Home ProtectionDefinitions and Licensing

Section § 12740

Explanation

This section defines key terms related to home protection contracts in California. A 'home protection contract' is an agreement where a person, not involved in the sale or building of the home, agrees to repair or replace home components or systems for a set period and fee. It doesn't cover damage from component failures. A 'home protection company' is any entity licensed to issue such contracts.

The 'protection contract fee' is the amount paid for the contract, usually covering one year of protection. If the coverage exceeds one year, the fee includes an annual amount plus a partial fee for the additional time. 'Home' or 'residential property' means any residential unit, like houses or mobile homes.

The definitions used in this section govern the construction and terms used in this part but shall not affect any other provisions of this code:
(a)CA Insurance Code § 12740(a) “Home protection contract” means a contract or agreement whereby a person, other than a builder, seller, or lessor of the home which is the subject of the contract, undertakes for a specified period of time, for a predetermined fee, to repair or replace all or any part of any component, system or appliance of a home necessitated by wear and tear, deterioration or inherent defect, arising during the effective period of the contract, and, in the event of an inspection conducted pursuant to subdivision (b) of Section 12761, by the failure of that inspection to detect the likelihood of any such loss.
Such contract shall provide for a system of service for effectuating such repair or replacement and shall not include protection against consequential damage from the failure of any component, system or appliance.
(b)CA Insurance Code § 12740(b) “Home protection company” means any person licensed pursuant to this part which issues home protection contracts.
(c)CA Insurance Code § 12740(c) “Protection contract fee” means the consideration received, or to be received, by a home protection company for the issuance of any home protection contract.
A home protection contract fee shall be the fee established by a home protection company for coverage extending one year from the effective date of the contract. Where initial coverage is provided for a period in excess of one year, the home protection contract fee shall be the annual fee, plus a separately stated pro rata portion of the annual fee for the period of coverage which exceeds one year.
(d)CA Insurance Code § 12740(d) “Home” or “residential property” as used in this part means any single or multiple unit or units, including mobilehomes, (as defined in Health and Safety Code Section 18211) used primarily for residential purposes.
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Section § 12741

Explanation

This law explains the types of contracts and agreements that are not covered by certain regulations. It does not apply to performance guarantees or service contracts for homes, appliances, or systems provided by builders, manufacturers, or sellers even if there's a fee. Also, if a service contract is provided by someone who sold or serviced the item at the time of issuing the contract, and they are not a home protection company, they are exempt too. Pest control service agreements are also not subject to this part. These exemptions have been effective since January 1, 2004.

This part shall not apply to:
(a)CA Insurance Code § 12741(a) Performance guarantees or service contracts given by either the builder of a home or the manufacturer or seller of an appliance or other system or component, whether or not an identifiable charge is made for such guarantee or service contract.
(b)CA Insurance Code § 12741(b) Any service contract, guarantee, or warranty intending to guarantee or warrant the repairs or service of a home appliance, system or component, provided such service contract, guarantee, or warranty is issued by a person who has sold, serviced, repaired or provided replacement of that appliance, system or component at the time of, or prior to issuance of the contract, guarantee, or warranty; and, provided, further, that the person issuing the service contract, guarantee, or warranty does not engage in the business of a home protection company.
(c)CA Insurance Code § 12741(c) The provider of any pest control service agreement pursuant to Section 8516 of the Business and Professions Code.
(d)CA Insurance Code § 12741(d) This section shall become operative January 1, 2004.
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Section § 12742

Explanation

This law states that home protection contracts and the companies offering them are exclusively regulated by the rules in this specific part of the insurance code. It also notes that, except for what's mentioned in Section 12743, these contracts and companies aren't governed by other insurance code rules.

Home protection contracts and home protection companies, and all matters incident to or concerned with such contracts and companies, shall be exclusively subject to and regulated by the provisions of this part and, except as provided in Section 12743, shall not be governed by any other provision of this code.
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Section § 12743

Explanation

This section outlines which parts of the insurance code apply to home protection contracts and companies. It specifies a range of sections and chapters from the code that are relevant. Certain words are redefined in the context of home protection: for example, “insurer” means home protection company, and “insured” means a contract holder. If there's a conflict between this section and other code parts, this section takes priority.

