Legislation has been signed into law in New Jersey (Senate Bill 854) regulating service contracts as service contracts, not as insurance. The legislation takes effect July 16, 2014. While regulations applicable to service contracts vary in each state, often times service contracts are governed as insurance. The newly-adopted New Jersey framework creates regulatory hurdles to compliance for service contract issuers who sometimes struggle to comply with insurance laws that do not squarely fit the product being offered.
New Jersey is the most recent state to adopt a solution for separately regulating service contracts. The legislation establishes compliance requirements related to financial responsibility, statutorily defined terms and conditions, and recordkeeping requirements. It also allows for electronic delivery of the service contract to the consumer. Finally, the law provides penalties for violators and is enforceable by the State Attorney General.