California Resources
Summary
Statutes
CALIFORNIA CODES INSURANCE CODE
For direct link to State Codes 12740 to 12764 CLICK HERE
Note: 12743 is the area of greatest issue, confusion and danger as it invokes by reference, literally hundreds of pages of insurance code, much of which directly conflict with 12743(k), see below. By most rational analysis, HPA covered home warranties are not insurance according to the California Legislature. Otherwise, there would be no need for the HPA at all.
SECTION 12740-12764
12740. The definitions used in this section govern the construction
and terms used in this part but shall not affect any other
provisions of this code:
(a) "Home protection contract" means a contract or agreement
whereby a person, other than a builder, seller, or lessor of the home
which is the subject of the contract, undertakes for a specified
period of time, for a predetermined fee, to repair or replace all or
any part of any component, system or appliance of a home necessitated
by wear and tear, deterioration or inherent defect, arising during
the effective period of the contract, and, in the event of an
inspection conducted pursuant to subdivision (b) of Section 12761, by
the failure of that inspection to detect the likelihood of any such
loss. Such contract shall provide for a system of service for
effectuating such repair or replacement and shall not include
protection against consequential damage from the failure of any
component, system or appliance.
(b) "Home protection company" means any person licensed pursuant
to this part which issues home protection contracts.
(c) "Protection contract fee" means the consideration received, or
to be received, by a home protection company for the issuance of any
home protection contract.
A home protection contract fee shall be the fee established by a
home protection company for coverage extending one year from the
effective date of the contract. Where initial coverage is provided
for a period in excess of one year, the home protection contract fee
shall be the annual fee, plus a separately stated pro rata portion of
the annual fee for the period of coverage which exceeds one year.
(d) "Home" or "residential property" as used in this part means
any single or multiple unit or units, including mobilehomes, (as
defined in Health and Safety Code Section 18211) used primarily for
residential purposes.
12741. This part does not apply to:
(a) Performance guarantees or service contracts given by either
the builder of a home or the manufacturer or seller of an appliance
or other system or component, whether or not an identifiable charge
is made for such guarantee or service contract.
(b) A service contract, guarantee, or warranty intending to
guarantee or warrant the repairs or service of a home appliance,
system or component, provided the service contract, guarantee or
warranty is issued by a person who has sold, serviced, repaired or
provided replacement of the appliance, system or component at the
time of, or prior to issuance of the contract, guarantee or warranty;
and, provided, further, that the person issuing the service
contract, guarantee, or warranty, does not engage in the business of
a home protection company.
(c) The provider of a pest control service agreement pursuant to
Section 8516 of the Business and Professions Code.
(d) A repair or maintenance program for a home electrical system,
or a component of such a wiring system where the program is offered
or issued by a person or affiliate of a person whose business is
regulated by the Public Utilities Commission, provided that the
repair or maintenance program is related to a service provided by the
regulated person or affiliate of the regulated person, and that the
regulated person, or affiliate of the regulated person, or parent
company of the regulated person acts as the guarantor of any repair
or maintenance program created under this subdivision regardless of
whether the service is performed by the regulated person or an
affiliate.
The company offering or issuing the program shall designate the
company that will act as the guarantor of the program.
(e) On or after January 1, 2000, a service contract that is
offered or issued by a person or affiliate of a person whose business
is regulated by the Public Utilities Commission, provided that all
of the following conditions are met:
(1) The regulated person, or affiliate of the regulated person, or
parent company of the regulated person, acts as the guarantor of any
service contract under this subdivision regardless of whether the
service is performed by the regulated person or an affiliate.
(2) The service contract term is for one month or less.
(3) The person issuing or offering the service contract does not
engage in the business of a home protection company.
The company offering or issuing the service contract shall
designate the company that will act as the guarantor of the service
contract.
(f) For purposes of subdivision (e), the person issuing or
offering the service contract is subject to regulation by the Bureau
of Electronic and Appliance Repair of the Department of Consumer
Affairs.
(g) This section shall remain in effect only until January 1,
2004, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2004, deletes or extends
that date.
12741. This part shall not apply to:
(a) Performance guarantees or service contracts given by either
the builder of a home or the manufacturer or seller of an appliance
or other system or component, whether or not an identifiable charge
is made for such guarantee or service contract.
(b) Any service contract, guarantee, or warranty intending to
guarantee or warrant the repairs or service of a home appliance,
system or component, provided such service contract, guarantee, or
warranty is issued by a person who has sold, serviced, repaired or
provided replacement of that appliance, system or component at the
time of, or prior to issuance of the contract, guarantee, or
warranty; and, provided, further, that the person issuing the service
contract, guarantee, or warranty does not engage in the business of
a home protection company.
