Insurance; Service Contracts

Creates a regulatory framework governing the sale, terms, and
administration of service contracts.  (CD1)

THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 2000                                H.D. 2
STATE OF HAWAII                                            C.D. 1

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The purpose of this Act is to protect service
 2 contract holders in this State by creating a regulatory framework
 3 governing the sale, terms, and administration of service
 4 contracts sold to consumers.
 5      SECTION 2.  The Hawaii Revised Statutes is amended by adding
 6 a new chapter to be appropriately designated and to read as
 7 follows:
 8                           "CHAPTER    
 9                         SERVICE CONTRACTS
10        -1 Application.(a)  This chapter shall not apply to:
11      (1)  Express or implied warranties;
12      (2)  Maintenance agreements; and 
13      (3)  Warranties, service contracts, and maintenance
14           agreements offered by public utilities on their
15           transmission devices to the extent they are regulated
16           by the public utilities commission or the department of
17           commerce and consumer affairs.
18      (b)  The marketing, sale, offering for sale, issuance,
19 making, proposing to make, and administration of service

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 1 contracts by providers and related service contract sellers,
 2 administrators, and other persons shall be exempt from regulation
 3 under the insurance laws of this State other than laws included
 4 in this chapter.
 5        -2 Definitions.  As used in this chapter:
 6      "Administrator" means a person appointed or designated by a
 7 provider who administers service contracts and service contract
 8 plans on behalf of the provider and subject to the requirements
 9 of this chapter.
10      "Commissioner" means the insurance commissioner.
11      "Consumer" means a natural person who buys, other than for
12 purposes of resale, any tangible personal property that is
13 distributed in commerce and that is normally used for personal,
14 family, or household purposes, and not for business or research
15 purposes.
16      "Contract holder" means a person who is the purchaser or
17 holder of a service contract.
18      "Contractual liability insurance policy" means a policy of
19 insurance that is issued to a provider, insures the provider's
20 service contracts, and may provide:
21      (1)  Reimbursement to the provider for sums that the
22           provider is legally obligated to pay under the insured
23           service contract; or

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 1      (2)  The service that the provider is legally obligated to
 2           perform under the insured service contract.
 3      "Maintenance agreement" means a contract of limited duration
 4 that provides scheduled maintenance only.
 5      "Nonoriginal manufacturer's parts" means replacement parts
 6 not made for or by the original manufacturer of the property,
 7 commonly referred to as "after market parts".
 8      "Person" means an individual, partnership, limited liability
 9 company, corporation, incorporated or unincorporated association,
10 joint stock company, reciprocal, syndicate, or any similar entity
11 or combination of entities acting in concert.
12      "Premium" means the consideration paid to an insurer for a
13 contractual liability insurance policy.
14      "Provider" means a person who is contractually obligated to
15 the service contract holder under the terms of the service
16 contract, including all sellers of motor vehicle service
17 contracts.
18      "Provider fee" means the consideration paid for a service
19 contract.
20      "Service contract" means a contract or agreement for a
21 separately stated consideration and a specific duration, to
22 perform or indemnify the repair, replacement, or maintenance of
23 property for operational or structural failure due either to a

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 1 defect in materials or artisanship, or to normal wear and tear,
 2 with or without additional provision for incidental payment or
 3 indemnity under limited circumstances, including but not limited
 4 to towing, rental, and emergency road service.  Service contracts
 5 may provide for the repair, replacement, or maintenance of
 6 property damaged by power surges, or accidentally damaged during
 7 handling.
 8      "Warranty" means a warranty made without consideration,
 9 solely by the manufacturer, importer, or seller of property or
10 services, that is not negotiated or separated from the sale of
11 the product and is incidental to the sale of the product, that
12 provides repair or replacement for defective parts, mechanical or
13 electrical breakdown, labor, or other remedial measures.
14        -3 Registration.(a)  Before conducting business in
15 this State, a provider shall register with the commissioner on a
16 form prescribed by the commissioner, and shall pay to the
17 commissioner a fee as provided under section 431:7-101.
18      (b)  Provider registration shall be updated annually and
19 shall contain the following information:
20      (1)  The address of the principal office of the provider;
21      (2)  The name and address of the provider's agent for the
22           service of process in this State, if other than the
23           provider;

