The state of Oklahoma has made technical changes to its rules governing extended-service contract providers, making it clearer that extended-service contracts shouldn't be regulated like insurance.
Service contracts aren't insurance, Okla. says
Extended-service contract providers were worried because a state Supreme Court ruling last year had exposed service contract providers to aspects of the same rules that govern insurance companies, said Stephen McDaniel, assistant executive director for the Service Contract Industry Council. The trade group represents extended-service contract providers, including companies in the automotive segment.
McDaniel said a sticking point was the possibility that extended-service contract providers, like insurance companies, could be sued for punitive damages -- that is, damages beyond compensation, which are meant to punish a defendant.
"Punitive damages are a big deal," McDaniel said.
So the trade group helped persuade the state legislature to pass a law that makes it clear that vehicle service contracts are not insurance, shouldn't be regulated like insurance, and aren't subject to punitive damages.
Said McDaniel: "We went in and essentially unwound [the court decision] with legislation."
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