WHAT ARE YOUR RIGHTS UNDER A SERVICE CONTRACT IN NEW MEXICO?
Have you purchased a Service Contract in New Mexico and been denied coverage, been ignored or just have questions about your rights under the Service Contract?
WHAT IS A SERVICE CONTRACT IN NEW MEXICO?
The law defines exactly what does, and what does not, constitute a service contract in New Mexico. Basically, if you paid more than $250 for a product or good in New Mexico and paid more than $25 for an agreement for maintenance or repair of that product, changes are you are protected the the "Service Contract Regulation Act. A "Service Contract" doesn't include a manufacturer warranty on a new product, a maintenance agreement or a service contract sold to a business or otherwise not for personal, family or household use.
More specifically, the law provides that a "service contract" means a contract pursuant to which a provider, in exchange for separately stated consideration, is obligated for a specified period to repair, replace or perform maintenance on, or indemnify or reimburse the holder for the costs of repairing, replacing or performing maintenance on, property that is described in the service contract and that has an operational or structural failure as a result of a defect in materials, workmanship or normal wear and tear, including a contract that provides or includes one or more of the following:
(1) incidental payment of indemnity under limited circumstances, including towing, rental and emergency road service and food spoilage;
(2) the repair, replacement or maintenance of property for damages that result from power surges or accidental damage from handling;
(3) the repair or replacement of tires and wheels on a motor vehicle damaged as a result of coming into contact with road hazards;
(4) the removal of dents, dings or creases on a motor vehicle that can be repaired using the process of paintless dent removal without affecting the existing paint finish and without replacing vehicle body panels, sanding, bonding or painting;
(5) the repair of chips or cracks in motor vehicle windshields or the replacement of motor vehicle windshields as a result of damage caused by road hazards;
(6) the replacement of a motor vehicle key or key fob in the event the key or key fob becomes inoperable or is lost or stolen;
There may be other products or good covered by the Act, but the Insurance Superintendent must decide that by regulation. Now that you have a better understanding of what a service contract is in New Mexico, you may wonder,
WHAT ARE THE REQUIREMENTS OF A SERVICE CONTRACT?
The Service Contract Regulation Act sets out clearly what information is required to be placed in a service contract.
A. A service contract shall:
(1) be written in language that is understandable and printed in a typeface that is easy to read;
(2) include the amount, if applicable, of any deductible that the holder is required to pay;
(3) include the name, address and telephone number of the provider and, if applicable:
(a) the name, address and telephone number of the administrator;
(b) the name of the holder, if provided by the holder; and
(c) the name, address and telephone number of the seller; however, the names and addresses of the foregoing persons are not required to be preprinted on the service contract and may be added to the service contract at the time of the sale;
(4) include the purchase price of the service contract; however, the purchase price of the service contract is not required to be preprinted on the service contract and may be added to the service contract at the time of the sale;
(5) include a description of the property covered by the service contract;
(6) specify the duties of the provider and any limitations, exceptions or exclusions;
(7) if the service contract covers a motor vehicle, indicate whether replacement parts that are not made for or by the original manufacturer of the motor vehicle may be used to comply with the terms of the service contract;
(8) include, if applicable, any restrictions on transferring or renewing the service contract;
(9) include the terms, restrictions or conditions for canceling the service contract before it expires and the procedure for canceling the service contract. The conditions for canceling the service contract shall include the provisions of Section 59A-58-12 NMSA 1978;
(10) include the duties of the holder under the contract, including the duty to protect against damage to the property covered by the service contract or to comply with any instructions included in the owner's manual for the property;
(11) indicate whether the service contract authorizes the holder to recover consequential damages; and
(12) indicate whether any defect in the property covered by the service contract existing on the date the contract is purchased is not covered under the service contract.
Ok, that is a little dense but is basically self explanatory. If you have a question about whether you paid for a service contract, just give us a call. You may also wonder what you can do about a refusal by the service contract seller to provide needed repairs or service? Our experience is that some sellers don't understand their obligations under the law and don't take their responsibilities seriously. Below, we explain the requirements that sellers of service contract have to buyers of these contracts.
New Mexico has strong protections for purchasers of service contracts. Many other states treat refusals by sellers to pay under service contracts as a simple breach of contract. That means you can only recover financial losses that you can prove in the event the sellers simply refuses to pay. In those other states, you might even have to pay your own lawyer out of your pocket.
In important ways, New Mexico wisely treats service contracts as insurance policies. People who buy service contracts are entitled to the rights and benefits of the Unfair Insurance Claims Practices Act.
Purchasers of Service Contracts are considered "insureds" by the Act. The following practices, if done knowingly or as part of a general business practice, are violations of the Act. (We have rephrased and edited the section below because the Act also applies to other types of insurance coverage)
A. misrepresenting important facts or policy provisions relating to coverage;
B. failing to acknowledge and act reasonably promptly after being information of needed repairs or service;
C. failing to use reasonable standards for the prompt investigation and processing of claims arising under policies;
D. failing to affirm or deny coverage within a reasonable time after you have prepared required papers and returned;
E. not acting in good faith to promptly and fairly settle claims that are not in reasonable dispute;
G. compelling suit by offering substantially less than the amounts ultimately recovered in similar circumstances;
H. attempting to settle a for less than the amount to which a reasonable person would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application;
L. delaying the investigation or payment of claims by requiring multiple submission of preliminary and formal reports containing the same information;
N. failing to promptly provide an insured a reasonable explanation of the basis relied on in the policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement;