Basics of Service Contracts
What is a service contract?
In New York, a service contract is a contract or agreement, for a separate or additional consideration and for a specific duration, to perform the repair, replacement or maintenance of any kind of property, or indemnification for the repair, replacement or maintenance of property, due to a defect in materials or workmanship or wear and tear. Although a service contract may cover any kind of property, some of the most common kinds of property covered by service contracts include motor vehicles, personal electronics, computers, home appliances and certain residential plumbing, heating, cooling, ventilation, and electrical system components. A service contract may also include coverage for damage to the property that results from power surges and accidental damage from handling.
In addition, a service contract may provide for the following:
- repair or replacement of a motor vehicle tire or wheel as a result of damage due to a road hazard, when the contract is made by or for the manufacturer or seller of the tire (“road hazard service contracts”);
- repair of chips or cracks in a motor vehicle windshield (“windshield repair service contracts”), when the contract is made by or for the supplier or seller of such service, but may not provide for the replacement of the windshield;
- repair or removal of dents, dings or creases from a motor vehicle without affecting the existing paint finish using paintless dent repair techniques (“paintless dent repair service contracts”), when the contract is made by or for the supplier or seller of such service, but may not include services that involve the replacement of vehicle body panels, or sanding, bonding, or painting.
A motor vehicle service contract, road hazard service contract, windshield repair service contract or paintless dent repair service contract, may also provide coverage for towing, rental and emergency road service.
Warranties and Maintenance Agreements
Warranties covering defects in materials or workmanship made by manufacturers, sellers, or distributors of the product that is covered are very similar to service contracts but generally do not constitute either service contracts or insurance contracts. For a fuller discussion as to the differences between warranties and service contracts, select this link.
Maintenance agreements are agreements in which one party agrees to actively perform regularly scheduled maintenance of property for a limited duration. Maintenance agreements are not subject to oversight by the Superintendent.
Service Contract Providers
A service contract provider (“provider”) is any person or entity who sells or administers a service contract, and who is contractually obligated to provide service under the service contract. A provider must first register with and obtain approval from the Superintendent of Financial Services (“Superintendent”) prior to selling any service contracts in New York. The applicant must provide acceptable proof of its financial responsibility to meet its service contract obligations as required under the Insurance Law.
A service contract issued by a registered provider is not an insurance contract in New York. The Insurance Law exempts the making of a service contract by a registered provider from the doing of an insurance business.
To see the current list of Registered Providers, select this link.
Provider Fees for Windshield Repair and Paintless Dent Repair Service Contracts
Effective August 17, 2012, a provider who sells windshield repair service contracts or paintless dent repair service contracts is required to file the amount of the provider fee (the total amount of money and other consideration charged to the consumer for the service contract) for these contracts with the Superintendent at least 30 days prior to the effective date of the initial fee, or at least 30 days before the effective date of a change in the provider fee. The provider fee charged to a consumer for a windshield repair service contract or a paintless dent repair service contract may not exceed the amount filed with the Superintendent. Providers are not required to file their provider fees with the Superintendent for any other type of service contract.
The amounts of the provider fees that have been filed with the Superintendent are available on the Department of Financial Services website. To see these provider fees, select this link.
If you have a complaint about a registered service contract provider, or a person who is selling or administering a service contract that you believe should be registered with the Superintendent, select this link.