Chapter 12

22 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 1 DIVISION 2 INSURANCE LAW 2014 NOTE: P.L. 4-102 (Sept. 12, 1958) added Title 39 to the Government Code (Chapters 1 - 4, §§ 43000 - 43501) entitled 'I nsurance Law.' It was codified by the Compiler to the Guam Code Annotated between as Title 22, Division 2, Chapters 12 - 29, §§ 12101 - 29110 afte r the 21st Guam Legislature and was first published in print during the 1994 co dification of the GCA. Chapter 12. Administration. Chapter 15. Business of Insurance. Chapter 18. The Contract of Insurance. Chapter 20. Effective Date. Chapter 23. Captive Insurance Companies. Chapter 26. Prepaid Legal Service Programs. Chapter 29. Medical Care Insurance. CHAPTER 12 ADMINISTRATION Article 1. General Provisions. Article 2. Service Contracts. 2011 NOTE: Reference to the 'Banking Commisioner' and the 'I nsurance Commisioner' changed to the 'Commissioner of Banki ng and Insurance' pursuant to P.L. 27-088:10 (May 6, 2004). Referen ce to the 'Banking Board' changed to the 'Banking and Insurance Board' pursua nt to P.L. 27-088:10 (May 6, 2004). ARTICLE 1 GENERAL PROVISIONS § 12101. Short Title. § 12102. Provisions Construed as Continuations. § 12103.

rd' changed to the 'Banking and Insurance Board' pursua nt to P.L. 27-088:10 (May 6, 2004). ARTICLE 1 GENERAL PROVISIONS § 12101. Short Title. § 12102. Provisions Construed as Continuations. § 12103. Not Retroactive. § 12104. Definitions. § 12105. Exercise of Power. § 12106. Notice. § 12107. Time. § 12108. Scope of Title. § 12109. Penalty. COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 2 § 12110. False Swearing. § 12111. Conflict of Interest Between Insured and I nsurer. § 12111.1. Misrepresentations and False Advertising Prohibited. § 12112. Twisting Prohibited. § 12113. Air Ambulance Services Membership Plan Exe mpted. § 12101. Short Title. This Title may be cited as the Insurance Law. SOURCE: GC '43000. § 12102. Provisions Construed as Continuations. The provisions of this Title insofar as they are su bstantially the same as existing statutory provisions relating to the same subject matter shall be construed as restatements and continuations thereof , and not as new enactments. SOURCE: SOURCE: GC § 43001. § 12103. Not Retroactive. No action or proceedings commenced, and no right ac crued, prior to the effective date hereof, is affected by the provision s of this

enactments. SOURCE: SOURCE: GC § 43001. § 12103. Not Retroactive. No action or proceedings commenced, and no right ac crued, prior to the effective date hereof, is affected by the provision s of this Title, but all procedure hereafter taken shall conform to the prov isions of this Title so far as possible. SOURCE: GC § 43002. § 12104. Definitions. The rules and definitions contained in this section shall be used in interpreting the provisions of this Title. (a) The present tense includes the past and future tenses; and the future, the present. (b) The masculine gender includes the feminine and neuter. (c) The singular number includes the plural, and th e plural includes the singular. (d) The word shall is mandatory and the word may is permissive, unless otherwise apparent from the context. COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 3 (e) Adjuster means any person who acts for or on be half of an insurer or an insured in determining and making set tlement of the amount payable to the insured for any loss or damag e under a policy. (f) Admitted in relation to a person, means entitle d to transact insurance business in Guam under the laws of Guam; nonadmitted, in

unt payable to the insured for any loss or damag e under a policy. (f) Admitted in relation to a person, means entitle d to transact insurance business in Guam under the laws of Guam; nonadmitted, in relation to a person, means not entitled to transac t insurance business in Guam under the laws of Guam. (g) Advisory organization means every person, other than an admitted insurer, who prepares policy forms or make s underwriting rules, or who collects and furnishes loss or expens e statistics or other statistical information and data and acts in an adv isory, as distinguished from a rate making, capacity. No duly authorized at torney-at-law acting in the usual course of his profession shall be deem ed an advisory organization. (h) Agent means both general agent and sub-agent, u nless otherwise apparent from the context (i) Alien means organized under the laws of any gov ernment other than Guam or the United States or any political sub division thereof, whether or not admitted. (j) Broker means a person who, for compensation and on behalf of another person, transacts insurance business other than as insurer, general agent, sub-agent or solicitor.

