Section R590-166-5 - Security Deposit, Surety Bond, or Irrevocable Letter of Credit(1) A home protection company that maintains a security deposit, a surety bond, or an irrevocable letter of credit shall comply with this subsection. (a)(i) A security deposit shall be in an amount not less than $10,000 for each 500 home protection service contracts in force in this state, but not to exceed $100,000.(ii) A security deposit must be made in a federally insured financial institution under a tri-party agreement that names the commissioner as a party.(iii) If a home protection company fails to perform its obligations to its contract holders, the commissioner may make equitable distributions to contract holders from funds on deposit.(b)(i) A surety bond shall be in favor of the commissioner in the amount of $50,000.(ii) When the number of home protection service contracts issued by a home protection company in force in this state exceeds 2,500, the amount of a surety bond shall be increased to $100,000.(iii) A surety bond shall be issued by an insurer authorized to transact surety business in this state.(iv) A surety bond may not be cancelled or subject to cancellation unless at least 30 days advance written notice is filed with the commissioner and evidence of other security is provided.(c)(i) An irrevocable letter of credit shall be in favor of the commissioner in the amount of $50,000.(ii) When the number of home protection service contracts issued by a home protection company in force in this state exceeds 2,500, the amount of an irrevocable letter of credit shall be increased to $100,000.(iii) An irrevocable letter of credit shall be issued from a bank approved by the commissioner and in a form acceptable to the commissioner.(iv) An irrevocable letter of credit may not be cancelled or subject to cancellation unless at least 30 days advance written notice is filed with the commissioner and evidence of other security is provided.(d)(i) Proceeds from a security deposit, a surety bond, or an irrevocable letter of credit under this rule may be administered by the commissioner for the benefit of a person sustaining actionable injury due to the insolvency or impairment of a home protection company.(ii) At the option of the commissioner, the commissioner may seek to arrange the assumption of an insolvent home protection company's obligations and business on behalf of a solvent company, and apply the insolvent home protection company's deposits or proceeds of a surety bond or an irrevocable letter of credit with the assuming company.(2)(a) A security deposit, a surety bond, or an irrevocable letter of credit shall be maintained unimpaired while a home protection company continues to do business in this state.(b) When a home protection company ceases to do business in this state and furnishes the commissioner proof that it has discharged or otherwise adequately provided for each of its obligations to its contract holders, the commissioner shall authorize release of a security deposit, a surety bond, or an irrevocable letter of credit on file at that time.Utah Admin. Code R590-166-5
Amended by Utah State Bulletin Number 2022-04, effective 2/8/2022