A motor vehicle service agreement is a contract or agreement between the owner/leaser of a motor vehicle and the company providing coverage. It provides coverage for a motor vehicle specified on the service agreement; this includes new or used vehicles. It covers loss due to failure of a mechanical or other component part, or a mechanical or other component part that does not function as it was originally intended. Motor Vehicle Service Agreements are defined in Section 634.011, Florida Statutes.
These contracts usually provide service after the normal warranty expires but some begin at other stated times. These contracts are also referred to as an “extended warranty”. (Please note: service agreements sold to cover company fleet vehicles used for commercial purposes are excluded from this definition and are exempt from regulation under the Florida Insurance Code.)
A motor vehicle service agreement company is a corporation, sole proprietorship, or partnership (other than an authorized insurance company) issuing motor vehicle service agreements. An authorized insurance company may also write this product, if authorized for this line of business. A motor vehicle service agreement company must have a license to sell this product in Florida, pursuant to Section 634.031, Florida Statutes.
Section 634.282(17), Florida Statutes requires, if requested by the consumer, a complete sample copy of the terms and conditions of the service agreement (also referred to as an auto extended warranty) must be provided prior to the time of sale. A service agreement company may comply with this requirement by providing the consumer a sample copy of the terms and conditions of the service agreement or by directing the consumer to a website that displays a complete sample of the terms and conditions of the service agreement.
Per Section 634.095(3)(a), Florida Statutes, the following are prohibited acts:
Any service agreement (also referred to as an auto extended warranty) company or salesperson may not issue or cause to be issued any advertisement which:
(a) Does not fully disclose in boldfaced type the name, address, and license number of the service agreement company.
(b) In any respect is in violation of or does not comply with applicable provisions of the Florida Insurance Code, or applicable rule of the commission. (also, please see the unfair trade practices below)
(c) Is ambiguous, misleading, or deceptive.
(d) Is false, deceptive, or misleading with respect to:
The service agreement company’s affiliation with a motor vehicle manufacturer;
The service agreement company’s possession of information regarding a motor vehicle owner’s current motor vehicle manufacturer’s original equipment warranty;
The expiration of a motor vehicle owner’s current motor vehicle manufacturer’s original equipment warranty; or
Any requirement that the motor vehicle owner register for a new motor vehicle service agreement with the company in order to maintain coverage under the current motor vehicle service agreement or manufacturer’s original equipment warranty.
Also, according to Section 634.282, Florida Statutes, the following two items are considered an Unfair Trade Practice:
Misrepresentation and false advertising: Knowingly making, issuing, circulating, or causing to be made, issued, or circulated, any estimate, illustration, circular, statement, sales presentation, omission, or comparison which:
(a) Misrepresents the benefits, advantages, conditions, or terms of any motor vehicle service agreement.
(b) Is misleading or is a misrepresentation as to the financial condition of any person.
(c) Uses any name or title of any contract misrepresenting the true nature thereof.
(d) Is a misrepresentation for the purpose of inducing, or tending to induce, the lapse, forfeiture, exchange, conversion, or surrender of any motor vehicle service agreement.
(e) Uses any advertisement that would mislead or otherwise cause a reasonable person to believe mistakenly that the state or federal government is responsible for the motor vehicle service agreement sales activity of any person or stands behind any person's credit or that any person, the state, or the federal government guarantees any returns on motor vehicle service agreements or is a source of payment of any motor vehicle service agreement obligation of or sold by any person.
False information and advertising generally: Knowingly making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public:
(a) In a newspaper, magazine, or other publication;
(b) In the form of a notice, circular, pamphlet, letter, or poster;
(c) Over any radio or television station; or
(d) Over the Internet, electronically, or in any other way, an advertisement, announcement, or statement containing any assertion, representation, or statement with respect to the business of motor vehicle service agreements, which assertion, representation, or statement is untrue, deceptive, or misleading.
Per Section 634.121, Florida Statutes, all motor vehicle service agreements (also known as an auto extended warranty) are assignable and must contain a statement in conspicuous, boldfaced type, informing the purchaser of their right to assign it to a subsequent retail purchaser of the motor vehicle covered by the service agreement. The assignment must occur within a period of time specified in the agreement, which period may not expire earlier than 15 days after the date of the sale or transfer of the motor vehicle. The service agreement company may charge an assignment fee not to exceed $40.
Section 634.121, Florida Statutes, also requires the following disclosures:
Restrictions or limitations on the benefits: Each service agreement (also known as an auto extended warranty) form must contain in conspicuous, boldfaced type any statement or clause that places restrictions or limitations on the benefits offered or disclose such restrictions or limitations in regular type in a section of the service agreement containing a conspicuous, boldfaced type heading.
The use of remanufactured or used replacement parts: If an insurer or service agreement company intends to use or require the use of remanufactured or used replacement parts, each service agreement form as well as all service agreement brochures must contain in conspicuous, boldfaced type a statement to that effect.
Company identification required: Each service agreement form as well as all service agreement company sales brochures must clearly identify the name, address, and Florida license number of the licensed insurer or service agreement company.
Rental car provision: If a service agreement contains a rental car provision, it must disclose the terms and conditions of this benefit in conspicuous, boldfaced type or disclose such restrictions or limitations in regular type in a section of the service agreement containing a conspicuous, boldfaced type heading.
