(a) A service contract seller shall not issue, sell, or offer for sale a service contract unless the obligor under the service contract has complied with one of the following requirements:

(1) Files with the director one of the following:

Terms Used In California Business and Professions Code 9855.2

  • administrator: means a person who performs or arranges the collection, maintenance, or disbursement of moneys to compensate any party for claims or repairs pursuant to a service contract, and who also performs or arranges any of the following activities on behalf of service contract sellers:

    California Business and Professions Code 9855

  • Contract: A legal written agreement that becomes binding when signed.
  • Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
  • Director: means the Director of Consumer Affairs. See California Business and Professions Code 9801
  • Escrow: Money given to a third party to be held for payment until certain conditions are met.
  • seller: means a person who sells or offers to sell a service contract to a service contractholder, including a person who is the obligor under a service contract sold by the seller, manufacturer, or repairer of the product covered by the service contract. See California Business and Professions Code 9855
  • Service contract: means a contract in writing to perform, over a fixed period of time or for a specified duration, services relating to the maintenance, replacement, or repair of consumer goods and may include provisions for incidental payment of indemnity under limited circumstances, including, but not limited to, power surges, food spoilage, or accidental damage from handling. See California Business and Professions Code 9855
  • Service contract reimbursement insurance policy: means a policy of insurance issued by an insurer admitted to do business in this state providing coverage for all obligations and liabilities incurred by a service contract seller under the terms of the service contracts sold in this state by the service contract seller to a service contractholder. See California Business and Professions Code 9855
  • Service contractor: means a service contract administrator or a service contract seller. See California Business and Professions Code 9855
  • State: means the State of California, unless applied to the different parts of the United States. See California Business and Professions Code 21

(A) The most recent annual report on Form 10-K required by the Securities and Exchange Commission, reflecting a net worth greater than the sum of the deferred revenues from service contracts in force. If the service contractor is a foreign corporation that files a comparable audited financial statement with its home government or with the United States government, the director may deem that statement an acceptable substitute for Form 10-K.

(B) The most recent audited financial statement reflecting a net worth of not less than one hundred million dollars ($100,000,000). The financial statement shall be certified by a certified public accountant who is licensed in the state where the service contract seller maintains its principal place of business or the seller’s state of domestic incorporation.

(2) Obtains a service contract reimbursement insurance policy.

(3) Sells service contracts that are administered by a service contract administrator who has obtained a service contract reimbursement insurance policy covering the seller’s service contracts.

(4) Maintains and annually verifies to the director a funded account held in escrow equal to a minimum of 25 percent of the deferred revenues from the service contracts in force.

(b) A service contract administrator shall not administer service contracts sold in this state unless a service contract reimbursement insurance policy covering these service contracts has been obtained.

(Amended by Stats. 2010, Ch. 543, Sec. 4. (AB 2111) Effective January 1, 2011. Repealed as of January 1, 2028, pursuant to Section 9855.9.)

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