Iowa Code § 523C.5
Financial responsibility — demonstration requirements
Redline — January 1, 2012 → current.View current text →
Current — January 1, 2021
As of January 1, 2012
1. To assure the faithful performance of obligations under residential service contracts issued and outstanding in this state, a service company shall, prior to the issuance or renewal of a license, file with the commissioner a surety bond in the amount of one hundred thousand dollars, which has been issued by an authorized surety company and approved by the commissioner as to issuer, form, and contents or establish a custodial account in the amount of one hundred thousand dollars at an authorized depository. The bond or custodial account shall not be canceled or be subject to cancellation unless thirty days’ advance notice in writing is filed with the commissioner. Notwithstanding chapter 17A, if a bond or custodial account is canceled for any reason and a new bond or notice that a new custodial account has been established in the required amount is not received by the commissioner on or before the effective date of cancellation, the license of the service company is automatically revoked as of the date the bond or custodial account ceases to be in effect. A service company whose license is revoked under this section may file an application for a new license pursuant to section 523C.3.
The bond or custodial account posted by a service company pursuant to this section shall be for the benefit of, and subject to recovery thereon by any residential service contract holder sustaining actionable injury due to the failure of the service company to faithfully perform its obligations under a residential service contract because of insolvency of the service company.
If a service company ceases to do business in this state and furnishes to the commissioner satisfactory proof that it has discharged all obligations to contract holders, the surety bond or custodial account shall be released.
The commissioner may by rule designate institutions authorized to act as a depository under this section and establish requirements for custodians, custodial agreements, custodial accounts, or the method of valuing noncash assets held in a custodial account which the commissioner believes necessary to protect the holders of residential service contracts issued and outstanding in this state.
2. In lieu of the bond or custodial account required by this section, the service company may deposit with the treasurer of state a cash deposit in the same amount. The treasurer of state shall not refund a deposit until sixty days after the service company has ceased doing business in this state, a bond has been filed with the commissioner which complies with this section, or a custodial account is established which complies with this section.
In order to assure the faithful performance of a service company’s obligations to its contract holders in this state, a licensed service company shall demonstrate financial responsibility to the commissioner by satisfying one of the following, as evidenced by the service company:
1. Insuring all motor vehicle service contracts and residential service contracts offered for sale in this state under a reimbursement insurance policy that complies with section 523C.6.
2. Doing both of the following:
a. Maintaining a funded reserve account for the service company’s obligations under any issued and outstanding service contracts in this state, in an amount no less than forty percent of gross consideration received, less claims paid, for the sale of all service contracts issued and in force in this state. The reserve account shall be subject to examination and review by the commissioner.
b. Placing in trust with the commissioner a financial security deposit in an amount no less than five percent of the gross consideration received by the service company, less claims paid, for the sale of all motor vehicle service contracts and residential service contracts issued and in force in this state, but not less than twenty-five thousand dollars, consisting of one of the following:
(1) Cash.
(2) Securities of the type eligible for deposit by insurers authorized to transact business in this state.
(3) Certificates of deposit.
(4) A surety bond issued by an authorized surety company.
(5) Another form of security as prescribed by the commissioner by rule.
3. Doing both of the following:
a. Maintaining, on its own or together with a parent company, a minimum net worth or stockholders’ equity of one hundred million dollars or more.
b. Upon request from the commissioner, providing either:
(1) A copy of the service company’s financial statements.
(2) If the service company’s financial statements are consolidated with those of its parent company, a copy of the parent company’s most recent form 10-K or form 20-F filed with the federal securities and exchange commission within the last calendar year, or if the parent company does not file with the federal securities and exchange commission, a copy of the parent company’s audited financial statements showing a net worth of at least one hundred million dollars. If the service company’s financial statements are consolidated with those of its parent company, the service company shall also provide a copy of a written agreement by the parent company guaranteeing the obligations of the service company under motor vehicle service contracts and residential service contracts issued and outstanding by the service company in this state.
83 Acts, ch 87, §6; 88 Acts, ch 1112, §705; 92 Acts, ch 1078, §3
83 Acts, ch 87, §6; 88 Acts, ch 1112, §705; 92 Acts, ch 1078, §3; 2012 Acts, ch 1023, §157; 2019 Acts, ch 142, §5, 19
Referred to in
Official source: Iowa Legislature. Reproduced from public-domain Iowa statutes; confirm against the official source for the current text. Not legal advice.