The following provisions of this code shall be applicable to home protection contracts and home protection companies:
(a)CA Insurance Code § 12743(a) Sections 1 to 46, inclusive.
(b)CA Insurance Code § 12743(b) Chapter 3 (commencing with Section 330) of Part 1, Division 1.
(c)CA Insurance Code § 12743(c) Chapter 12 (commencing with Section 679.70) of Part 1, Division 1.
(d)CA Insurance Code § 12743(d) These provisions of Chapter 1, Part 2, Division 1:
(1)CA Insurance Code § 12743(d)(1) Article 1 (commencing with Section 680).
(2)CA Insurance Code § 12743(d)(2) Article 1.5 (commencing with Section 685).
(3)CA Insurance Code § 12743(d)(3) Article 2 (commencing with Section 690).
(4)CA Insurance Code § 12743(d)(4) Section 699, 699.5, 700, 701, 704, 704.5, 704.7, 705, 705.1, 707, 708, 709, 710, 713, 714, 715, 716, 717, 718, 720, and 725 of Article 3 (commencing with Section 699).
(5)CA Insurance Code § 12743(d)(5) Section 750.
(6)CA Insurance Code § 12743(d)(6) Article 5.5 (commencing with Section 770).
(7)CA Insurance Code § 12743(d)(7) Article 6.5 (commencing with Section 790).
(8)CA Insurance Code § 12743(d)(8) Article 8 (commencing with Section 820).
(9)CA Insurance Code § 12743(d)(9) Article 9 (commencing with Section 880).
(10)CA Insurance Code § 12743(d)(10) Article 11 (commencing with Section 939).
(11)CA Insurance Code § 12743(d)(11) Article 13 (commencing with Section 980).
(12)CA Insurance Code § 12743(d)(12) Article 14 (commencing with Section 1010).
(13)CA Insurance Code § 12743(d)(13) Article 14.5 (commencing with Section 1065.1).
(14)CA Insurance Code § 12743(d)(14) Article 15 (commencing with Section 1070).
(15)CA Insurance Code § 12743(d)(15) Article 16 (commencing with Section 1080).
(16)CA Insurance Code § 12743(d)(16) Article 17 (commencing with Section 1100).
(e)CA Insurance Code § 12743(e) These provisions of Chapter 2, Part 2, Division 1:
(1)CA Insurance Code § 12743(e)(1) Article 1 (commencing with Section 1140).
(2)CA Insurance Code § 12743(e)(2) Article 2 (commencing with Section 1150).
(3)CA Insurance Code § 12743(e)(3) Article 3 (commencing with Section 1170).
(4)CA Insurance Code § 12743(e)(4) Article 4 (commencing with Section 1190).
(5)CA Insurance Code § 12743(e)(5) Article 4.7 (commencing with Section 1215).
(6)CA Insurance Code § 12743(e)(6) Article 7 (commencing with Section 1250).
(7)CA Insurance Code § 12743(e)(7) Article 8 (commencing with Section 1260).
(f)CA Insurance Code § 12743(f) Article 4 (commencing with Section 1610) of Chapter 4 of Part 2 of Division 1.
(g)CA Insurance Code § 12743(g) Article 3 (commencing with Section 1631) of Chapter 5 of Part 2 of Division 1.
(h)CA Insurance Code § 12743(h) Sections 1850, 1850.5, 1852, 1853.5, 1853.7, 1853.8, 1857, 1857.2, 1857.3, 1857.4, 1857.5, 1858, 1858.05, 1858.1, 1858.15, 1858.2, 1858.3, 1858.4, 1858.5, 1858.6, 1858.7, 1859, 1859.1, 1860, 1860.1, 1860.2 of Chapter 9, Part 2, Division 1.
(i)CA Insurance Code § 12743(i) Division 3 (commencing with Section 12900).
(j)CA Insurance Code § 12743(j) In any references in the provisions made applicable to this part by subdivisions (a) to (i) inclusive of this section:
(1)CA Insurance Code § 12743(j)(1) “Insurer” shall mean home protection company.
(2)CA Insurance Code § 12743(j)(2) “Insured” shall mean a home protection contract holder.
(3)CA Insurance Code § 12743(j)(3) “Premium” shall mean protection contract fee.
(4)CA Insurance Code § 12743(j)(4) “Policy” or “insurance” shall mean home protection contract.
(k)CA Insurance Code § 12743(k) When any provision of this code, other than this part, is applied to home protection companies, such provision shall be construed in accordance with the nature of home protection companies and the home protection business. In the event of any conflict between such other provision and this part, this part shall prevail.
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Section § 12744