f, whether or not admitted. (j) Broker means a person who, for compensation and on behalf of another person, transacts insurance business other than as insurer, general agent, sub-agent or solicitor. (k) Certificate means the Certificate of Authority required of an insurer to transact insurance business in Guam. (l) >Department = means the Department of Revenue and Taxation. (n) Domestic means organized under the laws of Guam , whether or not admitted. (o) Foreign means not organized under the laws of G uam, but organized under the laws of the United States or an y political subdivision thereof, whether or not admitted. (p) General Agent means a person authorized by an i nsurer to countersign, issue and deliver new policies, to acc ept service of process on behalf of the insurer, and vested with full auth ority to consummate a contract of insurance and to transact all other nec essary business of the COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 4 insurer in Guam. [ Gordon Mailloux Enterprises, Inc. v. Fireman's Ins. Co . (1966), 366 F.2d. 740.] (q) Insurance is a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from

ordon Mailloux Enterprises, Inc. v. Fireman's Ins. Co . (1966), 366 F.2d. 740.] (q) Insurance is a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from contingent or unknown events. (r) Insurer means the person who undertakes to inde mnify another by insurance; insured means the person so indemnifi ed. (s) Issue means to write, renew, execute, effect or other- wise enter into a contract of insurance. (t) Paid-in capital or Capital paid-in means the lo wer of the following amounts: (1) The value of an insurer's assets in excess of t he sum of its liabilities for losses reported, expenses, taxes, a nd all other indebtedness and reinsurance of outstanding risks a s provided by law; (2) The aggregate par value of an insurer's issued shares of stock, including treasury shares. For the purpose of computing paid in capital or cap ital, paid in, shares of stock are not considered as liabiliti es. (u) Person means any person, association, organizat ion, partnership, business trust, or corporation. (v) Policy means the written instrument in which a contract of insurance is set forth.

biliti es. (u) Person means any person, association, organizat ion, partnership, business trust, or corporation. (v) Policy means the written instrument in which a contract of insurance is set forth. (w) Political subdivision in reference to the Unite d States, means any State, the District of Columbia, any territory, possession, or commonwealth belonging to or part of the United Sta tes. (x) Rating bureau means every person, other than an admitted insurer, who has as his object or purpose the makin g of rates, rating plans or rating systems. (y) Reinsurance means the insurance ceded and accep ted between two insurers one of whom has effected the direct in surance. COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 5 (z) Signature includes a mark when the signer or su bscriber cannot write, provided his name is written near the mark b y a witness who also signs the instrument together with a second witness . (aa) Solicitor means a person authorized by either the insurer or its general agent or a sub-agent to act as its represen tative but whose duties and authority are confined merely to soliciting ins urance and aiding in the preparation of applications for insurance.

its general agent or a sub-agent to act as its represen tative but whose duties and authority are confined merely to soliciting ins urance and aiding in the preparation of applications for insurance. (bb) Sub-agent means a person authorized by either the insurer or its general agent to solicit applications, receive proposals, receive premiums, deliver policies, and to make contracts o f insurance. The receipt by a sub-agent of any premiums shall bind t he insurer on the contract of insurance for that period of time cover ed by the premium payment. (cc) Transact means, when applied to insurance, sol icitation, negotiations preliminary to execution, execution or transaction subsequent to execution, or a contract of insurance or matters appertaining thereto. (dd) United States means its entire system and grou p of political jurisdictions including the States, the District of Columbia, territories, possessions, or commonwealths. (ee) Writing means any form of recorded message cap able of comprehension by ordinary visual means. (ff) Board = means the Banking and Insurance Board. (gg) Commissioner means the Commissioner of Banking and Insurance.

any form of recorded message cap able of comprehension by ordinary visual means. (ff) Board = means the Banking and Insurance Board. (gg) Commissioner means the Commissioner of Banking and Insurance. (hh) Office means the office of the Commissioner of Banking and Insurance. (ii) Air Ambulance Service means the emergency an d non- emergency transportation of a doctor-qualified pati ent-candidate for higher level care from Guam to another location by a legally authorized air ambulance in which health care services, includ ing advanced life support services, are provided to the patient for t he duration of such transportation. COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 6 (jj) Air Ambulance Services Membership Plan means a plan contract between air ambulance services providers a nd members or enrollees in which such providers provide air ambul ance services for its members or enrollees in exchange for an annual fee. SOURCE: GC § 43003. Subsection (l) amended and subsections (ff), (gg) and (hh) added by P.L. 27-88:7(a). Subsections (ii) and (jj ) added by P.L. 29-113:VI:56(b-c) (Sept. 30, 2008). § 12105. Exercise of Power.

§ 43003. Subsection (l) amended and subsections (ff), (gg) and (hh) added by P.L. 27-88:7(a). Subsections (ii) and (jj ) added by P.L. 29-113:VI:56(b-c) (Sept. 30, 2008). § 12105. Exercise of Power. Whenever, by the provisions of this Title, a power is granted to a public officer or a duty imposed upon such officer, the po wer or duty may be performed by a deputy or assistant of such officer authorized to do so. SOURCE: GC § 43004. § 12106. Notice. Whenever any notice is required by this Title, it s hall be in writing unless expressly otherwise provided. Any required n otice may be given by mailing such notice, postage prepaid, addressed to the person to be notified, at his last known residence or his principal place of business, unless expressly otherwise provided. An affidavit setting forth the facts of such mailing by the person doing so is prima facie evide nce of such notice. SOURCE: GC § 43005. § 12107. Time. Any date or time mentioned in this Title, or in any policy of insurance issued under authority thereof, shall be conclusive ly presumed to refer to Guam time unless specifically and clearly otherwise stated. SOURCE: GC § 43006. § 12108. Scope of Title.

