SB492,13,2322 (b) The security under this subsection shall be in one or a combination of the
23following forms:
SB492,13,2424 1. A deposit of securities under s. 601.13 for the benefit of Wisconsin consumers.
SB492,14,12
12. An irrevocable letter of credit that is from a bank properly chartered by the
2federal government or any state, that is acceptable to the commissioner, and that is
3issued for a term of at least 5 years with provision for renewal 2 years before
4termination. The letter of credit shall be payable to the commissioner or the
5commissioner's designee for the benefit of Wisconsin consumers upon a finding by
6the commissioner that a provider is insolvent or financially impaired and unable to
7meet its obligations under service contracts issued in Wisconsin. The provider shall
8notify the commissioner in writing of the nonrenewal of a letter of credit within 30
9days after receiving a notice of nonrenewal. No provider whose letter of credit has
10been nonrenewed may offer or sell or renew any service contract on or after the date
11of nonrenewal until the provider obtains security satisfying the requirements of this
12subsection or satisfies the requirements of sub. (6).
SB492,14,1413 (c) The security under this subsection shall be not less than $50,000 plus one
14of the following:
SB492,14,1715 1. If the provider has not appointed an administrator under s. 616.54 (1), 15
16percent of the provider fees collected from service contract holders for all unexpired
17service contracts in force in Wisconsin on January 1 of each year.
SB492,14,2018 2. If the provider has appointed an administrator under s. 616.54 (1), 22.5
19percent of the provider fees collected from service contract holders for all unexpired
20service contracts in Wisconsin on January 1 of each year.
SB492,14,2321 (d) The security under this subsection shall continue until released by the
22commissioner pursuant to a finding that it is not necessary for the reasonable
23protection of Wisconsin consumers.
SB492,15,4 24(8) Financial statements. A provider using a deposit or irrevocable letter of
25credit as specified in sub. (7) to satisfy sub. (5) shall, by the end of the 5th month

1following the end of each fiscal year of the provider, submit financial statements for
2the fiscal year to the commissioner that are prepared on an accrual basis in
3accordance with generally accepted accounting principles and that are audited by an
4independent certified public accountant.
SB492,15,7 5(9) Commissioner limitation. Except for the requirements specified in sub. (5),
6no other financial security requirements shall be required by the commissioner for
7providers.
SB492,15,9 8(10) Payment of claims. A provider shall be subject to and shall pay claims
9under a service contract in accordance with s. 628.46 (1) and (2).
SB492,15,11 10(11) Service contract sellers. A service contract seller is not subject to
11licensure or registration under this subchapter.
SB492,15,17 12616.56 Form filing and required disclosures. (1) A service contract may
13not be marketed, sold, offered for sale, issued, made, proposed to be made, or
14administered in this state unless the service contract has been filed with and
15approved by the commissioner in a manner and format prescribed by the
16commissioner. Service contracts shall be filed in the final printed format or typed
17facsimile exactly as they will be offered for issuance or delivery in this state.
SB492,15,23 18(2) Service contracts shall be written, printed, or typed in commonly
19understood language, shall be legible, appropriately divided, and captioned by their
20various sections, and their various sections shall be presented in a meaningful
21sequence. Contract filings shall be accompanied by a certificate of compliance and
22readability signed by an officer of the provider or administrator submitting the
23contract for review and approval.
SB492,16,3
1(3) Service contracts shall contain the following statement printed in bold and
2capitalized type: "THIS CONTRACT IS SUBJECT TO LIMITED REGULATION BY
3THE OFFICE OF THE COMMISSIONER OF INSURANCE."
SB492,16,13 4(4) Service contracts insured under a reimbursement insurance policy
5pursuant to s. 616.54 (6) shall contain a statement in substantially the following
6form: "Obligations of the provider under this service contract are insured under a
7service contract reimbursement insurance policy." The service contract shall state
8the name and address of the insurer; state that if a provider does not provide, or
9reimburse or pay for, a service that is covered under a service contract within 60 days
10after a contract holder provides proof of loss, or if the provider becomes insolvent or
11otherwise financially impaired, the contract holder may file a claim directly with the
12service contract reimbursement insurer for reimbursement, payment, or provision
13of the service; and state the instructions on how to file a claim.
SB492,16,17 14(5) Service contracts not insured under a reimbursement insurance policy
15pursuant to s. 616.54 (6) shall contain a statement in substantially the following
16form: "Obligations of the provider under this service contract are backed by the full
17faith and credit of the provider."
SB492,16,23 18(6) Service contracts shall state the name and address of the provider, and shall
19identify any administrator that is different from the provider, the service contract
20seller, and the service contract holder, if the name of the service contract holder has
21been furnished by the service contract holder. The identities of such parties are not
22required to be preprinted on the service contract and may be added to the service
23contract at the time of sale.
