June 29, 2005, Introduced by Reps. Emmons, Hune, Mortimer, Hildenbrand, Farrah, Leland, Marleau, Stahl and Gaffney and referred to the Committee on Insurance.
A bill to regulate warranties on motor vehicle protection
products; to provide for the powers and duties of certain state
officers and entities; and to prescribe civil sanctions.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the
"vehicle protection product act".
Sec. 3. As used in this act:
(a) "Administrator" means a third party other than the
warrantor who is designated by the warrantor to be responsible for
the administration of vehicle protection product warranties in this
state.
(b) "Department" means the department of labor and economic
growth.
(c) "Incidental costs" means expenses specified in a warranty
incurred by a warranty holder and related to the failure of a
vehicle protection product to perform as provided in the warranty.
Incidental costs may include, but are not limited to, insurance
policy deductibles, rental vehicle charges, the difference between
the actual value of a stolen vehicle at the time of theft and the
cost of a replacement vehicle, sales taxes, registration fees,
transaction fees, and mechanical inspection fees.
(d) "Vehicle protection product" means a vehicle protection
device, system, or service that is installed on or applied to a
vehicle and is designed to prevent loss or damage to a vehicle from
a specific cause. 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.
(e) "Vehicle protection product warrantor" or "warrantor" means
a person that is contractually obligated to a warranty holder under
the terms of a vehicle protection product warranty agreement.
Warrantor does not include an insurer regulated under the insurance
code of 1956, 1956 PA 218, MCL 500.100 to 500.8302.
(f) "Vehicle protection product warranty" or "warranty" means a
written agreement by a warrantor that provides if a warranted
product fails to prevent loss or damage to a vehicle from a
specific cause covered by the warranty, the warrantor shall pay the
warranty holder specified incidental costs that result from the
failure of the warranted product to perform.
(g) "Warranted product" means a vehicle protection product
covered by a written warranty.
(h) "Warranty holder" means a person who purchases a warranted
product or who is a permitted transferee.
(i) "Warranty reimbursement insurance policy" means a policy of
insurance that is issued to a vehicle protection product warrantor
to provide reimbursement to the warrantor or to pay on behalf of
the warrantor all covered contractual obligations incurred by the
warrantor under the terms and conditions of an insured vehicle
protection product warranty sold by a warrantor.
Sec. 5. (1) A person shall not sell or offer for sale a
warranted product in this state unless the seller, warrantor, and
any administrator comply with the provisions of this act.
(2) A vehicle protection product warrantor, a seller of a
warranted product, or an administrator that complies with this act
is not required to comply with and is not subject to the insurance
code of 1956, 1956 PA 218, MCL 500.100 to 500.8302.
Sec. 7. (1) A person may not act as a warrantor or represent
to the public that the person is a warrantor unless the person is
registered with the department on a form prescribed by the
department.
(2) A warrantor shall file warrantor registration records
annually and shall update those records within 30 days of any
change. The registration records shall contain all of the following
information:
(a) The warrantor’s name, any assumed or fictitious names
under which the warrantor does business in this state, and the
warrantor's principal office address and telephone number.
(b) The name and address of the warrantor’s designated agent
for service of process in this state if it is not the warrantor.
(c) The names of the warrantor’s executive officer or officers
directly responsible for the warrantor’s warranted product
business.
(d) The name, address, and telephone number of any
administrators designated by the warrantor to be responsible for
the administration of vehicle protection product warranties in this
state.
(e) A copy of the warranty reimbursement insurance policy or
policies or other financial information required in section 9.
(f) A copy of each warranty the warrantor proposes to use in
this state.
(g) A statement indicating that the warrantor qualifies to do
business in this state as a warrantor under section 9.
(3) The department shall make the information described in
subsection (2)(a) and (b) available to the public.
(4) The department may charge each registrant a reasonable fee
to offset the cost of processing a registration and maintaining the
records. The fee shall not exceed $250.00 per year.
(5) If a registrant fails to register by the renewal deadline
established by the department, the department shall give the
registrant written notice of the failure and the registrant has 30
days to complete the renewal of its registration before the
registrant is suspended from acting as a warrantor in this state.
(6) An administrator or person who sells or solicits a sale of
a warranted product but who is not a warrantor is not required to
register as a warrantor or be licensed under the insurance laws of
this state to sell warranted products.
Sec. 9. (1) Every warranted product sold or offered for sale
in this state shall have a warranty reimbursement insurance policy
guaranteeing the warrantor's obligations under the warranty to the
warranty holder. The department shall not require any other
financial security requirements or financial standards from a
warrantor.
(2) In addition to the requirements described in section 11, a
warranty reimbursement insurance policy provided by a vehicle
protection product warrantor for purposes of subsection (1) must
meet all of the following:
(a) Be filed with the department.
