BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1130|
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THIRD READING
Bill No: AB 1130
Author: Wilk (R)
Amended: 6/30/14 in Senate
Vote: 21
SENATE INSURANCE COMMITTEE : 10-0, 6/25/14
AYES: Monning, Corbett, Correa, DeSaulnier, Lieu, Mitchell,
Nielsen, Roth, Torres, Vidak
NO VOTE RECORDED: Gaines
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 78-0, 5/30/13 - See last page for vote
SUBJECT : Insurance: home protection contracts
SOURCE : National Home Service Contract Association
DIGEST : This bill streamlines the application process
required of out-of-state applicants for a home protection
company license. This bill requires each home protection
company to file a single annual statement exhibiting its
conditions and affairs. This bill prohibits the Insurance
Commissioner from conducting more than one financial examination
of a company in any five-year period, unless the Insurance
Commissioner makes a specified finding.
ANALYSIS :
Existing law:
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AB 1130
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1. Defines "home protection contract" to mean a contract whereby
a person, other than a builder, seller, or lessor of the
home, 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.
2. Requires that the contract provide for the servicing, repair,
or replacement of the covered appliances or components, but
may not cover damages arising from the failure of any
component, system or appliance.
3. Requires home protection companies to be licensed and
regulated by the California Department of Insurance (CDI).
4. Requires home protection companies to comply with specified
statutes governing insurance companies.
This bill:
1. Exempts foreign applicants for a home protection company
license from the following requirements if the chief
executive officer agrees to provide the CDI the same
financial reports required of domestic home protection
companies:
A. Filing a financial statement certified by their
domestic regulator.
B. Filing a report of examination by the insurance
regulator in their home state.
C. Holding a certificate of authority as an insurance
company.
2. Stipulates that the applicant's chief executive officer must
provide a company's financial reports in the same manner
required of domestic home protection companies.
3. States that nothing in its provisions may be construed to
limit the authority of the Insurance Commissioner to request
financial statements from licensees at any time.
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4. States that the Insurance Commissioner shall not conduct more
than one financial examination of a company in any five-year
period, unless the Insurance Commissioner finds that the
financial condition of the company has deteriorated, thereby
warranting an interim examination.
Background
According to the National Home Service Contract Association, the
bill's sponsor, home protection contracts, often referred to as
"home warranties," are often purchased in connection with the
sale of homes to provide buyers with coverage should the wear
and tear on home appliances and systems require repair or
replacement. The contracts are short in duration, often for a
year but sometimes monthly, and do not carry the "long-tail"
liability typical of more insurance products like life or
long-term care insurance.
Home protection contracts might not be considered "insurance" in
other states because of the nature of the coverage.
Academically, property and casualty insurance is often thought
of as covering only those risks that are accidental or by
chance. This is sometimes referred to as the fortuity doctrine.
Some states, however, do not view home protection contracts as
a form of insurance, but rather distinguish service or
maintenance contract because they cover damages that relate to
predictable and controllable wear and tear.
California regulates home protection companies similarly to
insurers. Companies from out-of-state may be subject to
numerous requirements not required in their home state.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 7/30/14)
National Home Service Contract Association (source)
ARGUMENTS IN SUPPORT : The National Home Service Contract
Association writes that the bill "grants CDI the authority to
waive certain pre-licensing requirements for new out-of-state
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applicants which are not licensed as insurers in their home
states. In many states, home protection or home warranty
companies are not required to obtain insurance licenses, and in
some circumstances it should not be necessary for applicants to
obtain insurance licenses in California if they have been
operating successfully in other states."
ASSEMBLY FLOOR : 78-0, 5/30/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,
Buchanan, Ian Calderon, Campos, Chau, Ch�vez, Chesbro, Conway,
Cooley, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hern�ndez,
Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Mansoor, Medina, Melendez, Mitchell, Morrell,
Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson,
Perea, V. Manuel P�rez, Quirk, Quirk-Silva, Rendon, Salas,
Skinner, Stone, Ting, Wagner, Waldron, Weber, Wieckowski,
Wilk, Williams, Yamada, John A. P�rez
NO VOTE RECORDED: Holden, Vacancy
AL:d 8/5/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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