Chief Sponsor: Curtis S. Bramble

House Sponsor: James A. Dunnigan


8     General Description:
9          This bill modifies provisions of the Insurance Code related to service contracts.
10     Highlighted Provisions:
11          This bill:
12          ▸     amends the scope and applicability of the Insurance Code;
13          ▸     amends the definition of "service contract"; and
14          ▸     makes technical changes.
15     Money Appropriated in this Bill:
16          None
17     Other Special Clauses:
18          None
19     Utah Code Sections Affected:
20     AMENDS:
21          31A-1-103, as last amended by Laws of Utah 2010, Chapter 274
22          31A-6a-101, as last amended by Laws of Utah 2016, Chapter 138

24     Be it enacted by the Legislature of the state of Utah:
25          Section 1. Section 31A-1-103 is amended to read:
26          31A-1-103. Scope and applicability of title.
27          (1) This title does not apply to:

28          (a) a retainer contract made by an attorney-at-law:
29          (i) with an individual client; and
30          (ii) under which fees are based on estimates of the nature and amount of services to be
31     provided to the specific client;
32          (b) a contract similar to a contract described in Subsection (1)(a) made with a group of
33     clients involved in the same or closely related legal matters;
34          (c) an arrangement for providing benefits that do not exceed a limited amount of
35     consultations, advice on simple legal matters, either alone or in combination with referral
36     services, or the promise of fee discounts for handling other legal matters;
37          (d) limited legal assistance on an informal basis involving neither an express
38     contractual obligation nor reasonable expectations, in the context of an employment,
39     membership, educational, or similar relationship;
40          (e) legal assistance by employee organizations to their members in matters relating to
41     employment; [or]
42          (f) death, accident, health, or disability benefits provided to a person by an organization
43     or its affiliate if:
44          (i) the organization is tax exempt under Section 501(c)(3) of the Internal Revenue
45     Code and has had its principal place of business in Utah for at least five years;
46          (ii) the person is not an employee of the organization; and
47          (iii) (A) substantially all the person's time in the organization is spent providing
48     voluntary services:
49          (I) in furtherance of the organization's purposes;
50          (II) for a designated period of time; and
51          (III) for which no compensation, other than expenses, is paid; or
52          (B) the time since the service under Subsection (1)(f)(iii)(A) was completed is no more
53     than 18 months[.]; or
54          (g) a prepaid contract of limited duration that provides for scheduled maintenance only.
55          (2) (a) This title restricts otherwise legitimate business activity.
56          (b) What this title does not prohibit is permitted unless contrary to other provisions of
57     Utah law.
58          (3) Except as otherwise expressly provided, this title does not apply to:

59          (a) those activities of an insurer where state jurisdiction is preempted by Section 514 of
60     the federal Employee Retirement Income Security Act of 1974, as amended;
61          (b) ocean marine insurance;
62          (c) death, accident, health, or disability benefits provided by an organization if the
63     organization:
64          (i) has as its principal purpose to achieve charitable, educational, social, or religious
65     objectives rather than to provide death, accident, health, or disability benefits;
66          (ii) does not incur a legal obligation to pay a specified amount; and
67          (iii) does not create reasonable expectations of receiving a specified amount on the part
68     of an insured person;
69          (d) other business specified in rules adopted by the commissioner on a finding that:
70          (i) the transaction of the business in this state does not require regulation for the
71     protection of the interests of the residents of this state; or
72          (ii) it would be impracticable to require compliance with this title;
73          (e) except as provided in Subsection (4), a transaction independently procured through
74     negotiations under Section 31A-15-104;
75          (f) self-insurance;
76          (g) reinsurance;
77          (h) subject to Subsection (5), employee and labor union group or blanket insurance
78     covering risks in this state if:
79          (i) the policyholder exists primarily for purposes other than to procure insurance;
80          (ii) the policyholder:
81          (A) is not a resident of this state;
82          (B) is not a domestic corporation; or
83          (C) does not have its principal office in this state;
84          (iii) no more than 25% of the certificate holders or insureds are residents of this state;
85          (iv) on request of the commissioner, the insurer files with the department a copy of the
86     policy and a copy of each form or certificate; and
87          (v) (A) the insurer agrees to pay premium taxes on the Utah portion of its business, as
88     if it were authorized to do business in this state; and
89          (B) the insurer provides the commissioner with the security the commissioner

