2003 - 2004 LEGISLATURE
February 19, 2004 - Introduced by Representatives Ladwig, Hahn, Plouff and
Townsend, cosponsored by Senators Schultz, Kanavas and Hansen. Referred
to Committee on Insurance.
AB862,1,3 1An Act to amend 601.41 (1) (intro.); and to create 100.203, 600.01 (1) (b) 11.,
2601.31 (1) (km), 631.37 (4) (g) and 632.185 of the statutes; relating to: vehicle
3protection product warranties.
Analysis by the Legislative Reference Bureau
The Wisconsin Administrative Code (code) provides requirements for the
business of issuing warranties in lieu of the application of the insurance provisions
of the statutes. The code provides that the commissioner of insurance
(commissioner) finds that the making of a contract relating to the repair,
replacement, or restoration of a good, product, or object is the transaction of
insurance and that the person making the contract is subject to the insurance
provisions of the statutes unless the person complies with the requirements under
the code. This bill provides that the insurance provisions of the statutes do not apply
to a vehicle protection product warranty and establishes a system to regulate vehicle
protection product warranties. A vehicle protection product warranty is defined as
a written representation, made to a warranty holder, that applies to a vehicle
protection product (a device, system, or service installed on or applied to a vehicle
that is designed to prevent loss or damage to the vehicle) and that asserts the vehicle
protection product will prevent specified loss or damage to the vehicle or the
warrantor will pay the warranty holder specified incidental costs.
Under the bill, if a person sells or offers to sell a vehicle protection product that
includes a warranty, the warrantor must meet several requirements. These
requirements include:

1. The warrantor must register with the office of the commissioner before he
or she may operate as a warrantor or represent to the public that he or she is a
warrantor. The commissioner may charge an annual fee not to exceed $250 for
processing and maintaining registration records. A warrantor must renew his or her
registration annually. If the warrantor fails to renew his or her registration, the
commissioner will suspend the warrantor's registration after 30 days. If the
warrantor still fails to renew his or her registration one year after the renewal
deadline, his or her registration will be terminated.
2. The warrantor must meet one of two conditions of financial responsibility.
Either the warrantor must have a net worth of, or ownership interests in the
warrantor must total, at least $50,000,000 or the warrantor must be insured under
a warranty reimbursement insurance policy (insurance policy) that meets the
conditions specified in the bill and must have filed a copy of the insurance policy with
the commissioner.
3. If the warrantor is insured under an insurance policy, the insurance policy
must meet several conditions. The conditions include: the insurance policy issuer
must be authorized to do business in this state; the insurance policy must state that
the policy issuer will pay all covered sums; the insurance policy must state that, if
the warrantor does not provide payment due within 60 days after the warranty
holder has filed proof of loss, the warranty holder may file directly with the insurance
policy issuer for reimbursement; and the insurance policy must contain specified
cancellation provisions.
4. The warrantor must provide specific disclosures on each warranty. The
disclosures include the identity of the warrantor, the seller, and the warranty holder;
the total purchase price and payment terms; the procedure for making a claim; the
existence of any deductible amount; any conditions of substitution; and any terms
and conditions governing the cancellation.
5. The warrantor may cancel a warranty only under limited, specified
conditions. The conditions include circumstances in which the warranty holder:
fails to pay for the vehicle protection product; commits fraud; or breaches the
warranty holder's duties under the warranty.
6. The warrantor must maintain accurate records of all warranty transactions,
and the records must be available to the commissioner. The records must include the
following: copies of all warranties under which the warrantor is obligated; names
and addresses of warranty holders; and dates, amounts, and descriptions of all
receipts, claims, and expenditures related to the warrantor's warranties.
If a warrantor violates a requirement under the vehicle protection product
warranty provisions, the commissioner may enforce the requirement, issue orders,
and protect warranty holders. A violator may be ordered to forfeit not more than
$500 per violation and not more than $10,000 for all violations of a similar nature.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB862, s. 1
1Section 1. 100.203 of the statutes is created to read:
AB862,3,3 2100.203 Vehicle protection product warranties. (1) Definitions. In this
3section:
AB862,3,54 (a) "Administrator" means a party other than the warrantor whom the
5warrantor designates to be responsible for the administration of warranties.
AB862,3,66 (b) "Commissioner" means the commissioner of insurance.
AB862,3,127 (c) "Incidental costs" means expenses incurred by the warranty holder that are
8specified in the warranty and that are related to the failure of the vehicle protection
9product to perform as the warranty provides. "Incidental costs" include insurance
10policy deductibles, rental vehicle charges, the difference between the actual value of
11the stolen vehicle at the time of theft and the cost of a replacement vehicle, sales
12taxes, registration fees, transaction fees, and mechanical inspection fees.
AB862,3,1313 (d) "Office" means the office of the commissioner.
AB862,3,1814 (e) "Vehicle protection product" means a device, system, or service installed on
15or applied to a vehicle that is designed to prevent loss or damage to the vehicle.
16"Vehicle protection product" includes alarm systems, body-part marking products,
17steering locks, window-etch products, pedal and ignition locks, fuel and ignition kill
18switches, and electronic, radio, and satellite tracking devices.
AB862,3,2019 (f) "Warrantor" means a person who is obligated to the warranty holder under
20the terms of the warranty.
AB862,3,2421 (g) "Warranty" means a written representation, made to a warranty holder,
22that applies to a vehicle protection product and that asserts that the vehicle
23protection product will prevent specified loss or damage to a vehicle or the warrantor
24will pay the warranty holder specified incidental costs.
AB862,4,3
1(h) "Warranty holder" means the person who purchases a vehicle protection
2product that includes a warranty or who is a permitted transferee under the terms
3of the warranty.
AB862,4,74 (i) "Warranty reimbursement insurance policy" means an insurance policy that
5is issued to a warrantor to provide reimbursement to the warrantor for, or to pay on
6behalf of the warrantor, all obligations incurred by the warrantor under the terms
7and conditions of the insured warranties sold by the warrantor.
AB862,4,10 8(2) Registration and filing requirements of warrantors. (a) A person shall
9register with the office by filing a form prescribed by the commissioner before
10operating as a warrantor or representing to the public that the person is a warrantor.
AB862,4,1211 (b) 1. Warrantor registration records shall be filed with the office annually and
12shall be updated within 30 days of any change.
AB862,4,1413 2. The registration records shall contain the following information, which shall
14be available to the public:
AB862,4,1715 a. The warrantor's name, any names under which the warrantor does business
16in this state, the warrantor's principal office address, and the warrantor's telephone
17number.
AB862,4,1918 b. The name and address of the warrantor's agent for service of process in this
19state if other than the warrantor.
AB862,4,2120 3. The registration records shall contain the following information, which is
21confidential and not available for inspection or copying under s. 19.35 (1):
AB862,4,2322 a. The name of the warrantor's executive officer directly responsible for the
23warrantor's vehicle protection product business.
AB862,5,3
1b. The name, address, and telephone number of any administrator that the
2warrantor designates to be responsible for the administration of warranties in this
3state.
AB862,5,54 c. A copy of the warranty reimbursement insurance policy or other financial
5information required under sub. (3).
AB862,5,66 d. A copy of each warranty that the warrantor plans to use in this state.
AB862,5,97 e. A statement indicating that the warrantor qualifies to do business in this
8state under sub. (3) (a) or that the warrantor qualifies to do business in this state
9under sub. (3) (b).
AB862,5,1210 (c) 1. If a registrant fails to register by the renewal deadline, the commissioner
11shall give the registrant written notice of the failure. The registrant shall have 30
12days to complete the renewal before his or her registration is suspended.
AB862,5,1613 2. If a registrant's registration is suspended under subd. 1., the suspension
14shall last until the registrant registers and pays any late payment, except that the
15registration shall be terminated one year after the renewal deadline if the registrant
16has not registered or paid any late payment.
AB862,5,1917 (d) A person who sells or solicits a sale of a vehicle protection product that
18includes a warranty but who is not a warrantor is not required to register as a
19warrantor to sell the vehicle protection product.
AB862,5,22 20(3) Financial responsibility. No person may sell, or offer to sell, a vehicle
21protection product that includes a warranty unless the warrantor meets one of the
22following conditions:
AB862,5,2523 (a) The warrantor is insured under a warranty reimbursement insurance
24policy that meets the conditions specified in s. 632.185 (2) and has filed with the
25commissioner a copy of the warranty reimbursement insurance policy.
AB862,6,13
1(b) The warrantor's net worth, or the total of all outstanding ownership
2interests in the warrantor, is at least $50,000,000, or, if the warrantor is a subsidiary,
3the parent entity's net worth is at least $50,000,000. If the warrantor files with the
4U.S. Securities and Exchange Commission, the warrantor provides the
5commissioner with a copy of the warrantor's, or the parent entity's, most recent U.S.
6Securities and Exchange Commission form 10-K or form 20-f, filed within the
7preceding year pursuant to 15 USC 78L(b) or (g), 78m, or 78o(d). If the warrantor
8does not file with the U.S. Securities and Exchange Commission, the warrantor
9provides the commissioner a copy of the warrantor's, or the parent entity's, audited
10financial statements. If the warrantor's parent entity's forms or audited financial
11statements are filed to meet the condition specified under this subsection, then the
12parent entity shall agree to guarantee the obligations of the warrantor relating to
13warranties issued by the warrantor in this state.
AB862,6,17 14(4) Disclosure to warranty holder. (a) Every warranty shall be written in
15clear language that is understandable to lay persons and shall be printed or typed
16in easy-to-read size and style of type. No warranty may be sold or offered for sale
17unless it meets all of the following conditions:
AB862,6,1918 1. If the warrantor chooses to meet its financial responsibility obligations
19under sub. (3) (a):
AB862,6,2220 a. The warranty states that the obligations of the warrantor to the warranty
21holder are guaranteed under a warranty reimbursement insurance policy and states
22the name and address of the insurer.
