N.J. Admin. Code § 5:25-4.2

Current through Register Vol. 56, No. 8, April 15, 2024

Section 5:25-4.2 - Requirements

(a) In order to receive or maintain an approval a private plan shall conform to all the requirements specified in this section.

(b) The private plan shall provide financial security adequate to cover the total amount of claims that may be reasonably assessed against participating builders and adequate to cover the costs of operation of the plan.

(c) No private plan shall require any payment by an owner at any time subsequent to the warranty date as a condition of maintaining in effect the warranty prescribed by subchapter 3 of this chapter.

(d) A private plan may provide that either the builder or the warranty guarantor are primarily responsible for satisfying claims against the warranty at any given point during the life of the warranty, but such responsibility shall be clearly disclosed to the owner on or before the warranty date and shall not be modified or changed after the warranty term begins to run.

(e) A private plan shall provide a complaint, claims and payment procedure which:

1. Provides for an attempt at informal settlement of any claim arising out of the warranty between the builder and the owner and requires that any owner desiring to make a claim provide written notice of the complaint to the builder.

2. Provides for conciliation and/or arbitration of any warranty claim dispute by an independent third party selected and appointed in a manner approved by the Department and disclosed to the owner on or before the warranty date.

3. Provides the owner with an opportunity to accept or reject a conciliation decision in satisfaction of the claim and notice of the opportunity to appeal that decision to a court of competent jurisdiction.

4. Provides fixed periods of time for action by either party pursuant to the arbitration or conciliation decision.

(f) Private plans shall provide for written notice to the owner concerning warranty coverage and the claims and dispute settlement procedures utilized, expressing in plain language the scope, applicability and standards for the warranty and the forms, procedures and processes involved in making a claim under the warranty. The form and content of the written notice shall be approved by the Department.

(g) Private plans shall maintain such loss and payment records as the Department may require and shall provide such reports as the Department may require including, but not limited to the following:

1. Once every 12 months a report showing the number of builders participating, the number of homes covered in each of these categories (first year, second year, third through tenth years), the total number and total amount of claims paid during the reporting period and the total amount of funds available to pay such claims.

2. Once every three months a report showing the names, addresses and builder registration numbers of any new builders admitted to coverage.

3. Within ten days, all private plans shall notify the Department in all cases where a builder's enrollment has been terminated and shall provide sufficient information on the cause of termination as it relates to 5:25-2.5 "Denial, Suspension and Revocation of Registration."

(h) A private plan shall disclose to the Department in writing each occurrence and the circumstances surrounding the decision of the program to refuse to honor a claim awarded by an arbitrator not later than the date upon which an appeal to a court of competent jurisdiction is filed.

(i) Rules concerning notification of non-payment of warranty premium by enrolled builders are:

1. The private plan shall document for the Department in writing all procedures taken to collect warranty premiums from enrolled builders negligent in such payment. Such documentation shall include the following steps:

i. The private plan must notify the enrolled builder immediately upon the discovery of any failure to pay such premium and shall give such builder not more than ten days in which to pay. The private plan shall notify the Department of the failure of any builder to remit such a premium within the ten-day period.

ii. The private plan shall also investigate all homes constructed by the enrolled builder to determine all instances of non-payment of warranty premiums. The private plan shall report its findings to the Department within ten days of the completion of its investigation.

(j) The private plan shall have a warranty guarantor which shall conform to all of the following requirements:

1. The warranty guarantor shall either possess a Certificate of Authority issued by the New Jersey Department of Insurance to write the kind of insurance specified in N.J.S.A. 17:17-1.1(g) or be designated by the Department of Insurance as an eligible surplus lines carrier under N.J.S.A. 17:22-6.4 5.

2. The warranty guarantor shall furnish to the Department satisfactory evidence that the form of any insurance policy to be used to provide coverage for the private plan has been approved by the New Jersey Department of Insurance with respect to its compliance with the provisions of State insurance law.

3. The warranty guarantor shall have and shall maintain an A.M. Best and Company, Inc. rating of "A" or "A+" and shall otherwise be and remain in a financial condition adequate, considering all circumstances including reinsurance arrangements, to cover the risk assumed under the private plan.

4. The terms and conditions of any insurance agreement insuring the private plan shall be subject to approval by the Department as providing the coverage with respect to the warranties required to be provided under said plan. Such terms and conditions shall not be modified or altered without the prior consent of the Department.

5. The warranty guarantor shall agree to provide to the Department such information concerning the settlement of claims and its financial condition as may reasonably be required to demonstrate its initial qualifications to act as a warranty guarantor, the performance of its obligations under the terms of its insurance agreement and its continued satisfaction of the requirements as to financial condition expressed herein.

N.J. Admin. Code § 5:25-4.2

Amended by R.1980 d.158, eff. 4/15/1980.
See: 12 N.J.R. 249(d).
Amended by R.1986 d.141, effective 5/5/1986.
See: 17 N.J.R. 2816(a), 18 N.J.R. 959(a).
Substantially amended.