file those reports with the Securities and Exchange

4-27 Commission, the provider shall provide to the commissioner a copy of the

4-28 most recently audited financial statements of the provider or parent

4-29 company. If the net worth or stockholders’ equity of the parent company

4-30 of the provider is used to comply with the requirements of this subsection,

4-31 the parent company must guarantee to carry out the duties of the

4-32 provider under any service contract issued or sold by the provider.

4-33 Sec. 14. The tax imposed pursuant to NRS 680B.027 does not apply

4-34 to any business transacted pursuant to the provisions of this chapter.

4-35 Sec. 15. 1. Except as otherwise provided in this chapter, the

4-36 marketing, issuance, sale, offering for sale, making, proposing to make

4-37 and administration of service contracts are not subject to the provisions

4-38 of Title 57 of NRS, except, when applicable, the provisions of:

4-39 (a) NRS 679B.020 to 679B.157, inclusive;

4-40 (b) NRS 679B.159 to 679B.300, inclusive;

4-41 (c) NRS 679B.310 to 679B.370, inclusive;

4-42 (d) NRS 685B.090 to 685B.190, inclusive;

4-43 (e) NRS 686A.010 to 686A.095, inclusive;

5-1 (f) NRS 686A.160 to 686A.187, inclusive; and

5-2 (g) NRS 686A.260, 686A.270, 686A.280, 686A.300 and 686A.310.

5-3 2. A provider, person who sells service contracts, administrator or

5-4 any other person is not required to obtain a certificate of authority from

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

5-6 for sale or administer service contracts.

5-7 Sec. 16. 1. A service contract is void and a provider shall refund to

5-8 the holder the purchase price of the service contract if the holder has not

5-9 made a claim under the service contract and the holder returns the

5-10 service contract to the provider:

5-11 (a) Within 20 days after the date the provider mails a copy of the

5-12 service contract to the holder;

5-13 (b) Within 10 days after the purchaser receives a copy of the service

5-14 contract if the provider furnishes the holder with the copy at the time the

5-15 contract is purchased; or

5-16 (c) Within a longer period specified in the service contract.

5-17 2. The right of a holder to return a service contract pursuant to this

5-18 section applies only to the original purchaser of the service contract.

5-19 3. A service contract must include a provision that clearly states the

5-20 right of a holder to return a service contract pursuant to this section.

5-21 4. The provider shall refund to the holder the purchase price of the

5-22 service contract within 45 days after a service contract is returned

5-23 pursuant to subsection 1. If the provider fails to refund the purchase

5-24 price within that time, the provider shall pay the holder a penalty of 10

5-25 percent of the purchase price for each 30-day period or portion thereof

5-26 that the refund and any accrued penalties remain unpaid.

5-27 Sec. 17. 1. A contractual liability insurance policy issued in this

5-28 state must provide that the issuer of the policy shall:

5-29 (a) Reimburse or pay on behalf of the provider any money the

5-30 provider has a duty to pay under a service contract; or

5-31 (b) Otherwise provide for the performance of the duties of the

5-32 provider under a service contract.

5-33 2. If a provider fails to perform his duties under a service contract

5-34 within 60 days after receiving notice from the holder that the goods

5-35 described in the contract are defective, the holder may apply to the issuer

5-36 of the contractual liability insurance policy for performance of the duties

5-37 of the provider under the service contract.

5-38 Sec. 18. 1. A service contract must:

5-39 (a) Be written in language that is understandable and printed in a

5-40 typeface that is easy to read.

5-41 (b) Indicate that it is insured by a contractual liability insurance

5-42 policy if it is so insured, and include the name and address of the issuer

6-1 of the policy or that it is backed by the full faith and credit of the provider

6-2 if the service contract is not insured by a contractual liability insurance

6-3 policy.

6-4 (c) Include the amount of any deductible that the holder is required to

6-5 pay.