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 1      (3)  The identities of the provider's executive officer or
 2           officers directly responsible for the provider's
 3           service contract business;
 4      (4)  The name, address, and telephone number of any
 5           administrators designated by the provider to be
 6           responsible for the administration of service contracts
 7           in this State;
 8      (5)  A copy of each service contract form the provider
 9           proposes to use in this State; and
10      (6)  A statement that the provider is in compliance with the
11           financial responsibility requirements of section    -4
12           and that details how the provider intends to meet the
13           requirements, and proof of compliance with the
14           requirements.
15        -4  Financial responsibility.  A provider shall comply
16 with the requirements under any one of the following paragraphs,
17 and shall not be subject to any other financial security
18 requirements under state law:
19      (1)  The provider shall insure all service contracts under a
20           contractual liability insurance policy issued by an
21           insurer authorized to transact insurance in this State
22           or issued pursuant to part III of article 8 of chapter
23           431;

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 1      (2)  The provider shall:
 2           (A)  Maintain a funded reserve account for all
 3                obligations under service contracts issued and in
 4                force in this State.  The reserves shall not be
 5                less than forty per cent of the gross
 6                consideration received from the sale of the
 7                service contract, less claims paid, for all in
 8                force contracts.  The reserve account shall be
 9                subject to examination by the commissioner; and
10           (B)  Place in trust with the commissioner, for all
11                service contracts issued and in force in this
12                State, a financial security deposit having a value
13                that is not less than $25,000, or five per cent of
14                the gross consideration received less claims paid
15                for the sale of the service contracts.  The
16                financial security deposit shall consist of one of
17                the following:
18                (i)   A surety bond issued by an authorized
19                      surety;
20               (ii)   Securities of the type eligible for deposit
21                      by authorized insurers in this State;
22              (iii)   Cash;
23               (iv)   A letter of credit issued by a qualified

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 1                      financial institution; or
 2                (v)   Another form of security authorized by the
 3                      commissioner by rule;
 4           or
 5      (3)  The provider or its parent company shall:
 6           (A)  Maintain a net worth or stockholders' equity of at
 7                least $100,000,000; and
 8           (B)  Upon request, provide the commissioner with a copy
 9                of the provider's or the provider's parent
10                company's most recent form 10-K or Form 20-F filed
11                with the Securities and Exchange Commission within
12                the last calendar year, or if the company does not
13                file with the Securities and Exchange Commission,
14                a copy of the provider's or the provider's parent
15                company's audited financial statements.
16           If the financial responsibility requirement under this
17           paragraph is to be maintained by the provider's parent
18           company, the parent company shall guarantee the
19           provider's obligations under service contracts sold by
20           the provider in this State.
21          -5  Recordkeeping.(a)  The provider or provider's
22 administrator shall keep accurate accounts, books, and records of
23 all transactions regulated under this chapter.

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 1      (b)  Accounts, books, and records maintained as required by
 2 this section shall include the following:
 3      (1)  Copies of each type of service contract sold;
 4      (2)  The name and address of each contract holder, to the
 5           extent that the name and address have been furnished by
 6           the contract holder;
 7      (3)  A list of the locations where the provider's service
 8           contracts are marketed, sold, or offered for sale; and
 9      (4)  Recorded claims files which at a minimum shall contain
10           the date and description of each claim under the
11           provider's service contracts.
12      (c)  The provider for each service contract shall retain
13 records required under this section for at least one year after
14 coverage under the contract has expired.  A provider
15 discontinuing business in this State shall maintain records
16 required under this section until it provides the commissioner
17 with satisfactory proof that the provider has discharged all
18 contractual obligations to contract holders in this State.
19      (d)  The records required under this section may be, but are
20 not required to be, maintained on a computer disk or other
21 recordkeeping technology.  If records are maintained in a form
22 other than hard copy, the records shall be in a form allowing
23 duplication as legible hard copy at the request of the

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 1 commissioner.
 2      (e)  Upon request of the commissioner, the provider shall
 3 make available to the commissioner all accounts, books, and
 4 records concerning service contracts sold by the provider
 5 reasonably necessary to enable the commissioner to determine
 6 compliance or noncompliance with this chapter.
 7          -6  Service contracts; receipt; disclosures.(a)
 8 Providers shall provide purchasers of a service contract with:
 9      (1)  A receipt for or other written evidence of the purchase
10           of the service contract that shall be provided to the
11           service contract holder;
12      (2)  A copy of the service contract that shall be provided
13           within a reasonable period of time from the date of
14           purchase; and
15      (3)  Except for offers or sales of service contracts by
16           telephone, mail, or electronic means, a written copy of
17           the basic terms and conditions of the service contract
18           to be made available to the purchaser where the
19           purchaser is physically present at the point of sale.
20      (b)  Service contracts shall be written in clear,
21 understandable language, and shall be printed or typed in a
22 typeface and format that is easy to read.
23      (c)  All service contracts shall:

