Prefiled 01/04/13. Read first time 01/14/13.   Referred to Committee on Business & Financial Services.

     AN ACT Relating to service contracts; amending RCW 48.110.020; and adding a new section to chapter 48.110 RCW.

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

Sec. 1   RCW 48.110.020 and 2011 c 171 s 104 are each amended to read as follows:
     The definitions in this section apply throughout this chapter.
     (1) "Administrator" means the person who is responsible for the administration of the service contracts, the service contracts plan, or the protection product guarantees.
     (2) "Commissioner" means the insurance commissioner of this state.
     (3) "Consumer" means an individual who buys any tangible personal property that is primarily for personal, family, or household use.
     (4) "Home heating fuel service contract" means a contract or agreement for a separately stated consideration for a specific duration to perform the repair, replacement, or maintenance of a home heating fuel supply system including the fuel tank and all visible pipes, caps, lines, and associated parts or the indemnification for repair, replacement, or maintenance for operational or structural failure due to a defect in materials or workmanship, or normal wear and tear.
     (5) "Incidental costs" means expenses specified in the guarantee incurred by the protection product guarantee holder related to damages to other property caused by the failure of the protection product to perform as provided in the guarantee. "Incidental costs" may include, without limitation, insurance policy deductibles, rental vehicle charges, the difference between the actual value of the stolen vehicle at the time of theft and the cost of a replacement vehicle, sales taxes, registration fees, transaction fees, and mechanical inspection fees. Incidental costs may be paid under the provisions of the protection product guarantee in either a fixed amount specified in the protection product guarantee or sales agreement, or by the use of a formula itemizing specific incidental costs incurred by the protection product guarantee holder to be paid.
     (6) "Maintenance agreement" means a contract of limited duration that provides for scheduled maintenance only.
     (7) "Motor vehicle" means any vehicle subject to registration under chapter 46.16A RCW.
     (8) "Person" means an individual, partnership, corporation, incorporated or unincorporated association, joint stock company, reciprocal insurer, syndicate, or any similar entity or combination of entities acting in concert.
     (9) "Premium" means the consideration paid to an insurer for a reimbursement insurance policy.
     (10) "Protection product" means any product offered or sold with a guarantee to repair or replace another product or pay incidental costs upon the failure of the product to perform pursuant to the terms of the protection product guarantee.
     (11) "Protection product guarantee" means a written agreement by a protection product guarantee provider to repair or replace another product or pay incidental costs upon the failure of the protection product to perform pursuant to the terms of the protection product guarantee.
     (12) "Protection product guarantee holder" means a person who is the purchaser or permitted transferee of a protection product guarantee.
     (13) "Protection product guarantee provider" means a person who is contractually obligated to the protection product guarantee holder under the terms of the protection product guarantee. Protection product guarantee provider does not include an authorized insurer providing a reimbursement insurance policy.
     (14) "Protection product seller" means the person who sells the protection product to the consumer.
     (15) "Provider fee" means the consideration paid by a consumer for a service contract.
     (16) "Reimbursement insurance policy" means a policy of insurance that is issued to a service contract provider or a protection product guarantee provider to provide reimbursement to the service contract provider or the protection product guarantee provider or to pay on behalf of the service contract provider or the protection product guarantee provider all contractual obligations incurred by the service contract provider or the protection product guarantee provider under the terms of the insured service contracts or protection product guarantees issued or sold by the service contract provider or the protection product guarantee provider.
     (17)(a) "Service contract" means a contract or agreement entered into at any time for consideration over and above the lease or purchase price of the property for ((a)) any specific duration to perform the repair, replacement, or maintenance of property or the indemnification for repair, replacement, or maintenance for operational or structural failure due to a defect in materials or workmanship, or normal wear and tear. Service contracts may provide for the repair, replacement, or maintenance of property for damage resulting from power surges and accidental damage from handling, with or without additional provision for incidental payment of indemnity under limited circumstances, including towing, rental, emergency road services, or other expenses relating to the failure of the product or of a component part thereof.
     (b) "Service contract" also includes a contract or agreement sold for separately stated consideration for a specific duration to perform the repair or replacement of tires and/or wheels damaged as a result of coming into contact with road hazards including but not limited to potholes, rocks, wood debris, metal parts, glass, plastic, curbs, or composite scraps. However, a contract or agreement meeting the definition under this subsection (17)(b) in which the party obligated to perform is either a tire or wheel manufacturer or a motor vehicle manufacturer is exempt from the requirements of this chapter.
     (18) "Service contract holder" or "contract holder" means a person who is the purchaser or holder of a service contract.
     (19) "Service contract provider" means a person who is contractually obligated to the service contract holder under the terms of the service contract.
     (20) "Service contract seller" means the person who sells the service contract to the consumer.
     (21) "Warranty" means a warranty made solely by the manufacturer, importer, or seller of property or services without consideration; that is not negotiated or separated from the sale of the product and is incidental to the sale of the product; and that guarantees indemnity for defective parts, mechanical or electrical breakdown, labor, or other remedial measures, such as repair or replacement of the property or repetition of services.

NEW SECTION.  Sec. 2   A new section is added to chapter 48.110 RCW to read as follows:
     This chapter does not prohibit a service contract provider from covering, in whole or in part, residential water, sewer, utilities, or similar systems with or without coverage of appliances or from sharing contract revenue with local governments or other third parties for endorsements and marketing services.