90     considers necessary for the payment of premium taxes under Title 59, Chapter 9, Taxation of
91     Admitted Insurers;
92          (i) to the extent provided in Subsection (6):
93          (i) a manufacturer's or seller's warranty; and
94          (ii) a manufacturer's or seller's service contract;
95          (j) except to the extent provided in Subsection (7), a public agency insurance mutual;
96     or
97          (k) except as provided in Chapter 6b, Guaranteed Asset Protection Waiver Act, a
98     guaranteed asset protection waiver.
99          (4) A transaction described in Subsection (3)(e) is subject to taxation under Section
100     31A-3-301.
101          (5) (a) After a hearing, the commissioner may order an insurer of certain group or
102     blanket contracts to transfer the Utah portion of the business otherwise exempted under
103     Subsection (3)(h) to an authorized insurer if the contracts have been written by an unauthorized
104     insurer.
105          (b) If the commissioner finds that the conditions required for the exemption of a group
106     or blanket insurer are not satisfied or that adequate protection to residents of this state is not
107     provided, the commissioner may require:
108          (i) the insurer to be authorized to do business in this state; or
109          (ii) that any of the insurer's transactions be subject to this title.
110          (6) (a) As used in Subsection (3)(i) and this Subsection (6):
111          (i) "manufacturer's or seller's service contract" means a service contract:
112          (A) made available by:
113          (I) a manufacturer of a product;
114          (II) a seller of a product; or
115          (III) an affiliate of a manufacturer or seller of a product;
116          (B) made available:
117          (I) on one or more specific products; or
118          (II) on products that are components of a system; and
119          (C) under which the person described in Subsection (6)(a)(i)(A) is liable for services to
120     be provided under the service contract including, if the manufacturer's or seller's service

121     contract designates, providing parts and labor;
122          (ii) "manufacturer's or seller's warranty" means the guaranty of:
123          (A) (I) the manufacturer of a product;
124          (II) a seller of a product; or
125          (III) an affiliate of a manufacturer or seller of a product;
126          (B) (I) on one or more specific products; or
127          (II) on products that are components of a system; and
128          (C) under which the person described in Subsection (6)(a)(ii)(A) is liable for services
129     to be provided under the warranty, including, if the manufacturer's or seller's warranty
130     designates, providing parts and labor; and
131          (iii) "service contract" [is as] means the same as that term is defined in Section
132     31A-6a-101.
133          (b) A manufacturer's or seller's warranty may be designated as:
134          (i) a warranty;
135          (ii) a guaranty; or
136          (iii) a term similar to a term described in Subsection (6)(b)(i) or (ii).
137          (c) This title does not apply to:
138          (i) a manufacturer's or seller's warranty;
139          (ii) a manufacturer's or seller's service contract paid for with consideration that is in
140     addition to the consideration paid for the product itself; and
141          (iii) a service contract that is not a manufacturer's or seller's warranty or manufacturer's
142     or seller's service contract if:
143          (A) the service contract is paid for with consideration that is in addition to the
144     consideration paid for the product itself;
145          (B) the service contract is for the repair or maintenance of goods;
146          (C) the cost of the product is equal to an amount determined in accordance with
147     Subsection (6)(e); and
148          (D) the product is not a motor vehicle.
149          (d) This title does not apply to a manufacturer's or seller's warranty or service contract
150     paid for with consideration that is in addition to the consideration paid for the product itself
151     regardless of whether the manufacturer's or seller's warranty or service contract is sold:

152          (i) at the time of the purchase of the product; or
153          (ii) at a time other than the time of the purchase of the product.
154          (e) (i) For fiscal year 2001-02, the amount described in Subsection (6)(c)(iii)(C) shall
155     be equal to $3,700 or less.
156          (ii) For each fiscal year after fiscal year 2001-02, the commissioner shall annually
157     determine whether the amount described in Subsection (6)(c)(iii)(C) should be adjusted in
158     accordance with changes in the Consumer Price Index published by the United States Bureau
159     of Labor Statistics selected by the commissioner by rule, between:
160          (A) the Consumer Price Index for the February immediately preceding the adjustment;
161     and
162          (B) the Consumer Price Index for February 2001.
163          (iii) If under Subsection (6)(e)(ii) the commissioner determines that an adjustment
164     should be made, the commissioner shall make the adjustment by rule.
165          (7) (a) For purposes of this Subsection (7), "public agency insurance mutual" means an
166     entity formed by two or more political subdivisions or public agencies of the state:
167          (i) under Title 11, Chapter 13, Interlocal Cooperation Act; and
168          (ii) for the purpose of providing for the political subdivisions or public agencies:
169          (A) subject to Subsection (7)(b), insurance coverage; or
170          (B) risk management.
171          (b) Notwithstanding Subsection (7)(a)(ii)(A), a public agency insurance mutual may
172     not provide health insurance unless the public agency insurance mutual provides the health
173     insurance using:
174          (i) a third party administrator licensed under Chapter 25, Third Party Administrators;
175          (ii) an admitted insurer; or
176          (iii) a program authorized by Title 49, Chapter 20, Public Employees' Benefit and
177     Insurance Program Act.
178          (c) Except for this Subsection (7), a public agency insurance mutual is exempt from
179     this title.
180          (d) A public agency insurance mutual is considered to be a governmental entity and
181     political subdivision of the state with all of the rights, privileges, and immunities of a
182     governmental entity or political subdivision of the state including all the rights and benefits of