olicy of insurance issued under authority thereof, shall be conclusive ly presumed to refer to Guam time unless specifically and clearly otherwise stated. SOURCE: GC § 43006. § 12108. Scope of Title. All insurance transacted in Guam is governed by the provisions of this Title. SOURCE: GC § 43007. § 12109. Penalty. Any person violating any of the provisions of this Title, or of any regulation issued hereunder, or any lawful order of the Commissioner, for COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 7 which a penalty is not otherwise specifically provi ded, shall be guilty of a misdemeanor. SOURCE: GC § 43008. Amended by P.L. 13-187:212. § 12110. False Swearing. Any person who shall knowingly swear to, or verify, any false or fraudulent statement, or who, when testifying at an y hearing, examination or inquiry pursuant to this Title shall make any false or fraudulent statement, shall be guilty of a felony. SOURCE: GC § 43009. Amended by P.L. 13-187:213. § 12111. Conflict of Interest Between Insured and Insurer. (a) If the provisions of a policy of insurance impo se a duty to defend upon an insurer and a conflict of interest arises w hich creates a duty on the part of

of Interest Between Insured and Insurer. (a) If the provisions of a policy of insurance impo se a duty to defend upon an insurer and a conflict of interest arises w hich creates a duty on the part of the insurer to provide independent counsel to the insured, the insurer shall provide independent counsel to represent the insured, unless, at the time the insured is informed that a possible confli ct may arise or does exist, the insured expressly waives, in writing, the right to independent counsel. An insurance contract may contain a provision which sets forth the method of selecting independent counsel consistent with th is Section. (b) For purposes of this Section, a conflict of int erest does not exist as to all allegations or facts in the litigation for w hich the insurer denies coverage; however, when an insurer reserves its rig hts on a given issue and the outcome of that coverage issue can be controlle d by counsel first retained by the insurer for the defense of the claim, a conf lict of interest may exist. No conflict of interest shall be deemed to exist as to allegations of punitive damages or be deemed to exist solely because an ins ured is sued for an amount in excess of

lict of interest may exist. No conflict of interest shall be deemed to exist as to allegations of punitive damages or be deemed to exist solely because an ins ured is sued for an amount in excess of the insurance policy limits. (c) When the insured has selected independent couns el to represent the insured, the insurer may exercise its right to require that the counsel selected by the insured possess certain minimum qua lifications, which may include that the selected counsel have: (i) at lea st five (5) years in civil litigation practice, which includes substantial def ense experience in the subject at issue in the litigation; and (ii) errors and omissions coverage. The insurer =s obligation to pay fees to the independent counsel selected by the insured is limited to the rates which are ac tually paid by the insurer to attorneys retained by it in the ordinary course of business in the defense of COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 8 similar actions in the community where the claim ar ose or is being defended. This Article does not invalidate other different o r additional policy provisions pertaining to attorney =s fees or providing methods of settlement

munity where the claim ar ose or is being defended. This Article does not invalidate other different o r additional policy provisions pertaining to attorney =s fees or providing methods of settlement of disputes concerning those fees. Any dispute concerning attorney =s fees not resolved by these methods shall be resolved by final and binding arbitration by a single neutral arbitrator selected by the parties to the dispute. In the event that the parties cannot agree upon the selection of a neutral arbitr ator, then upon petition of any party to the dispute, the Superior Court of Gua m shall designate a neutral arbitrator. (d) When independent counsel has been selected by t he insured, it shall be the duty of that counsel and the insured t o disclose to the insurer all information concerning the action, except privilege d materials relevant to coverage disputes, and to timely inform and consult with the insurer on all matters relating to the action. Any claim of privi lege asserted is subject to in camera review by the Superior Court of Guam. Any i nformation disclosed by the insured or by independent counsel is not a w aiver of the privilege as to any other party, person or legal

subject to in camera review by the Superior Court of Guam. Any i nformation disclosed by the insured or by independent counsel is not a w aiver of the privilege as to any other party, person or legal entity. (e) The insured may waive its rights to select inde pendent counsel by signing the following statement: >I have been advised and informed of my right to select independent counsel to represent me in this lawsuit. I have considered this matter fully and freely waive my ri ght to select independent counsel at this time. I authorize my insurer to se lect a defense attorney to represent me in this lawsuit. = (f) Where the insured selects independent counsel p ursuant to the provisions of this Section, both the counsel provid ed by the insurer and independent counsel selected by the insured shall b e allowed to participate in all aspects of the litigation. Counsel shall coope rate fully in the exchange of information that is consistent with each counsel =s ethical and legal obligation to the insured. Nothing in this Section shall relieve the insured o f the insured =s duty to cooperate with the insurer under the provisions of the insurance contract. SOURCE: Added by P.L. 26-39:2.

to the insured. Nothing in this Section shall relieve the insured o f the insured =s duty to cooperate with the insurer under the provisions of the insurance contract. SOURCE: Added by P.L. 26-39:2. NOTE: The Compiler has changed ASubdivision @ to Article in (c) para. 2 to reflect the fact that this Chapter of the GCA does not cont ain subdivisions, but does contain Articles. COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 9 § 12111.1. Misrepresentations and False Advertisin g Prohibited. (a) No person shall: (1) make, issue, circulate, or cause to be made, is sued or circulated, any estimate, circular or statement mis representing the terms of any policy issued, or to be issued, or the benef its or advantages promised thereby, or the dividends or share of the surplus to be received thereon; (2) make any false or misleading statement as to th e dividends or share of surplus previously paid on similar policie s; (3) make any misleading representation or any misre presentation as to the financial condition of any insurer, or as to the legal reserve upon which any life insurer operates; or (4) use any name or title of any policy or class of policies misrepresenting the

tion as to the financial condition of any insurer, or as to the legal reserve upon which any life insurer operates; or (4) use any name or title of any policy or class of policies misrepresenting the true nature thereof. (b) Only the words in the carrier =s actual policy are actionable, and falsely written advertisements by the carrier about its actual policy shall not give rise to a cause of action against the carrier; provided, the carrier, or its licensed representative, is not in violation of Sub section (a) herein. SOURCE: Added as § 12111 by P.L. 26-56:1. Number changed by Compiler because § 12111 was already used on another subject . § 12112. Twisting Prohibited. No person shall make or issue, nor cause to be made or issued, any written statement misrepresenting or making incompl ete comparisons as to the terms, conditions or benefits contained in any policy for the purpose of inducing, or attempting to induce, the policyholder to lapse, forfeit, surrender, retain, exchange or convert any insuranc e policy. SOURCE: Added by P.L. 26-56:2. Renumbered by Compiler. § 12113. Air Ambulance Services Membership Plan Exe mpted.

lder to lapse, forfeit, surrender, retain, exchange or convert any insuranc e policy. SOURCE: Added by P.L. 26-56:2. Renumbered by Compiler. § 12113. Air Ambulance Services Membership Plan Exe mpted. The provisions of this Chapter shall not prohibit o r apply to Air Ambulance Services Membership Plans. SOURCE: Added by P.L. 29-113:VI:56(d) (Sept. 30, 2008). ---------- COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 10 ARTICLE 2 SERVICE CONTRACTS SOURCE: P.L. 04-102 (Sept. 12, 1958) added Article 2, §§ 43025-43036, entitled 'Insurance Commissioner.' P.L. 09-202 (Ju ly 9, 1968) added § 43027. Article 2 repealed by P.L. 27-088:2 (May 5, 2004). New Article 2 added by P.L. 32-087:2 (Nov. 27, 2013). 2014 NOTE: This article (§§ 12202-12213) was formerly entit led Insurance Commissioner, codified from Government Code (§§ 430 25-43037). The entire article was repealed by P.L. 27-088:8 (May 6, 2004) , which created a new Banking and Insurance Commissioner, defined by 11 G CA § 103102. References to the 'Banking Commissioner' and the 'I nsurance Commissioner' have been altered to the 'Commissioner of Banking a nd Insurance' pursuant to P.L. 27-088:10. § 12201.

by 11 G CA § 103102. References to the 'Banking Commissioner' and the 'I nsurance Commissioner' have been altered to the 'Commissioner of Banking a nd Insurance' pursuant to P.L. 27-088:10. § 12201. Service Contracts Excepted. § 12202. Definitions. § 12203. License Required. § 12204. Financial Responsibility. § 12205. Powers and Duties. § 12206. Recordkeeping. § 12207. Filing of Annual Report. § 12208. Receipt and Disclosures. § 12209. Returns and Refunds. § 12210. Prohibited Acts. § 12211. Rules. § 12212. Enforcement. § 12213. Effective Date. § 12214. Severability. § 12201. Service Contracts Excepted. The marketing, sale, offering for sale, issuance, m aking, proposing to make and administration of a service contract shall not be construed to be the business of insurance, and shall be exempt from reg ulation as insurance under this Division. Express or implied warranties shall be exempt from the requirements under this Article. § 12202. Definitions. COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 11 (a) Administrator means a person appointed or desig nated by a provider who administers service contracts and service contr act plans on behalf of the provider, and

