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2019 SESSION
19102368DBe it enacted by the General Assembly of Virginia:
1. That § 59.1-437 of the Code of Virginia is amended and reenacted as follows:
§ 59.1-437. Third party obligors; proof of financial stability.
A. Every extended service
contract obligor, before it is registered, shall file and maintain with the
Commissioner, in form and substance satisfactory to him, a bond with corporate
surety, from a company authorized to transact business in the Commonwealth or a
letter of credit from a bank insured by the Federal Deposit Insurance
Corporation, in the amount of $10,000. Additional bond or letter of credit
amounts shall be similarly filed with the Commissioner and shall be adjusted
from time to time, in accordance with the following schedule:
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The total amount of unexpired
extended service contracts shall be the total consideration paid by all
purchasers to the extended service obligor for all extended service contracts currently
in effect.
B. The bond or letter of
credit required by subsection A of this section shall be in favor of the
Commonwealth for the benefit of purchasers of extended service contracts for
consumer products in the event that the extended service contract obligor does
not fulfill its obligations under such contracts for any reason, including
insolvency or bankruptcy.
C. The aggregate liability of
the bond or letter of credit to all persons for all breaches of the conditions
of the bond or letter of credit shall in no event exceed the amount of the bond
or letter of credit. The bond or letter of credit shall not be cancelled or
terminated except with the consent of the Commissioner.
D. In
order to ensure the faithful performance of a third party obligor's obligations
to its contract holders, each third party obligor shall furnish proof of its
financial stability by complying with either of the following:
1. The third party obligor shall show that it has a net worth of at least $100 million by providing the Commissioner with a copy of the third party obligor's most recent annual audited financial statement; or
2. The third party obligor shall show a net worth of the third party obligor or its parent company of at least $100 million by providing the Commissioner with a copy of the third party obligor's, or if the third party obligor's financial statements are consolidated with those of its parent company, the third party obligor's parent company's, most recent Form 10-K or Form 20-F filed with the Securities and Exchange Commission, provided the Form 10-K or Form 20-F was filed with the Securities and Exchange Commission within the last calendar year. If the third party obligor's parent company's Form 10-K or Form 20-F is filed to meet the third party obligor's financial stability requirement, then the parent company shall agree to guarantee the obligations of the third party obligor relating to service contracts sold by the third party obligor in this Commonwealth.
E. B. In
lieu of compliance with subsection D A, a
third party obligor may demonstrate financial responsibility by filing with the
Commissioner a copy of a liability insurance policy issued by an insurer
authorized to transact business in this Commonwealth and which covers 100
percent of the obligor's service contract liabilities, including the
administration of claims and the cost for such administration. Reimbursement
insurance policies filed pursuant to this section may not be cancelled by
either the third party obligor or the issuing insurer without providing 60
days' notice to the Commissioner.