Substantial revisions to California’s Vehicle Service Contract Law (Cal. Ins. Code §§ 12800 – 12865)(the “CVSC Law”) become effective on January 1, 2008. These changes are made by California Assembly Bill 1008 (“AB 1008”), which was recently passed by the California legislature and signed by the governor. Most of the revisions focus on the scope of contracts regulated as “vehicle service contracts” rather than insurance. The revisions also give an “obligor” a new “net worth” option to meet the CVSC Law’s financial responsibility requirement.
Expansion of the Vehicle Service Contract Definition
AB 1008 does not change the basic definition of a “vehicle service contract,” which still reads as follows:
a contract or agreement for a separately stated consideration and for a specific duration to repair, replace, or maintain a motor vehicle or watercraft, or to indemnify for the repair, replacement, or maintenance of a motor vehicle or watercraft, necessitated by an operational or structural failure due to a defect in materials or workmanship, or due to normal wear and tear.
Also, as before AB 1008, a vehicle service contract may still include incidental indemnity payments for the following benefits: towing, substitute transportation, emergency road service, rental car reimbursement, reimbursement of deductible amounts under a manufacturer’s warranty, and reimbursement for travel, lodging, or meals. See CVSC Law § 12800 (as amended by AB 1008).