(c) The provider of any pest control service agreement pursuant to
Section 8516 of the Business and Professions Code.
(d) This section shall become operative January 1, 2004.
12742. Home protection contracts and home protection companies, and
all matters incident to or concerned with such contracts and
companies, shall be exclusively subject to and regulated by the
provisions of this part and, except as provided in Section 12743,
shall not be governed by any other provision of this code.
12743. The following provisions of this code shall be applicable to
home protection contracts and home protection companies:
(a) Sections 1 to 46, inclusive.
(b) Chapter 3 (commencing with Section 330) of Part 1, Division 1.
(c) Chapter 12 (commencing with Section 679.70) of Part 1,
Division 1.
(d) These provisions of Chapter 1, Part 2, Division 1:
(1) Article 1 (commencing with Section 680).
(2) Article 1.5 (commencing with Section 685).
(3) Article 2 (commencing with Section 690).
(4) Section 699, 699.5, 700, 701, 704, 704.5, 704.7, 705, 705.1,
707, 708, 709, 710, 713, 714, 715, 716, 717, 718, 720, and 725 of
Article 3 (commencing with Section 699).
(5) Section 750.
(6) Article 5.5 (commencing with Section 770).
(7) Article 6.5 (commencing with Section 790).
(8) Article 8 (commencing with Section 820).
(9) Article 9 (commencing with Section 880).
(10) Article 11 (commencing with Section 939).
(11) Article 13 (commencing with Section 980).
(12) Article 14 (commencing with Section 1010).
(13) Article 14.5 (commencing with Section 1065.1).
(14) Article 15 (commencing with Section 1070).
(15) Article 16 (commencing with Section 1080).
(16) Article 17 (commencing with Section 1100).
(e) These provisions of Chapter 2, Part 2, Division 1:
(1) Article 1 (commencing with Section 1140).
(2) Article 2 (commencing with Section 1150).
(3) Article 3 (commencing with Section 1170).
(4) Article 4 (commencing with Section 1190).
(5) Article 4.7 (commencing with Section 1215).
(6) Article 7 (commencing with Section 1250).
(7) Article 8 (commencing with Section 1260).
(f) Article 4 (commencing with Section 1610) of Chapter 4 of Part
2 of Division 1.
(g) Article 3 (commencing with Section 1631) of Chapter 5 of Part
2 of Division 1.
(h) Sections 1850, 1850.5, 1852, 1853.5, 1853.7, 1853.8, 1857,
1857.2, 1857.3, 1857.4, 1857.5, 1858, 1858.05, 1858.1, 1858.15,
1858.2, 1858.3, 1858.4, 1858.5, 1858.6, 1858.7, 1859, 1859.1, 1860,
1860.1, 1860.2 of Chapter 9, Part 2, Division 1.
(i) Division 3 (commencing with Section 12900).
(j) In any references in the provisions made applicable to this
part by subdivisions (a) to (i) inclusive of this section:
(1) "Insurer" shall mean home protection company.
(2) "Insured" shall mean a home protection contract holder.
(3) "Premium" shall mean protection contract fee.
(4) "Policy" or "insurance" shall mean home protection contract.
(k) When any provision of this code, other than this part, is
applied to home protection companies, such provision shall be
construed in accordance with the nature of home protection companies
and the home protection business. In the event of any conflict
between such other provision and this part, this part shall prevail.
12744. (a) No person shall issue or offer to issue home protection
contracts in this state unless such person holds a home protection
company license issued by the department, except as provided in
subdivision (b) of this section.
(b) An insurer admitted for the class of insurance defined in
Section 120 is authorized, in addition to the underwriting powers
granted by such class, to issue home protection contracts, but the
provisions of this part shall not be otherwise applicable to such
insurers or their contracts.
(c) No license shall be granted to a foreign applicant that has
not fulfilled the requirements of Sections 716 and 717. For purposes
of this part, the term "class of insurance" as used in said sections
shall mean the business of a home protection company. This section
shall not prohibit the admission of a foreign home protection company
which has actively transacted home protection business in its state
of domicile for three years or more.
(d) The commissioner shall by regulation prescribe forms for
applications for home protection company licenses consistent with the
provisions of this part. Any reference to certificate of authority
in Article 3 (commencing with Section 699) of Chapter 1 of Part 2 of
Division 1, shall mean home protection company license.
