N.Y. Insurance Law § 7903: Requirements for doing business

§ 7903. Requirements for doing business. (a) Notwithstanding any other

provision of this chapter to the contrary, the marketing, sale, offering

for sale, issuance, making, proposing to make and administration of

service contracts by any provider, administrator or other person, shall

be exempt from all other provisions of this chapter. A provider may, but

is not required to, appoint an administrator or other designee to be

responsible for any or all of the administration of service contracts

and compliance with this article. Notwithstanding any other provision of

this article, a provider of a service contract, as defined in paragraphs

two and three of subsection (k) of section seven thousand nine hundred

two of this article, shall, at least thirty days prior to the effective

date of an initial provider fee, or a change in a provider fee, file the

amount of the provider fee with the superintendent and such filing shall

be open to public inspection; and provided further that the provider fee

shall not exceed the amount filed. The requirement to file the amount of

the provider fee with the superintendent in this subsection shall not

apply to fees set forth in any agreement to which an authorized insurer

is a party.

(b) Service contracts shall not be issued, sold or offered for sale in

this state unless the provider:

(1) provides a receipt for, or other written evidence of, the purchase

of the service contract and a copy of the terms and conditions of the

service contract to the service contract holder where the sale takes

place in a retail store or other place of business. A copy of the

service contract in all cases shall be provided to the service contract

holder within a reasonable period of time after the date of purchase of

the service contract; and

(2) otherwise complies with this article.

(c) In order to assure the faithful performance of a provider's

obligations to its contract holders, each provider who is contractually

obligated to provide service under a service contract shall comply with

one of the following three paragraphs of this subsection:

(1) insure the performance of its obligations under all service

contracts pursuant to a service contract reimbursement insurance policy

issued by an insurer authorized to issue service contract reimbursement

insurance in this state or procured by an excess line licensee pursuant

to section two thousand one hundred eighteen of this chapter. Each

provider may maintain a maximum of five service contract reimbursement

insurance policies insuring its service contracts actively offered. In

the event the provider fails to insure its obligations pursuant to this

paragraph or in the event that such insurance shall lapse or be

terminated, the provider shall comply with either paragraph two or three

of this subsection within forty-five days of the insurance lapse or

termination;

(2) (A) maintain a funded reserve account for its obligations under

its service contracts issued and outstanding in this state, which

reserve account (i) contains reserves in an amount not less than forty

percent of the gross consideration received upon the sale of, less

claims paid under, all its service contracts then in force, but not less

than zero, and (ii) shall be subject to examination and review by the

superintendent; and

(B) place in trust with the superintendent a financial security

deposit, having a value of not less than five percent of the gross

consideration received upon the sale of, less claims paid under, all

service contracts issued and then in force, but not less than fifty

thousand dollars, consisting of one or more of the following:

(i) a surety bond issued by an authorized surety;

(ii) securities of the type eligible for deposit by authorized

insurers in this state;

(iii) cash; or

(iv) a letter of credit issued by a qualified United States financial

institution; or

(3) (A) maintain a net worth or stockholders' equity of at least one

hundred million dollars; and

(B) provide the superintendent with a copy of the financial statements

of the provider, either on a stand alone basis or consolidated with its

consolidated affiliates, included in its or its direct or indirect

parent company's most recent annual report on form 10-K or form 20-F

filed with the securities and exchange commission within the last

calendar year, or if the provider or its direct or indirect parent

company is not required to file such reports with the securities and

exchange commission, a copy of the audited financial statements of the

provider, either on a stand alone basis or consolidated with its

consolidated affiliates. If the net worth or stockholders' equity of the

provider, either on a stand alone basis or consolidated with its

consolidated affiliates, as shown in the foregoing financial statements

is at least one hundred million dollars, the provider shall be deemed to

meet the requirements of this paragraph and there shall be no

requirement of a guarantee, reimbursement insurance, or other form of

financial stability arrangement. In the event the net worth or

stockholders' equity of the provider, either on a stand alone basis or

consolidated with its consolidated affiliates, is not at least one

hundred million dollars, or the net worth or stockholders' equity of the

provider, as aforesaid, is not determinable from the foregoing audited

financial statements, the provider shall comply with paragraph one or

two of this subsection within forty-five days of becoming aware of such

deficiency. If the provider's direct or indirect parent company's form

10-K, form 20-F, or audited financial statements are filed to meet the

provider's financial stability requirement, then the parent company

shall agree to guarantee the obligations of the provider relating to

service contracts sold by the provider in this state.

(d) Premium taxes. (1) Provider fees shall not be subject to premium

taxes.

(2) Premiums collected on service contract reimbursement insurance

policies shall be subject to applicable premium taxes.

(e) Service contracts shall require every provider to permit the

service contract holder to return the contract within at least twenty

days of the date of mailing of the service contract or within at least

ten days if the service contract is delivered at the time of the sale or

within a longer time period permitted under the contract. If no claim

has been made under the contract, the contract shall be void and the

provider shall refund to the contract holder the full purchase price of

the contract. A ten percent penalty per month shall be added to a refund

that is not made within thirty days of return of the contract to the

provider. The provisions of this subsection only apply to the original

purchaser of the service contract.