AB862,7,223 b. The warranty states that if a warranty holder makes a claim against a party
24other than the issuer of the warranty reimbursement insurance policy, the warranty
25holder may make a direct claim against the insurer if the warrantor fails to pay any

1claim or to meet any obligation under the terms of the warranty within 60 days after
2proof of loss has been filed with the warrantor.
AB862,7,33 2. The warranty identifies the warrantor, the seller, and the warranty holder.
AB862,7,64 3. The warranty sets forth the total purchase price and the payment terms. The
5purchase price does not have to be preprinted on the warranty and may be negotiated
6with the purchaser at the time of sale.
AB862,7,87 4. The warranty sets forth the procedure for making a claim, including a
8telephone number.
AB862,7,99 5. The warranty states the existence of any deductible amount.
AB862,7,1310 6. The warranty specifies the payments or performance to be provided under
11the warranty, including payments for incidental costs, how the payments or
12performance will be calculated or determined, and any limitations, exceptions, or
13exclusions.
AB862,7,1514 7. The warranty sets forth the conditions under which substitution will be
15allowed.
AB862,7,1616 8. The warranty states all of the obligations and duties of the warranty holder.
AB862,7,1717 9. The warranty sets forth any terms governing transferability of the warranty.
AB862,7,1918 10. The warranty contains a disclosure that reads substantially as follows:
19"This agreement is a product warranty and is not insurance."
AB862,7,2120 11. The warranty clearly states any terms and conditions governing the
21cancellation of the sale and warranty.
AB862,7,2322 (b) The seller of the warranty or the warrantor shall provide one of the following
23to the purchaser:
AB862,7,2424 1. At the time of sale, a copy of the warranty.
AB862,8,3
12. At the time of sale, a receipt or other written evidence of the purchase of the
2vehicle protection product and, within 30 days after the purchase, a copy of the
3warranty.
AB862,8,5 4(5) Warranty cancellation. (a) A warrantor may cancel the warranty only if
5the warranty holder does one of the following:
AB862,8,66 1. Fails to pay for the vehicle protection product to which the warranty applies.
AB862,8,87 2. Makes a material misrepresentation to the seller of the vehicle protection
8product to which the warranty applies or to the warrantor.
AB862,8,99 3. Commits fraud.
AB862,8,1010 4. Substantially breaches the warranty holder's duties under the warranty.
AB862,8,1411 (b) A warrantor canceling a warranty shall mail written notice of cancellation
12to the warranty holder at the last address of the warranty holder in the warrantor's
13records at least 30 days prior to the effective date of the cancellation. The notice shall
14state the effective date of the cancellation and the reason for the cancellation.
AB862,8,20 15(6) Prohibited acts. (a) A warrantor that is not an insurer, as defined in s.
16600.03 (27), may not use in its name, contracts, or literature any of the terms,
17"insurance," "casualty," "surety," "mutual," or any other words descriptive of the
18insurance, casualty, or surety business. A warrantor may not use any name or
19description that is deceptively similar to the name or description of any insurance
20or surety corporation or to any other warrantor.
AB862,8,2221 (b) No warrantor may make any warranty claim that is untrue, deceptive, or
22misleading as provided in s. 100.18.
AB862,8,2523 (c) No person may require as a condition of sale or financing of a motor vehicle
24that a retail purchaser of a motor vehicle purchase a vehicle protection product that
25is not installed on the vehicle at the time of sale.
AB862,9,2
1(7) Record keeping. (a) Warrantors shall keep accurate records of transactions
2regulated under this section.
AB862,9,33 (b) A warrantor's records shall include all of the following:
AB862,9,44 1. Copies of all warranties under which the warrantor is obligated.
AB862,9,65 2. The name and address of each warranty holder to whom the warrantor is
6obligated.
AB862,9,87 3. The dates, amounts, and descriptions of all receipts, claims, and
8expenditures related to the warrantor's warranties.
AB862,9,139 (c) A warrantor shall retain all required records pertaining to each warranty
10holder to whom the warrantor is obligated for at least 2 years after the specified
11period of coverage has expired. A warrantor discontinuing business in this state
12shall maintain its records until it furnishes the commissioner satisfactory proof that
13it has discharged all obligations to warranty holders in this state.
AB862,9,1514 (d) Warrantors shall make all records concerning transactions regulated under
15this section available to the commissioner.
AB862,9,22 16(8) Sanctions; administrative penalty. (a) The commissioner may take
17necessary and appropriate action to enforce this section and the commissioner's
18rules and orders and to protect warranty holders. If a warrantor violates this section
19and the commissioner reasonably believes the violation threatens to render the
20warrantor insolvent or cause irreparable loss or injury to the property or business
21of any person located in this state, the commissioner may issue an order that does
22any of the following:
AB862,9,2323 1. Prohibits the warrantor from engaging in the act that violates this section.
AB862,9,2524 2. Prohibits the warrantor from selling or offering for sale any warranty that
25violates this section.
AB862,10,1
13. Imposes a forfeiture on the warrantor.
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