GULATIONS CH. 12 ADMINISTRATION 11 (a) Administrator means a person appointed or desig nated by a provider who administers service contracts and service contr act plans on behalf of the provider, and subject to the requirements of this A rticle. (b) Commissioner means the Insurance and Banking Co mmissioner. (c) Consumer means an individual who buys any tangi ble personal goods that is primarily for personal, family, or ho usehold use. (d) Non-original manufacturer’s parts means replace ment parts not made for or by the original manufacturer of the goo ds, commonly referred to as 'after-market parts.' (e) Person means an individual, limited liability p artnership, partnership, limited liability company, corporation , incorporated or unincorporated association, joint stock company, re ciprocal, syndicate, or any similar entity or combination of entities actin g in concert. (f) Reimbursement insurance policy means a policy o f insurance issued to a service contract provider by an authorized ins urer. Pursuant to this insurance policy, the insurer agrees, for the benef it of the service contract holders, to discharge all of the obligations and li abilities of the service contract

horized ins urer. Pursuant to this insurance policy, the insurer agrees, for the benef it of the service contract holders, to discharge all of the obligations and li abilities of the service contract provider under the terms of the issued ser vice contracts or in the event of non-performance by the insured service con tract provider. A reimbursement insurance policy insurer shall not te rminate the policy until it has issued a notice of termination required by the Commissioner under the insurance laws, rules, or regulations of the govern ment of Guam. The termination of a reimbursement insurance policy sha ll not reduce the insurer’s responsibility for service contracts issu ed by service contract providers prior to the date or termination. A servi ce contract provider shall be considered the agent of the reimbursement insura nce policy insurer for purposes of determining duties owed by the insurer to service contract holders in accordance with the service contract, an d this Article. Insurers are deemed to have received the premiums for the insura nce upon the payment of provider fees by consumers for service contracts issued by the insured service contract provider.

his Article. Insurers are deemed to have received the premiums for the insura nce upon the payment of provider fees by consumers for service contracts issued by the insured service contract provider. 'All obligations and lia bilities' include: (1) the failure or inability of the insured service contract provider to perform under the terms and conditions of the pr ovider’s issued service contracts; and COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 12 (2) in the event of cancellation, the service contr act provider’s failure or inability to return the unearned portion of the paid service contract fee to the service contract holder. (g) Service contract, for the purposes of this Arti cle, means a contract or agreement for a separately stated consideration for a specific duration to perform the repair, replacement or maintenance of g oods or indemnification for repair, replacement or maintenance, for the ope rational or structural failure of any motor vehicle or other goods due to a defect in materials, workmanship, accidental damage from handling, or no rmal wear and tear, with or without additional provisions for incidenta l payment of indemnity under limited

er goods due to a defect in materials, workmanship, accidental damage from handling, or no rmal wear and tear, with or without additional provisions for incidenta l payment of indemnity under limited circumstances, including, but not lim ited to, towing, rental and emergency road service, and road hazard protection. Motor vehicle manufacturer and original equipment manufacturer (O EM)-backed contracts shall be exempt from the requirements in this Artic le. Service contracts may provide for repair, replacement, or maintenance of goods for damage resulting from power surges or interruption. Servic e contracts also include a contract or agreement sold for a separately stated consideration for a specific duration that provides for any of the following: (1) the repair or replacement or indemnification fo r the repair or replacement of a motor vehicle for the operational or structural failure of one or more parts or systems of the motor vehicl e brought about by the failure of an additive product to perform as re presented; (2) the repair or replacement of tires and/or wheel s on a motor vehicle damaged as a result of coming into contact with road hazards, including, but not limited to,

oduct to perform as re presented; (2) the repair or replacement of tires and/or wheel s on a motor vehicle damaged as a result of coming into contact with road hazards, including, but not limited to, potholes, rocks, woo d debris, metal parts, glass, plastic, curbs, or composite scraps; (3) the removal of dents, dings, or creases on a mo tor vehicle that can be repaired using the process of paint-less den t removal without affecting the existing paint finish and without rep lacing vehicle body panels, sanding, bonding or painting; (4) the repair of small motor vehicle windshield ch ips or cracks, but which expressly excludes the replacement of the entire windshield; or (5) the repair of damage to the interior components of a motor vehicle caused by wear and tear, but which expressl y excludes the replacement of any part or component of a motor veh icle’s interior. COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 13 (h) Service Contract Provider means a person who is contractually obligated to the service contract holder under the terms of the service contract. (i) Service Contract Holder or contract holder mean s a person who is the purchaser or holder of a service

tractually obligated to the service contract holder under the terms of the service contract. (i) Service Contract Holder or contract holder mean s a person who is the purchaser or holder of a service contract. (j) Service Contract Seller means the person who se lls the service contract to the consumer. (k) Warranty means a warranty made without consider ation, solely by the manufacturer, importer, or seller of goods or s ervices, that is not negotiated or separated from the sale of the produc t and is incidental to the sale of the product, that provides repair or replac ement for defective parts, mechanical or electrical breakdown, labor, or other remedial measures. § 12203. License Required. It shall be unlawful for any person to act as, or o ffer to act as, or hold himself or herself out to be a service contract pro vider, nor may a service contract be sold to a consumer, unless the service contract provider has a valid license as a service contract provider issued by the Commissioner. A service contract provider shall make an application to the Commissioner upon a form prescribed by the Commissioner, and sha ll pay to the Commissioner a fee as provided under this Article.

