Faithful Performance of a Motor Vehicle Extended Service Contract Provider’s Obligations

PURPOSE: The purpose of this rule is to effectuate the provisions of sections 385.200 to 385.220, RSMo, regarding assuring the faithful performance of a provider’s obligations to its contract holders. (1) Each provider who is contractually obligated to the service contract holder under the terms of a motor vehicle extended service contract is responsible for maintaining proof of its assurance of faithful performance and its continuing compliance with the requirements of section 385.202, RSMo, with the director. (2) The following applies to reimbursement insurance policies used to assure the faithful performance of a provider’s obligations to its contract holders as set forth in section 385.202.3(1), RSMo: (A) Any such policy is acceptable only if it is issued by an insurance company authorized to transact insurance in this state. As used in this paragraph, the term “insurance company authorized to transact insurance in this state” means either an insurance company with a valid certificate of authority from the director to transact liability insurance or a financially responsible risk retention group (RRG) meeting the following requirements: 1. Such RRG is registered in good standing with the director pursuant to sections 375.1080–375.1105, RSMo; 2. Such RRG is not in a hazardous financial condition; and 3. Such RRG is authorized to transact liability insurance in this state. (B) Any such policy is acceptable only if it assures the satisfaction of all obligations and liabilities of the provider under the terms of motor vehicle extended service contracts issued while the reimbursement insurance policy is in effect in the event of nonperformance by the provider. No policy with any provision imposing a deductible or retention payable by the policyholder or any claimant under the policy will satisfy this requirement. (C) Any such policy is acceptable only if it contains a provision requiring the insurer issuing such policy to provide the director with at least sixty (60) days prior notice of insurer’s termination of such policy by delivering notice to the director. (3) The following applies to each funded reserve account as set forth in section 385.202.3(2)(a), RSMo. Such account may be used to establish compliance with section 385.202.3(2)(a), RSMo, only if such account satisfies the following requirements: (A) Such account is maintained in cash or cash equivalent assets of a value sufficient to meet the reserve requirements of section 385.202.3(2)(a), RSMo; (B) Such account is maintained exclusively for the satisfaction of the provider’s obligations to contract holders under Missouri motor vehicle extended service contracts; (C) Such account is maintained at a qualified financial institution which is insured by the Federal Deposit Insurance Corporation; and (D) Such account is maintained at a level and in a manner which is consistent with the requirements of this rule and the laws of this state. (4) The following applies to financial security deposits placed in trust with the director as set forth in section 385.202.3(2)(b), RSMo. Such deposit may be used to establish compliance with section 385.202.3(2)(b), RSMo, only if the deposit satisfies the following requirements: (A) The value of such deposit is at least that amount established under section 385.202.3(2)(b), RSMo; and (B) To the extent that such deposit consists of— 1. A surety bond issued by an authorized surety, as provided in section 385.202.3(2)(b)a, RSMo, the bond will be acceptable only if the bond is completed on the Bond of Motor Vehicle Service Contract Provider Form (Form SC-1), provided by the director; 2. Cash or securities as permitted by section 385.202.3(2) (b)b or c, RSMo, such cash or securities will be acceptable only if the deposit is made with the same depository and upon the same terms and conditions as the capital deposits of insurance companies domiciled in this state, except that the amount of the deposit will be determined by the provisions of section 385.202.3(2)(b), RSMo; 3. A letter of credit, as provided in section 385.202.3(2)(b)d, RSMo, such letter of credit will be acceptable only if it complies with the following requirements: A. The letter of credit is clean, irrevocable, and unconditional; B. The beneficiary is the director and his or her successors in office; AND INSURANCE C. The letter of credit is issued by a qualified financial institution; D. The letter of credit contains a statement to the effect that the obligation of the qualified United States financial institution under the letter of credit is in no way contingent upon reimbursement with respect thereto; and E. The letter of credit includes an issue date and expiration date. The term of the letter of credit will be at least one (1) year and will be subject to an “evergreen clause” that prevents the expiration of the letter of credit without due notice from the provider of no less than thirty (30) days’ to the director. (5) The following applies to each provider maintaining a net worth of one hundred (100) million dollars and establishing such net worth through the guaranty of the provider’s parent company, as set forth in section 385.202.3(2)(b), RSMo. To be accepted as proof that the provider has assured faithful performance of the provider’s obligations to its contract holders, the guarantee will be filed with the director in a writing that substantially conforms to the Guaranty of Motor Vehicle Service Contract Obligations Form (Form SC-2), provided by the director. AUTHORITY: section 385.218, RSMo 2016.* Original rule filed June 26, 2006, effective Dec. 30, 2006. Amended: Filed Jan. 29, 2008, effective Sept. 30, 2008. Amended: Filed Jan. 8, 2019, effective July 30, 2019. *Original authority: 385.218, RSMo 2007.