What's happening
This bill creates a legal framework to regulate theft protection program warranties in New York, excluding them from insurance laws.
Why it matters
Consumer Protections and Clarity. The bill establishes clear rules about what theft protection program warranties are, what they cover (including which costs can be reimbursed), and what information must be disclosed to consumers. This clarity helps consumers understand what they are buying and what to expect if their theft protection fails.
Industry Oversight Without Insurance Regulation. By exempting theft protection program warranties from insurance law but still requiring warrantors to register, meet certain financial standards, and keep records, the bill creates oversight tailored to these products. This may encourage more companies to offer these warranties while ensuring basic standards and accountability.
Limits on Abuses and Misleading Practices. The legislation prohibits certain abusive practices, such as requiring the purchase of a theft protection warranty as a condition for a vehicle loan or sale, and bans misleading advertising or branding that could confuse consumers about whether a warranty is insurance.
Legal Recourse and Enforcement. The bill gives the state superintendent authority to investigate, enforce compliance, and impose penalties for violations. It also ensures that if a warranty provider fails to pay a valid claim, consumers may seek payment directly from a backup insurer, providing an extra layer of financial protection for buyers.
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Who cares
Headline styles
Regulate Theft Warranty Programs
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to insurance
Full text
9 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
8589
IN SENATE
May 10, 2018
Introduced by Sen. SEWARD -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance
AN ACT to amend the insurance law, in relation to theft protection products
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. The insurance law is amended by adding a new article 79-A to read as follows:
ARTICLE 79-A
THEFT PROTECTION PRODUCTS Section 7951. Scope and purpose.
7952. Definitions.
7953. Warrantor registration required.
7954. Warrantor financial requirements.
7955. Theft protection program warranty receipt required.
7956. Required disclosures.
7957. Required disclosures; reimbursement insurance policy.
7958. Theft protection program warranty not insurance.
7959. Prohibited acts.
7960. Record-keeping requirements.
7961. Cancellation of reimbursement insurance policy.
7962. Obligation of reimbursement insurance policy insurers.
7963. Enforcement provisions.
7964. Premium taxes.
7965. Severability.
7966. Applicability.
7967. Effect on current business.
§ 7951. Scope and purpose. (a) The purpose of this article is to create a legal framework within which theft protection program warranties, as defined in this article, are regulated and may be offered in this state. Notwithstanding any other section of law, including but not limited to section three thousand four-hundred forty-six of this chapter, theft protection program warranties shall not be subject to any
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD15866-01-8
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laws, rules, or regulations related to the offering, sale, or issuance of insurance in this state.
(b) The following are exempt from this article:
(1) Maintenance agreements as defined under section three hundred ninety-five-a of the general business law;
(2) Service contracts as defined in article seventy-nine of this chapter;
(3) Motor clubs; and
(4) GAP waiver agreements as covered under section three hundred twoA of the personal property law.
§ 7952. Definitions. As used in this section: (a) "Administrator" means the person who is responsible for the administration of the theft protection program warranty.
(b) "Incidental costs" means expenses specified in a theft protection program warranty that are incurred by the warranty holder due to the failure of a theft protection program to perform as provided in the theft protection program warranty. Incidental costs may include, without limitation, insurance policy deductibles, rental vehicle charges, the difference between the actual value of the stolen vehicle at the time of theft and the cost of a replacement vehicle, sales taxes, registration fees, transaction fees, and mechanical inspection fees. Incidental costs may be reimbursed in either a fixed amount specified in the theft protection program warranty or by use of a formula itemizing specific incidental costs incurred by the warranty holder.
(c) "Motor vehicle" means self-propelled or towed vehicles designed for personal or commercial use, including but not limited to automobiles, trucks, motorcycles, recreational vehicles, all-terrain vehicles, snowmobiles, campers, boats, personal watercraft, and motorcycle, boat, camper, and personal watercraft trailers.
(d) "Theft protection program" means a device or system that (1) is installed on or applied to a motor vehicle, (2) is designed to prevent loss or damage to a motor vehicle from theft, and (3) includes a theft protection program warranty. For purposes of this section, the term theft protection program shall include, but not be limited to, alarm systems, body part marking products, steering locks, window etch products, pedal and ignition locks, fuel and ignition kill switches, and electronic, radio, and satellite tracking devices. Theft protection program does not include fuel additives, oil additives, or other chemical products applied to the engine, transmission, or fuel system, or interior or exterior surfaces of a motor vehicle.
(e) "Theft protection program warranty" means a written agreement by a warrantor that provides if the theft protection program fails to prevent loss or damage to a motor vehicle from theft, that the warrantor will pay to or on behalf of the warranty holder specified incidental costs as a result of the failure of the theft protection program to perform pursuant to the terms of the theft protection program warranty.
(f) "Person" means an individual, company, association, organization, partnership, business trust, corporation, or any other form of legal entity.
(g) "Reimbursement insurance policy" means a policy of insurance issued to a warrantor to either provide reimbursement to the warrantor under the terms of the designated theft protection program warranties issued by the warrantor, in the event of the warrantor's non-performance, to pay on behalf of the warrantor all covered theft protection program warranty obligations incurred by the warrantor under the terms of the insured theft protection program warranties.
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(h) "Warranty holder" means the person who purchases a theft protection program, any authorized transferee or assignee of the purchaser, or any other person legally assuming the purchaser's rights under the anti-theft protection program theft protection program warranty.
(i) "Warrantor" means a person who is obligated to the warranty holder under the terms of the theft protection program warranty.
§ 7953. Warrantor registration required. (a) Each warrantor intending to issue theft protection program warranties in this state shall file a registration with the superintendent consisting of their name, full corporate address, telephone number and contact person and designate a person in this state for service of process. Each warrantor shall pay to the superintendent a fee in the amount of two hundred dollars upon initial registration and every year thereafter. Said registration need only be updated by written notification to the superintendent if material changes occur in the registration on file.
(b) A warrantor may, but is not required to, appoint an administrator or other designee to be responsible for any or all of the administration of its theft protection program warranties and compliance with this article.
(c) Other than the warrantor registration requirements in this section, warrantors and related theft protection program sellers, administrators, and other persons marketing, selling, offering to sell or issuing theft protection programs are exempt from any licensing requirements of this state in order to conduct theft protection program warranty business.
§ 7954. Warrantor financial requirements. (a) In order to assure the faithful performance of a warrantor's obligations to its warrant holders, each warrantor shall be responsible for complying with the requirements of one of the following provisions:
(1) Insure all theft protection program warranties under a reimbursement insurance policy issued by an insurer licensed, registered, or otherwise authorized to do business in this state, and either:
(A) at the time the policy is filed with the superintendent, and continuously thereafter, (i) maintain surplus as to policyholders and paid-in capital of at least fifteen million dollars and (ii) annually file copies of the insurer's financial statements, its NAIC annual statement, and the actuarial certification required by and filed in the insurer's state of domicile; or
(B) at the time the policy is filed with the superintendent, and continuously thereafter, (i) maintain surplus as to policyholders and paid-in capital of less than fifteen million dollars but at least equal to ten million dollars, (ii) demonstrate to the satisfaction of the superintendent that the company maintains a ratio of net written premiums, wherever written, to surplus as to policyholders and paid-in capital of not greater than three to one, and (iii) annually file copies of the insurer's audited financial statements, its NAIC annual statement, and the actuarial certification required by and filed in the insurer's state of domicile; or
(2)(A) Maintain a funded reserve account for its obligations under its theft protection program warranties issued and outstanding in this state. The reserves shall not be less than forty percent of gross consideration received, less claims paid, on the sale of the theft protection program warranty for all in-force theft protection program warranties. The reserve account shall be subject to examination and review by the superintendent; and
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(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, less claims paid, on the sale of the theft protection program warranty for all theft protection program warranties issued and in-force, but not less than twenty-five thousand dollars consisting of one 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;
(iv) a letter of credit issued by a qualified financial institution; or
(v) another form of security prescribed by regulations issued by the superintendent.
(b) Except for the requirements specified in this section, no other financial security requirements shall be required by the superintendent for warrantors.
§ 7955. Theft protection program warranty receipt required. (a) Theft protection program warranties shall not be issued in this state unless the warrantor provides a copy of the theft protection program warranty to the warranty holder within a reasonable period of time from the date of purchase. A warranty may comply with this provision by providing the holder with a physical copy of the complete terms and conditions of the theft protection program warranty, by directing the consumer to a website containing a copy of the complete terms and conditions of the theft protection program warranty, or by delivering a copy of the complete terms and conditions of the theft protection program warranty via electronic mail.
(b) A warrantor shall provide a consumer with a complete sample copy of the theft protection program warranty terms and conditions prior to the time of sale upon a request for the same by the consumer. A warrantor may comply with this provision by providing the consumer with a complete sample copy of the terms and conditions or by directing the consumer to a website containing a complete sample of the terms and conditions of the theft protection program warranty.