12745. (a) Any insurance holding company subject to Article 4.7
(commencing with Section 1215) of Chapter 2 of Part 2 of Division 1,
one of whose affiliates is a home protection company as defined in
this part, may invest in or operate a corporation which provides home
service contractor or dispatch services or appliance service or
appliance repair services pursuant to a contract issued for that
purpose. The corporation shall not be subject to licensing or
regulation under this part except as set forth in this section,
provided, that the contract shall not be sold in conjunction with, or
otherwise attach to, the sale or any proposed sale of the real
property to which it relates.
(b) At the time of filing its registration statement under Section
1215.4, and annually thereafter, each affiliate owning or operating
such a corporation shall file as a supplement thereto, a statement of
the financial condition of the corporation prepared according to
generally accepted accounting principles, and a designated list of
the name and addresses of all agents, employees, and independent
contractors utilized to issue or sell those contracts. Each
statement of financial condition and designated list shall be
certified as correct by an officer of the corporation. The
commissioner may prescribe the form for the statement or list.
12750. (a) A home protection company which has issued or renewed an
aggregate number of 1,000 or less contracts in the preceding
calendar year shall maintain a minimum net worth of forty thousand
dollars ($40,000) and for each additional 500 contracts, or fraction
thereof, up to 10,000 contracts, an additional twenty thousand
dollars ($20,000).
(b) Net worth is defined as the excess of admitted assets over all
liabilities and required reserves. At least twenty thousand dollars
($20,000) of net worth shall consist of paid-in capital.
12751. Any home protection company which has issued and in force,
prior to January 1, 1979, any contracts for home protection exempt
from the provisions of this part pursuant to Section 12741, shall
carry a portion of the fee received for such contracts in the reserve
contemplated by Section 985, as though such fees were premiums
subject to the provisions of that section, and such sums shall be
deemed equivalent to premiums for purposes of that section but shall
not be considered premiums for the purposes of Section 12202 of the
Revenue and Taxation Code.
12752. (a) Each home protection company shall file statements
exhibiting its conditions and affairs in accordance with Sections
900, 900.5, 900.7, 900.8, 900.9, 902, 903, 903.5, 904, 922.1 to
922.8, inclusive, 923, 923.5, and 924. However, the required
contents of the statements may be varied from the requirements
thereof, pursuant to regulation adopted by the commissioner in
accordance with Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of Title 2 of the Government Code, so as to adapt the
requirements to the home protection business.
(b) The commissioner shall, prior to licensure and at other times
as appears necessary, examine the business and affairs of any home
protection company subject to this part. Every home protection
company so examined shall open its books and records for inspection
by the commissioner and shall otherwise facilitate and cooperate in
the examination. In making the examination, the commissioner shall
have the rights specified in Section 733, and the examinee shall be
subject to the obligations of Section 736.
12753. (a) A home protection company shall maintain a reserve for
unearned premiums in an amount not less than 40 percent of the
aggregate premiums charged on its contracts currently in force.
Amounts to be reserved shall be on a 12-month basis. Where the
contract is for a period of more than 12 months, the reserve for
unearned premiums for the period beyond 12 months shall be 100
percent of the pro rata portion of the contract fee attributable to
the period of coverage in excess of 12 months. The unearned premium
reserve for contracts exceeding 12 months shall be reduced to not
less than 40 percent of the pro rata portion of the contract fee
applicable to the next succeeding 12-month period, as of the first
day of the succeeding 12-month period, and each succeeding 12-month
period thereafter during which the contract is in effect.
Where the home protection contract provides coverage during the
selling or listing period of the real property to which the contract
applies, the home protection contract fee applicable to this period
of coverage shall be deemed fully earned upon the close of escrow,
and receipt of payment of the applicable contract fee.
(b) For purposes of this section, such reserve shall not include
protection contract fees on home protection contracts to the extent
provision is made for reinsurance of the outstanding risk on such
contracts.
(c) The commissioner may, by regulation, prescribe the format by
which the reserve shall be reported.
12755. A home protection company shall be deemed insolvent whenever
its net worth is reduced below 50 percent of the amount required by
Section 12750.
12756. A home protection company shall invest only in those assets
defined in Article 3 (commencing with Section 1170) and Article 4
(commencing with Section 1190) of Chapter 2 of Part 2 of Division 1,
except that an amount to be determined by the commissioner by
regulation of its admitted assets may be invested in tangible
personal property held by it for the purpose of repair or replacement
of home components, systems or appliances under its home protection
contracts.
12757. The provisions of Article 14.2 (commencing with Section
1063) of Chapter 1 of Part 2 of Division 1, shall not be applicable
to home protection companies.
