Session Laws

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:

Chapter 175 of the General Laws is hereby amended by inserting after section 149E the following seven sections:-

Section 149F. As used in this section, the following words shall have the following meanings:-

"Home warranty contract", a contract or agreement whereby a person, other than a builder, seller, or lessor, agrees for a fee and for a specified period of time, to repair or replace all or any part of any structural component, appliance, or utility system of residential property necessitated by wear and tear, malfunction, deterioration, or inherent defect. A home warranty contract shall not include any service contract, maintenance contract, performance guarantee or warranty sold, offered for sale or issued by any manufacturer, seller, builder or installer of any structural components, appliances or utility systems for residential property.

"Home warranty company", any person who is not otherwise licensed as an insurance company who issues, or offers to issue, a home warranty contract. Except as otherwise provided herein, a home warranty company shall not be considered to be an insurance company or insurer for purposes of this chapter.

Section 149G. (a) No person shall establish or operate a home warranty company in the commonwealth, or issue home warranty contracts, or sell, offer to sell, or solicit offers to purchase or receive advance or periodic consideration in conjunction with a home warranty contract unless the person has obtained and maintains a certificate of authority pursuant to section one hundred and forty-nine H.

(b) Every home warranty company that is established and operating in the commonwealth on the effective date of this section shall, within forty-five days after such effective date, submit an application for a certificate of authority pursuant to section one hundred and forty-nine H.

(c) A home warranty company may market home warranty contracts through insurance brokers or appointed agents licensed pursuant to this chapter or through real estate brokers or salespeople duly licensed in the commonwealth.

Section 149H. (a) Any person, including but not limited to a foreign corporation licensed to transact business in this state, may apply to the commissioner of insurance for a certificate of authority to offer home warranty contracts in compliance with this section.

(b) Each application for a certificate of authority under this section shall be certified by the applicant or by an officer or authorized representative of the applicant. The application shall be accompanied by all of the following:

(1) a copy of all basic organizational documents of the applicant, if any, including but not limited to the articles of incorporation, articles of association, or other applicable documents, and all amendments to such articles and documents;

(2) a copy of all by-laws, rules, or other similar documents, if any, that regulate the conduct of the internal affairs of the applicant and all amendments to such by-laws, rules and documents;

(3) a list of the names, addresses, and official positions of persons who are responsible for the conduct of the affairs of the applicant, including all members of its governing board and principal officers;

(4) a description of the applicant, including, but not limited to, a current financial statement showing the applicant's assets, liabilities, income, other sources of financial support and expenses;

(5) a copy of each type of home warranty contract that is to be issued to prospective subscribers;

(6) a copy of the schedule of contract fees for each home warranty contract;

(7) administrative proceedings or investigations conducted concerning the applicant by regulatory authorities in any state or by any federal authority;

(8) the name and address of a resident of this state who is an agent for service of process and upon whom notices or orders of the commissioner of insurance or process issued at his discretion may be served;

(9) an application fee as established pursuant to section fourteen.

(c) The commissioner shall examine the application and make such further investigation as he deems appropriate.

(d) A certificate of authority shall be issued if the commissioner is satisfied that the applicant meets the requirements of clauses (1) to (9), inclusive, paragraph (b). An application for a certificate of authority shall be considered approved unless disapproved within sixty days of submittal; provided, however, that the commissioner may postpone such action for such further time, not to exceed thirty days, as he may deem necessary for proper consideration.

(e) The commissioner shall not issue a certificate of authority to any home warranty company unless the commissioner finds all of the following:

(1) The company's management is competent and trustworthy and can reasonably be expected to successfully manage the affairs of the company in compliance with law;

(2) The company has a minimum net worth of fifty thousand dollars, based upon a current financial statement prepared in accordance with generally accepted accounting principles and certified by an independent certified public accountant;

(3) The company has furnished a surety bond as required under section one hundred and forty-nine I.

Section 149I. To assure the faithful performance of obligations under home warranty contracts issued and outstanding in the commonwealth, a home warranty company shall, prior to the issuance of a certificate of authority, file with the commissioner a surety bond in the amount of twenty-five thousand dollars, which bond has been issued by an authorized surety company and approved by the commissioner as to issuer, form and contents. The bond shall not be canceled or be subject to cancellation unless thirty days advance notice in writing is filed with the commissioner. Notwithstanding the foregoing, if a bond is canceled for any reason and a new bond in the required amount is not received by the commissioner on or before the effective date of cancellation, the certificate of authority of the home warranty company shall be automatically revoked as of the date the bond ceases to be in effect. A home warranty company whose certificate of authority is revoked under this section may file an application for a new home warranty pursuant to section one hundred and forty-nine H.

The bond posted by a home warranty pursuant to this section shall be for the benefit of, and subject to recovery thereon, by any home warranty contract holder sustaining injury due to failure of the home warranty company to faithfully perform its obligations under a home warranty contract because of insolvency of the home warranty company.

If a home warranty company ceases to do business in the commonwealth and furnishes to the commissioner satisfactory proof that it has discharged all obligations to contract holders, the surety bond shall be released.

Section 149J. (a) A home warranty company shall report to the commissioner within ten days any amendments to or changes in the documents and supplements or revisions to information submitted pursuant to section one hundred and forty-nine H.

(b) A home warranty company shall file with the commissioner within one hundred and twenty days of the close of its fiscal year the following:-

(1) a current financial statement including a balance sheet and statement of operations prepared in accordance with generally accepted accounting principles and certified by an independent certified public accountant;

(2) with respect to home warranty contracts issued by the home warranty company within the commonwealth, a report showing the number of home warranty contracts issued during the preceding fiscal year, the number canceled or expired during that year, the number in effect at year end and the amount of home warranty contract fees received during the year;

(3) any other information relating to the performance and solvency of the home warranty company required by the commissioner.

The commissioner may, upon thirty days written notice, suspend or revoke the certificate of authority of any home warranty company which fails to file the foregoing information within the time provided by this section.

Section 149K. The provisions of chapter one hundred and seventy-six D shall be applicable to all home warranty companies.

Section 149L. To the extent that any provisions of sections one hundred and forty-nine F to one hundred and forty-nine K, inclusive, conflict with any other provisions of this chapter, the provisions of said sections one hundred and forty F to one hundred and forty-nine K, inclusive, shall govern.