SB492,17,2 24(7) Service contracts shall state the total purchase price and the terms under
25which the service contract is sold. The purchase price is not required to be preprinted

1on the service contract and may be negotiated at the time of sale with the service
2contract holder.
SB492,17,3 3(8) Service contracts shall identify any applicable deductible amount.
SB492,17,5 4(9) Service contracts shall specify the merchandise and services to be provided
5and any limitations, exceptions, or exclusions.
SB492,17,7 6(10) Service contracts covering motor vehicles shall state whether the use of
7nonoriginal manufacturers' parts is allowed.
SB492,17,9 8(11) Service contracts shall state any applicable restrictions governing the
9transferability of the service contract.
SB492,17,16 10(12) Service contracts shall state the terms, restrictions, or conditions
11governing cancellation of the service contract by the provider prior to the termination
12or expiration date of the service contract. A service contract may be cancelled by a
13provider only for nonpayment of the provider fee, material misrepresentation by the
14contract holder to the provider or administrator, or substantial breach of duties by
15the service contract holder relating to the covered product or its use. A provider shall
16comply with all of following when cancelling a service contract:
SB492,17,1917 (a) The provider shall mail a written notice to the service contract holder at the
18last-known address of the service contract holder contained in the records of the
19provider at least 5 days prior to cancellation by the provider.
SB492,17,2120 (b) The notice under par. (a) shall state the effective date of the cancellation and
21the reason for the cancellation.
SB492,17,2422 (c) If a service contract is cancelled by the provider for a reason other than
23nonpayment of the provider fee, the provider shall refund to the service contract
24holder 100 percent of the unearned pro rata provider fee, less any claims paid.
SB492,18,2
1(d) A provider may charge a reasonable administrative fee for cancellation,
2which may not exceed 10 percent of the provider fee.
SB492,18,5 3(13) Service contracts shall set forth all of the obligations and duties of the
4service contract holder, including the duty to protect against any further damage and
5any requirement to follow the owner's manual.
SB492,18,9 6(14) Service contracts shall state whether or not the service contract provides
7for or excludes consequential damages or preexisting conditions. Service contracts
8may, but are not required to, cover damage resulting from rust, corrosion, or damage
9caused by a noncovered part or system.
SB492,18,24 10(15) Service contracts shall require the provider to permit the service contract
11holder to return the service contract within 20 days of the date the service contract
12was mailed to the service contract holder, or within 10 days of delivery if the service
13contract is delivered to the service contract holder at the time of sale, or within a
14longer period permitted under the service contract. Upon return of the service
15contract to the provider within the applicable period, if no claim has been made under
16the service contract prior to its return to the provider, the service contract is void and
17the provider shall refund to the service contract holder, or credit the account of the
18service contract holder, the full purchase price of the service contract. Unless
19otherwise stated in a service contract, the right to void a service contract under this
20paragraph is not transferable and shall apply only to the original service contract
21purchaser. If a provider does not pay or credit a refund within 45 days after the
22return of a service contract to the provider, the provider shall pay a 10 percent per
23month penalty of the refund amount outstanding which the provider shall add to
24amount of the refund.
SB492,19,7
1(16) Service contracts shall provide that, subsequent to the period specified in
2sub. (15) for voiding a service contract or if a claim has been made under a service
3contract within such period, a service contract holder may cancel the service contract
4and the provider shall refund to the service contract holder 100 percent of the
5unearned pro rata provider fee, less any claims paid. A provider may charge a
6reasonable administrative fee for the cancellation, which may not exceed 10 percent
7of the provider fee.
SB492,19,8 8(17) A service contract shall be subject to s. 631.85.
SB492,19,12 9(18) In the event of a total loss of property covered by a service contract that
10is not covered by a replacement of the property pursuant to the terms of the contract,
11a service contract holder shall be entitled to cancel the service contract and receive
12a pro rata refund of any unearned provider fee, less any claims paid.
SB492,19,18 13616.58 Prohibited acts. (1) (a) A provider shall not use in its name used in
14this state the words "insurance," "casualty," "surety," or "mutual" or any other words
15descriptive of the insurance, casualty, or surety business; or a name deceptively
16similar to the name or description of any insurance or surety corporation, or to the
17name of any other provider. The word "guaranty" or a similar word may be used by
18a provider.
SB492,19,2119 (b) Paragraph (a) does not apply to a provider that was using any language
20prohibited under par. (a) in its name used in this state prior to the effective date of
21this paragraph .... [LRB inserts date].
SB492,20,7 22(2) (a) No provider, administrator, service contract seller, or provider's
23representative may make or cause to be made any communication relating to a
24service contract, the service contract business, insurance business, any insurer, any
25administrator, or any provider that contains false or misleading information,

1including information that is misleading due to incompleteness. Filing a report and,
2with intent to deceive a person examining it, making a false entry in a record or
3intentionally refraining from making a proper entry, are "communications" within
4the meaning of this paragraph. No provider or administrator may use any business
5name, slogan, emblem, or related device that is misleading or likely to cause the
6provider or administrator to be mistaken for another provider or administrator
7already in business.
