Pursuant to recently enacted legislation, guarantors of extended service agreements must file a Virginia home service contractor bond in addition to evidence of specific net worth requirements. The modifications to Virginia Code Chapter 727, remove this class of service provider from the insurance statute and creates a industry specific regulation. "Home service contract" means a contract or agreement for a separately stated consideration for any duration to perform the service, repair, replacement, or maintenance of property or to indemnify for the costs of service, repair, replacement, or maintenance, for the operational failure of any property due to a defect in materials, workmanship, inherent defect, or normal wear and tear, with or without additional provisions for incidental payment of indemnity under limited circumstances. Home service contracts may provide for the service, repair, replacement, or maintenance of property for damage resulting from power surges or interruption and for accidental damage from handling. Home service contracts may provide roof leak coverage." Those contractors providing these specific services must meet the following thresholds.
|Total Amount of Unexpired Home Service Contracts||Amount of Bond|
|$50,001 to $300,000||$40,000|
|$300,001 to $750,000||$65,000|
|$750,001 or more||$90,000|
The total amount of unexpired home service contracts are the total fees paid by all purchasers to the contractor for all home service contracts in effect. The surety bond must run to the Commonwealth for the benefit of purchasers of home service contracts for property in the event that the contractor does not fulfill his or her obligations under those contracts for any reason, including insolvency or bankruptcy. The aggregate liability of the surety bond for all breaches of the conditions of the bond will never exceed the amount of the bond. The Virginia home service contractor bond may not be canceled without the consent of the Commissioner of Agriculture (VDACS).
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