6-6 (d) Include the name and address of the provider and, if applicable:

6-7 (1) The name and address of the administrator; and

6-8 (2) The name of the holder, if provided by the holder.

6-9 The names and addresses of such persons are not required to be

6-10 preprinted on the service contract and may be added to the service

6-11 contract at the time of the sale.

6-12 (e) Include the purchase price of the service contract. The purchase

6-13 price must be determined pursuant to a schedule of fees established by

6-14 the provider. The purchase price is not required to be preprinted on the

6-15 service contract and may be negotiated with the holder and added to the

6-16 service contract at the time of sale.

6-17 (f) Include a description of the goods covered by the service contract.

6-18 (g) Specify the duties of the provider and any limitations, exceptions

6-19 or exclusions.

6-20 (h) If the service contract covers a motor vehicle, indicate whether

6-21 replacement parts that are not made for or by the original manufacturer

6-22 of the motor vehicle may be used to comply with the terms of the service

6-23 contract.

6-24 (i) Include any restrictions on transferring or renewing the service

6-25 contract.

6-26 (j) Include the terms, restrictions or conditions for canceling the

6-27 service contract before it expires and the procedure for canceling the

6-28 service contract. The conditions for canceling the service contract must

6-29 include, without limitation, the provisions of section 19.5 of this act.

6-30 (k) Include the duties of the holder under the contract, including,

6-31 without limitation, the duty to protect against damage to the goods

6-32 covered by the service contract or to comply with any instructions

6-33 included in the owner’s manual for the goods.

6-34 (l) Indicate whether the service contract authorizes the holder to

6-35 recover consequential damages.

6-36 (m) Indicate whether any defect in the goods covered by the service

6-37 contract existing on the date the contract is purchased is not covered

6-38 under the service contract.

6-39 2. A provider shall not allow, make or cause to be made a false or

6-40 misleading statement in any of his service contracts or intentionally omit

6-41 a material statement that causes a service contract to be misleading. The

6-42 commissioner may require the provider to amend any service contract

6-43 that the commissioner determines is false or misleading.

7-1 Sec. 19. 1. A provider shall provide a receipt for, or other written

7-2 evidence of, the purchase of a service contract.

7-3 2. The provider shall furnish a copy of the service contract to the

7-4 holder within a reasonable time after the contract is purchased.

7-5 Sec. 19.5. 1. No service contract that has been in effect for at least

7-6 70 days may be canceled by the provider before the expiration of the

7-7 agreed term or 1 year after the effective date of the service contract,

7-8 whichever occurs first, except on any of the following grounds:

7-9 (a) Failure by the holder to pay an amount when due;

7-10 (b) Conviction of the holder of a crime which results in an increase in

7-11 the service required under the service contract;

7-12 (c) Discovery of fraud or material misrepresentation by the holder in

7-13 obtaining the service contract, or in presenting a claim for service

7-14 thereunder;

7-15 (d) Discovery of:

7-16 (1) An act or omission by the holder; or

7-17 (2) A violation by the holder of any condition of the service

7-18 contract,

7-19 which occurred after the effective date of the service contract and which

7-20 substantially and materially increases the service required under the

7-21 service contract; or

7-22 (e) A material change in the nature or extent of the required service or

7-23 repair which occurs after the effective date of the service contract and

7-24 which causes the required service or repair to be substantially and

7-25 materially increased beyond that contemplated at the time that the service

7-26 contract was issued or sold.

7-27 2. No cancellation of a service contract may become effective until at

7-28 least 15 days after the notice of cancellation is mailed to the holder.

7-29 Sec. 20. 1. Except as otherwise provided in this section, a provider

7-30 shall not include in the name of his business:

7-31 (a) The words "insurance," "casualty," "surety," "mutual" or any

7-32 other word or term that implies that he is engaged in the business of

7-33 transacting insurance or is a surety company; or

7-34 (b) A name that is deceptively similar to the name or description of an

7-35 insurer or surety company or the name of another provider.