SB492,20,128 (b) If an administrator or representative of a provider distributes cards or
9documents, exhibits a sign, or publishes an advertisement that violates par. (a),
10having reference to a particular provider that the administrator or representative
11represents, such violation creates a rebuttable presumption that the violation was
12also committed by the provider.
SB492,20,18 13(3) A person, including a bank, savings and loan association, lending
14institution, manufacturer, or seller of any product, shall not require the purchase of
15a service contract as a condition of a loan or a condition for the sale of any property,
16except that a person buying or selling a home may condition the purchase or sale of
17the home on the seller's or buyer's procurement of a service contract that covers the
18home.
SB492,20,22 19(4) A motor vehicle service contract provider or its representative shall not,
20directly or indirectly, represent in any manner, whether by written solicitation or
21telemarketing, a false, deceptive, or misleading statement with respect to any of the
22following:
SB492,20,2323 (a) The provider's affiliation with a motor vehicle manufacturer.
SB492,20,2524 (b) The provider's possession of information regarding a motor vehicle owner's
25current motor vehicle manufacturer's original equipment warranty.
SB492,21,2
1(c) The expiration of a motor vehicle owner's current motor vehicle
2manufacturer's original equipment warranty.
SB492,21,63 (d) A requirement that a motor vehicle owner purchase a new motor vehicle
4service contract with the provider in order to maintain coverage under the motor
5vehicle owner's current motor vehicle service contract or manufacturer's original
6equipment warranty.
SB492,21,9 7616.60 Record-keeping requirements. (1) (a) A provider shall keep
8accurate accounts, books, and records concerning transactions regulated under this
9subchapter.
SB492,21,1010 (b) A provider's accounts, books, and records shall include all of the following:
SB492,21,1111 1. Copies of each type of service contract sold.
SB492,21,1312 2. The name and address of each service contract holder that has furnished
13such information to the provider.
SB492,21,1514 3. A list of the locations where service contracts are marketed, sold, or offered
15for sale in this state.
SB492,21,1716 4. Written claims files that shall contain at least the dates, descriptions, and
17amounts paid or denied for claims related to the service contracts.
SB492,21,1918 5. The effective date, expiration date, name of the seller, and provider fee paid
19for each service contract sold in this state.
SB492,21,2220 (c) Except as provided in sub. (2), a provider shall retain all records required
21to be maintained under this subsection for a service contract for at least one year
22after the period of coverage specified in the contract has expired.
SB492,22,223 (d) The records required under this subsection may be, but are not required to
24be, maintained on a computer disk or other record-keeping technology. If the records

1are maintained in other than hard copy, the records shall be capable of duplication
2to electronic copy or legible hard copy at the request of the commissioner.
SB492,22,5 3(2) A provider discontinuing business in this state shall maintain its records
4until it furnishes the commissioner satisfactory proof that it has discharged all
5obligations to service contract holders in this state.
SB492,22,12 6616.62 Enforcement. (1) The commissioner may conduct examinations of
7providers, administrators, servicer contract sellers, or other persons under ss. 601.43
8to 601.45 to enforce the provisions of this subchapter and protect service contract
9holders in this state. Upon request of the commissioner, a provider shall make all
10accounts, books, and records concerning service contracts sold by or on behalf of the
11provider available to the commissioner which are necessary to enable the
12commissioner to reasonably determine compliance with this subchapter.
SB492,22,17 13(2) The commissioner may take any action under ss. 601.41 and 601.61 to
14601.73 that is necessary or appropriate to enforce the provisions of this subchapter
15and the commissioner's rules and orders and to protect service contract holders in
16this state. The commissioner may subject a provider to any reporting and replying
17requirement under s. 601.42.
SB492, s. 4 18Section 4. Subchapter II (title) of chapter 616 [precedes 616.71] of the statutes
19is renumbered subchapter IV (title) of chapter 616 [precedes 616.71] of the statutes.
SB492, s. 5 20Section 5. 628.02 (1) (b) 9. of the statutes is created to read:
SB492,22,2421 628.02 (1) (b) 9. A person whose activities are limited to marketing, selling, or
22offering for sale a warranty contract, as defined in s. Ins 15.01 (4) (d), Wis. Adm. Code,
23maintenance agreement, as defined in s. 616.50 (5), or service contract, as defined
24in s. 616.50 (11).
SB492, s. 6 25Section 6. Initial applicability.
SB492,23,3
1(1) Service contracts. The treatment of subchapter III of chapter 616 of the
2statutes first applies to service contracts that are issued, sold, or offered for sale, on
3the effective date of this subsection.
SB492,23,64 (2) Insurance marketing intermediaries. The treatment of section 628.02 (1)
5(b) 9. of the statutes first applies to activities that take place on the effective date of
6this subsection.
SB492,23,77 (End)
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