Bill
SB 5108
SB 5108 standardizes financial-responsibility rules for service contracts and guarantees, expands reimbursement policies, and ensures direct insurer payout if a provider underperfo
Status and Timing
- Bill Number: SB 5108
- Title: Regulating service contracts and protection product guarantees
- Introduced: December 23, 2024
- Current Status: By resolution, returned to Senate Rules Committee for third reading
- House Hearings/Actions: Public hearing 3/14/2025; executive action 3/18/2025; committee majority reports; advanced through Senate in early 2025
- Effective Date: 90 days after adjournment of the session in which enacted
Purpose and Core Intent
- To update and align financial responsibility requirements for providers of service contracts and protection product guarantees, particularly regarding motor vehicles.
- To revise the use and requirements of reimbursement insurance policies that back these obligations.
- To ensure consumers have direct avenues to obtain payment or performance from insurers when a provider underperforms or ceases operations.
Key Provisions and Changes
1) Financial Responsibility Modernization
- Removes separate financial responsibility requirements for:
- Protection product guarantee providers
- Providers of service contracts on motor vehicles
- Makes protection product guarantee providers and motor-vehicle service contract providers subject to the same financial-responsibility options as general service-contract providers.
- Allows using reimbursement insurance policies to insure each individual service contract or protection product guarantee (per-contract or per-guarantee coverage) rather than requiring a single blanket policy or other arrangements.
2) Reimbursement Insurance Policies (RIP)
- Redefines “reimbursement insurance policy” to include policies that reimburse or pay on behalf of the provider all contractual obligations, including in cases of nonperformance or non-fulfillment.
- Providers may hold multiple reimbursement insurance policies concurrently.
- Policy content must state either:
- The insurer will reimburse the provider, or
- In the event of nonperformance or non-fulfillment, the insurer will pay on behalf of the provider all sums the provider is legally obligated to pay or provide the service.
- Policies must either fully insure obligations or insure only in the event of default.
- A new requirement: if a policy only pays on nonperformance, it must state that if a covered service/product is not provided within 30 days of proof of loss, the holder may apply directly to the insurer for payment or performance; if the provider has ceased operation, the holder may apply directly without waiting 30 days.
- Each policy must be filed with the Commissioner if a provider uses multiple RIPs.
3) Compliance Language and Notices
- For motor vehicle service contracts not insured under RIPs, the contract must state: “Obligations of the service contract provider under this contract are backed by the full faith and credit of the service contract provider.”
Who Is Affected
- Providers of service contracts (including motor-vehicle service contracts)
- Providers of protection product guarantees
- Holders/consumers of service contracts and protection product guarantees
- The Washington State Office of the Insurance Commissioner (regulatory oversight)
Procedural/Timeline Aspects
- Effective date set 90 days after adjournment of the session adopting the bill.
- Ongoing committee and floor actions occurred through early 2025, with the latest status indicating referral back to Senate Rules for third reading.
Fiscal Note and Appropriation
- Appropriation: None
- Fiscal Note: Available
Bottom line
SB 5108 modernizes and harmonizes financial-responsibility standards for service-contract and protection-product-guarantee providers, expands the use and clarity of reimbursement insurance policies, and strengthens consumer protections by ensuring direct access to insurer funds in cases of nonperformance or provider dissolution.
Compiled from official sources — confirm details with the bill’s official record.
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