AN ACT Relating to motor vehicle service contracts; amending RCW 48.96.030, 48.96.040, 48.96.050, and 48.96.060; adding new sections to chapter 48.96 RCW; creating a new section; and providing an effective date.

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

NEW SECTION. Sec. 1. The purpose of this chapter is to protect the public and motor vehicle dealers from losses arising from the mismanagement of funds paid for motor vehicle service contracts, to better inform the public of their rights and obligations under the contracts, to permit purchasers of such contracts the opportunity to return the contract for a refund, and to require the liabilities owed under these contracts to be fully insured, rather than partially insured, or insured only in the event of provider default.

NEW SECTION. Sec. 2. (1) Every insurer issuing a reimbursement insurance policy shall include, as a part of the policy, the motor vehicle service contract that the reimbursement insurance policy is intended to cover. Subsequent changes to a motor vehicle service contract must be filed by the insurer with the commissioner no later than thirty days after the date of the change.

(2) Every insurer issuing a reimbursement insurance policy must require that premiums due for coverage under the policy be paid directly by the provider to the insurer or its agent.

NEW SECTION. Sec. 3. A motor vehicle service contract shall not be issued, sold, or offered for sale in this state unless the contract contains a conspicuous statement that has been initialed by the service contract holder and discloses:

(1) Any material conditions that the service contract holder must meet to maintain coverage under the contract including, but not limited to any maintenance schedule to which the service contract holder must adhere, any requirement placed on the service contract holder for documenting repair or maintenance work, and any procedure to which the service contract holder must adhere for filing claims;

(2) The work and parts covered by the contract;

(3) Any time or mileage limitations;

(4) That the implied warranty of merchantability on the motor vehicle is not waived if the contract has been purchased within ninety days of the purchase date of the motor vehicle;

(5) Any exclusions of coverage; and

(6) That the contract holder is permitted to return the contract within ten days of its purchase to the provider for a full refund of the purchase price of the contract and for a full refund less a cancellation fee if returned after ten days but within thirty days provided that no claim has been made by the contract holder under the contract.

NEW SECTION. Sec. 4. Every provider shall permit the service contract holder to return the contract within thirty days of its purchase, provided that no claim has been made under the contract, and shall refund to the holder the full purchase price of the contract unless the service contract holder returns the contract ten days after its purchase, in which case the provider may charge a cancellation fee not exceeding twenty-five dollars. A ten percent penalty shall be added to any refund that is not paid within thirty days of return of the contract to the provider. If a contract holder returns the contract within ten days of its purchase, the contract shall be void from the beginning and the parties shall be in the same position as if no contract had been issued.

Sec. 5. Section 3, chapter 99, Laws of 1987 and RCW 48.96.030 are each amended to read as follows:

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.

Sec. 6. Section 4, chapter 99, Laws of 1987 and RCW 48.96.040 are each amended to read as follows:

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 insurance policy, and unless the contract conspicuously states the name and address of the issuer of the reimbursement insurance policy, the applicable policy number, and the means by which a service contract holder may file a claim under the policy.

Sec. 7. Section 5, chapter 99, Laws of 1987 and RCW 48.96.050 are each amended to read as follows:

((~~This chapter does~~)) RCW 48.96.020, 48.96.030, and 48.96.040 do not apply to motor vehicle service contracts issued by a motor vehicle manufacturer or ((~~importer~~)) import distributor.

Sec. 8. Section 6, chapter 99, Laws of 1987 and RCW 48.96.060 are each amended to read as follows:

Failure to comply with the provisions of this chapter 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 insurance 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. 9. Sections 2 through 4 of this act are each added to chapter 48.96 RCW.

NEW SECTION. Sec. 10. This act shall take effect January 1, 1991.