Since July 1, 2011, each service agreement sold in this state must be accompanied by a written disclosure to the consumer advising the rate charged for the service agreement is not subject to regulation by the Office of Insurance Regulation. A service agreement company may comply with this requirement by including such disclosure in its service agreement form or in a separate written notice provided to the consumer at the time of sale.
Section 634.031, Florida Statutes, states a service agreement (also known as an auto extended warranty) company cannot transact, administer, or market, service agreements in this state or from this state unless it is authorized to do so under a subsisting license issued to it by the Office of Insurance Regulation.
A service agreement company cannot, from offices or by personnel or facilities in this state, solicit applications or otherwise transact service agreement sales in another state or country unless it holds a subsisting license issued to it by the Office of Insurance Regulation authorizing it to transact the same kind or kinds of service agreement business in this state.
An authorized insurance company may also write service agreements, if authorized for this line of business.
The cancellation requirements are located in Section 634.121, Florida Statutes. They provide the following:
Cancellation during the first 60 days: Any service agreement (also known as an auto extended warranty) is cancelable by the purchaser within 60 days after purchase. The refund must be 100 percent of the gross premium paid, less any claims paid on the agreement. A reasonable administrative fee may be charged not to exceed 5 percent of the gross premium paid by the agreement holder.
If the service agreement is canceled by the insurer or service agreement company, the return of premium must not be less than 100 percent of the paid unearned pro rata premium, less any claims paid on the agreement.
Cancellation after first 60 days: After the service agreement has been in effect for 60 days, it may not be canceled by the insurer or service agreement company unless:
There has been a material misrepresentation or fraud at the time of sale of the service agreement;
The agreement holder has failed to maintain the motor vehicle as prescribed by the manufacturer;
The odometer has been tampered with or disabled and the agreement holder has failed to repair the odometer; or
For nonpayment of premium by the agreement holder, in which case the service agreement company shall provide the agreement holder notice of cancellation by certified mail.
If, after 60 days, the service agreement is canceled by the service agreement holder, the insurer or service agreement company shall return directly to the agreement holder not less than 90 percent of the unearned pro rata premium, less any claims paid on the agreement. The service agreement company remains responsible for full refunds to the consumer on canceled service agreements. However, the salesperson and agent are responsible for the refund of the unearned pro rata commission. A service agreement company may effectuate refunds through the issuing salesperson or agent.
According to Section 634.282, Florida Statutes, the following are considered an Unfair Claim Settlement Practice:
Attempting to settle claims on the basis of an application or any other material document that was altered without notice to, or knowledge or consent of, the service agreement (also known as an auto extended warranty) holder;
Making a material misrepresentation to the contract holder for the purpose and with the intent of effecting settlement of a claim on less favorable terms than those provided in the contract; or
Committing or performing with such frequency as to indicate a general business practice any of the following practices:
Failure to adopt and implement internal standards for the investigation of claims;
Misrepresentation of pertinent facts or contract provisions relating to coverages at issue;
Failure to acknowledge and act promptly upon communications with respect to claims;
Denial of claims without conducting reasonable investigations based upon available information;
Failure to affirm or deny full or partial coverage of claims and, as to partial coverage, the dollar amount or extent of coverage, or failure to provide a written statement that the claim is being investigated, upon written request of the contract holder within 30 days after proof-of-loss statements have been completed;
Failure to promptly provide a reasonable explanation to the contract holder of the basis in the contract in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement;
Failure to promptly notify the contract holder of any additional information necessary for the processing of a claim; or
Failure to clearly explain the nature of the requested information and the reasons such information is necessary.
Extended warranties can be a great way to provide continuing protection when purchasing valuable assets such as a home, an automobile, or even electronics.
If you are interested in purchasing a warranty, the Department of Financial Services recommends you follow these tips to make sure you get the coverage and benefits you want:
Be sure you know the complete name of the warranty company providing your coverage. It may be listed as “underwritten by” or "Obligor" somewhere in the material provided at the time of solicitation or purchase.
Verify the warranty company is licensed in Florida to sell the product you are considering. You can use this link to review company information to include their authorized lines of business.
Research complaints involving the warranty company through the Division of Consumer Services at www.MyFloridaCFO.com or by calling 850-413-3089 or 877-693-5236, the Better Business Bureau, the Internet, and your auto repairman.
Read the warranty material provided and be sure you understand the coverage, including deductibles, service charges and the length of the coverage period, before you purchase.
Find out what repairs are covered, and for how long, by the original manufacturer’s warranty before you purchase an extended warranty.
Be sure you understand the exclusions, what is not covered or is limited by the warranty. For example, some automotive warranties have “mileage limitations” and cover the vehicle only up to a specified number of miles. Some auto warranties require the auto to be serviced at certain intervals. You must understand your maintenance responsibilities as well.
Be sure you understand your responsibilities in the event of a claim.
Keep all documents related to your warranty (receipts etc.) together in one location. This documentation may be needed when you submit a claim.
Don’t rush into a purchase.
If you purchase a warranty and the warranty company is ordered into receivership, your warranty and any pending claims are not guaranteed will not be covered by any Florida guaranty association.
Should you need additional information, you may speak with an insurance specialist between the hours of 8am–5:00pm at one of the telephone numbers listed below:
Out of State Callers: (850) 413-3089