Senate Bill S9101

                                 
BILL NUMBER: S9101

SPONSOR: BRESLIN
 
TITLE OF BILL:

An act to amend the insurance law, in relation to contractual liability
insurance policies

 
PURPOSE:

This bill amends the Insurance Law to allow service contract providers
to demonstrate financial responsibility pursuant to NY Insurance Law §
7903(c)(1) by using "default" service contract reimbursement insurance
policies and by procuring multiple policies of service contract
reimbursement insurance.

 
SUMMARY OF PROVISIONS:

Section 1 of the bill amends paragraph (1) of subsection (c) of Insur-
ance Law § 7903 to allow service contract providers to utilize "default"
service contract reimbursement insurance. The bill further confirms that
service contract providers may satisfy this paragraph's requirements by
              

purchasing multiple policies of service contract reimbursement insurance
from multiple insurers.

Section 2 provides that this bill is effective immediately.

 
EXISTING LAW:

Insurance Law § 7903 requires service contract providers to demonstrate
financial responsibility, which is an important consumer protection.
Providers may demonstrate financial responsibility by purchasing a poli-
cy of service contract reimbursement insurance ("SCRI"). The law
currently allows only "first dollar" SCRI and does not allow for
"default" SCRI.

 
LEGISLATIVE HISTORY:

This is a new bill.

 
STATEMENT IN SUPPORT:

Service contract reimbursement insurance ("SCRI") is available in two
forms: "first dollar" SCRI and "default" SCRI. Both types fully protect
consumers' rights and both types fully cover all of service contract
providers' financial obligations.  However, the Insurance Law does not
currently allow providers to utilize "default" SCRI.

"First dollar" SCRI obligates an insurer to reimburse a service contract
provider for all obligations incurred, meaning every dollar paid.
"Default" SCRI obligates an insurer to pay or provide services on behalf
of a provider only if the provider fails to perform its obligations. In
other words, under default SCRI, the service contract provider is the
first line of defense and the SCRI policy is the second line of defense:
it is only activated if the provider fails to perform.

Service contract providers generally pay for covered services with the
fees consumers pay for service contracts, so a default SCRI policy is
only triggered in the rare event that a provider becomes insolvent.
Reliance on default SCRI is rare, making the cost of this coverage more
economical.

Restricting SCRI to first dollar policies increases costs to all stake-
holders, including consumers. This bill would alleviate those costs by
authorizing the use of default SCRI. Providers could pass these cost
savings on to consumers while maintaining all of the important
protections SCRI provides.

Finally, there are a variety of administrative and operational reasons
why providers may wish to utilize more than one SCRI policy. One scenar-
io occurs when certain benefits, such as motor club benefits, are
conferred or when a consumer adds additional categories of services,
such as windshield or paintless dent repair to his or her contract. It
can also benefit providers to use different SCRI policies in different
geographical locations where certain insurers may be more prominent.
This bill's amendment to allow multiple SCRI policies in satisfaction of
the requirements in Insurance Law § 7903(c)(1) will ease both adminis-
trative and operational burdens for providers, while still maintaining
the requirement for coverage over all obligations, thus preserving all
consumer protections.

 
BUDGET IMPLICATIONS:

This bill will not have an impact on State finances.

 
EFFECTIVE DATE:
This bill would take effect immediately.