(1)(a) For the purposes of this section, a service contract is a contract or agreement to perform or indemnify for a specific duration the repair, replacement or maintenance of property for operational or structural failure that results from a defect in materials, workmanship or normal wear and tear, with or without an additional incidental provision to pay indemnity under limited circumstances, including but not limited to rental and emergency road service. A service contract may also provide for:

Ask a business law question, get an answer ASAP!
Thousands of highly rated, verified business lawyers.
Click here to chat with a lawyer about your rights.

(A) Repairing, replacing or maintaining property for damage that results from lightning, power surges or accidental damage from handling;

(B) Repairing or replacing tires or wheels on a motor vehicle damaged as a result of contacting a road hazard;

(C) Removing dents, dings, creases or other damage on a motor vehicle that a process of paintless dent removal can repair without affecting an existing paint finish or replacing vehicle body panels, sanding, bonding or repainting;

(D) Repairing chips or cracks in motor vehicle windshields or replacing motor vehicle windshields because of damage that results from road hazards;

(E) Replacing motor vehicle keys or key fobs that become inoperable or that are lost or stolen;

(F) Paying specified incidental costs that result from the failure of a vehicle protection product, as defined in ORS § 646A.430, to perform according to the specifications for the vehicle protection product; and

(G) Other services the Director of the Department of Consumer and Business Services specifies by rule, to the extent that the services are similar to services described in this paragraph.

(b) For the purposes of this section, a service contract does not include coverage for repairing damage to or replacing components of a motor vehicle’s interior or exterior paint or finish unless the service contract provides the services described in this paragraph in connection with the sale of a vehicle protection product, as defined in ORS § 646A.430.

(c) Consideration for a service contract must be stated separately from the price of the consumer product.

(d) For purposes of this section, a service contract does not include insurance policies that insurers issue under the Insurance Code or maintenance agreements.

(2) An obligor may not issue, sell or offer for sale a service contract in this state unless the obligor has complied with the provisions of this section and ORS § 646A.156 and 646A.158.

(3) All obligors of service contracts issued, sold or covering property located in this state shall file a registration with the Department of Consumer and Business Services on a form, at a fee and at a frequency that the director specifies under ORS § 646A.168.

(4) An obligor shall keep accurate accounts, books and records concerning transactions that involve service contracts.

(5) Except as provided in subsection (6) of this section, to ensure the faithful performance of an obligor’s obligations to the obligor’s contract holders, each obligor shall provide the director with one of the following as proof of financial stability:

(a) A copy of the obligor’s most recent Form 10-K that the obligor or the obligor’s parent company, if the obligor consolidates financial statements with a parent company, filed with the Securities and Exchange Commission. A Form 10-K that the obligor or the obligor’s parent company filed within the last calendar year must show that the obligor or the obligor’s parent company has a net worth of at least $100 million. If the obligor’s parent company files the Form 10-K to meet the obligor’s financial stability requirement, the parent company shall agree to guarantee the obligations the obligor has in service contracts the obligor sells in this state.

(b) Evidence of a reimbursement insurance policy described in ORS § 742.390 that an authorized insurer issues to the obligor and that insures all service contracts the obligor sells.

(6)(a) An obligor of a home service agreement as defined in ORS § 731.164 shall file with the director a surety bond executed to the State of Oregon in the sum of $25,000. The surety bond must be issued by a surety company authorized to do business in this state. An obligor of a home service agreement does not need to file proof of financial stability under subsection (5) of this section.

(b) The surety bond described in paragraph (a) of this subsection must be issued on the condition that the obligor comply with all provisions of ORS § 646A.150 to 646A.172 and fully perform on all contracts or agreements into which the obligor enters.

(c) The surety bond must be continuous until canceled and must remain in full force and unimpaired at all times to comply with this section. The surety shall give the director at least 30 days’ written notice by registered or certified mail before the surety cancels or terminates the surety’s liability under the bond.

(d) Any person who suffers damage as a result of a violation of any provision of ORS § 646A.150 to 646A.172 or any rule the director adopts pursuant to ORS § 646A.150 to 646A.172 has a right of action under the bond. The state or a person with a right of action may bring an action under the bond by filing a complaint in a court of competent jurisdiction not later than one year after the surety bond is canceled or terminated. The court may award the prevailing plaintiff reasonable attorney fees and costs in an action under the bond.

(e) The aggregate liability of the surety may not exceed the principal sum of the bond.

(7) Filing requirements are as follows:

(a) The obligor shall file with the director proof of financial stability or a surety bond as required by subsection (5) or (6) of this section.

(b) The director by rule may specify the procedure for filing the proof of financial stability or the surety bond.

(c) A person may not file or cause to be filed with the director any article, certificate, report, statement, application or any other information required or permitted to be filed under this subsection that the person knows is false or misleading in any material respect.

(8) Service contract sellers and employees of service contract sellers that market, sell or offer to sell service contracts for obligors who comply with this section and ORS § 646A.156 and 646A.158 are exempt from the requirements of the Insurance Code including, but not limited to, the requirement to belong to the Oregon Insurance Guaranty Association.

(9) Obligors that comply with ORS § 646A.156 and 646A.158 do not need to comply with the Insurance Code including, but not limited to, the requirement to belong to the Oregon Insurance Guaranty Association.

(10) If a service contract seller is not the same person as the obligor under the service contract, the service contract seller shall remit the agreed-upon consumer purchase price of the service contract to the obligor within 30 days after selling the service contract or in accordance with terms and conditions to which the service contract seller and obligor agree in writing. [Formerly 646.267; 2013 c.527 § 2]