Houston Independent Automobile Dealers Association March 2016 Issue: Floor Plans | Page 16

she bought the insurance. See Lacy v. Progressive Direct Insurance Co., 2016 U.S. Dist. LEXIS
24 (N.D. Ill. January 4, 2016).
Insurance Policy Covering "Wrongful Repossession" Did Not Cover Claims that Pre- and
Post-Sale Notices Violated State Law: A dealership was insured under two insurance policies.
One provided up to $500,000 for indemnity from and defense against suits for damages arising
from the dealership's "wrongful repossession" of an automobile and was linked to a separate
$25 million umbrella policy. The other provided for up to $25,000 for costs in defending against
suits arising from the sale of a car. The dealership sold a car to consumers and later
repossessed and sold it for nonpayment. Prior to the sale of the car for nonpayment, the
dealership sent the consumers a notice informing them that for a $25 charge, they could request
an accounting. After the sale, the dealership sent them a notice charging them attorneys' fees.
The dealership sued the consumers for the deficiency balance, and they counterclaimed,
alleging that the dealership's pre- and post-sale notices violated the Uniform Commercial Code
and the Missouri Motor Vehicle Time Sales Act. The dealership tendered the counterclaims to
the insurer for defense and indemnity under the larger policy. The insurer refused, asserting that
the claims did not constitute claims for "wrongful repossession." The dealership sued, and the
insurer moved for summary judgment. The trial court granted the motion, concluding that the
larger policy only applied to repossessions that were wrongful, not to wrongful debt collection
practices after repossession. The U.S. Court of Appeals for the Eighth Circuit affirmed. The
appellate court found that the procedures required by statute for disposition of repossessed
property are not part of the repossession process because sale of repossessed property is a
separate event that takes place after repossession is complete. See Wolfe Automotive Group,
LLC v. Universal Underwriters Insurance Company, 2015 U.S. App. LEXIS 21649 (8th Cir.
(W.D. Mo.) December 15, 2015).
SCRA Does Not Apply to Obligations Incurred While on Active Duty, Even if Orders
Changed While on Duty: A servicemember obtained a loan with a 34.37% annual percentage
rate while he was on active duty in the National Guard. He asked that the lender reduce the
interest rate to 6% per year pursuant to the Servicemembers Civil Relief Act. The lender notified
the servicemember that he was not eligible for the interest rate reduction because the SCRA
applies to obligations made before entry onto active duty, and he was on active duty when the
debt was incurred. The servicemember sued, arguing that his orders were revised and that,
arguably, he got the loan while he was not on active duty. The federal trial court disagreed,
noting that although his orders may have changed, he was always on active duty during the
relevant time frame, and granted summary judgment for the lender. See Hall v. Springleaf
Financial Services Inc., 2015 U.S. Dist. LEXIS 154139 (S.D. Miss. November 13, 2015).
Dealer May be Liable for Misrepresentations about Condition of Car in "As Is" Sale: A
creditor repossessed a car after it was repaired following an accident. The creditor sent the car
to auction, where the auctioneer disclosed that the car had suffered damage to its frame. A
dealership bought the car at the auction and offered to sell the car to a buyer "as is." The
dealership told the buyer that the car never had repairs that cost more than 25% of the value of
the car. The dealership gave her a copy of a CARFAX vehicle history report that did not mention
the accident or the repairs. After the buyer learned about the damage, she sued the dealership
for fraud, tortious breach of contract, civil conspiracy, unfair and deceptive trade practices, and
negligence. She also sued the repossessing creditor for all but the breach of contract claim. The
defendants moved to dismiss, and the trial court gra