56:12-90 Assurance of faithful performance required to sell service contracts.
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/nj/title-56/chapter-12/56-12-90A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
4. a. Except as otherwise provided in subsection d. of this section, a person shall not provide or administer service contracts in this State unless the person complies with one or more of the following means of assuring faithful performance to its contract holders:
(1)each service contract shall be insured under a reimbursement insurance policy issued by an insurer licensed, registered, or otherwise authorized to transact the business of insurance in this State, and which complies with the provisions of section 6 of P.L.2013, c.197 (C.56:12-92);
(2)a funded reserve account shall be established and maintained for its obligations under each contract issued and outstanding in this State, with reserves calculated at not less than 40% of gross consideration received, then less the amount of claims paid under those contracts. If those reserves fall below the minimum required, the provider has 90 days to come into compliance without violating this section. The reserve account shall be subject to examination and review by the director pursuant to section 10 of P.L.2013, c.197 (C.56:12-96); or
(3)alone or together with the provider's parent or other affiliated corporation, the provider shall maintain a net worth or stockholders' equity of not less than $100,000,000. Upon request by the director, the provider shall provide the director with a copy of the provider's or its parent's or other affiliated corporation's most recent Form 10-K or Form 20-F, or successor form containing substantially the same information, filed with the Securities and Exchange Commission within the last 12-month period, or if the provider, or parent or other affiliated corporation, does not file this form with the Securities and Exchange Commission, a copy of the entity's audited financial statements, which show a net worth of the provider, or parent or other affiliated corporation, of not less than $100,000,000. If the provider's parent's or other affiliated corporation's form or financial statements are filed to meet the provider's means of assuring faithful performance to its contract holders, the parent or other affiliated corporation shall agree to guarantee the obligations of the provider.
b. Except with respect to a provider that complies with paragraph
(1)or
(3)of subsection a. of this section or with respect to an insurer that the Commissioner of Banking and Insurance has determined meets financial solvency standards established under Title 17 of the New Jersey Statutes, in addition to the requirements set forth in subsection a. of this section, the provider shall maintain a bond, having a value of not less than five percent of the gross consideration received per annum, less claims paid, on the sale of the service contract for all service contracts issued and in force, but not less than $25,000, in order to provide service contracts in this State. The provider shall name the division as a party on the bond, and shall notify the division, in writing, in the event of the cancellation or non-renewal of the bond.
c. In addition to any applicable damages and penalties pursuant to subsection a. of section 10 of P.L.2013, c.197 (C.56:12-96), a person who provides or administers a service contract that is not in compliance with P.L.2013, c.197 (C.56:12-87 et al.) or that is issued by a provider that is not in compliance with P.L.2013, c.197 (C.56:12-87 et al.) shall be jointly and severally liable for all covered contractual obligations arising under the terms of such non-compliant contract or under the terms of any service contract issued at a time when the provider of the contract is non-compliant.
d. A person who administers service contracts in this State is required to comply with one or more means of assuring faithful performance as set forth in paragraph
(1)through
(3)of subsection a. of this section; or the means of assuring faithful performance of a service contract set forth in subsection a. of this section adopted by the provider of the service contract shall apply to indemnify that person's conduct with respect to administering the service contract.
L.2013, c.197, s.4; amended 2022, c.91, s.3.