7-36 2. A provider may include the word "guaranty" or a similar word in

7-37 the name of his business.

7-38 3. This section does not apply to a provider who, before January 1,

7-39 2000, includes in the name of his business a name that does not comply

7-40 with the provisions of subsection 1. Such a provider shall include in each

7-41 service contract he issues, sells or offers for sale a statement that the

7-42 service contract is not a contract of insurance.

8-1 Sec. 21. No person may require the purchase of a service contract as

8-2 a condition for the approval of a loan or the purchasing of goods.

8-3 Sec. 22. 1. A provider shall maintain records of the transactions

8-4 governed by this chapter. The records of a provider must include:

8-5 (a) A copy of each type of service contract that the provider issues,

8-6 sells or offers for sale;

8-7 (b) The name and address of each holder who possesses a service

8-8 contract under which the provider has a duty to perform, to the extent

8-9 that the provider knows the name and address of each holder;

8-10 (c) A list that includes each location where the provider issues, sells or

8-11 offers for sale service contracts; and

8-12 (d) The date and a description of each claim made by a holder under a

8-13 service contract.

8-14 2. Except as otherwise provided in this subsection, a provider shall

8-15 retain all records relating to a service contract for at least 1 year after the

8-16 contract has expired. A provider who intends to discontinue doing

8-17 business in this state shall provide the commissioner with satisfactory

8-18 proof that he has discharged his duties to the holders in this state and

8-19 shall not destroy his records without the prior approval of the

8-20 commissioner.

8-21 3. The records required to be maintained pursuant to this section

8-22 may be stored on a computer disk or other storage device for a computer

8-23 from which the records can be readily printed.

8-24 Sec. 23. 1. Except as otherwise provided in this subsection, the

8-25 commissioner may conduct examinations to enforce the provisions of

8-26 this chapter pursuant to the provisions of NRS 679B.230 to 679B.300,

8-27 inclusive, at such times as he deems necessary. The commissioner is not

8-28 required to comply with the requirement in NRS 679B.230 that insurers

8-29 be examined not less frequently than every 5 years in the enforcement of

8-30 this chapter.

8-31 2. A provider shall, upon the request of the commissioner, make

8-32 available to the commissioner for inspection any accounts, books and

8-33 records concerning any service contract issued, sold or offered for sale by

8-34 the provider which are reasonably necessary to enable the commissioner

8-35 to determine whether the provider is in compliance with the provisions of

8-36 this chapter.

8-37 Sec. 24. A person who violates any provision of this chapter or an

8-38 order or regulation of the commissioner issued or adopted pursuant

8-39 thereto may be assessed a civil penalty by the commissioner of not more

8-40 than $500 for each act or violation, not to exceed an aggregate amount

8-41 of $10,000 for violations of a similar nature. For the purposes of this

9-1 section, violations shall be deemed to be of a similar nature if the

9-2 violations consist of the same or similar conduct, regardless of the

9-3 number of times the conduct occurred.

9-4 Sec. 25. The commissioner may adopt such regulations as are

9-5 necessary to carry out the provisions of this chapter.

9-6 Sec. 26. NRS 680B.027 is hereby amended to read as follows:

9-7 680B.027 1. Except as otherwise provided in NRS 680B.033 and

9-18 industrial insurance system.

9-19 Sec. 27. 1. The provisions of this act do not apply to service

9-20 contracts issued or renewed before January 1, 2000.

9-21 2. The failure of a provider or other person to comply with the

9-22 provisions of this act or to administer a service contract in the manner set

9-23 forth in this act before January 1, 2000, is not admissible in any court,

9-24 arbitration or alternative dispute resolution proceeding, and may not

9-25 otherwise be used to prove that the action of any person or any provision of

9-26 the service contract was unlawful or otherwise improper.

9-27 Sec. 28. This act becomes effective upon passage and approval for the

9-28 purpose of adopting regulations and on January 1, 2000, for all other

9-29 purposes.