SENATE BILL REPORT

SSB 5779

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

Regulating vehicle mechanical breakdown insurers.

Senate Committee on Financial Institutions

Senate Hearing Date(s):February 24, 1987; March 6, 1987

Majority Report:  That Substitute Senate Bill No. 5779 be substituted therefor, and the substitute bill do pass.

      Signed by Senators Moore, Chairman; Bender, Vice Chairman; Bottiger, Fleming, McDermott, Metcalf, von Reichbauer.

Senate Staff:Phil Sorensen (786-7470)

                  April 8, 1987

House Committe on Financial Institutions & Insurance

AS PASSED SENATE, MARCH 13, 1987

BACKGROUND:

It is unlawful to engage in the business of insurance in this state without complying with Washington laws.  However, it is often difficult to determine whether a particular transaction constitutes an insurance contract.  Currently, vehicle warranties issued by either a manufacturer or a dealer in connection with a specific sale, for parts and workmanship, are not contracts for insurance.

Many dealers offer warranties developed and administered by third parties.  So long as these third party administrators do not commingle funds they receive from one dealer with those received from another, they do not qualify as insurers.  Therefore, they are not subject to the jurisdiction of the Commissioner and operate uninhibited by Washington's insurance code.

SUMMARY:

No motor vehicle service contract may be sold or offered in this state unless the provider of the service contract has a reimbursement insurance policy issued by an authorized insurer.

The provider must file annually with the Commissioner a copy of the service contract and the reimbursement policy.  The service contract must contain a conspicuous statement indicating the obligations of the provider and the existence of the reimbursement policy.  The Commissioner is given authority to issue cease and desist orders to noncomplying providers.

A cause of action against violators is established under the Consumer Protection Act.

Fiscal Note:      requested

Senate Committee - Testified: Senator Vognild; Janet Cunningham, Washington State Auto Dealers Association; Scott Jarvis, Legislative Liaison, Insurance Department

HOUSE AMENDMENT:

The striking amendment deletes the definition of "commissioner," removes the reimbursement policy filing requirement, and deletes the requirement that the Commissioner regulate motor vehicle service contracts.  Information must be provided to the service contract holder explaining the means by which a claim may be filed under the reimbursement policy.

Remedies available under the Consumer Protection Act are clarified and strengthened.  A delayed effective date of January 1, 1988 has been added.