ssioner. A service contract provider shall make an application to the Commissioner upon a form prescribed by the Commissioner, and sha ll pay to the Commissioner a fee as provided under this Article. A service contract provider shall update the application information a nd documents annually and furnish such updates to the Commissioner. The a pplication shall include or be accompanied by the following information and documents: (a) all basic organizational documents of the servi ce contract provider, including any articles of incorporation, articles of association, partnership agreement, trade name certificate, trus t agreement, shareholder agreement, bylaws, and other applicable documents, and all amendments to those documents; (b) the identities of the service contract provider ’s executive officers directly responsible for the service contr act provider’s service contract business, and, if more than fifty percent (50%) of the service contract provider’s gross revenue is derived from t he sale of service contracts, the identities of the service contract p rovider’s directors and stockholders having beneficial ownership of ten per cent (10%) or more of any class of securities;

rom t he sale of service contracts, the identities of the service contract p rovider’s directors and stockholders having beneficial ownership of ten per cent (10%) or more of any class of securities; COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 14 (c) audited annual financial statements or other fi nancial reports acceptable to the Commissioner for the two most rec ent years, which prove that the applicant is solvent, and any inform ation the Commissioner may require in order to review the cur rent financial condition of the applicant; (d) an application fee of Two Hundred Fifty Dollars ($250.00), which shall be deposited in the Better Public Servi ce Fund; and (e) any other pertinent information required by the Commissioner. § 12204. Financial Responsibility. (a) Any service contract provider applying for a li cense shall be solvent and shall meet the minimum requirements under this Section. If the financial responsibility requirement under this Section is to be maintained by the service contract provider’s parent company, the par ent company shall guarantee the service contract provider’s obligatio ns under service contracts sold by the service contract provider

ained by the service contract provider’s parent company, the par ent company shall guarantee the service contract provider’s obligatio ns under service contracts sold by the service contract provider licensed unde r this Article. (b) The service contract provider shall provide one of the following: (1) provide both: (A) maintain a funded reserve account for all oblig ations under service contracts issued and in force on Guam . The reserves shall not be less than forty percent (40%) of the g ross consideration received from the sale of the service contract, less claims paid, for all in force contracts. The reserv e account shall be subject to examination by the Commissioner; and (B) place in trust with the Commissioner, for all s ervice contracts issued and in force on Guam, a financial security deposit having a value that is the larger of Forty Thousand Dollars ($40,000) or five percent (5%) of the gross conside ration received, less claims paid for the sale of the service contra cts. The financial security deposit shall consist of one of the follow ing: (i) a surety bond issued by an authorized surety; (ii) securities of the type eligible for deposit by authorized insurers on

ts. The financial security deposit shall consist of one of the follow ing: (i) a surety bond issued by an authorized surety; (ii) securities of the type eligible for deposit by authorized insurers on Guam; (iii) cash or time certificate of deposit issued by a bank that is licensed in Guam and is insured by the Fede ral COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 15 Deposit Insurance Corporation (FDIC) or by the Nati onal Credit Union Administration (NCUA); (iv) a letter of credit issued by a qualified finan cial institution; or (v) another form of security authorized by the Commissioner by rule, subject to the approval of I Liheslaturan Guåhan. Service contracts for those service contract provid ers that provide the security in Subsections (A) and (B) of § 12204(b)(1) shall contain a statement in substantially the same format: 'The service contract provider’s obligations stated in this service contract are backed by the f ull faith and credit of the service contract provider.' (2) insure the performance for all service contract s issued by the service contract provider by a reimbursement insura nce policy issued by an insurer holding a certificate of authority fr

rovider.' (2) insure the performance for all service contract s issued by the service contract provider by a reimbursement insura nce policy issued by an insurer holding a certificate of authority fr om the Commissioner, and who is in good standing with the Commissioner. Service contracts insured by a reimbursement insurance policy shall: (A) conspicuously state the name and either the add ress or contact information for the insurance company; and (B) contain a statement in substantially the follow ing format: 'The service contract provider’s obligations stated in this service contract are covered by a reimbursement insurance policy. If your service contract provider fails to pay or provide service o n your claim, or a cancellation refund, or any other covered obligation under this service contract within sixty (60) days after that claim or request has been made by you to this service contract provider, you may then directly present your claim or request for service or payment to your service contract provider’s insurance company.' § 12205. Powers and Duties. The Commissioner shall: COL1031201422 GCA BUSINESS REGULATIONS CH.

