SB 5108
In CommitteeSenate
Service contracts
Regulating service contracts and protection product guarantees.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill strengthens oversight of service contracts and protection product guarantees sold in Washington by requiring providers to register, meet financial responsibility standards, and follow clear disclosure and cancellation rules. It also expands consumer rights to cancel contracts and file claims directly with insurers, and tightens requirements for insurance backing these products.
- Clarifies definitions of key terms like *service contract*, *protection product guarantee*, *administrator*, and *reimbursement insurance policy* to reduce ambiguity and improve enforcement.
- Requires financial responsibility for service contract and protection product guarantee providers through one of three options: (1) a $15M+ surplus insurer or risk retention group, (2) a funded reserve account and trust deposit, or (3) $100M+ net worth (or parent company net worth).
- Mandates registration and oversight of protection product guarantee providers, including background checks on officers, submission of contract forms, proof of financial stability ($200K+ net worth), and appointment of the state insurance commissioner as legal agent.
- Adds consumer protections, including a 30-day (for motor vehicles) or 20-day (for other service contracts) right to cancel and receive a full or pro rata refund, and requires clear disclosure of coverage, exclusions, and claim procedures.
- Strengthens insurance policy requirements, including that reimbursement insurance policies must fully cover provider obligations or pay directly to consumers upon provider default, and must allow consumers to file claims directly with the insurer.
Who is affected
- Consumers — Consumers who buy motor vehicles or other tangible personal property may be offered service contracts or protection product guarantees; this bill adds transparency, refund rights, and stronger oversight to protect them from misleading or unfulfilled promises.
- Service contract and protection product providers/sellers — Companies that sell service contracts or protection product guarantees must now meet stricter financial responsibility standards, register with the state, and follow new disclosure and refund rules.
- Insurers — Insurance companies that underwrite reimbursement insurance policies for service contracts or protection product guarantees must meet new capital requirements and allow direct claims by consumers.
- Motor vehicle manufacturers and importers — Motor vehicle manufacturers and importers who offer service contracts must file contract forms with the state and follow new disclosure and cancellation rules.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (5)
Grants consumers a 30-day unconditional right to cancel motor vehicle service contracts with full refund, protecting against high-pressure sales tactics and uninformed purchases.
Rights & LibertiesPeopleRef: RCW 48.110.050(3) (as amended by Sec. 2)Empowers consumers to file claims directly with insurers upon provider default, eliminating costly and time-consuming legal hurdles when providers fail to perform.
Rights & LibertiesPeopleRef: RCW 48.110.060(3)-(4)Requires protection product guarantee providers to register, undergo background checks, and demonstrate financial stability, reducing fraud risk and improving market integrity for small businesses offering protection products.
Business & EmploymentPeopleRef: RCW 48.110.055(2)-(3)Mandates clear, conspicuous disclosure of coverage, exclusions, and claim procedures, enabling informed purchasing decisions and reducing deceptive marketing of add-on products.
Rights & LibertiesPeopleRef: RCW 48.110.075(2)(b)-(i)Prohibits providers from denying claims based on general vehicle maintenance failures unless the specific failed part was affected, protecting consumers from overly restrictive interpretations of coverage.
Rights & LibertiesPeopleRef: RCW 48.110.075(5)
Potential Concerns (5)
Increases administrative and compliance costs for service contract and protection product providers through mandatory financial responsibility requirements (e.g., $15M+ insurer capital, $100M+ net worth option, reserve accounts, trust deposits), which may reduce profitability or force smaller providers out of the market.
Business & EmploymentRef: RCW 48.110.050(2)(a), (b), (c)Imposes $250 annual registration fees and $200K+ net worth requirement for protection product guarantee providers, creating a barrier to entry for small or new providers and consolidating the market among larger firms.
Business & EmploymentRef: RCW 48.110.055(3)(e)Mandates 30-day unconditional cancellation windows and pro rata refunds after 30 days for motor vehicle service contracts, reducing revenue predictability and increasing administrative burden for providers.
Business & EmploymentRef: RCW 48.110.075(4)(a)-(c)Requires insurers to allow direct consumer claims and pay within 30 days of provider default, increasing operational complexity and potential liability exposure for insurers.
Business & EmploymentRef: RCW 48.110.060(3)-(4)Increases state administrative costs for the Office of the Insurance Commissioner due to expanded registration, contract review, and oversight responsibilities, though no funding source is identified.
Local GovernmentRef: Fiscal Impact Summary
Who Is Most Affected
Consumers benefit significantly: they gain stronger cancellation rights, direct claim access to insurers, and clearer disclosures — reducing financial risk from unfulfilled promises on add-on products.
Larger service contract and protection product providers benefit from reduced competitive pressure from smaller, undercapitalized firms; however, all providers face higher compliance costs and operational changes.
Insurers face new obligations to pay directly to consumers and process claims faster, increasing liability exposure but also expanding their role in consumer protection — potentially increasing premiums or requiring capital adjustments.
Motor vehicle manufacturers and importers benefit from the exemption for their own service contracts (Sec. 1(18)(b)(i)), preserving their current business models while third-party providers face stricter rules.