LEGAL FILE

Store avoids lawsuit in credit life dispute


Automotive News | August 29, 2012 - 12:01 am EST

A Rock Hill, S.C., dealership that didn’t obtain the credit life insurance policy lease customers paid for was subject only to arbitration, not a lawsuit, the state Court of Appeals has ruled.

The dispute arose after Mary Walden and her husband leased a new 2007 Murano from Harrelson Nissan Inc. The Waldens opted for credit life insurance and financed the $602 premium. The lease included an arbitration provision.

Soon after the transaction, the husband was diagnosed with cancer, and his wife checked with the insurer about the terms of their coverage. The insurer responded that there was no policy because it hadn’t received the premium from Harrelson Nissan.

When the husband’s cancer went into remission, the couple traded in the SUV for a 2009 Murano from a different dealership and obtained credit life insurance from their credit union, according to plaintiff’s lawyer Mario Pacella in Columbia, S.C.

After the husband died in 2009, Walden received the proceeds of the policy on the second Murano

She sued Harrelson Nissan for breach of contract, breach of fiduciary duty, fraud and violation of the state unfair trade practices law. Pacella, her attorney, says he thought at the time that the situation involved “more than just stealing this premium.” He found some similar instances, he says, but the practice “was not pervasive.”

A lower-court judge ordered the case to arbitration based on the lease provision, and an arbitrator awarded Walden a refund of the $602 premium but no other damages.

On appeal, Walden argued that state law exempted the dispute from the arbitration requirement because the claims arose from an insurance policy.

Not so, the appeals court ruled, saying the exemption applies only when an insurance policy includes an arbitration provision. In this case, it said, Walden never had an insurance policy on the first Murano.

“She paid the premiums to Harrelson and the dealership accepted and retained those payments while failing to procure an insurance policy,” Judge H. Bruce Williams wrote for the unanimous three-member appellate panel “As a result, her selection of optional insurance did not create a separate binding insurance contract, but instead arose out of the original lease.”

Says defense lawyer W. Keith Martens of Rock Hill: “We fought hard for arbitration because they wanted to bump it into a class action and alleged it was a recurring practice by the dealership.”

Martens characterized the lawsuit as an effort “to subvert public policy” favoring enforcement of arbitration agreements.

Pacella says there will be no further appeal.

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