Section 66-373 - Insurance policy requirements(a) Each company or person subject to this section shall maintain contractual liability insurance or service agreement reimbursement insurance with an authorized insurer for one hundred percent (100%) of claims exposure, including reported and incurred but not reported claims and claims expenses, on business written in this State unless the company or person complies with all of the following: (1) Maintains an audited net worth of one hundred million dollars ($100,000,000).(2) Has offered service agreement contracts or warranties, as applicable to the respective company, its parent company, or person, for at least the preceding 10 years.(3) Either is required to file and has filed an SEC Form 10K or Form 20-F with the Securities and Exchange Commission (SEC) within the last calendar year or, if the company does not file with the SEC, can produce, upon request, a copy of the company's audited financial statements, which show a net worth of the company or person of at least one hundred million dollars ($100,000,000). A company or person may utilize its parent company's Form 10-K, Form 20-F, or audited financial statements to satisfy this requirement if the parent company agrees to guarantee the obligations of the company or person relating to service agreement contracts or warranties, as applicable to the respective company or person, sold by the company or person in this State. In lieu of complying with subdivisions (1), (2), and (3) of this subsection, the company or person may maintain a funded reserve account for the purpose of meeting its obligations under contracts issued and outstanding in this State. The reserves shall not be less than forty percent (40%) of gross consideration received, less claims paid, on the sale of the service contract for all in-force contracts.
(b) All forms relating to insurance policies written by authorized insurers under this section shall be filed with and approved by the Commissioner of Insurance before they may be used for any purpose in this State, irrespective of whether the insurers are licensed insurers.(c) Each policy shall contain the following provisions:(1) If the company or person does not fulfill its obligations under service agreements or warranties issued in this State for any reason, including federal bankruptcy or state receivership proceedings, the insurer will pay losses and unearned premium refunds directly to any person making the claim under the service agreement.(2) The insurer shall assume full responsibility for the administration of claims if the company or person is unable to do so.(3) The policy is subject to the cancellation, nonrenewal, and renewal provisions of G.S. 58-41-15, 58-41-20, 58-41-25, and 58-41-40.(4) The policy shall insure all service agreements and warranties that were issued while the policy was in effect, regardless of whether the premium was remitted to the insurer.(5) If the insurer is fulfilling any service agreement covered by the policy and if the service agreement holder cancels the service agreement, the insurer shall make a full refund of the unearned premium to the consumer pursuant to G.S. 66-372(e)(3). This subdivision applies only to service agreement companies.(d) The Commissioner of Insurance may adopt rules, in addition to the requirements of this section, governing the terms and conditions of policy forms for the insurance required by this section.(e) Persons and companies subject to G.S. 58-1-15, 58-1-20, 66-370, 66-371, and 66-374 are subject to and shall comply with this section.Amended by 2011 N.C. Sess. Laws 222,s. 1, eff. 7/1/2011.Amended by 2007 N.C. Sess. Laws 95,s. 12, eff. 10/1/2007.Renumbered from § 58-1-36 by 2007 N.C. Sess. Laws 95,s. 5, eff. 10/1/2007.Amended by 2003 N.C. Sess. Laws 0290, s. 1.(c), eff. 10/1/2003.1993 (Reg. Sess., 1994), c. 730, s. 1.