CHAPTER 743j

EXTENDED WARRANTIES

Table of Contents

Sec. 42-260. Extended warranties. Definitions. Warranty requirements. Reimbursement insurance policy. Reserves. Surplus and ratio requirement. Requirement re filing of financial statement. Regulations. Exceptions.

Secs. 42-261 to 42-269. Reserved


Sec. 42-260. Extended warranties. Definitions. Warranty requirements. Reimbursement insurance policy. Reserves. Surplus and ratio requirement. Requirement re filing of financial statement. Regulations. Exceptions. (a) As used in this section:

(1) “Extended warranty” means a contract or agreement to either perform or provide indemnification for the repair, replacement or maintenance of a product because of operational or structural failure of such product due to a defect in materials, skill or workmanship or normal wear and tear given for consideration over and above the lease or purchase price of a product.

(2) “Extended warranty provider” means a person who issues, makes, provides or offers to provide an extended warranty to a buyer and who is contractually obligated to provide service under such extended warranty, excluding a retail seller of an extended warranty if such seller: (A) Is the manufacturer of the product covered under the extended warranty, or a subsidiary of the manufacturer; (B) sells or offers an extended warranty for a product obligating the manufacturer, a subsidiary of the manufacturer, a distributor or an importer to provide the service or indemnification arising under the extended warranty; or (C) performs at least ninety per cent of the repair service provided to buyers pursuant to extended warranties purchased from such seller.

(3) “Buyer” means a person who purchases an extended warranty from an extended warranty provider.

(4) “Extended warranty reimbursement insurance policy” means a policy of insurance providing coverage for all obligations and liabilities incurred by an extended warranty provider under the terms of the extended warranty sold to a buyer by such provider.

(b) An extended warranty shall obligate the extended warranty provider to supply to the buyer all services and functional parts that may be necessary to repair the product for the duration of the extended warranty without additional charge, except as otherwise expressly provided.

(c) An extended warranty shall contain all of the following:

(1) A clear description and identification of the product;

(2) The date when the extended warranty commences and its duration, and, if the extended warranty is for less than one year, the extended warranty shall include a provision for the automatic extension of the extended warranty while the product is in the custody of the extended warranty provider for repair under such warranty;

(3) A description of the limits on transfer or assignment of the extended warranty if the enforceability of an extended warranty is limited to the original buyer or is limited to persons other than every consumer owner of the covered product during the term of the extended warranty;

(4) A statement of the obligation of the extended warranty provider including statements of: (A) Any services, parts, components, defects, malfunctions, conditions, repairs or remedies that are excluded from the scope of the extended warranty; (B) any limits on the obligations of the extended warranty provider; (C) any additional services which the extended warranty provider will supply; (D) whether the buyer has the responsibility of any other obligations and, if so, the nature and frequency of such obligations, and the consequences of any noncompliance;

(5) A step-by-step explanation of the procedure which the buyer shall follow in order to obtain performance of any obligation under the extended warranty including: (A) The full legal and business name of the extended warranty provider; (B) the mailing address of the extended warranty provider; (C) the persons or class of persons that are authorized to perform service; (D) the name or title and address of any agent, employee or department of the extended warranty provider that is responsible for the performance of any obligations; (E) the method of giving notice to the extended warranty provider of the need for service; (F) whether in-home service is provided or, if not, whether the costs of transporting the product for service or repairs will be paid by the extended warranty provider; (G) if the product must be transported to the extended warranty provider, either the place where the product may be delivered for service or repairs or a toll-free telephone number which the buyer may call to obtain that information; (H) all other steps which the buyer must take to obtain service; and (I) all fees, charges and other costs that the buyer must pay to obtain service;

(6) A description of the services the extended warranty provider will supply under the extended warranty; and

(7) A statement of a right to cancel the warranty if the buyer returns the product or the product is sold, lost, stolen or destroyed, or a statement that there is no right to cancel.

(d) (1) An extended warranty shall not be issued, sold or offered for sale unless the extended warranty provider is insured under an extended warranty reimbursement insurance policy issued by an insurer authorized to do business in this state or the extended warranty provider can demonstrate that reserves for claims contained in the provider’s financial statements are not in excess of one-half of a provider’s audited net worth. If such reserves are in excess of one-half of a provider’s net worth, the reserves shall be held in trust by an independent trustee and certified annually as adequate by an actuary.

(2) The extended warranty reimbursement insurance policy shall cover the obligations under the extended warranty sold by the extended warranty provider during the period of time that such provider’s insurance policy is in force.

(3) An insurer authorized to issue an extended warranty reimbursement insurance policy in this state shall, at the time the policy is filed with the Insurance Commissioner as set forth in subsection (c) of section 38a-676 and continuously thereafter: (A) Maintain a surplus as to policyholders and paid-in capital of not less than fifteen million dollars; (B) demonstrate to the satisfaction of said commissioner that the company maintains a ratio of net written premiums, wherever written, to a surplus as to policyholders and paid-in capital of not greater than three to one; and (C) annually file with the Insurance Commissioner copies of such insurer’s audited financial statements, its National Association of Insurance Commissioners’ Annual Statement and the actuarial certification required by and filed in such insurer’s state of domicile.

(e) An extended warranty provider shall submit to the Insurance Commissioner: (1) A copy of the extended warranty form issued by said provider; and (2) a copy of said provider’s extended warranty reimbursement insurance policy form issued by an insurer authorized to do business in this state or a certification by a certified public accountant attesting to the adequacy of the reserves for claims reported on said provider’s financial statements or contained in said provider’s trust account.

(f) (1) An extended warranty shall contain the name and address of the insurers insuring the obligations and liabilities of such warranty and instructions on how the buyer, or successor to the buyer’s rights, of the product may file a claim with the insurer if the extended warranty provider fails to perform according to the terms of the extended warranty.

(2) An insurer of an extended warranty shall not refuse to renew any policy unless such insurer or its agent shall send, by registered or certified mail or by mail evidenced by a certificate of mailing or delivery to the Insurance Commissioner, at least sixty days’ advance notice of its intention not to renew. The notice of intent not to renew shall state or be accompanied by a statement specifying the reason for such nonrenewal.

(g) The Insurance Commissioner shall develop regulations, in accordance with chapter 54, implementing an arbitration process to settle disputes arising from extended warranty contracts between extended warranty providers and buyers.

(h) Nothing in this section shall apply to a home warranty contract or home warranty service agreement, as defined in section 38a-320, or regulated utilities.

(P.A. 93-258; P.A. 94-86, S. 1; P.A. 97-63; P.A. 03-50, S. 1; P.A. 09-24, S. 1.)

History: P.A. 94-86 redefined “extended warranty provider” to exclude retail sellers providing at least 90% of repair service under extended warranties and replaced “independent certified public accountant” with “actuary” in Subsec. (d)(1); (Revisor’s note: In 1997 a reference in Subsec. (f) to “Commissioner of Insurance” was changed editorially by the Revisors to “Insurance Commissioner” for consistency with Sec. 38a-1); P.A. 97-63 amended Subdiv. (c)(2) to limit automatic extension requirement to contracts for less than one year; P.A. 03-50 amended Subsec. (a)(1) and (2) to redefine “extended warranty” and “extended warranty provider”, and amended Subsec. (h) to delete reference to “automobiles”, effective July 1, 2003; P.A. 09-24 added Subsec. (d)(3) re surplus, ratio and filing requirements.

Secs. 42-261 to 42-269. Reserved for future use.