Ohio

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Summary

Home service contracts are exempt from the insurance code in Ohio. Regulation defaults to the general consumer protection under the Attorney General. Since 1987, the Ohio Department of Insurance had enforced Chapter 3957, the so called Ohio, “Home Warranty Act.” The law regulated home service contracts under the insurance code including the insurance holding company act. In early 2003, the Department willingly accepted an overture by NHSCA members to repeal the law. On May 7, 2004 House Bill 243 was signed into law repealing the “Home Warranty Act” and replacing it with NHSCA model language exempting home service contracts. It became effective on August 7, 2004. In transition, providers formerly licensed under Chapter 3957, should file their 1st and 2nd quarter reports with the Department of Insurance. The relevant sections of HB 243 are set forth below. An issue arose in discussion over HB 243 whether already, or as a result of 243, the Ohio Consumer Sales Practices Act, Chapter 1345, may be applicable to home service contract companies. Informal, but non binding, assurances were provided through the Ohio Attorney General’s Office that such an interpretation would not be on any priority list. However, the issue remains of some limited concern. NHSCA overtures to have a specific exemption for home service contracts placed into 1345 would have been potentially disruptive to passage of HB 243 and were not pursued in 2004. A copy of the definition portions of 1345 are set forth below

Statutes

125th General Assembly (Substitute House Bill 243)

AN ACT

To amend sections 3901.043, 3901.51, 3905.24, and 3915.073, to enact section 3905.422, and to repeal sections 3957.01, 3957.02, 3957.03, 3957.04, 3957.05, 3957.06, 3957.07, 3957.08, 3957.09, 3957.10, 3957.11, 3957.12, 3957.13, 3957.14, 3957.15, 3957.16, 3957.17, 3957.18, 3957.19, and 3957.99 of the Revised Code to regulate the sale of home service contracts as consumer transactions rather than as the sale of insurance.

Be it enacted by the General Assembly of the State of Ohio:

SECTION 1. That sections 3901.043, 3901.51, 3905.24, and 3915.073 be amended and section 3905.422 of the Revised Code be enacted to read as follows:

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Sec. 3905.422. (A) As used in this section:

(1) "Home service contract" means a contract, however described or denominated by the issuer of the contract, whereby, for a predetermined fee, a person undertakes to repair or replace all or any part of any structural component, appliance, or system of a home necessitated by wear and tear, deterioration, or inherent defect that occurs on or after the effective date of the home service contract.

(2) "Appliance" includes a stove, refrigerator, dishwasher, and any similar piece of equipment.

(3) "Structural component" includes the roof, foundation, basement, walls, ceiling, and similar components of a home.

(4) "System" includes the heating, cooling, plumbing, electrical system, and similar systems of a home.

(B) A home service contract is not insurance and its sale or issuance is not governed by the laws of this state relating to insurance, except a home service contract issued by a licensed property and casualty insurance company as an insurance policy shall be governed by the laws of this state relating to insurance.

(C) The sale or other issuance of a home service contract constitutes a consumer transaction for purposes of Chapter 1345. of the Revised Code. A person who purchases or is entitled to the benefits of a home service contract is a consumer as defined in division (D) of section 1345.01 of the Revised Code.

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SECTION 2. That existing sections 3901.043, 3901.51, 3905.24, and 3915.073 and sections Sec. 3957.01. ,Sec. 3957.02. ,Sec. 3957.03. ,Sec. 3957.04. ,Sec. 3957.05. ,Sec. 3957.06. ,Sec. 3957.07. ,Sec. 3957.08. ,Sec. 3957.09. ,Sec. 3957.10. ,Sec. 3957.11. ,Sec. 3957.12. ,Sec. 3957.13. ,Sec. 3957.14. ,Sec. 3957.15. ,Sec. 3957.16. ,Sec. 3957.17. ,Sec. 3957.18. ,Sec. 3957.19. , and Sec. 3957.99. of the Revised Code are hereby repealed.

SECTION 3. No home warranty company established and operating in this state on the effective date of this act pursuant to a certificate of authority issued by the Superintendent of Insurance under Chapter 3957. of the Revised Code shall sell, offer to sell, or solicit offers for, home service contracts on or after the effective date of this act as contracts regulated by Chapter 3957. of the Revised Code.

All home service contracts issued pursuant to Chapter 3957. of the Revised Code and outstanding on the effective date of this act shall be consummated. The interpretation and fulfillment of the terms and conditions of these outstanding contracts, and of any home service contract sold or issued by a home warranty company on or after the effective date of this act, is subject to Chapter 1345. of the Revised Code on and after the act's effective date, rather than to Ohio's Insurance Law.

A home warranty company with outstanding home service contracts in this state on the effective date of this act shall maintain a single reserve sufficient to provide for its liability to furnish repair and replacement services under those contracts. The amount of this reserve shall be calculated according to sound actuarial principles.

The repeal of Chapter 3957. of the Revised Code pursuant to this act does not: (1) invalidate any home service contract issued by a home warranty company prior to the effective date of this act; (2) discharge any liability based on the acts or conduct of a home warranty company or its agents or employees prior to the effective date of this act; (3) discharge or otherwise affect any other liability incurred by a home warranty company prior to the effective date of this act; or (4) affect a home warranty company's conduct of business in accordance with other provisions of state and federal law.

The repeal of Chapter 3957. of the Revised Code pursuant to this act does not affect the authority of licensed property and casualty insurers to issue home service contracts in accordance with the Ohio Insurance Law.

SECTION 4. Section 3901.043 of the Revised Code is presented in this act as a composite of the section as amended by both Sub. H.B. 370 and Am. Sub. S.B. 67 of the 122nd General Assembly. The General Assembly, applying the principle stated in division (B) of section 1.52 of the Revised Code that amendments are to be harmonized if reasonably capable of simultaneous operation, finds that the composite is the resulting version of the section in effect prior to the effective date of the section as presented in this act.

SECTION 5. Section 3905.492 (3905.24) of the Revised Code is presented in this act as a composite of the section as amended and renumbered by Sub. S.B. 129 and amended by Am. Sub. S.B. 138, both of the 124th General Assembly. The General Assembly, applying the principle stated in division (B) of section 1.52 of the Revised Code that amendments are to be harmonized if reasonably capable of simultaneous operation, finds that the composite is the resulting version of the section in effect prior to the effective date of the section as presented in this act.

CHAPTER 1345

CONSUMER SALES PRACTICES

1345.01. Definitions.

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§ 1345.21. Definitions.

As used in sections 1345.21 to 1345.28 of the Revised Code:

(A) "Home solicitation sale" means a sale of consumer goods or services in which the seller or a person acting for the seller engages in a personal solicitation of the sale at a residence of the buyer, including solicitations in response to or following an invitation by the buyer, and the buyer's agreement or offer to purchase is there given to the seller or a person acting for the seller, or in which the buyer's agreement or offer to purchase is made at a place other than the seller's place of business. It does not include a transaction or transactions in which:

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(E) "Consumer goods or services" means goods or services purchased, leased, or rented primarily for personal, family, or household purposes, including courses or instruction or training regardless of the purpose for which they are taken.