ent your claim or request for service or payment to your service contract provider’s insurance company.' § 12205. Powers and Duties. The Commissioner shall: COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 16 (a) receive applications for certification or licen se of service contract providers; (b) establish the procedure for processing applicat ions made under this Article; (c) retain all applications and other records submi tted to him or her; (d) maintain a registry of the names and addresses of persons licensed under this Article; (e) establish and collect fees as required by this Article; (f) approve/disapprove applications for license; (g) establish, suspend, revoke, or reprimand servic e contract licenses; and (h) perform the other duties necessary to implement this Article. § 12206. Recordkeeping. (a) The service contract provider or service contra ct provider’s administrator shall keep accurate accounts, books, and records of all transactions regulated under this Article. (b) Accounts, books, and records maintained as requ ired by this Section shall include the following: (1) copies of each type of service contract sold; (2) the name and address of each service

ticle. (b) Accounts, books, and records maintained as requ ired by this Section shall include the following: (1) copies of each type of service contract sold; (2) the name and address of each service contract h older, to the extent that the name and address have been furnishe d by the service contract holder; (3) a list of the locations where the service contr act provider’s service contracts are marketed, sold, or offered fo r sale; and (4) recorded claims filed which, at a minimum, shal l contain the date and description of each claim under the servic e contract provider’s service contracts. (c) The service contract provider for each service contract shall retain records required under this Section for at least on e year after coverage under the contract has expired. A service contract provid er discontinuing business on Guam shall maintain records required under this Section until it provides COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 17 the Commissioner with satisfactory proof that the s ervice contract provider has discharged all contractual obligations to contr act holders on Guam.

GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 17 the Commissioner with satisfactory proof that the s ervice contract provider has discharged all contractual obligations to contr act holders on Guam. (d) The records required under this Section may be, but are not required to be, maintained on a computer disk, computer driv e or server or other electronic recordkeeping technology. If records are maintained in a form other than hard copy, the records shall be in a for m allowing duplication as a legible hard copy at the request of the Commissione r. (e) Upon request of the Commissioner, the service c ontract provider shall make available to the Commissioner all accoun ts, books, and records concerning service contracts sold by the service co ntract provider reasonably necessary to enable the Commissioner to determine c ompliance or noncompliance with this Article. § 12207. Filing of Annual Report. (a) Every registered service contract provider must file an annual report for the preceding calendar year with the Commission er on or before July 1 st of each year, or within any extension of the time t he Commissioner for good cause may grant.

must file an annual report for the preceding calendar year with the Commission er on or before July 1 st of each year, or within any extension of the time t he Commissioner for good cause may grant. The report must be in the form and contain those matters as the Commissioner prescribes, and shall be verified by at least two officers of the service contract provider, or for service contr act providers with a single officer, the sole officer of service contract provi ders with a single officer. (b) At the time of filing the report, the service c ontract provider must pay a filing fee of Twenty Five Dollars ($25.00), w hich shall be deposited in the Better Public Service Fund. (c) As part of any investigation by the Commissione r, the Commissioner may require a service contract provide r to file monthly financial reports whenever, in the Commissioner’s d iscretion, there is a need to more closely monitor the financial activities of the service contract provider. If the Commissioner requires monthly fina ncial reports, the service contract provider shall file monthly financial stat ements, which shall be filed with the Commissioner no later than the twenty-fift h (25th) day of the

quires monthly fina ncial reports, the service contract provider shall file monthly financial stat ements, which shall be filed with the Commissioner no later than the twenty-fift h (25th) day of the month following the month for which the financial report is being filed. These monthly financial reports are the internal financia l statements of the service contract provider. The monthly financial reports th at are filed with the Commissioner constitute information that might be d amaging to the service contract provider if made available to its competit ors, and therefore shall be kept confidential by the Commissioner. This informa tion may not be made COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 18 public or be subject to subpoena, other than by the Commissioner, and then only for the purpose of enforcement actions taken b y the Commissioner. § 12208. Receipt and Disclosures. (a) Service contract providers shall provide purcha sers of a service contract with: (1) a receipt or other written evidence of the purc hase of the service contract that shall be provided to the serv ice contract holder; (2) a copy of the service contract that shall be pr ovided within a

receipt or other written evidence of the purc hase of the service contract that shall be provided to the serv ice contract holder; (2) a copy of the service contract that shall be pr ovided within a reasonable period of time from the date of purchase ; and (3) except for offers or sales of service contracts by telephone, mail, or electronic means, a written copy of the ba sic terms and conditions of the service contract to be made avail able to the purchaser where the purchaser is physically present at the po int of sale. (b) Service contracts shall be written in clear, un derstandable language, and shall be printed or typed in a typeface and for mat that is easy to read. (c) All service contracts shall have the following information: (1) the name and address of the service contract pr ovider and the administrator of the service contract, if different from the service contract provider; (2) the identity of the service contract seller and the service contract holder, to the extent that the service con tract holder has furnished the service contract seller, administrato r, or service contract provider with that information; (3) the terms of the sale, including the purchase p rice;

t the service con tract holder has furnished the service contract seller, administrato r, or service contract provider with that information; (3) the terms of the sale, including the purchase p rice; (4) the procedure the service contract holder must follow to obtain service; (5) any deductible amount that applies; (6) the specific merchandise and services to be pro vided, and any limitations, exceptions, or exclusions; (7) where the service contract covers a motor vehic le, whether the use of non-original manufacturer’s parts is allowed ; COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 19 (8) any restrictions governing the transferability of the service contract that apply; (9) the terms, restrictions, or conditions governin g the return or cancellation of the service contract by either the service contract provider or service contract holder prior to the se rvice contract’s termination or expiration date; (10) the obligations and duties of the service cont ract holder, such as the duty to protect against any further damage, or to follow the owner’s manual instructions; and (11) a provision for, or exclusion of consequential damages or pre- existing conditions that

