(a) A provider may, but shall not be required to, appoint an administrator or other designee to be responsible for any or all of the administration of service contracts and compliance with this chapter.
(b) Service contracts shall not be issued, sold, or offered for sale unless the provider has:
(1) Provided a receipt for, or other written evidence of, the purchase of the service contract to the contract holder; and
(2) Provided a copy of the service contract to the service contract holder within a reasonable period of time from the date of purchase.
(c)(1) A provider shall provide a consumer with a complete sample copy of the service contract terms and conditions before the time of sale upon a request by the consumer.
(2) A provider shall be in compliance with this subsection by providing the consumer with a complete sample copy of the terms and conditions or by directing the consumer to a website containing a complete sample of the terms and conditions of the service contract.
(d)(1) Each provider of a service contract sold in the District shall:
(A) File a registration with the Commissioner that includes the provider's name, full corporate address, telephone number, and contact person; and
(B) Designate a person in the District for service of process.
(2) A provider shall pay to the Commissioner a fee in the amount of $200 upon initial registration and every year thereafter.
(3) A provider shall update its registration by written notification to the Commissioner when material changes occur in the registration on file.
(e) To assure the faithful performance of a provider's obligations to its contract holders, each provider shall be responsible for complying with the requirements of one of the following 3 paragraphs:
(1) Insure all service contracts under a reimbursement insurance policy issued by an insurer licensed, registered, or otherwise authorized to do business in the District, and:
(A) At the time the policy is filed with the Commissioner, and continuously thereafter:
(i) Maintain surplus as to policyholders and paid-in capital of at least $15 million; and
(ii) Annually file copies of the insurer's financial statements, its National Association of Insurance Commissioners ("NAIC") annual statement, and the actuarial certification required by and filed in the insurer's state of domicile; or
(B) At the time the policy is filed with the Commissioner, and continuously thereafter:
(i) Maintain surplus as to policyholders and paid-in capital of less than $15 million but at least $10 million;
(ii) Demonstrate to the satisfaction of the Commissioner that the company maintains a ratio of net written premiums, wherever written, to surplus as to policyholders and paid-in capital of not greater than 3 to 1; and
(iii) Annually file copies of the insurer's audited financial statements, its NAIC annual statement, and the actuarial certification required by and filed in the insurer's state of domicile;
(2)(A) Maintain a funded reserve account for its obligations under its contracts issued and outstanding in the District; provided, that reserves shall not be less than 40% of gross consideration received, less claims paid, on the sale of the service contract for all in-force contracts; provided further, that such funded reserve account shall be subject to examination and review by the Commissioner; and
(B) Place in trust with the Commissioner a financial security deposit, having a value of not less than 5% of the gross consideration received, less claims paid, on the sale of the service contract for all service contracts issued and in force, but not less than $25,000, consisting of one of the following:
(i) A surety bond issued by an authorized surety;
(ii) Securities of the type eligible for deposit by authorized insurers in the District;
(iv) A letter of credit issued by a qualified financial institution; or
(v) Another form of security prescribed by regulation issued by the Mayor or Commissioner; or
(3)(A) Maintain, or together with its parent company maintain, a net worth or stockholders' equity of $100 million; and
(B)(i) Upon request, provide the Commissioner with a copy of the provider's, or the provider's parent company's, most recent Form 10-K or Form 20-F filed with the Securities and Exchange Commission ("SEC") within the last calendar year, or, if the company does not file with the SEC, a copy of the company's audited financial statement that shows a net worth of the provider or its parent company of at least $100 million.
(ii) If the provider's parent company's Form 10-K, Form 20-F, or audited financial statement is filed to meet the provider's financial stability requirement, then the parent company shall agree to guarantee the obligations of the provider relating to service contracts sold by the provider in the District.
(f) Except for the requirements specified in subsections (d) and (e) of this section, no other financial security requirements shall be required by the Commissioner for service contract providers.
(g)(1)(A) Service contracts shall require the provider to permit the service contract holder to return the service contract within 30 days of the date the service contract was mailed to the service contract holder, or the date of delivery if the service contract is delivered to the service contract holder at the time of sale, or within a longer time period permitted under the service contract.
(B) Upon return of the service contract to the provider within the applicable time period, if no claim has been made under the service contract prior to its return to the provider, the service contract shall be void and the provider shall refund to the service contract holder, or credit the account of the service contract holder, with the full purchase price of the service contract.
(C) The right to void the service contract provided by this subsection shall not be transferable and shall apply only to the original service contract purchaser and only if no claim has been made prior to its return to the provider.
(D) A 10% penalty per month shall be added to a refund that is not paid or credited within 45 days after return of the service contract to the provider.
(2)(A) Subsequent to the time period specified in paragraph (1) of this subsection or if a claim has been made under the service contract within that time period, a service contract holder may cancel the service contract and the provider shall refund to the contract holder 100% of the unearned pro rata provider fee, less any claims paid and administrative fee charged, as authorized by subparagraph (B) of this paragraph.
(B) A reasonable administrative fee may be charged by the provider not to exceed 10% of the gross provider fee paid by the service contract holder.
(h)(1) Provider fees collected on service contracts shall not be subject to premium taxes.
(2) Premiums for reimbursement insurance policies shall be subject to applicable taxes.
(i) Except for the registration requirements in subsection (d)(1) of this section, providers and related service contract sellers, administrators, and other persons marketing, selling, or offering to sell service contracts shall be exempt from any licensing requirements of the District.