§ 4-90-505 - Mandatory insurance.
4-90-505. Mandatory insurance.
(a) No motor vehicle service contract shall be issued, sold, or offered for sale in this state unless the motor vehicle service contract provider is insured under a motor vehicle service contract reimbursement insurance policy issued by an insurer authorized to do business in this state, and providing that the insurer will pay on behalf of the provider all sums which the provider is legally obligated to pay and will guarantee the performance of the provider's obligations undertaken according to the provider's contractual obligations under the service contracts issued or sold by the provider.
(b) No policy of insurance may be cancelled, terminated, or nonrenewed by the insurer unless a sixty-day written notice has been given to the motor vehicle service contract provider before the date of the cancellation, termination, or nonrenewal.
(c) No cancellation, termination, or nonrenewal shall affect the liability of the insurer to guarantee the provider's performance under the motor vehicle service contracts issued or sold prior to the effective date of cancellation or termination or nonrenewal.
(d) The insured motor vehicle service contract must conspicuously state:
(1) That the obligations of the provider to the service contract holder are guaranteed under a motor vehicle service contract reimbursement insurance policy;
(2) The name, address, and telephone number of the issuer of the provider's motor vehicle service contract reimbursement insurance policy; and
(3) The procedure for filing a claim under the service contract directly with the motor vehicle service contract reimbursement insurer.
(e) The motor vehicle service contract reimbursement insurer shall establish and maintain unearned premium reserves and claims reserves for the gross policy obligations under the motor vehicle service contract reimbursement insurance policy, net of reinsurance ceded, for which the insurer is entitled to full reserve credit on its financial statements, in accordance with the provisions of this subchapter.