A person generally may not sell or solicit residential service contracts unless the person is tied to a licensed provider/administrator or is separately licensed in certain ways. A limited exception allows some compensated nonemployees to do this if the contract carries a required bold notice. Providers using a captive-insurance reimbursement policy must keep a minimum funded reserve, and the department must prescribe the calculation form.
Sec. 1304.157. RESIDENTIAL SERVICE CONTRACTS. (a) A person may not sell, offer to sell, arrange or solicit the sale of, or receive an application for a residential service contract unless the person is: (1) employed by a provider or administrator of a residential service contract who is licensed under this chapter; or (2) licensed as a real estate sales agent, real estate broker, mobile home dealer, or insurance agent in this state. (b) Notwithstanding Subsection (a), a person compensated by a provider or administrator, but who is not employed by that provider or administrator, may sell, offer to sell, arrange or solicit the sale of, or receive an application for a residential service contract if the contract contains the following statement in at least 10-point boldface type: "NOTICE: THIS COMPANY PAYS PERSONS NOT EMPLOYED BY THE PROVIDER FOR THE SALE, ADVERTISING, INSPECTION, OR PROCESSING OF A RESIDENTIAL SERVICE CONTRACT UNDER CHAPTER 1304, OCCUPATIONS CODE." For purposes of Subsection (a) and this subsection, a person is employed by a provider or administrator if, in connection with the person selling, offering to sell, arranging or soliciting the sale of, or receiving applications for residential service contracts, the provider or administrator: (1) directs and controls the person's performance; and (2) is responsible for representations made by the person when acting within the scope of the person's employment. (c) Notwithstanding Section 1304.151(a)(1), a provider of a residential service contract may use a reimbursement insurance policy issued by a captive insurance company as defined by Section 964.001, Insurance Code, to insure the provider's residential service contracts if the provider maintains a funded reserve equal to not less than an amount computed by subtracting the amount of any claims paid from the product of 25 percent and the gross consideration the provider received from consumers from the sale of all the provider's service contracts issued and outstanding in this state. The department shall prescribe a calculation form to be used by a provider to calculate the minimum amount required to be maintained in the provider's reserve account under this subsection. A reimbursement insurance policy issued to a residential service contract provider in accordance with this subsection: (1) is not subject to Section 1304.152; and (2) is considered to satisfy the requirements of Sections 1304.1025 and 1304.151(a)(1) for purposes of this chapter. Added by Acts 2021, 87th Leg., R.S., Ch. 663 (H.B. 1560), Sec. 4.09, eff. September 1, 2021. Amended by: Acts 2023, 88th Leg., R.S., Ch. 622 (H.B. 4316), Sec. 3, eff. September 1, 2023.