(b) Provide that the insurer will reimburse or pay on behalf
of the warrantor all covered sums that the warrantor is legally
obligated to pay or will provide all services the warrantor is
legally obligated to perform according to the warrantor’s
contractual obligations under the warrantor’s vehicle protection
product warranty.
(c) Provide that if payment due under the warranty is not
provided by the warrantor within 60 days after the warranty holder
files proof of loss according to the terms of the warranty, the
warranty holder may file proof of loss directly with the warranty
reimbursement insurance company for reimbursement.
(d) Provide that the premium for the policy is considered paid
if the warranty holder paid for the warranted product and the
insurer’s liability under the policy is not reduced or relieved by
a failure of the warrantor, for any reason, to report the issuance
of a warranty to the insurer.
(e) Contain all of the following provisions regarding
cancellation of the policy:
(i) That the issuer of the reimbursement insurance policy shall
not cancel that policy until a notice of cancellation in writing
has been mailed or delivered to the department and each insured
warrantor.
(ii) That the cancellation of the reimbursement insurance
policy shall not reduce the issuer’s responsibility for warranted
products sold before the date of cancellation.
(iii) That if an insurer cancels a policy that a warrantor has
filed with the department, the warrantor shall do 1 of the
following:
(A) File a copy of a new policy with the department before the
termination of the prior policy so there is no lapse in the
warranty holder's coverage after the termination of the prior
policy.
(B) Discontinue acting as a warrantor as of the termination
date of the policy until a new policy becomes effective and is
accepted by the department.
Sec. 11. A person shall not sell or offer for sale in this
state a warranted product unless the warranty on the vehicle
protection product meets all of the following requirements:
(a) Is written in clear, understandable language and is
printed or typed in easy-to-read type, size, and style.
(b) Conspicuously states that the obligations of the warrantor
to the warranty holder are guaranteed under a warranty
reimbursement insurance policy.
(c) Conspicuously states that if a warranty holder must make a
claim against a party other than the warranty reimbursement
insurance policy issuer, the warranty holder is entitled to 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 60 days after proof of loss has been filed with the
warrantor.
(d) Conspicuously states the name and address of the issuer of
the warranty reimbursement insurance policy.
(e) Identifies the warrantor, the seller, and the warranty
holder.
(f) Contains the total purchase price for the warranty.
However, the parties may negotiate the purchase price at the time
of sale and it is not required that the purchase price be
preprinted on the warranty.
(g) Describes the procedure for making a claim, including a
telephone number.
(h) Conspicuously states the existence of any deductible
amount.
(i) Specifies the payments or performance provided under the
warranty, including, but not limited to, any payments for
incidental costs, the manner of calculation or determination of
payments or performance, and any limitations, exceptions, or
exclusions.
(j) Describes the conditions under which substitution of
parties or performance is allowed.
(k) Conspicuously sets forth all of the obligations and duties
of the warranty holder, including, but not limited to, any duty to
protect against any further damage to the vehicle, the obligation
to notify the warrantor in advance of any repair, or any other
similar requirements.
(l) Sets forth any terms, restrictions, or conditions governing
any right to transfer the warranty.
(m) Contains a disclosure that reads substantially as follows:
"This agreement is a product warranty and is not insurance.".
(2) At the time of sale, the seller or warrantor shall provide
1 of the following to the purchaser:
(a) A copy of the vehicle protection product warranty.
(b) A receipt or other written evidence of the purchase of the
warranted product. A warrantor or seller that provides a receipt or
other evidence under this subdivision shall provide the purchaser
with a copy of the warranty within 30 days after the date of
purchase.
Sec. 13. (1) A person shall not sell or offer for sale in this
state a warranted product unless the vehicle protection product
warranty clearly states any terms and conditions governing the
cancellation of the sale and warranty.
(2) A warrantor may only cancel a warranty if the warranty
holder does any of the following:
(a) Fails to pay for the warranted product.
(b) Makes a material misrepresentation to the seller or
warrantor.
(c) Commits fraud.
(d) Substantially breaches the warranty holder’s duties under
the warranty.
(3) A warrantor canceling a warranty shall mail written notice
of cancellation to the warranty holder at the last address of the
warranty holder in the warrantor’s records at least 30 days before
the effective date of a cancellation. The notice shall state the
effective date of the cancellation and the reason for the
cancellation.
Sec. 15. (1) Unless licensed as an insurance company, a
vehicle protection product warrantor shall not use in its name,
contracts, or literature any of the words "insurance", "casualty",
"surety", or "mutual" or any other words descriptive of the
insurance, casualty, or surety business or use any name or words in
its name that are deceptively similar to the name or description of
any insurer or surety or any other vehicle protection product
warrantor. However, a warrantor may use the term "guaranty" or a
similar word in the warrantor’s name.
