Citations Affected: IC 27-18.
Synopsis: Vehicle protection products. Provides that a vehicle
protection product warrantor (warrantor) must register with the
department of insurance before doing business, and provides for a fee
for issuance of a registration. Specifies conditions for sale of a vehicle
protection product by a warrantor, including that a warrantor must be
insured under a warranty reimbursement insurance policy before a sale
may occur. Specifies: (1) conditions for a warranty reimbursement
insurance policy; and (2) terms of a vehicle protection product
warranty. Provides for sanctions and administrative penalties for failure
to comply with these requirements, terms, and conditions.
Effective: July 1, 2008.
January 14, 2008, read first time and referred to Committee on Insurance.
A BILL FOR AN ACT to amend the Indiana Code concerning
warranty. Incidental costs include, but are not limited to:
(1) insurance policy deductibles;
(2) rental vehicle charges;
(3) the difference between the:
(A) actual value of the stolen vehicle at the time of theft; and
(B) cost of a replacement vehicle;
(4) sales taxes;
(5) registration fees;
(6) transaction fees; and
(7) mechanical inspection fees.
Sec. 6. "Vehicle protection product" means a vehicle protection device, system, or service that:
(1) is installed on or applied to a vehicle;
(2) is designed to prevent loss or damage to a vehicle from a specific cause; and
(3) includes a written warranty.
The term includes, but is not limited to, alarm systems, body part marking products, steering locks, window etch products, pedal and ignition locks, fuel and ignition kill switches, and electronic, radio, and satellite tracking devices.
Sec. 7. (a) "Vehicle protection product warrantor" or "warrantor" means a person that is contractually obligated to the warranty holder under the terms of the vehicle protection product warranty agreement.
(b) The term does not include an authorized insurer providing a warranty reimbursement insurance policy.
Sec. 8. "Vehicle protection product warranty" or "warranty" means a written agreement by a warrantor that provides that if the vehicle protection product fails to prevent loss or damage to a vehicle from a specific cause, the warrantor will pay to or on behalf of the warranty holder specified incidental costs as a result of the failure of the vehicle protection product to perform under the terms of the warranty.
Sec. 9. "Warranty holder" means a person that:
(1) purchases a vehicle protection product; or
(2) is a permitted transferee of the vehicle protection product.
Sec. 10. "Warranty reimbursement insurance policy" means a policy of insurance that is issued to the vehicle protection product warrantor to:
(1) provide reimbursement to the warrantor for; or
(2) pay on behalf of the warrantor;
(60) days after proof of loss has been filed according to the
terms of the warranty by the warranty holder, the warranty
holder may file directly with the warranty reimbursement
insurance company for reimbursement.
(3) The policy provides that:
(A) a warranty reimbursement insurance company that insures a warranty shall be considered to have received payment of the premium, if the warranty holder paid for the vehicle protection product; and
(B) the insurer's liability under the policy shall not be reduced or relieved by a failure of the warrantor, for any reason, to report the issuance of a warranty to the insurer.
(4) The policy has the following provisions regarding cancellation of the policy:
(A) The issuer of a reimbursement insurance policy may not cancel the policy until a notice of cancellation in writing has been mailed or delivered to the commissioner and each insured warrantor.
(B) The cancellation of a reimbursement insurance policy may not reduce the issuer's responsibility for vehicle protection products sold before the date of cancellation.
(C) If an insurer cancels a policy that a warrantor has filed with the commissioner, the warrantor shall do one (1) of the following:
(i) File a copy of a new policy with the commissioner before the termination of the prior policy, to ensure that there is no lapse in coverage following the termination of the prior policy.
(ii) Discontinue offering warranties as of the termination date of the policy until a new policy becomes effective and is accepted by the commissioner.
Chapter 6. Disclosure to Warranty Holder; Incidental Costs
Sec. 1. No vehicle protection product warranty may be sold or offered unless the warranty does the following:
(A) "The obligations of the warrantor to the warranty holder are guaranteed under a warranty reimbursement insurance policy'' if the warrantor elects to meet its financial responsibility obligations under IC 27-18-4-1(1); or
(B) "The obligations of the warrantor under this warranty are backed by the full faith and credit of the warrantor" if
the warrantor elects to meet its financial responsibility
obligations under IC 27-18-4-1(2).
