806 KAR 5:050. Motor vehicle warranties.
RELATES TO: KRS 304.5-070
STATUTORY AUTHORITY: KRS Chapter 13A, 304.2-110, 304.5-070
NECESSITY, FUNCTION, AND CONFORMITY: KRS 304.2-110 authorizes the Executive Director of Insurance to adopt administrative regulations necessary for or as an aid to the effectuation of any provision of the Kentucky Insurance Code. KRS 304.5-070(1)(p) authorizes the Executive Director of Insurance to adopt administrative regulations to interpret the provisions of KRS 304.5-070(1)(p). This administrative regulation interprets the 1986 amendment to KRS 304.5-070(1)(p) (1986 Ky. Acts ch. 146). Under 1994 Ky. Acts ch. 375, sec. 1(1)(p), a warranty service company can be a maker of auto guaranties through a motor vehicle dealer.
Section 1. Definitions. (1) "Authorized insurer" means an insurer holding a certificate of authority from the Commonwealth of Kentucky to transact motor vehicle insurance or insurance to indemnify motor vehicle dealers for the cost of repairs under motor vehicle warranties.
(2) "Motor vehicle dealer" means a motor vehicle dealer licensed pursuant to KRS Chapter 190.
(3) "Motor vehicle warranty" means a contract covering only defects in material and workmanship in exchange for a separately stated charge where it is merely incidental to the business of selling or leasing motor vehicles.
(4) "Person" has the meaning set forth in KRS 304.1-020.
(5) "Warranty service company" means a company which issues motor vehicle warranties through a motor vehicle dealer and has an insurance policy with an authorized insurer to assure performance of warranties.
Section 2. Only the following may issue motor vehicle warranties covering Kentucky risks:
(1) Authorized insurers; or
(2) Motor vehicle dealers who meet the conditions of KRS 304.5-070(1)(p) and this administrative regulation; or
(3) Warranty service companies:
(a) Which issue motor vehicle warranties through a motor vehicle dealer, in which the motor vehicle dealer is the seller but not the obligor under the contract; and
(b) Which meet the conditions of KRS 304.5-070(1)(p) and this administrative regulation.
Section 3. Motor vehicle dealers are permitted to sell motor vehicle warranties only if the sale of the motor vehicle warranty is merely incidental to the sale or lease of motor vehicles.
(1) A motor vehicle dealer shall not solicit or sell motor vehicle warranties as to motor vehicles not sold or leased by the motor vehicle dealer.
(2) A person may not solicit the general public for the sale of motor vehicles warranties.
Section 4. Motor vehicle dealers are permitted to sell motor vehicle warranties if the obligor of the contract obtains from an authorized insurer an insurance policy which meets the requirements of KRS 304.5-070(1)(p) for such period of time as such coverage is maintained in full force and effect.
(1) Motor vehicle dealers which market motor vehicle warranties, where the obligor under the contract has obtained and maintained an appropriate insurance policy from an authorized insurer and has complied with all other requirements of KRS 304.5-070(1)(p) and this administrative regulation, are deemed to have received a permit to sell motor vehicle warranties.
(2) Motor vehicle dealers selling motor vehicle warranties, where the obligor of the contract has not obtained and continuously maintained an appropriate insurance policy from an authorized insurer and are not in compliance with the other provisions of KRS 304.5-070(1)(p) and this administrative regulation, are deemed to have been denied a permit to sell motor vehicle warranties.
Section 5. Nothing in this administrative regulation shall affect warranties provided by motor vehicle manufacturers.
Section 6. Incidental Benefits Arising from Defects in Material or Workmanship. Motor vehicle warranties may provide incidental benefits arising from defects in material or workmanship, such as reimbursement for the cost of towing and substitute transportation. (13 Ky.R. 2170; Am. 14 Ky.R. 212; eff. 8-5-87; 21 Ky.R. 795; eff. 10-10-94; TAm eff. 8-9-2007.)