§ 7956. Required disclosures. (a) Theft protection program warranties offered, issued, made, proposed to be made, or administered in this state shall be written, printed, or typed in clear, understandable language that is easy to read, and shall disclose the following requirements, as applicable:
(1) the name and address of the warrantor, the seller of the theft protection program, and the warranty holder;
(2) the total purchase price of the theft protection program and the terms under which it is to be paid, however, the purchase price is not required to be preprinted on the theft protection program warranty and may be negotiated with the consumer at the time of sale;
(3) the procedure for making a claim, including a telephone number for the warrantor or administrator responsible for processing the claim;
(4) the payments or performance to be provided under the warranty including payments for incidental costs, the manner of calculation or determination of payments or performance, and any limitations, exceptions or exclusions. Incidental costs may be reimbursed under the provisions of the warranty in either a fixed amount specified in the warranty or sales agreement or by the use of a formula itemizing specific incidental costs incurred by the warranty holder;
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(5) the obligations and duties of the warranty holder such as the duty to protect against any further damage to the vehicle, the obligation to notify the warrantor in advance of any repair, or other similar requirements, if any;
(6) any terms, restrictions, or conditions governing transferability and cancellation of the warranty, if any;
(7) a disclosure that reads substantially as follows: "This agreement is not insurance."
(b) A theft protection program warranty that is insured by a reimbursement insurance policy under section seven thousand nine hundred fifty-four of this article shall conspicuously state all of the following:
(1) "This theft protection program warranty is not insurance and is not subject to the insurance laws of the State of New York."
(2) That the obligations of the warrantor are insured under a reimbursement insurance policy;
(3) That if a warrantor fails to perform or make payment due under the terms of the warranty within sixty days after the warranty holder requests performance or payment pursuant to the terms of the warranty, the warranty holder may request performance or payment directly from the warrantor's reimbursement insurance policy insurer;
(4) The name, address, and telephone number of the warrantor's reimbursement insurance policy insurer.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the insurance law, in relation to theft protection products
Purpose
This bill would permit the sale of theft protection warranty plans in the state of New York.
Summary of provisions
Section 1 of the bill creates a new article 79-A that would permit and provide for the regulation of theft protection warranty plans in New York, specifically:
Read the full memo (751 words)
Section 7951 provides for the purpose and intent of the legislation to allow for the sale of theft protection program warranties, and makes clear such products are not insurance;
Section 7952 provides for necessary definitions under the new article;
Section 7953 provides for registration with the Department of Financial Services, and the amount of the annual fee;
Section 7954 provides for the financial requirements to operate the program and assurances that must be proved and provided for to the Department of Financial Services in order to be registered as a warran- tor of theft protection program warranties;
Section 7955 provides the means and methods that a copy of the theft protection program warranty must be provided to the purchaser of the warranty;
Section 7956 provides for all required disclosures that must be made when selling or offering for sale theft protection program warranties in New York;
Section 7957 provides for additional protection to consumers in the event that the warrantor fails to be able to perform or make payment on a theft protection program warranty;
Section 7958 provides that the program is not insurance;
Section 7959 prohibits certain actions by warrantors under this article, including referring or implying that the product is insurance, making any false or misleading statements, requiring the purchase of the prod- uct in order to obtain financing, making any false or misleading state- ments regarding affiliation with a manufacturer, and making any false or misleading statements regarding the relationship between the theft protection program warranty and other applicable warranties on the vehi- cle;
Section 7960 provides for record keeping requirements for theft protection warranty program warrantors, and requires retention for at least one year of all records after all obligations under the warranty have been discharged;
Section 7961 provides for the procedures when a reimbursement insurance policy covering a warrantor operating a theft protection warranty program is cancelled;
Section 7962 provides for the obligations of reimbursement insurance policy issuers who issue such insurance to warrantors under this arti- cle, and provide for direction of funds to consumers;
Section 7963 provides for enforcement by the Department of Financial Services under the article for any violations; Section 7964 provides for how fees and premiums shall be taxed;
Section 7965 provides for severability of the sections of the article in the event that any individual provision shall be held to be invalid;
Section 7966 provides for the applicability of the section, and provides that the failure to comply cannot be used against a person until after the effective date of the section, and no penalties can be issued for prior conduct in the sale of theft protection warranty plans;
Section 7967 provides that if any entity is engaged in offering theft protection products currently may continue to do so, so long as they file an application and registration with DFS within 30 days of the effective date of this section.
Justification
Theft Protection Program warranties provide coverage for a vehicle if the theft protection purchased by the consumer fails and the vehicle is stolen. These products can vary from alarm and tracking systems, to conspicuous etching of VIN numbers onto the vehicle in order to prevent and deter theft, as well as assist law enforcement in recovering any stolen vehicles. The warranty ensures that consumers receive a defini- tive benefit for purchasing theft protection plan products in the event that the product fails to perform as intended.
Currently, many New Yorkers do not have access to theft protection warranty plans that fully protect their vehicles. The present regulatory scheme treats theft protection warranty plans as insurance, and requires any business or entity wishing to provide said products to comply with a number of insurance regulations that have little applicability to the product being offered. This bill will ensure that consumers have access to and receive benefits from these warranties and plans, while allowing companies to offer these types of warranty products under less stringent regulatory standards than those placed on the insurance industry.
Legislative history
New bill.
Fiscal implications
None.
Effective date
This act shall take effect on January 1, 2019.
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