This section explains several key terms related to motor vehicles and watercraft service contracts in California. A "motor vehicle" includes self-propelled devices like cars and RVs but excludes very heavy vehicles, those designed for many passengers, or those transporting hazardous materials. "Watercraft" refers to vessels and their transport trailers.

"Vehicle service contracts" are agreements where people pay for services related to the repair or maintenance of vehicles due to issues like material defects or normal wear and tear. These contracts may also include extra benefits like towing and rental car reimbursement, provided they're incidental to the main services. "Service contract administrator" handles money and claims for these contracts, but isn't the obligated party ("obligor").

A "purchaser" is anyone buying such a contract; a "seller" can be car dealers or watercraft sellers providing these as a side service. "Road hazards" are things that might damage a vehicle during normal use, like rocks or potholes.

This law outlines specific types of agreements related to watercraft or motor vehicles that are not considered insurance policies. These include vehicle service contracts by manufacturers, distributors, or sellers that cover their own products, and agreements by repair facilities or part manufacturers for repairs or replacements. Employers offering mileage reimbursement or maintenance for personal vehicles used for business are also covered. Certain agreements follow special exemptions, meaning they don't have to adhere to all insurance rules but must still follow specific conditions.

This law states that only authorized sellers can sell vehicle service contracts. It also prohibits sellers from acting as 'fronting companies,' meaning sellers cannot allow a third party to use their name or business to get around this rule and sell contracts unlawfully.

If you're a person or company offering vehicle service contracts but not selling cars, you need a specific license called a vehicle service contract provider license. This license follows similar rules to property and casualty broker-agent licenses but with some differences.

You don't have to take a prelicensing course or pass a test to get this license. It costs $4,939 to get the license and $847 to renew it. Additionally, if you're managing these service contracts, you must have a property and casualty broker-agent license.

This law states that before offering or providing a vehicle service contract, the provider must first submit the document to the insurance commissioner. The contract can include various benefits as permitted by other sections of the law and must contain specific disclosures depending on compliance with different sections.

Vehicle service contracts must highlight any exclusions or duties for the buyer in clear, bold text. They should also include the company's name, contact information, price details, and compliance with specified Civil Codes. If coverage for preexisting conditions is excluded, this must be clearly noted in 12-point type.

Some benefits included in these contracts are considered insurance, such as coverage for theft or fire, and these must be explicitly stated. This regulation has been effective since January 1, 2017.

This law allows a service contract provider (obligor) to cancel the contract within 60 days of sale if they mail a cancellation notice before day 61. The obligor must refund the full price within 30 days unless they've paid any claims, in which case a pro-rata refund is allowed. The contract ends at least five days after the cancellation notice's postmark date, and the notice must state why it's canceled.

The provider can also cancel at any time if the buyer doesn’t pay, has misrepresented information, or committed fraud. They must mail the buyer a cancellation notice, refund any due amounts within 30 days, and mention the specific reason for cancellation. If a claim occurs before the cancellation takes effect, the provider must handle it if the contract covers it. If claims are paid or promised before cancelation, only a partial, adjusted refund is needed.

This law section outlines the insurance requirements for obligors under vehicle service contracts in California. Before obligors can enter into these contracts, they must file an insurance policy with the commissioner. This policy must cover 100 percent of the obligations and be issued by a compliant insurer or risk retention group, meeting specific financial standards (like having at least $15 million in surplus and capital). However, certain exceptions apply, such as affiliates of new motor vehicle distributors, who meet specific sales criteria being exempt from these requirements.

This law also requires the insurance policy to guarantee that insurers will fulfill obligors' obligations if the obligor fails to do so within 60 days, provided certain conditions are met, like failure to satisfy a contract and notice given to the insurer by the purchaser. An insurer's liability isn't reduced by failures in contract reporting or payment remittance. Only one valid insurance policy should be on file with the commissioner at any time, unless exempted. Notices of policy cancellation must be filed in advance, with different timelines for regular and fraud-related cancellations.

If an insurer cancels a policy it has registered with the commissioner, the named party on the policy has two options. First, they can file a new policy with the commissioner before the old one ends, ensuring no gap in coverage. Alternatively, they can stop serving as an obligor as of the policy's end date until a new policy is active and approved by the commissioner.

The law doesn't spare the named party from any obligations under service contracts issued before the policy's end.

Instead of following Section 12830, a company or its parent company can show that it has a net worth of at least $100 million to satisfy requirements. The company needs to provide documents and affidavits to prove this net worth. These documents might include financial statements and sworn statements from top executives. If the parent company is being used to meet this net worth requirement, it must also agree in writing to back the company's obligations on contracts made in the state.

This law requires companies that offer service contracts, like warranties, to keep detailed financial and transaction records. They must store these records for at least three years after a contract ends. The records should be available to the insurance commissioner if needed, and must include details like financial ledgers, copies of service contracts, purchaser information, sales locations, and claim files.

Insurers have the right to access these records to meet their obligations, and the commissioner can investigate anyone handling these contracts. Any review costs will be borne by the contract provider or manager. These records must be kept confidential, but the commissioner can use them in legal actions against the provider. Failing to keep records or denying access can result in losing a license or a cease and desist order.

This law states that any company or person responsible for vehicle service contracts, called an 'obligor' or 'administrator,' who provides these contracts to sellers or buyers, must follow specific rules outlined in other sections (12815, 12830, and 12835). If they don't, they can face jail time, a hefty fine up to $500,000, or both. Also, they will be legally prohibited from further violations. However, this law doesn't apply to sellers who are responsible for the contracts they sell. The insurance commissioner has the authority to stop these companies or people from continuing to violate the rules by issuing a cease-and-desist order if necessary.

This law sets rules for how claims under a service contract are handled. First, it requires that the person responsible for the contract (known as the obligor) must prove if a claim isn't covered or if the settlement amount is correct according to the contract's terms. Second, it prohibits sellers of service contracts from making their pay dependent on reducing the costs of claims, ensuring fair processing of claims without financial incentives to deny them.

This law allows the commissioner to create rules and regulations that help carry out the purposes of this chapter.

This law states that if any part of this insurance regulation is found to be invalid or unenforceable, the rest of the rules still apply and can be enforced separately. In other words, one invalid part won't nullify the entire regulation.

This law states that if a company promises to refund part or all of the purchase price of a service contract based on claims made by the purchaser, it is considered insurance unless certain conditions are met, which then classify it as a refund agreement.

For it to be a refund agreement, the promise must be made without separate consideration (extra payment). The company making the promise (promisor) must meet one of the following: be a service contract provider, be a seller using a refund agreement administrator, or be a third party not involved in the sale or service contract provision but complying with further requirements.

A refund agreement administrator, someone who manages the refund logistics, must follow specific legal guidelines and cannot promise any benefits beyond the refund itself. Also, only sellers are allowed to offer these refund agreements directly to buyers.