(2) States that if a warranty holder must make a claim against a party other than the warranty reimbursement insurance policy holder, the warranty holder may make a direct claim against the insurer upon the failure of the warrantor to pay any claim or meet any obligation under the terms of the warranty within sixty (60) days after proof of loss has been filed with the warrantor, if the warrantor elects to meet its financial obligations under IC 27-18-4-1(1).
(3) States the name and address of the issuer of the warranty reimbursement insurance policy. (This information does not need to be preprinted on the warranty form, but may be added to or stamped on the warranty, if the warrantor elects to meet its financial obligations under IC 27-18-4-1(1).)
(4) Identifies the:
(B) seller; and
(C) warranty holder.
(5) Sets forth the total purchase price and the terms under which the purchase price is to be paid. (However, the purchase price is not required to be preprinted on the vehicle protection product warranty and may be negotiated with the consumer at the time of sale.)
(6) Sets forth the procedure for making a claim, and includes a telephone number of a contact representing the warrantor.
(7) Sets forth the payments or performance to be provided under the warranty including:
(A) payment for incidental costs;
(B) the manner of calculation or determination of payment or performance; and
(C) any limitations, exceptions, or exclusions.
(8) Sets forth all the obligations and duties of the warranty holder, including:
(A) the duty to protect against any further damage to the vehicle;
(B) the obligation to notify the warrantor in advance of any repair; or
(C) a similar requirement.
(9) Sets forth any terms, restrictions, or conditions governing transferability and cancellation of the warranty, if any.
(10) Contains a disclosure that reads substantially as follows:
or other words descriptive of the insurance, casualty, or surety
business or deceptively similar to the name or description of an
insurance or a surety corporation, or another vehicle protection
Sec. 2. A vehicle protection product seller or warrantor may not require that a retail purchaser of a vehicle purchase a vehicle protection product as a condition of financing.
Chapter 10. Sanctions and Administrative Penalties
Sec. 1. The commissioner may:
(1) conduct examinations of warrantors, administrators, or other persons to enforce this article; and
(2) take action necessary or appropriate to enforce this article and the rules of the department;
to protect warranty holders.
Sec. 2. If a warrantor engages in a pattern or practice of conduct that appears to violate this article and that the commissioner reasonably believes threatens to render the warrantor insolvent or cause irreparable loss or injury to the property or business of a person, the commissioner shall:
(1) notify the warrantor in writing specifically stating the alleged grounds for sanctions; and
(2) hold a hearing under IC 4-21.5.
Sec. 3. If, after a hearing under section 2 of this chapter, the commissioner finds grounds for sanction, the commissioner may issue:
(1) an order directed to the warrantor to cease and desist from engaging in further acts, practices, or transactions that are causing the conduct that violates this article;
(2) an order prohibiting the warrantor from selling or offering for sale vehicle protection products in violation of this article;
(3) an order imposing a civil penalty on the warrantor; or
(4) a combination of orders under subdivisions (1) through (3), as applicable.
Sec. 4. The decision, determination, or order of the commissioner under section 3 of this chapter is subject to judicial review under IC 4-21.5.
Sec. 5. The commissioner may bring a civil action in the name of the state through the attorney general, in a circuit or superior court having jurisdiction in a county in which the warrantor does business or in which the property or business of a person may suffer loss or injury from the warrantor, to restrain the warrantor
from commencing or continuing to violate any of the following:
(1) This article.
(2) A rule adopted under this article.
(3) An order entered under this article.
Sec. 6. In addition to an order issued against a warrantor under section 3 of this chapter, the commissioner may order the warrantor to pay the department a civil penalty in an amount determined by the commissioner of not more than five hundred dollars ($500) per violation and not more than ten thousand dollars ($10,000) total for all violations of a similar nature. For purposes of this section, violations are of a similar nature if the violations consist of the same or similar course of conduct, action, or practice, regardless of the number of times the conduct, action, or practice that is determined to be a violation of this article occurred. Civil penalties collected under this section shall be deposited in the department of insurance fund established by IC 27-1-3-28.