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 1      (1)  State the name and address of:
 2           (A)   The provider; and
 3           (B)   The administrator of the contract, if different
 4                 from the provider;
 5      (2)  Identify:
 6           (A)   The service contract seller; and
 7           (B)   The contract holder, to the extent that the
 8                 contract holder has furnished the contract
 9                 seller, administrator, or provider with that
10                 information;
11      (3)  The terms of the sale, including the purchase price;
12      (4)  The procedure the contract holder must follow to obtain
13           service;
14      (5)  Any deductible amount that applies;
15      (6)  The specific merchandise and services to be provided,
16           and any limitations, exceptions, or exclusions;
17      (7)  Where the contract covers a motor vehicle, whether the
18           use of nonoriginal manufacturer's parts is allowed;
19      (8)  Any restrictions governing the transferability of the
20           service contract that apply;
21      (9)  The terms, restrictions, or conditions governing the
22           return or cancellation of the service contract by
23           either the provider or contract holder prior to the

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 1           contract's termination or expiration date;
 2     (10)  The obligations and duties of the contract holder, such
 3           as the duty to protect against any further damage, or
 4           to follow owner's manual instructions; and
 5     (11)  Any provision for, or exclusion of consequential
 6           damages or preexisting conditions that applies.
 7 The information under paragraphs (1) and (2) shall not be
 8 required to be preprinted on the service contract and may be
 9 added to the service contract at the time of sale.  The purchase
10 price under paragraph (3) shall not be required to be preprinted
11 on the service contract and may be negotiated with the contract
12 holder at the time of sale.
13      (d)  Service contracts insured under a contractual liability
14 insurance policy shall include the name and address of the
15 insurer and contain a statement substantially similar to the
16 following:
17      "Obligations of the provider under this service
18      contract are insured under a service contract
19      contractual liability insurance policy."
20      (e)  Service contracts not insured under a contractual
21 liability insurance policy shall contain a statement
22 substantially similar to the following:
23      "Obligations of the provider under this service

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 1      contract are backed by the full faith and credit of the
 2      provider."
 3          -7  Service contract returns and refunds.  (a)  Service
 4 contracts shall state that the contract holder may return the
 5 contract within:
 6      (1)  Thirty days of the date that the contract was mailed to
 7           the contract holder;
 8      (2)  Twenty days of the date the contract was delivered to
 9           the contract holder, if the contract was delivered at
10           the time of sale; or
11      (3)  A longer time period as specified in the service
12           contract.
13      (b)  Upon return of the service contract to the provider
14 within the applicable time period, and if no claim has been made
15 under the service contract prior to its return to the provider,
16 the service contract shall be void and the provider shall refund
17 to, or credit the account of, the contract holder with the full
18 purchase price of the service contract.  A ten per cent penalty
19 per month shall be added to a refund that is not paid or credited
20 within forty-five days after the return of the service contract
21 to the provider.
22      (c)  The right to void a service contract under subsection
23 (b) shall not be transferred and shall apply only to the original

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 1 service contract purchaser upon the terms and conditions provided
 2 in the contract and consistent with this chapter.
 3      (d)  Upon cancellation of a service contract by the
 4 provider, the provider, at least five days prior to cancellation,
 5 shall mail to the contract holder at the contract holder's last
 6 known address, a written prior notice of cancellation that states
 7 the effective date of the cancellation; provided that prior
 8 notice under this subsection shall not be required if
 9 cancellation is for:
10      (1)  Nonpayment of the provider's fee for the service
11           provided under the service contract;
12      (2)  A material misrepresentation by the contract holder to
13           the provider; or
14      (3)  A substantial breach of duties of the contract holder
15           under the service contract, relating to a covered
16           product or its use.
17        -8  Contractual liability insurance policies.(a)
18 Contractual liability insurance policies in this State shall
19 provide that if covered service is not provided by the service
20 contract provider or administrator within sixty days of proof of
21 loss by the contract holder, the contract holder is entitled to
22 apply directly to the contractual liability insurance company for
23 services under the service contract that are covered under the