Explanation

This law section explains that to offer a home protection contract in California, a person or company must have a specific license, unless they are already an authorized insurer under a different insurance category. If you're a foreign company wanting to do this business, you must meet certain requirements unless you've been operating as a home protection company in your own state for at least three years. The commissioner will set up the application process, and there are some exemptions for foreign companies regarding paperwork if their home state doesn't require certain documents, but they'll need to agree to provide financial reports as if they were a local company.

(a)CA Insurance Code § 12744(a) No person shall issue or offer to issue home protection contracts in this state unless the person holds a home protection company license issued by the department, except as provided in subdivision (b) of this section.
(b)CA Insurance Code § 12744(b) An insurer admitted for the class of insurance defined in Section 120 is authorized, in addition to the underwriting powers granted by the class, to issue home protection contracts, but the provisions of this part shall not be otherwise applicable to those insurers or their contracts.
(c)CA Insurance Code § 12744(c) No license shall be granted to a foreign applicant that has not fulfilled the requirements of Sections 716 and 717. For purposes of this part, the term “class of insurance” as used in said sections shall mean the business of a home protection company. This section shall not prohibit the admission of a foreign home protection company that has actively transacted home protection business in its state of domicile for three years or more.
(d)CA Insurance Code § 12744(d) The commissioner shall by regulation prescribe forms for applications for home protection company licenses consistent with the provisions of this part. Any reference to certificate of authority in Article 3 (commencing with Section 699) of Chapter 1 of Part 2 of Division 1, shall mean home protection company license.
(e)Copy CA Insurance Code § 12744(e)
(1)Copy CA Insurance Code § 12744(e)(1) Subject to paragraph (2) and, notwithstanding subdivision (c) or any regulation to the contrary, the following requirements shall not apply to any foreign applicant:
(A)CA Insurance Code § 12744(e)(1)(A) Filing a financial statement certified by the applicant’s home state regulatory official as a true and correct copy of the statement filed with that official. This exemption applies only if the official does not require a home protection company or the applicant to file a financial statement.
(B)CA Insurance Code § 12744(e)(1)(B) Filing an examination report certified by the applicant’s home state regulatory official as a true and correct copy. This exemption applies only if the official does not prepare examination reports of home protection companies or has not prepared an examination report of the applicant.
(C)CA Insurance Code § 12744(e)(1)(C) Holding a certificate of authority as an insurance company.
(2)CA Insurance Code § 12744(e)(2) The exemptions described in paragraph (1) apply only if the applicant’s chief executive officer stipulates that the company will provide financial reports in the same manner required of domestic home protection companies.
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Section § 12745

Explanation

This law is about how insurance holding companies that have an affiliate home protection company can invest in or run a business that offers home service or appliance repair services. These businesses don't need a special license under this law as long as they don't sell contracts together with the sale of a house.

The affiliates must file a financial report of the business when registering and then every year. This includes a list of all agents or contractors involved, certified as accurate by a company officer. The commissioner may set the format for these reports.

(a)CA Insurance Code § 12745(a) Any insurance holding company subject to Article 4.7 (commencing with Section 1215) of Chapter 2 of Part 2 of Division 1, one of whose affiliates is a home protection company as defined in this part, may invest in or operate a corporation which provides home service contractor or dispatch services or appliance service or appliance repair services pursuant to a contract issued for that purpose. The corporation shall not be subject to licensing or regulation under this part except as set forth in this section, provided, that the contract shall not be sold in conjunction with, or otherwise attach to, the sale or any proposed sale of the real property to which it relates.
(b)CA Insurance Code § 12745(b) At the time of filing its registration statement under Section 1215.4, and annually thereafter, each affiliate owning or operating such a corporation shall file as a supplement thereto, a statement of the financial condition of the corporation prepared according to generally accepted accounting principles, and a designated list of the name and addresses of all agents, employees, and independent contractors utilized to issue or sell those contracts. Each statement of financial condition and designated list shall be certified as correct by an officer of the corporation. The commissioner may prescribe the form for the statement or list.
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