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                                         SUBSTITUTE SENATE BILL NO. 5779

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                                                            AS AMENDED BY THE HOUSE

                                                                            C 099 L 87

State of Washington                              50th Legislature                              1987 Regular Session

By Senate Committee on Financial Institutions (originally sponsored by Senators Vognild, Bender, Sellar, Wojahn, McCaslin, Metcalf, Rasmussen, Zimmerman and Garrett)

Read first time 3/6/87.

AN ACT Relating to vehicle mechanical breakdown insurers; adding a new chapter to Title 48 RCW; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1.     (1) "Motor vehicle service contract" or "service contract" means a contract or agreement given for consideration over and above the lease or purchase price of a motor vehicle that undertakes to perform or provide repair or replacement service, or indemnification for that service, for the operational or structural failure of a motor vehicle due to a defect in materials or skill of work or normal wear and tear, but does not include mechanical breakdown insurance.

          (2) "Motor vehicle service contract provider" or "provider" means a person who issues, makes, provides, sells, or offers to sell a motor vehicle service contract.

          (3)  "Mechanical breakdown insurance" means a policy, contract, or agreement that undertakes to perform or provide repair or replacement service, or indemnification for that service, for the operational or structural failure of a motor vehicle due to a defect in materials or skill of work or normal wear and tear, and that is issued by an insurance company authorized to do business in this state.

          (4) "Motor vehicle service contract reimbursement insurance policy" or "reimbursement insurance policy" means a policy of insurance providing coverage for all obligations and liabilities incurred by a motor vehicle service contract provider under the terms of motor vehicle service contracts issued by the provider.

          (5) "Motor vehicle" means any vehicle subject to registration under chapter 46.16 RCW.

          (6) "Service contract holder" means a person who purchases a motor vehicle service contract.

NEW SECTION. Sec. 2.     A motor vehicle service contract shall not be issued, sold, or offered for sale in this state unless the provider of the service contract is insured under a motor vehicle service contract reimbursement insurance policy issued by an insurer authorized to do business in this state.

NEW SECTION. Sec. 3.     A motor vehicle service contract reimbursement insurance policy shall not be issued, sold, or offered for sale in this state unless the reimbursement insurance policy conspicuously states that the issuer of the policy shall pay on behalf of the provider all sums which the provider is legally obligated to pay for failure to perform according to the provider's contractual obligations under the motor vehicle service contracts issued or sold by the provider.

NEW SECTION. Sec. 4.     A motor vehicle service contract shall not be issued, sold, or offered for sale in this state unless the contract conspicuously states that the obligations of the provider to the service contract holder are guaranteed under the service contract reimbursement policy, and unless the contract conspicuously states the name and address of the issuer of the reimbursement policy, the applicable policy number, and the means by which a service contract holder may file a claim under the policy.

NEW SECTION. Sec. 5.     This chapter does not apply to motor vehicle service contracts issued by a motor vehicle manufacturer or importer.

NEW SECTION. Sec. 6.     Failure to comply with the provisions of this act is an unfair method of competition and an unfair or deceptive act or practice in the conduct of a trade or commerce, as specifically contemplated by RCW 19.86.020, and is a violation of the Consumer Protection Act, chapter 19.86 RCW.  Any service contract holder injured as a result of a violation of a provision of this chapter shall be entitled to maintain an action pursuant to chapter 19.86 RCW against the motor vehicle service contract provider and the insurer issuing the applicable motor vehicle service contract reimbursement policy and shall be entitled to all of the rights and remedies afforded by that chapter.  Any successful claimant under this section shall also be entitled to reasonable attorneys' fees.

NEW SECTION. Sec. 7.     This act shall apply to all motor vehicle service contracts issued, sold, or offered for sale on or after January 1, 1988.

NEW SECTION. Sec. 8.     Sections 1 through 7 of this act shall constitute a new chapter in Title 48 RCW.

                                                                                                                             Passed the Senate April 9, 1987.

                                                                                                                                       President of the Senate.

                                                                                                                             Passed the House April 7, 1987.

                                                                                                                                         Speaker of the House.