(a) A licensed funeral service establishment shall deposit any money or securities which such establishment receives pursuant to a funeral service contract, and not later than fifteen days after its receipt of such money or securities, in one or more escrow accounts established in accordance with the provisions of this section. Not later than ten days after the initial deposit of such money or securities, the escrow agent shall notify the purchaser, in writing, of the agent’s receipt of such initial deposit and the amount of such initial deposit. Such escrow agent shall notify the purchaser of any transfer of such funds or securities, except when such transfer is to pay for services as required by the funeral service contract. Such funds or securities shall not be transferred to an insurance contract without a description to the purchaser by the funeral director of any fees, costs or commissions associated with such insurance contract and without obtaining the written consent of the purchaser to such transfer.

(b) Each escrow account established pursuant to this section shall be administered and maintained by an escrow agent. The funeral service establishment which deposits money or securities in such escrow account shall appoint such agent who shall be one of the following: (1) A national banking association; (2) a state bank and trust company; (3) a federal or state chartered savings bank; (4) a federal or state chartered savings and loan association; (5) a licensed insurance company; or (6) a registered broker-dealer. No such institution shall be appointed as an agent unless such institution is authorized by law to act as an escrow agent.

(c) Assets held in escrow accounts established pursuant to this section shall be invested in one or more of the following: (1) Deposit accounts insured by the Federal Deposit Insurance Corporation; (2) accounts insured against loss of principal by an agency or instrumentality of the United States government; (3) bonds in which savings banks in this state may, by law, invest; (4) bonds of the United States or any agency thereof or of this state or any municipality of this state; (5) insurance contracts with an insurance company licensed by the state of Connecticut to offer such contracts and maintaining not less than a B plus rating for financial security by A.M. Best; or (6) any other deposit account or security of a quality, safety and expense comparable to those set forth in this subsection.

(d) All interest, dividends and other income earned on the amounts deposited in an escrow account pursuant to this section shall be retained in such escrow account and credited, less any administration expenses, to the respective interests of those persons for whose benefit the escrow account is maintained. Amounts in an escrow account shall be removed from such account only as provided in sections 42-200 to 42-206, inclusive. Each party to a funeral service contract shall receive an annual statement of the amount credited to such party’s escrow account. Such statement shall include the name and address of the escrow agent.

(e) If a purchaser of funeral services, property or merchandise defaults in making payments required under the terms of such contract, or if the purchaser or the person responsible for making funeral arrangements for a deceased beneficiary fails to have the funeral service establishment provide services specified in the funeral services contract, the funeral service establishment may retain any origination fee and any costs actually and reasonably incurred by such establishment in the performance of the contract as liquidated damages, provided the sum of the amount retained as an origination fee and the amount retained to pay for costs incurred by the funeral establishment in the performance of the contract shall not exceed an amount equal to five per cent of the amount in the escrow account at the time the purchaser of such funeral services defaults in making such payments. The balance of any amount remaining in the escrow account shall be paid to such purchaser upon request.

(f) A person, firm or corporation licensed in accordance with the provisions of chapter 385 which enters into a funeral service contract shall furnish the agent of an escrow account established in accordance with the provisions of this section with the name of the purchaser of such services, property or merchandise, the address and name of the beneficiary of the funeral service contract and the amount contracted for, together with a copy of the contract listing the services, personal property or merchandise to be furnished by the funeral service establishment. Nothing in this section shall prohibit the commingling within an escrow account of the money or securities received under more than one funeral service contract for the purpose of management and investment of funds in such escrow account.

(g) A funeral service contract shall provide that, if the particular merchandise provided for in the contract is not available at the time of death, the funeral service establishment shall furnish merchandise similar in style and at least equal in quality of material and workmanship to the merchandise provided for in the contract.

(h) The provisions of this section shall not apply to a funeral service contract funded through an assignment of a death benefit payable under an individual or group life insurance policy.