12760. No home protection company shall pay a commission to any
person as an inducement or compensation for the issuance, purchase or
acquisition of a home protection contract, nor shall a home
protection company or any other insurer either directly or
indirectly, as a part of any real property transaction in which a
home protection contract will be issued, purchased or acquired,
require that a home protection contract be issued, purchased or
acquired in conjunction with or as a condition precedent to the
issuance, purchase or acquisition, by any person, of any other policy
of insurance. The provisions of this section shall not prohibit
payment of an override commission or marketing fee to an employee or
commission sales agent who is the marketing representative of the
home protection company or its parent, subsidiary, or affiliate on
the sale or marketing of a home protection contract, provided such
person is not a real estate licensee sharing in or entitled to share
in, or affiliated with a real estate brokerage firm which is entitled
to share in the real estate commission generated by the underlying
real property transaction.
12761. (a) The furnishing of a home protection contract without
charge to any person shall constitute a violation of this part. No
home protection contract providing coverage prior to the time an
interest in the home to which it attaches is sold shall be issued or
delivered unless it provides for consideration. Such consideration
may consist of a bona fide promise to pay the protection contract fee
at the time of and only upon transfer of title.
(b) A home protection company may require an onsite inspection as
a prequalification for the issuance of a home protection contract,
and in such event offer a report on the inspection in connection with
a bona fide application for the issuance of such contract even
though the issuance of a contract on the property which is the
subject of the inspection does not occur.
12761.1. (a) A home protection company which was licensed as such
on December 31, 1988, and as of that date was a franchisor of
entities authorized by Section 771.1 to solicit, negotiate, or effect
home protection contracts, or a parent, subsidiary, or affiliate of
such a franchisor, and continues to be such a franchisor or parent,
subsidiary, or affiliate of such a franchisor, may provide coverage
for a listing period.
(b) For the purposes of this section, a "listing period" means a
period prior to the time an interest in the home to which the home
protection coverage attaches is sold, during which there is in effect
an exclusive right to sell listing as that term is defined in
Section 1086 of the Civil Code, between the seller of that home and a
franchisee of that franchisor.
(c) Home protection contracts providing listing period coverage
issued pursuant to this section shall be exempt from the provisions
of both of the following:
(1) Subdivision (c) of Section 12740, which requires a separately
stated pro rata portion of the annual fee for the period of coverage
which exceeds one year.
(2) Subdivision (a) of Section 12753, which requires reserves for
unearned premiums applicable to the listing period coverage provided
under those home protection contracts.
12762. (a) A home protection contract shall specify, in clear and
conspicuous terms, the following information:
(1) Each of the appliances, systems and components covered by the
contract.
(2) All exclusions and limitations respecting the extent of
coverage.
(3) The period during which the contract will remain in effect,
the protection contract fee and the renewal terms, if any.
(4) With respect to the performance of services by the home
protection company, all of the following:
(A) The services to be performed by the company and the terms and
conditions of such performance.
(B) The service fee or fees, if any, to be charged for such
services.
(C) All limitations respecting the performance of services,
including any restrictions as to the time period when or geographical
area within which services may be requested or will be performed.
(D) A statement that services will be performed upon telephonic
request therefor to the company, without any requirement that claim
forms or applications be filed prior to the rendition of service.
(E) A representation that services will be initiated by or under
the direction of the company within 48 hours after request is made
for such services by any person entitled to make such request under
the contract, or the agent of such person.
(b) The commissioner may adopt, pursuant to Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code, such reasonable regulations as may be necessary
to make more specific the provisions of this section. Those
regulations may also establish such other contract form standards and
requirements as the commissioner may deem necessary and appropriate
in the public interest. However, this section does not authorize the
commissioner to specify those appliances, systems, or components
which must be covered by a home protection contract except to the
extent necessary to guarantee the equity of the exclusions from
coverage offered or provided under a contract, or to the extent
necessary to avoid illusory coverage due to the nature or extent of
exclusions from the contract.
12763. No home protection contract shall be issued or delivered
until a copy of the form thereof is filed with the commissioner. The
commissioner may charge a fee for the filing, which fee shall be
established by regulation adopted pursuant to Chapter 3.5 (commencing
with Section 11340) of Part 1 of Division 3 of Title 2 of the
Government Code.
12764. (a) Any home protection contract shall be noncancellable
during the initial term for which it was issued, except for:
(1) Nonpayment of protection contract fees;
(2) Fraud or misrepresentation of facts material to the issuance
of such contract; or
(3) Contracts providing coverage prior to the time that an
interest in the residential property to which it attaches is sold,
upon the contingency that such sale does not occur.
(b) Nothing in this section establishes a right of the contract
holder to renewal of any contract.
