PORTABLE ELECTRONIC DEVICE INSURANCE

Portable Electronic Device Insurance

"Portable Electronic Device Insurance" means insurance which may be offered on a month to month or other periodic basis as a group or master property and casualty insurance policy coverage for portable electronic devices against any one or more of the following causes of loss:  Portable electronic device insurance does not include a service contract.

ABOUT

Statutes authorizing portable electronics insurance have either been enacted, are pending, or have been proposed, in over 45 states and in Washington D.C.  This type of insurance is similar to traditional inland marine insurance and covers a wide variety of electronic devices from a wide variety of causes of loss.  The definition of an included device is typically broad; it certainly includes a digital camera, a laptop, a tablet computer, a smart phone, and a handheld GPS unit.

The majority of states have passed these portable electronics insurance statutes in the last several years.  North Carolina’s version was passed in 2011 and is codified at N.C.G.S. § 58-44A-1, et seq.  The goal of such legislation was to balance consumer protection with insurance regulatory burden.  The statutes provide a layer of consumer protection and oversight to the selling of these specialty consumer contracts – typically add-ons for an additional monthly fee at the point of purchase – without subjecting the manufacturers and retailers to the full burdens of becoming admitted insurance carriers or fully licensed insurance producers. 

North Carolina defines portable electronics insurance to be insurance coverage for the repair or replacement of portable electronics which may include coverage for loss, theft, and inoperability due to mechanical failure, malfunction, damage, and other similar causes of loss.   N.C.G.S. § 58-44A-1(5).  This definition is similar to the definition adopted in many other states.  The statutes passed across the country clarify the relationship between the seller of the insurance and the insurer issuing the policy. See, e.g., N.C.G.S. § 58-44A-15.  This includes which party will collect the premiums, what disclosures must be made, how to file a claim, and what the termination conditions are.  See, e.g., N.C.G.S. § 58-44A-10(a)(1)-(5). 

The legislation, both in North Carolina and in all other states which have passed similar statutes, was designed to rein in the “Wild West” atmosphere that included both manufacturer-supplied contracts, retailer-supplied contracts, and third-party contracts purporting to cover loss or damage to devices.  Under nearly all versions of the statute, sellers of portable electronics insurance are required to have a limited lines insurance license, certain written materials must be available to consumers, vendor employees must be trained according to certain guidelines but are not required to each hold insurance producer licenses, and requirements for billing, cancellation, and refunds are established.  The process for a business to obtain the limited lines insurance license in order to sell portable electronics insurance is relatively simple and only requires the payment of a fee, the submission of an application to the Commissioner of Insurance, and a certification from the issuer of the insurance.  N.C.G.S. § 58-44A-25. 

North Carolina’s statute, like those in other states, require particular types of written materials to be available where portable electronics insurance is sold.  N.C.G.S. § 58-44A-10.  Additionally, the seller must disclose that purchase of the insurance is not required to activate service on the device and must summarize the coverage (including the identity of the insurer, whether there is any deductible amount and what that amount is, what are the benefits of coverage are, and the key terms and conditions of coverage including whether it includes repair or replacement with either new or remanufactured parts.  N.C.G.S. § 58-44A-10(a)(3)-(5).  The claims process must also be explained to the customer.  N.C.G.S. § 58-44A-10(b).  The statute does not state anywhere that there are limitations on remedies for aggrieved consumers.  Unlike most states, North Carolina does not include special termination requirements in the statute. The adverse action terms – such as termination or modification of coverage – are only required to be set forth in the policy but are not established by statute.  See, e.g., N.C.G.S. § 58-44A-10(d).

Providers or sellers of portable electronics insurance are not exempt from either N.C.G.S. § 58-63-15 or N.C.G.S. § 75-1.1. 

IT HELPS TO:

Nearly every American consumer who has purchased a portable electronic device has been offered an extended warranty or insurance plan, either from the manufacturer, the retailer, or an aftermarket third-party seller.  One purpose of the portable electronics insurance regulations is to clarify that the purchase of such a policy may duplicate existing coverage that the consumer already has. 

Among the mandatory disclosures, the seller is required to state that the coverage offered may be a duplication of coverage which the insured already has under a homeowner’s or renter’s policy or service contract.  Prior to this disclosure requirement, many purchasers of these contracts were paying additional charges each month for insurance on their portable devices and may not have realized that the device was already covered under their existing policies. 

Of course, there are numerous valid reasons to purchase specific portable electronics insurance even if those items are already covered under a policyholder’s homeowners or renters policy.  Among them, the deductible on a homeowner’s policy may be higher than the value of the portable device and a separate policy avoids having to file a small personal property claim against a homeowner’s policy. 

An additional point to consider is that while the legal definition of portable electronics insurance includes coverage for theft or simply losing the item ,many of the popular manufacturer-provided policies only provide coverage for physical damage.  In order to obtain coverage as broad as legally-allowed -coverage that includes losing the device itself or having it stolen - the consumer would have to consider either retailer or third-party provided policies.

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