Tennessee § 47-18-318 - Surety bond — Applicability — Filing of audited financial statement.

§ 47-18-318. Surety bond — Applicability — Filing of audited financial statement.

In order to provide a degree of protection to members of health clubs, each health club shall post a bond in an amount of twenty-five thousand dollars ($25,000) for each location doing business in this state. The bond shall be made with a bond issued by a corporate surety authorized to do business in this state. The bond shall be maintained for two (2) years following the date on which the health club location ceases to conduct business in this state. In an action brought by the attorney general and reporter pursuant to part 1 of this chapter, the attorney general and reporter shall have the right to request that the total amount of the bond posted by the health club be awarded to the state for consumer restitution. Any person who has entered into a health club agreement that is not fulfilled by the operator may make a claim against the bond. This section shall not apply to any health club or health club operator that has, for at least seven (7) consecutive years, operated under substantially the same ownership and control. Any health club claiming the exemption pursuant to this subsection (d) shall maintain documentation as of January 1 of each year in which the exemption is claimed demonstrating the required period of ownership. Such proof shall be retained for a period of at least five (5) years from the end of the year in which the exemption is claimed. This documentation shall be made available for examination upon request of any law enforcement agency or the attorney general. A refusal to provide such documentation shall constitute a violation of this part. In lieu of the surety bond required in this section, a health club may maintain on file a current audited financial statement prepared by a certified public accountant licensed in this state that demonstrates that either the health club or the health club operator has a financial net worth of at least ten million dollars ($10,000,000) available to satisfy any claims. Any health club claiming the exemption pursuant to this subsection (e) shall maintain documentation as of January 1 of each year in which the exemption is claimed demonstrating at least ten million dollars ($10,000,000) available to satisfy any claims. Such proof shall be retained for a period of at least five (5) years from the end of the year in which the exemption is claimed. This documentation shall be made available for examination upon request of any law enforcement agency or the attorney general. A refusal to provide such documentation shall constitute a violation of this part. Acts 2008, ch. 1107, § 1; 2009, ch. 229, § 1; T.C.A., § 47-18-321 ; Acts 2015, ch. 339, § 20; 2016, ch. 858, § 15; 2019, ch. 459, § 18. Code Commission Notes. Former § 47-18-321 was transferred to § 47-18-318 by authority of the code commission in 2013. Compiler's Notes. Acts 2019, ch. 459, § 55 provided that the division of consumer affairs in the department of commerce and insurance shall coordinate with the attorney general and reporter to transfer all documents, information, systems, and other material deemed relevant to the operation of the division of consumer affairs of the office of the attorney general and reporter. Amendments. The 2015 amendment rewrote (a), which read: “In order to provide a degree of protection to members of health clubs, each health club shall post a bond of twenty-five thousand dollars ($25,000) with the department of commerce and insurance for each location conducting business in this state. The bond may be made through deposit of cash, a certificate of deposit, securities or with a bond issued by a corporate surety acceptable to the commissioner.”; added the second sentence in (c); substituted “department of commerce and insurance” for “department of commerce and insurance” at the end of (d); in (e)(1), substituted “the health club operator” for “its operator” and “department” for “division” at the end; in (e)(2), substituted “the health club or the health club operator shall notify the department of commerce and insurance of the change in the health club's” for “either the health club or its operator must notify the division of the change in its” at the end; and deleted (f), which read: “Any health club subject to this section and registered with the division on June 5, 2008, shall post a surety bond or file an audited financial statement on or before July 1, 2010.” The 2016 amendment rewrote (a), which read: “(1) In order to provide a degree of protection to members of health clubs, each health club shall post a bond in an amount as determined by the commissioner for each location conducting business in this state. The bond shall be made with a bond issued by a corporate surety acceptable to the commissioner.“(2) If the commissioner has not promulgated a rule setting the required level of bonding, then the bond shall be in the amount of twenty-five thousand dollars ($25,000) for each location doing business in this state.”; in (c), inserted “into” in the second sentence; in (d), deleted “and maintained a satisfactory registration with the department of commerce and insurance” following “control” at the end of the first sentence and added the last two sentences; in (e)(1), substituted “maintain on file” for “file with department of commerce and insurance”, deleted “to the department” following “demonstrates,” and deleted “imposed by the department” following “claims”; and rewrote (e)(2), which read: “(2) Any health club that files an audited financial statement in lieu of posting the surety bond required by this section shall annually file an updated audited financial statement that complies with subdivision (e)(1). Within thirty (30) calendar days of receiving information that would render the health club ineligible for exemption from the surety bond requirement under this subsection (e), the health club or the health club operator shall notify the department of commerce and insurance of the change in the health club's financial status and post the required surety bond with the department.” The 2019 amendment substituted “the attorney general” for “the division of consumer affairs of the department of commerce and insurance” in (d) and (e)(2). Effective Dates. Acts 2015, ch. 339, § 31. July 1, 2015; May 4, 2015, for the purpose of rulemaking. Acts 2016, ch. 858, § 19. July 1, 2016. Acts 2019, ch. 459, § 56. September 30, 2019. Collateral References. Construction and applicability of state statutes governing health club membership contracts or fees. 48 A.L.R.6th 223.