4-114-106. Required disclosure — Service contracts.

4-114-106. Required disclosure — Service contracts. (a) A service contract issued, sold, or offered for sale in this state shall: (1) Be written in clear, understandable language that is easy to read; and (2) Conspicuously disclose the applicable requirements of this section. (b)(1) A service contract insured under a reimbursement insurance policy under § 4-114-104(d)(1) shall contain the name and address of the insurer and a statement in substantially the following form: “Obligations of the provider under this service contract are guaranteed under a service contract reimbursement insurance policy. If the provider fails to pay or provide service on a claim within sixty (60) days after proof of loss has been filed, the service contract holder is entitled to make a claim directly against the insurance company.” (2) A claim against the provider may include a claim for return of the unearned provider fee. (c)(1) A service contract not insured under a reimbursement insurance policy under § 4-114-104(d)(1) shall conspicuously state the name and address of the provider and contain a statement in substantially the following form: “Obligations of the provider under this service contract are backed only by the full faith and credit of the provider (issuer) and are not guaranteed under a service contract reimbursement insurance policy.” (2) A claim against the provider shall also include a claim for return of the unearned provider fee. (d) A service contract shall identify the administrator, the provider obligated to perform the service under the contract, the service contract seller, and the service contract holder to the extent that the name and address of the service contract holder have been furnished by the service contract holder. (e)(1) A service contract or a service contract holder's receipt shall state the total purchase price and the terms under which the service contract is sold. (2) The purchase price is not required to be preprinted on the service contract and may be negotiated at the time of sale with the service contract holder. (f) If prior approval of repair work is required, a service contract shall state the procedure for obtaining prior approval and for making a claim, including a toll-free telephone number for claim service and a procedure for obtaining emergency repairs performed outside of normal business hours. (g) A service contract shall: (1) Disclose the deductible amount; (2) Specify the merchandise and services to be provided and any limitations, exceptions, or exclusions; (3)(A) State the conditions upon which the use of the nonoriginal manufacturer's parts or substitute service may be allowed. (B) Conditions stated shall comply with applicable state and federal laws; (4) State any terms, restrictions, or conditions governing the transferability of the service contract; (5)(A) State the terms, restrictions, or conditions governing termination of the service contract by the service contract holder. (B)(i) The provider of the service contract shall mail a written notice to the contract holder within fifteen (15) days of the date of termination in the event the provider terminates the service contract. (ii) Prior notice is not required if the reason for cancellation is nonpayment of the provider fee, a material misrepresentation by the service contract holder to the provider, or a substantial breach of duties by the service contract holder relating to the covered product or its use. (C) The notice shall state the effective date of the cancellation and the reason for the cancellation. (D) A pro rata refund of the unearned portion of the provider fee less the amount or value of any claims paid shall accompany the notice unless cancellation is for nonpayment; (6)(A) Require every provider to permit the service contract holder to return the contract within no less than twenty (20) days of the date of mailing of the service contract or no less than ten (10) days if the service contract is delivered at the time of sale or within a longer time period permitted under the service contract. (B) If no claim has been made under the service contract, the service contract is void and the provider shall refund to the service contract holder the full purchase price of the service contract. (C) A ten percent (10%) penalty per month shall be added to a refund that is not paid within forty-five (45) days of return of the service contract to the provider. (D) The applicable free-look time period on service contracts shall only apply to the original service contract purchaser and only if no claim has been made prior to its return to the provider; (7) Set forth all of the obligations and duties of the service contract holder, such as the duty to protect against any further damage and the requirement for certain service and maintenance; and (8) Clearly state whether or not the service contract provides for or excludes consequential damages or preexisting conditions.