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 financial guarantees based on each 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 over $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 a 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 regularly:
In some states, a Contractual Liability Reimbursement Policy CLRP is the only viable option available to a service contract provider to comply with the state's 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 pay for any covered claims offered in the service contract.
Most lenders require a Contractual Liability Reimbursement Policy CLRP 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, and 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 and Financial Backing for a Guarantee.
Contact Meramec Secure. Inc. for more information.