(2) A vehicle protection product warrantor shall not make,
permit, or cause any false or misleading statements, either oral or
written, in connection with the sale, offer to sell, or
advertisement of a warranted product.
(3) A vehicle protection product warrantor shall not permit or
cause the omission of any material statement in connection with the
sale, offer to sell, or advertisement of a warranted product, which
under the circumstances the warrantor should make in order to make
the statements in the warranty not misleading.
(4) A vehicle protection product warrantor shall not make,
permit, or cause any false or misleading statements, either oral or
written, about the performance required or payments that are
available under the vehicle protection product warranty.
(5) A vehicle protection product warrantor shall not make,
permit, or cause any statement or practice that has the effect of
creating or maintaining a fraud.
(6) A warranted product seller or warrantor may not require as
a condition of sale or financing that a retail purchaser of a motor
vehicle purchase a warranted product that is not installed on the
motor vehicle at the time of sale.
Sec. 17. (1) A vehicle protection product warrantor shall keep
accurate accounts, books, and records concerning transactions
regulated under this act.
(2) A vehicle protection product warrantor’s accounts, books,
and records shall include all of the following:
(a) Copies of all vehicle protection product warranties.
(b) The name and address of each warranty holder.
(c) The dates, amounts, and descriptions of all receipts,
claims, and expenditures.
(3) A vehicle protection product warrantor shall retain all
required accounts, books, and records pertaining to each warranty
holder for at least 2 years after the specified period of coverage
has expired. A warrantor discontinuing business in this state shall
maintain its records until it furnishes the department satisfactory
proof that it has discharged all obligations to warranty holders in
this state.
(4) A vehicle protection product warrantor shall make its
accounts, books, and records concerning transactions regulated
under this act available to the department for the purpose of
examination.
Sec. 19. (1) The department may conduct examinations of
warrantors, administrators, or other persons to enforce this act
and protect warranty holders in this state. Upon request of the
department, a warrantor shall make available to the department all
accounts, books, and records concerning warranted products sold by
the warrantor that are necessary to enable the department to
reasonably determine compliance or noncompliance with this act.
(2) The department may take any action that is necessary or
appropriate to enforce the provisions of this act and the
department’s rules and orders and to protect warranty holders in
this state. If a warrantor engages in a pattern or practice of
conduct that violates this act and that the department reasonably
believes threatens to render the warrantor insolvent or cause
irreparable loss or injury to the property or business of any
person or company located in this state, the department may do any
1 or more of the following:
(a) Issue an order directed to that warrantor to cease and
desist from engaging in further acts, practices, or transactions
that are causing the conduct.
(b) Issue an order prohibiting that warrantor from selling or
offering for sale warranted products in violation of this act.
(c) Issue an order imposing a civil fine on the warrantor.
(3) Unless the department reasonably believes that the
warrantor is or is about to become insolvent, the department shall
provide written notice of the order to the warrantor and the
opportunity for a hearing before the effective date of an order
under subsection (2). The department shall hold the hearing within
10 business days after delivery of the notice. Prior notice and
hearing is not required if the department reasonably believes that
the warrantor is, or is about to become, insolvent.
(4) A person aggrieved by an order issued under this section
may request a hearing before the department. The hearing request
shall be filed with the department within 20 days after the date
the department’s order is effective, and the department shall hold
the hearing within 15 days after receipt of the hearing request.
(5) At a hearing under this section, the burden is on the
department to show why an order issued under this section is
justified. The contested case provisions of the administrative
procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328, apply to
a hearing request to the department and a hearing conducted under
this section.
(6) The department may bring an action in any court of
competent jurisdiction for an injunction or other appropriate
relief to enjoin threatened or existing violations of this act or
of the department’s orders or rules. The department in an action
filed under this section may also seek restitution on behalf of
persons aggrieved by a violation of this act or orders or rules of
the department.
(7) A person that is found to have violated this act or orders
or rules of the department may be ordered to pay to the department
a civil fine in an amount determined by the department that is not
more than $500.00 per violation and not more than $10,000.00 in the
aggregate 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, irrespective of the number of times the conduct, action,
or practice that is determined to be a violation of this act occur.
Sec. 21. The department may promulgate rules under the
administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to
24.328, necessary to implement and administer this act. The rules
shall include disclosure requirements for the benefit of warranty
holders, record-keeping requirements, and procedures for public
complaints.
Sec. 23. This act applies to all warranted products sold or
offered for sale on or after the effective date of this act. The
failure of any person to comply with this act before its effective
date is not admissible in any court proceeding, administrative
proceeding, arbitration, or alternative dispute resolution
proceeding and may not otherwise be used to prove that the action
of any person or the affected warranted product is unlawful or
otherwise improper.
Enacting section 1. This act takes effect 120 days after the
date it is enacted.