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ARIZONA STATE SENATE
Fifty-Fifth Legislature, First Regular Session
certificate
of election; technical correction
(NOW: service contract; preexisting conditions)
Purpose
Requires a home service warranty contract (service contract) to clearly indicate, rather than disclose, whether preexisting conditions are covered or excluded under the terms of the service contract.
Background
A service company must obtain a permit from the Director of the Department of Insurance and Financial Institutions (DIFI) in order to offer or issue a service contract in Arizona. In addition to obtaining a permit, a service company must have a service contract filed with and approved by the Director of DIFI (Director) prior to selling the service contract. A service contract must disclose specific criteria, including any material acts or omissions committed by a contract holder that cancel or void coverage. Additionally, a service contract may not exclude preexisting conditions if the conditions were known or should reasonably have been known by the service company or a person selling the service contract on the service company's behalf (A.R.S. §§ 20-1095.01 and 20-1095.06).
Laws 2021, Chapter 5 requires a service contract to disclose whether the service contract covers or excludes preexisting conditions and allows a service contract to exclude preexisting conditions only if the conditions were known or would have been known by visually inspecting, operating or testing the covered property.
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Requires a service contract to clearly indicate, rather than disclose, whether preexisting conditions are covered or excluded under the terms of the service contract.
2. Removes the permissive authority of a service contract to exclude preexisting conditions only if the conditions were known or would have been known by visually inspecting, operating or testing the covered property.
3. Allows a permitted service company to continue to use any Director-approved service contract form before the effective date of this legislation until the service company submits a new service contract form to the Director for approval.
4. Becomes effective on the general effective date.
House Action
COM 2/16/21 DP 9-0-0-1
3rd Read 2/31/21 59-0-1
Prepared by Senate Research
March 8, 2021
MG/ML/gs