(a)As an alternative to the trust requirement of Section 34-13-194, the details of which are set forth in Divisions 3 and 4, a preneed provider, with the prior approval of the board, may purchase a surety bond in an amount not less than the aggregate value of outstanding liabilities on undelivered preneed contracts for merchandise, services, and cash advances. For the purposes of this section, the term “outstanding liabilities” means the original retail amount of services and cash advances and the actual cost to the entity to provide the undelivered merchandise sold on each contract written after April 30, 2002. The surety bond shall be in an amount sufficient to cover the outstanding liability at the time each contract is executed.
(b)The bond shall be made payable to the State of Alaba
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(a) As an alternative to the trust requirement of Section 34-13-194, the details of which are set forth in Divisions 3 and 4, a preneed provider, with the prior approval of the board, may purchase a surety bond in an amount not less than the aggregate value of outstanding liabilities on undelivered preneed contracts for merchandise, services, and cash advances. For the purposes of this section, the term “outstanding liabilities” means the original retail amount of services and cash advances and the actual cost to the entity to provide the undelivered merchandise sold on each contract written after April 30, 2002. The surety bond shall be in an amount sufficient to cover the outstanding liability at the time each contract is executed.
(b) The bond shall be made payable to the State of Alabama for the benefit of the
board
and of all purchasers of preneed merchandise, services, and cash advances. The bond shall be issued by an insurance company licensed in the State of Alabama and authorized to issue surety bonds and approved by the
board
.
(c) The amount of the bond shall be based on a report documenting the outstanding liabilities of the preneed provider for the previous calendar quarter and the projected liability for the immediately following quarter, shall be prepared by the preneed provider using generally accepted accounting principles, and shall be signed by the chief executive officer or chief financial officer of the preneed provider. The report shall be compiled as of the end of the preneed provider’s fiscal year and updated quarterly.
(d) The amount of the bond shall be increased or decreased as necessary to correlate with changes in the outstanding liabilities. Further, the
board
may order the bond to be increased as necessary to correlate with changes in the outstanding liabilities of bonded contracts due to increases in the consumer price index.
(e) If the preneed provider fails to maintain a bond pursuant to this section, the preneed provider shall cease the offering for sale and sale of preneed merchandise, services, and cash advances
as provided by rule of the board
.
(f) No surety bond used to comply with this section shall be canceled or subject to cancellation unless at least 60 days’ advance notice thereof, in writing, is filed with the
board
by the surety company. The cancellation of the bond shall not relieve the obligation of the surety company for claims arising out of contracts issued or otherwise covered before cancellation of the bond. In the event that notice of termination of the bond is filed with the
board
, the certificate holder insured thereunder
, within 30 days of the filing of the notice of termination with the
board
,
shall
provide the
board
with a replacement bond or with evidence that is satisfactory to the
board
demonstrating that
this chapter
has
been fully complied with. If within 30 days of filing of the notice of termination with the
board
no replacement bond acceptable to the
board
or no evidence satisfactory to the
board
demonstrating that
this chapter
has
been complied with is filed with the
board
, the
board
shall suspend the license of the certificate holder until the certificate holder files a replacement bond acceptable to the
board
or demonstrates to the satisfaction of the
board
that it has complied with
this chapter.
(g) Upon prior approval by the
board
, the preneed provider may file with the
board
a letter of credit in the amount of the outstanding liabilities in lieu of a surety bond, in the form and subject to the terms and conditions evidencing the financial responsibility of the party or parties issuing the letter of credit, and otherwise, as may be prescribed by the
board
.