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 1 policy.
 2      (b)  A contractual liability insurance policy insurer shall
 3 not terminate the policy until it has issued a notice of
 4 termination required by the commissioner under the insurance laws
 5 of this State.  The termination of a contractual liability
 6 insurance policy shall not reduce the insurer's responsibility
 7 for service contracts issued by providers prior to the date of
 8 termination.
 9      (c)  A provider covered by a contractual liability insurance
10 policy shall be considered the agent of the contractual liability
11 insurance policy insurer, for purposes of determining duties owed
12 by the insurer to contract holders in accordance with the service
13 contract and this chapter.
14      (d) Insurers issuing reimbursement insurance to providers
15 are deemed to have received the premiums for the insurance upon
16 the payment of provider fees by consumers for service contracts
17 issued by the insured provider.
18          -9  Applicability of premium taxes.  Service contract
19 provider fees shall not be subject to premium taxes.  Contractual
20 liability insurance policies shall be subject to premium taxes.
21          -10  Prohibited acts.  (a)  No provider shall use in
22 its name, the word "insurance", "casualty", "surety", "mutual",
23 or any other word descriptive of the insurance, casualty, or

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 1 surety business, or a name deceptively similar to the name or
 2 description of any insurance or surety corporation, or to the
 3 name of any other provider; provided that the word "guaranty" or
 4 similar word may be used by a provider.  This section shall not
 5 apply to a provider using any language prohibited by this section
 6 in its name prior to the effective date of this Act.  
 7      (b)  A provider or its representative shall not in its
 8 service contracts or literature make, permit, or cause to be
 9 made, any false or misleading statement, or deliberately omit any
10 material statement that would be considered misleading if
11 omitted.
12      (c)  No person shall condition a loan or the sale of any
13 property on the purchase of a service contract.
14          -11  Rules.  The commissioner may adopt rules pursuant
15 to chapter 91 to implement this chapter.
16          -12  Enforcement.(a)  The commissioner may take any
17 action necessary or appropriate to enforce this chapter, and the
18 rules adopted and orders issued hereunder.  The commissioner may
19 conduct investigations and examinations of providers,
20 administrators, insurers, or other persons.  If a provider has
21 violated this chapter, or rules or orders under this chapter, the
22 commissioner may issue an order:
23      (1)  Requiring a person to cease and desist from violating

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 1           this chapter or rules or orders under this chapter;
 2      (2)  Prohibiting a person from selling or offering for sale
 3           service contracts in violation of this chapter; or
 4      (3)  Imposing a civil penalty on a person or any combination
 5           of the foregoing, as applicable.
 6      (b)  A person aggrieved by an order under this section may
 7 request a hearing before the commissioner, conducted subject to
 8 chapter 91.  The hearing request shall be filed with the
 9 commissioner within twenty days of the effective date of the
10 commissioner's order.  Upon filing of a hearing request, the
11 order shall be suspended from its effective date, until
12 completion of the hearing and final decision of the commissioner.
13 At the hearing, the commissioner shall have the burden of proof
14 to show that the order is justified.
15      (c)  The commissioner may bring an action in any court of
16 competent jurisdiction, for an injunction or other appropriate
17 relief to remedy threatened or existing violations of this
18 chapter, rules established pursuant to this chapter, or orders of
19 the commissioner.  An action filed under this section may also
20 seek restitution on behalf of persons aggrieved by a violation of
21 this chapter, rules established pursuant to this chapter, or
22 orders of the commissioner.
23      (d)  Violations of this chapter, rules established pursuant

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 1 to this chapter, or orders of the commissioner shall be
 2 considered unfair or deceptive acts or practices in the conduct
 3 of trade or commerce under section 480-2."
 4      SECTION 3.  Section 431:1-209, Hawaii Revised Statutes, is
 5 amended to read as follows:
 6      "431:1-209  General casualty insurance defined.  General
 7 casualty insurance includes vehicle insurance as defined in
 8 section 431:1-208, disability insurance defined in section
 9 431:1-205 and in addition is insurance:
10      (1)  Against legal liability for the death, injury, or
11           disability of any human being, or from damage to
12           property[.];
13      (2)  Of medical, hospital, surgical, and funeral benefits to
14           persons injured, irrespective of legal liability of the
15           insured, when issued with or supplemental to insurance
16           against legal liability for the death, injury or
17           disability of human beings[.];
18      (3)  Of the obligation accepted by, imposed upon, or assumed
19           by employers under law for death, disablement, or
20           injury to employees[.];
21      (4)  Against loss or damage by burglary, theft, larceny,
22           robbery, forgery, fraud, vandalism, malicious mischief,
23           confiscation, or wrongful conversion, disposal or

