Contractual Liability Reimbursement Policy

Contractual Liability Reimbursement Policy CLRP for Service Contract Providers

What is a Contractual Liability Reimbursement Policy CLRP?

Many states require some form of a financial guarantee to allow a service contract provider, often referred to as the Obligor, to operate in their state. These guarantees are designed to ensure that a purchaser will receive the benefit they purchased regardless of the ability of the provider to perform its obligations. Since the states have seen service contract providers fail leaving the consumer with no coverage these requirements were implemented to protect the consumer.

Several options exist for the financial guarantees based on each individual state's regulations. These guarantees generally include posting a defined percentage of the gross retail consideration as security (surety bond, securities, cash) for a claims reserve account, providing a parental guarantee from a financially secure entity with net equity in excess of $100m (or other amount) or a Contractual Liability Reimbursement Policy CLRP (sometimes referred to as a Contractual Liability Insurance Policy CLIP or Service Contract Reimbursement Insurance Policy SCRIP.)

Here are few links to examples of various state guides and regs for service contract providers. The information contained on this page cannot be relied upon or construed as Legal Advice or Compliance Guidance since this is only a very small sample for example only purposes and the regs change on a regular basis:

In some states, a Contractual Liability Reimbursement Policy CLRP is the only viable option available to a service contract provider to comply with the states requirements. A CLRP is often accepted to satisfy the financial requirements for a Dealer Obligor Vehicle Service Contract Program or a Third Party Obligor program for most product lines.

The Contractual Liability Reimbursement Policy CLRP will generally need to be issued by an admitted insurance carrier authorized in the state. The policy must provide for payment of any covered claims offered in the service contract.

A Contractual Liability Reimbursement Policy CLRP is required by most lenders to satisfy their requirements before they will advance on an automobile loan that includes a vehicle service contract or other type of ancillary product. This includes vehicle service contracts, GAP, etch, appearance protection, tire and wheel, maintenance, key fob, dent and ding, windshield and other similar products. These requirements may also apply to different product types with different requirements on a state by state level: Home Warranty, Consumer Products, Automotive for example.

A Contractual Liability Reimbursement Policy CLIP may also be utilized to support various Limited Warranty or Product Warranty Insurance oriented solution for OEMs, retailers and solution providers.

Email Michael Frosch, Principal of Personal Safeguards Group, LLC, for additional information for Dealers, Retailers, Marketers, Agents and Brokers in sourcing obligors and Contractual Liability Reimbursement Policy CLRP, Contractual Liability Insurance Policies (CLIP) / Service Contract Reimbursement Insurance Policy providers for their service contract, extended warranty, limited warranty and other warranty and maintenance related programs.