such as the duty to protect against any further damage, or to follow the owner’s manual instructions; and (11) a provision for, or exclusion of consequential damages or pre- existing conditions that apply. The information under Subsections (1) and (2) shall not be required to be preprinted on the service contract and may be ad ded to the service contract at the time of sale. The purchase price un der Subsection (3) shall not be required to be preprinted on the service con tract and may be negotiated with the service contract holder at the time of sale. § 12209. Returns and Refunds. (a) Service contracts shall state that the service contract holder may return the contract within: (1) thirty (30) days of the date that the service c ontract was mailed to the service contract holder; (2) twenty (20) days of the date the service contra ct was delivered to the service contract holder, if the service cont ract was delivered at the time of sale; or (3) a longer time period as specified in the servic e contract. (b) Upon return of the service contract to the serv ice contract provider within the applicable time period, and if no claim has been made under the service contract prior to its

e servic e contract. (b) Upon return of the service contract to the serv ice contract provider within the applicable time period, and if no claim has been made under the service contract prior to its return to the service contract provider, the service contract shall be void and the service contract pro vider shall refund to, or credit the account of, the service contract holder with the full purchase price of the service contract. A ten percent (10%) penalt y per month shall be added to a refund that is not paid or credited with in sixty (60) days after the return of the service contract to the service contr act provider. COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 20 (c) The right to void a service contract under Subs ection (b) shall not be transferred and shall apply only to the original se rvice contract purchaser upon the terms and conditions provided in the contr act and consistent with this Article. (d) Upon cancellation of a service contract by the service contract provider, the service contract provider, at least f ive (5) days prior to cancellation, shall mail to the service contract ho lder at the service contract holder’s last known address, a written

tract provider, the service contract provider, at least f ive (5) days prior to cancellation, shall mail to the service contract ho lder at the service contract holder’s last known address, a written prior notice of cancellation that states the effective date of the cancellation; provided, t hat prior notice under this Subsection shall not be required if the cancellatio n is for: (1) nonpayment of the service contract provider’s f ee for the service provided under the service contract; (2) a material misrepresentation by the service con tract holder to the service contract provider; or (3) a substantial breach of duties of the service c ontract holder under the service contract, relating to a covered p roduct or its use. § 12210. Prohibited Acts. (a) No service contract provider shall use in its n ame, the word insurance, casualty, surety, mutual, guarantee, or any other word descriptive of the insurance, casualty, or surety business, or a name deceptively similar to the name or description of any insurance or sure ty corporation, or to the name of any other service contract provider.

f the insurance, casualty, or surety business, or a name deceptively similar to the name or description of any insurance or sure ty corporation, or to the name of any other service contract provider. This S ection shall not apply to a service contract provider using any language prohib ited by this Section in its name prior to July 1, 2013. (b) A service contract provider or its representati ve shall not in its service contracts or literature make, permit, or ca use to be made, any false or misleading statement, or deliberately omit any mate rial statement that would be considered misleading if omitted. (c) No person shall condition a loan or the sale of any goods on the purchase of a service contract. § 12211. Rules. The Commissioner may adopt rules to implement and a dminister this Article pursuant to the Administration Adjudication Act. § 12212. Enforcement. COL1031201422 GCA BUSINESS REGULATIONS CH. 12 ADMINISTRATION 21 (a) The Commissioner shall take any action necessar y or appropriate to enforce this Article, and the rules adopted and ord ers issued hereunder. The Commissioner shall conduct investigations and exami nations of service contract providers and administrators,

ropriate to enforce this Article, and the rules adopted and ord ers issued hereunder. The Commissioner shall conduct investigations and exami nations of service contract providers and administrators, or other per sons, upon receipt of a consumer complaint. If a service contract provider has violated this Article, or rules or orders under this Article, the Commissi oner shall issue an order: (1) requiring a person to cease and desist from vio lating this Article, or rules or orders under this Article; (2) prohibiting a person from selling or offering f or sale service contracts in violation of this Article until full r emedy is afforded to comply with this Article; and (3) imposing a civil penalty, at an amount not to e xceed fifteen percent (15%) of the recourse afforded in §12204 of this Article for the purpose of affording remedy to comply with the prov isions of this Article, on a person or any combination of the fore going, as applicable. § 12213. Effective Date. This Act shall take effect upon its enactment and a pply prospectively. § 12214. Severability. If any provision of this Act or its application to any person or circumstance is held invalid, the invalidity shall not

take effect upon its enactment and a pply prospectively. § 12214. Severability. If any provision of this Act or its application to any person or circumstance is held invalid, the invalidity shall not affect other provisions or applications of this Act which can be given effe ct without the invalid provision or application and to this end the provis ions of this Act is severable. ---------- COL10312014 COL10312014