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 1           concealment, or from any attempt of any of the
 2           foregoing; also insurance against loss or damage to
 3           moneys, coins, bullion, securities, notes, drafts,
 4           acceptances, or any other valuable papers or documents,
 5           resulting from any cause, except while in the mail[.];
 6      (5)  Upon personal effects of individuals, by an all-risk
 7           type of policy commonly known as the personal property
 8           floater[.];
 9      (6)  Against loss or damage to glass and its appurtenances
10           resulting from any cause[.];
11      (7)  Against any liability and loss or damage to property
12           resulting from accidents to or explosions of boilers,
13           pipes, pressure containers, machinery, or apparatus[.];
14      (8)  Against loss of or damage to any property of the
15           insured resulting from the ownership, maintenance or
16           use of elevators, except loss or damage by fire[.];
17      (9)  Against loss or damage to any property caused by the
18           breakage or leakage of sprinklers, water pipes or
19           containers, or by water entering through leaks or
20           openings in buildings[.];
21     (10)  Against loss or damage resulting from failure of
22           debtors to pay their obligations to the insured (credit
23           insurance)[.];

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 1     (11)  Against loss of or damage to any domesticated or wild
 2           animal resulting from any cause (livestock
 3           insurance)[.];
 4     (12)  Against loss of or damage to any property of the
 5           insured resulting from collision of any other object
 6           with such property, but not including collision to or
 7           by vessels, craft, piers, or other instrumentalities of
 8           ocean or inland navigation (collision insurance)[.];
 9     (13)  Against legal liability of the insured, and against
10           loss, damage, or expense incident to a claim of such
11           liability, and including any obligation of the insured
12           to pay medical, hospital, surgical, and funeral
13           benefits to injured persons, irrespective of legal
14           liability of the insured, arising out of the death or
15           injury of any person, or arising out of injury to the
16           economic interest of any person as the result of
17           negligence in rendering expert, fiduciary, or
18           professional service (malpractice insurance)[.];
19     (14)  Against any contract of warranty or guaranty which
20           promises service maintenance, parts replacement,
21           repair, money, or any other indemnity in the event of
22           loss of or damage to a motor vehicle or any part
23           thereof from any cause, including loss of or damage to

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 1           or loss of use of the motor vehicle by reason of
 2           depreciation, deterioration, wear and tear, use,
 3           obsolescence, or breakage if made by a warrantor or
 4           guarantor who or which as such is doing an insurance
 5           business[.
 6                The making of a contract covering only defects in
 7           material and work in exchange for a separately stated
 8           charge where it is incidental to the business of
 9           selling or leasing motor vehicles, shall not be deemed
10           insurance; provided the maker of the contract has an
11           insurance policy, with an insurer as defined in section
12           431:1-202, providing coverage for the making of those
13           contracts.  The policy shall assume the legal liability
14           created by each contract or, alternatively, the
15           ultimate legal liability of all contracts made by the
16           issuer.  If the maker of the contract is unable to
17           perform the duties imposed by the contract, the
18           purchaser of the contract then shall be considered a
19           policyholder of the insurer.  The policy shall include
20           a loss payee endorsement that provides coverage to any
21           lending institution as its interest may appear.  In
22           addition, the contract conspicuously shall state the
23           name and address of the licensed underwriting insurer

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 1           and contain a statement that the policyholder shall be
 2           entitled to make a direct claim against the insurer
 3           upon the failure of the issuer to pay any claim within
 4           sixty days after proof of loss has been filed with the
 5           issuer.  The requirement that the maker of the contract
 6           have an insurance policy with an insurer shall not
 7           apply if the maker is a manufacturer, distributor or
 8           importer of automobiles.]; provided that service
 9           contracts, as defined and meeting the requirements of
10           chapter    , shall not be subject to chapter 431.
11                The doing or proposing to do any business in
12           substance equivalent to the business described in this
13           section in a manner designed to evade the provisions of
14           this section is the doing of an insurance business[.];
15           and
16     (15)  Against any other kind of loss, damage, or liability
17           properly the subject of insurance and not within any
18           other class or classes of insurance as defined in
19           section 431:1-204 to section 431:1-211, if such
20           insurance is not contrary to law or public policy."
21      SECTION 4.  Section 431:7-101, Hawaii Revised Statutes, is
22 amended by amending subsections (a) and (b) to read as follows:
23      "(a)  The commissioner shall collect in advance the

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 1 following fees:
 2      (1)  Certificate of authority:  Issuance................$900
 3      (2)  Organization of domestic insurers and affiliated
 4           corporations:
 5           (A)  Application and all other papers required for
 6                issuance of solicitation permit, filing.....$1,500
 7           (B)  Issuance of solicitation permit...............$150
 8      (3)  General agent's license:
 9           (A)  Issuance, regular license......................$75
10           (B)  Issuance, temporary license....................$75
11      (4)  Subagent's license:
12           (A)  Issuance, regular license......................$75
13           (B)  Issuance, temporary license....................$75
14      (5)  Nonresident agent's or broker's license:
15           Issuance............................................$60
16      (6)  Solicitor's license: Issuance.......................$60
17      (7)  Independent adjuster's license: Issuance............$60
18      (8)  Public adjuster's license: Issuance.................$60
19      (9)  Workers' compensation claims adjuster's limited
20           license: Issuance...................................$60
21     (10)  Limited license issued pursuant to section
22           431:9-214(c): Issuance..............................$60
23     (11)  Managing general agent's license:

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 1           Issuance............................................$75
 2     (12)  Reinsurance intermediary's license:
 3           Issuance............................................$75
 4     (13)  Surplus line broker's license: Issuance............$150
 5     (14)  Service contract provider's registration:
 6           Issuance............................................$75
 7    [(14)] (15) Examination for license:  For each examination, a
 8           fee to be established by the commissioner.
 9      (b)  The fees for services of the department of commerce and
10 consumer affairs subsequent to the issuance of a certificate of
11 authority or a license are as follows:
12      (1)  $600 per year for all services (including extension of
13           the certificate of authority) for an authorized
14           insurer;
15      (2)  $75 per year for all services (including extension of
16           the license) for a regularly licensed general agent;
17      (3)  $75 per year for all services (including extension of
18           the license) for a regularly licensed subagent;
19      (4)  $45 per year for all services (including extension of
20           the license) for a regularly licensed nonresident agent
21           or broker;
22      (5)  $30 per year for all services (including extension of
23           the license) for a regularly licensed solicitor;

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 1      (6)  $45 per year for all services (including extension of
 2           the license) for a regularly licensed independent
 3           adjuster;
 4      (7)  $45 per year for all services (including extension of
 5           the license) for a regularly licensed public adjuster;
 6      (8)  $45 per year for all services (including extension of
 7           the license) for a regularly limited licensed workers'
 8           compensation claims adjuster;
 9      (9)  $45 per year for all services (including extension of
10           the license) for a limited license issued pursuant to
11           section 431:9-214(c);
12     (10)  $75 per year for all services (including extension of
13           the license) for a regularly licensed managing general
14           agent;
15     (11)  $75 per year for all services (including extension of
16           the license) for a regularly licensed reinsurance
17           intermediary;
18     (12)  $45 per year for all services (including extension of
19           the license) for a licensed surplus line broker; [and]
20     (13)  $75 per year for all services (including renewal of
21           registration) for a service contract provider; and
22    [(13)] (14) The services referred to in paragraphs (1) to
23           [(12)] (13) shall not include services in connection

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 1           with examinations, investigations, hearings, appeals,
 2           and deposits with a depository other than the
 3           department of commerce and consumer affairs[;]."
 4      SECTION 5.  If any provision of this Act, or the application
 5 of the provision to any person or circumstances, shall be held
 6 invalid, the remainder of the Act, and the application of the
 7 provision to person or circumstances other than those as to which
 8 it is held invalid, shall not be affected.
 9      SECTION 6.  This Act shall not apply to service contracts or
10 contractual liability insurance policies effective prior to
11 July 1, 2000, or to the activities of service contract providers,
12 administrators, sellers, or contractual liability insurance
13 policy insurers prior to July 1, 2000.  The failure of a provider
14 or other person to comply with this Act or otherwise to
15 administer a service contract plan, in the manner required by
16 this Act prior to July 1, 2000, shall not be admissible in any
17 court, arbitration, or alternative dispute resolution proceeding,
18 or otherwise used to prove that the action of any person or the
19 service contract was unlawful or otherwise improper.
20      SECTION 7.  Statutory material to be repealed is bracketed.
21 New statutory material is underscored.
22      SECTION 8.  This Act shall take effect on July 1, 2000.