183     Title 63G, Chapter 7, Governmental Immunity Act of Utah.
184          Section 2. Section 31A-6a-101 is amended to read:
185          31A-6a-101. Definitions.
186          As used in this chapter:
187          (1) "Mechanical breakdown insurance" means a policy, contract, or agreement issued
188     by an insurance company that has complied with either Chapter 5, Domestic Stock and Mutual
189     Insurance Corporations, or Chapter 14, Foreign Insurers, that undertakes to perform or provide
190     repair or replacement service on goods or property, or indemnification for repair or
191     replacement service, for the operational or structural failure of the goods or property due to a
192     defect in materials, workmanship, or normal wear and tear.
193          (2) "Nonmanufacturers' parts" means replacement parts not made for or by the original
194     manufacturer of the goods commonly referred to as "after market parts."
195          (3) (a) "Road hazard" means a hazard that is encountered while driving a motor
196     vehicle.
197          (b) "Road hazard" includes potholes, rocks, wood debris, metal parts, glass, plastic,
198     curbs, or composite scraps.
199          (4) (a) "Service contract" means a contract or agreement to perform or reimburse for
200     the repair or maintenance of goods or property, for their operational or structural failure due to
201     a defect in materials, workmanship, [or] normal wear and tear, power surge or interruption, or
202     accidental damage from handling, with or without additional provision for incidental payment
203     of indemnity under limited circumstances, including towing, providing a rental car, providing
204     emergency road service, and covering food spoilage.
205          (b) "Service contract" does not include:
206          (i) mechanical breakdown insurance[.]; or
207          (ii) a prepaid contract of limited duration that provides for scheduled maintenance
208     only, regardless of whether the contract is executed before, on, or after May 9, 2017.
209          (c) "Service contract" includes any contract or agreement to perform or reimburse the
210     service contract holder for any one or more of the following services:
211          (i) the repair or replacement of tires, wheels, or both on a motor vehicle damaged as a
212     result of coming into contact with a road hazard;
213          (ii) the removal of dents, dings, or creases on a motor vehicle that can be repaired using

214     the process of paintless dent removal without affecting the existing paint finish and without
215     replacing vehicle body panels, sanding, bonding, or painting;
216          (iii) the repair of chips or cracks in or the replacement of a motor vehicle windshield as
217     a result of damage caused by a road hazard, that is primary to the coverage offered by the motor
218     vehicle owner's motor vehicle insurance policy; or
219          (iv) the replacement of a motor vehicle key or key-fob if the key or key-fob becomes
220     inoperable, lost, or stolen, except that the replacement of lost or stolen property is limited to
221     only the replacement of a lost or stolen motor vehicle key or key-fob.
222          (5) "Service contract holder" or "contract holder" means a person who purchases a
223     service contract.
224          (6) "Service contract provider" means a person who issues, makes, provides,
225     administers, sells or offers to sell a service contract, or who is contractually obligated to
226     provide service under a service contract.
227          (7) "Service contract reimbursement policy" or "reimbursement insurance policy"
228     means a policy of insurance providing coverage for all obligations and liabilities incurred by
229     the service contract provider or warrantor under the terms of the service contract or vehicle
230     protection product warranty issued by the provider or warrantor.
231          (8) (a) "Vehicle protection product" means a device or system that is:
232          (i) installed on or applied to a motor vehicle; and
233          (ii) designed to prevent the theft of the vehicle.
234          (b) "Vehicle protection product" includes:
235          (i) a vehicle protection product warranty;
236          (ii) an alarm system;
237          (iii) a body part marking product;
238          (iv) a steering lock;
239          (v) a window etch product;
240          (vi) a pedal and ignition lock;
241          (vii) a fuel and ignition kill switch; and
242          (viii) an electronic, radio, or satellite tracking device.
243          (9) "Vehicle protection product warranty" means a written agreement by a warrantor
244     that provides if the vehicle protection product fails to prevent the theft of the motor vehicle,

245     that the warrantor will reimburse the warranty holder under the warranty in a fixed amount
246     specified in the warranty, not to exceed $5,000.
247          (10) "Warrantor" means a person who is contractually obligated to the warranty holder
248     under the terms of a vehicle protection product warranty.
249          (11) "Warranty holder" means the person who purchases a vehicle protection product,
250     any authorized transferee or assignee of the purchaser, or any other person legally assuming the
251     purchaser's rights under the vehicle protection product warranty.

Legislative Review Note
Office of Legislative Research and General Counsel