North Carolina § 66-372 - Miscellaneous requirements for motor vehicle and home appliance service agreement companies.

§ 66-372. Miscellaneous requirements for motor vehicle and home appliance service agreement companies.

The provisions of this section and G.S. 66-373 apply to companies specified in G.S. 66-370 and G.S. 66-371. The following definitions apply in this section and in G.S. 66-373: Service agreement. - Includes motor vehicle service agreements and home appliance service agreements. Service agreement company. - Includes motor vehicle service agreement companies and home appliance service agreement companies. Before the sale of any service agreement, the service agreement company shall give written notice to the customer clearly disclosing that the purchase of the agreement is not required either to purchase or to obtain financing for a motor vehicle or home appliance, as the case may be. No service agreement may be used in this State by any service agreement company if the agreement: In any respect violates, or does not comply with, the laws of this State; Contains, or incorporates by reference when incorporation is otherwise permissible, any inconsistent, ambiguous, or misleading clauses or any exceptions and conditions that deceptively affect the risk purported to be assumed in the general coverage of the agreement; Has any title, heading, or other indication of its provisions that is misleading; or Is printed or otherwise reproduced in a manner that renders any material provision of the agreement substantially illegible. All service agreements used in this State by a service agreement company shall: Not contain provisions that allow the company to cancel the agreement in its discretion other than for nonpayment of premiums or for a direct violation of the agreement by the consumer where the service agreement states that violation of the agreement would subject the agreement to cancellation; With respect to a motor vehicle service agreement as defined in G.S. 66-370, provide for a right of assignability by the consumer to a subsequent purchaser before expiration of coverage if the subsequent purchaser meets the same criteria for motor vehicle service agreement acceptability as the original purchaser; and Contain a cancellation provision allowing the consumer to cancel at any time after purchase and receive a pro rata refund less any claims paid on the agreement and a reasonable administrative fee, not to exceed ten percent (10%) of the amount of the pro rata refund. Each service agreement company, as a minimum requirement for permanent office records, shall maintain: A complete set of accounting records, including a general ledger, cash receipts and disbursements journals, accounts receivable registers, and accounts payable registers. Memorandum journals showing the service agreement forms issued to the company salespersons and recording the delivery of the forms to dealers. Memorandum journals showing the service agreement forms received by dealers and indicating the disposition of the forms by the dealers. A detailed service agreement register, in numerical order by agreement number, of agreements in force. The register shall include the following: agreement number, date of issue, issuing dealer, name of agreement holder, description of item covered, service agreement period (and, if applicable, mileage), gross premium, total commission paid, and net premium. A detailed claims register, in numerical order by service agreement number. The register shall include the following information: agreement number, date of issue, date claim paid, and, if applicable, disposition other than payment and reason for the disposition. Repealed by Session Laws 1993 (Reg. Sess., 1994), c. 730, s. 3. No insurer or service agreement company shall act as a fronting company for any unauthorized insurer or service agreement company that is not in compliance with this section. As used in this subsection, "fronting company" means a licensed insurer or service agreement company that, by reinsurance or otherwise, generally transfers to one or more unauthorized insurers or service agreement companies that are not in compliance with this section a substantial portion of the risk of loss under agreements it writes in this State. All funds belonging to insurers, companies, or others received by a salesperson of a service agreement are trust funds received by the salesperson in a fiduciary capacity; and the salesperson, in the applicable regular course of business, shall account for and pay the funds to the person entitled to the funds. Any salesperson who, not being entitled to the funds, diverts or appropriates the funds or any portion of the funds, other than funds representing the salesperson's commission if authorized by the salesperson agreement, to his or her own use, upon conviction is guilty of embezzlement under G.S. 14-90. Any person who knowingly offers for sale or sells a service agreement for a company that has failed to comply with the provisions of this section is guilty of a Class 1 misdemeanor. All service agreement companies and individuals selling service agreements are subject to G.S. 75-1 through G.S. 75-19. Repealed by Session Laws 1993 (Reg. Sess., 1994), c. 730, s. 2. No service agreement company shall use in its name, contracts, literature, advertising in any medium, or any other printed matter the words "insurance", "casualty", "surety", "mutual", or any other words descriptive of the insurance business or deceptively similar to the name or description of any insurer doing business in this State, except to indicate that the obligations of the contract are insured by an insurance company. Repealed by Session Laws 2007-95, s. 11. History (1991 (Reg. Sess., 1992), c. 1014, s. 1; 1993, c. 504, ss. 50, 51, 52; c. 539, s. 444; 1994, Ex. Sess., c. 24, s. 14(c); 1993 (Reg. Sess., 1994), c. 730, ss. 2, 3, 5; 1995, c. 193, ss. 4, 5; 2003-290, s. 2; 2007-95, ss. 4, 11; 2015-264, s. 12(a); 2015-283, s. 3.) Editor's Note. - This section was formerly codified as G.S. 58-1-35. It was recodified as G.S. 66-372 by Session Laws 2007-95, s. 4, effective October 1, 2007. Session Laws 2007-95, s. 14, contains a severability clause. Session Laws 2015-264, s. 12(a), which amended subsection (e), was repealed by Session Laws 2015-264, s. 12(b), contingent on Senate Bill 195, 2015 Regular Session, becoming law. Senate Bill 195 was enacted as Session Laws 2015-283. Effect of Amendments. - Session Laws 2015-264, s. 12(a), effective October 1, 2015, substituted "G.S. 66-370(b)(5)" for "G.S. 66-370(b)(1)" in subdivision (e)(2). Session Laws 2015-283, s. 3, effective October 1, 2015, substituted "G.S. 66-370" for "G.S. 66-370(b)(1)" near the beginning of subdivision (e)(2).