NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A1193
SPONSOR: Lunsford TITLE OF BILL:
An act to amend the insurance law, in relation to service contracts for
accidental damages from handling
PURPOSE OR GENERAL IDEA OF BILL:
This bill amends the definition of "service contract" to confirm that
coverage for power surges and accidental damage from handling is not
incidental coverage and may be offered separately from other service
contract coverage and therefore protect the consumer beginning on the
date their covered device is purchased.
SUMMARY OF PROVISIONS:
Section 1 of the bill amends section 7902(k) of the insurance law to
confirm that service contract coverage for power surges and accidental
damage from handling is primary coverage that may begin on the date a
covered device is purchased.
Section 2 is the effective date.
JUSTIFICATION:
Primary service contract coverage offers benefits comparable to a
manufacturer's limited warranty (i.e. coverage for defects in materials
and workmanship or wear and tear). Service contract coverage is supple-
mental to a manufacturer's warranty. To avoid unintentionally selling
duplicative coverage, primary service contract coverage may not begin
until the manufacturer's warranty expires.
Service contracts often also provide protection against power surges and
accidental damage from handling, but manufacturers' warranties usually
do not provide such coverage. Currently, the NYS Department of Financial
Services interprets Insurance Law § 7902(k) to state that coverage for
power surges and accidental damage from handling is only permissible as
incidental coverage and therefore, it must share the primary coverage's
term length (effective and expiration dates).
Since a manufacturer's warranty does not provide protection against
power surges and accidental damage from handling, and since a service
contract's protection against these perils may not begin until the
manufacturer's warranty expires, consumers are often left exposed and
without coverage against these perils during the term of the manufactur-
er's warranty.
This bill amends the Insurance Law to clarify that coverage for power
surges and accidental damage from handling is not incidental coverage,
and such coverage may be offered commencing on the date of purchase of a
covered device and may run concurrently with the manufacturer's warran-
ty. This change will provide substantial protection to consumers who
might otherwise end up paying the full replacement cost for a covered
device due to a power surge or accidental damage from handling during
the term of the manufacturer's warranty.
PRIOR LEGISLATIVE HISTORY:
A.10591 of 2021-22: referred to Insurance
FISCAL IMPLICATIONS:
None to the State.
EFFECTIVE DATE:
This act shall take effect immediately.
STATE OF NEW YORK
________________________________________________________________________
1193
2023-2024 Regular Sessions
IN ASSEMBLY
January 13, 2023
___________
Introduced by M. of A. LUNSFORD -- read once and referred to the Commit-
tee on Insurance
AN ACT to amend the insurance law, in relation to service contracts for
accidental damages from handling
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Subsection (k) of section 7902 of the insurance law, as
2 separately amended by chapter 247 of the laws of 2019 and section 1 of
3 subpart Q of part XX of chapter 55 of the laws of 2020, is amended to
4 read as follows:
5 (k) "Service contract" means a contract or agreement, for a separate
6 or additional consideration, for a specific duration to perform the
7 repair, replacement or maintenance of property, or indemnification for
8 repair, replacement or maintenance, due to a defect in materials or
9 workmanship or wear and tear, power surges or accidental damages from
10 handling, with or without additional provision for indemnity payments
11 for incidental damages, provided any such indemnity payment per incident
12 shall not exceed the purchase price of the property serviced. Service
13 contracts may include towing, rental and emergency road service[, and
14 may also provide for the repair, replacement or maintenance of property
15 for damage resulting from power surges and accidental damage from handl-
16 ing]. Service contracts may also include contracts to repair, replace or
17 maintain residential appliances and systems. Such term shall also mean a
18 contract or agreement made (1) by or for the manufacturer or seller of a
19 motor vehicle tire for repair or replacement of the tire or wheel as the
20 result of damage arising from a road hazard, (2) by or for the supplier
21 or seller of a service for repair of chips or cracks in a motor vehicle
22 windshield, but not including services that involve the replacement of
23 the entire windshield, (3) by or for the supplier or seller of a service
24 for repair or removal of dents, dings or creases from a motor vehicle
25 without affecting the existing paint finish using paintless dent repair
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD01944-01-3
A. 1193 2
1 techniques, but not including services that involve the replacement of
2 vehicle body panels, or sanding, bonding or painting; and (4) by or for
3 the supplier or seller of a service for repair or replacement of a motor
4 vehicle key or key fob in the event that the key or key fob becomes
5 inoperable, lost or stolen. In conjunction with a motor vehicle leased
6 for personal use, such term shall also mean a contract to perform the
7 repair, replacement or maintenance of property, or to provide indemnifi-
8 cation for repair, replacement or maintenance, due to excess wear and
9 use or damage for interior stains, rips or scratches or missing interior
10 parts that result in a lease-end charge not otherwise covered by a
11 service agreement or warranty, provided any such payment shall not
12 exceed the purchase price of the vehicle.
13 § 2. This act shall take effect immediately.
