Source: http://masscases.com/cases/app/1/1massappct569.html
Timestamp: 2019-04-19 18:15:03+00:00

Document:
GOVIE O. MCKINNEY vs. LIBERTY MUTUAL INSURANCE COMPANY.
CONTRACT. Writ in the Superior Court dated July 7, 1972.
The action was heard by Kalus, J., on demurrer.
Edward J. Dailey for the plaintiff.
Robert W. Macnamara for the defendant.
KEVILLE, J. This action was brought to establish that the defendant, in selling a Massachusetts motor vehicle liability insurance policy to the plaintiff, is subject to disclosure requirements of the Truth-in-Lending Act, G. L. c. 140C [Note 1] (the act), and that due to the defendant's failure to meet those requirements, it is subject to the penalty, costs and counsel fee imposed by Section 10(b) of the act. The plaintiff has appealed from the order of the trial judge sustaining the defendant's demurrer without leave to amend. The sole ground for demurrer argued by the defendant is that the declaration fails to state concisely and with substantial certainty the substantive facts necessary to constitute a legal cause of action.
nine percent) applied to the outstanding balance. [Note 3] The plaintiff chose the monthly billing plan and made payments to the defendant thereunder.
The plaintiff asserts that the sale to him of the monthly billing plan was a "Consumer credit" transaction as defined in Section 1(j) of the act, [Note 4] that the defendant failed to disclose details of the plan required by Section 7 and that the defendant is therefore liable to the plaintiff for the penalties imposed by Section 10(b).
There appears to be but one pertinent decision under the Federal act, Gerlach v. Allstate Ins. Co. 338 F. Supp. 642 (S.D. Fla. 1972), (cf. Stefanski v. Mainway Budget Plan Inc. 326 F. Supp. 138 [S.D. Fla. 1971]) in addition to correspondence releases of the Federal Reserve Board issued pursuant to its responsibility for implementing that act. 15 U.S.C. Sections 1604, 1607 (1970). [Note 6] To the limited extent to which it is set forth in the declaration the transaction before us is similar to that in the Gerlach case. There the insured was offered a plan under which the annual premium could be paid in ten instalments with a down payment of ten percent plus a flat monthly service charge. If an instalment were not paid when due, the sole remedy available to the insurer was cancellation of the policy. Indeed, in the event of cancellation for any reason, the insurer could make no claim for any premium earned for coverage already provided but not paid for by the insured. The court concluded that the insurer was not a creditor of the insured, that the transaction was not a consumer credit transaction and was not subject to the Truth-in-Lending Act. Gerlach v. Allstate Ins. Co., supra, at 647, 648, 649.
these releases, the Board has made a clear distinction between the situation in which the insured is not obligated to make remaining payments and the transaction in which he becomes contractually obligated to pay the premium or to pay an indebtedness for premium. Gerlach v. Allstate Ins. Co., supra, at 648. There is nothing set forth in the declaration before us to show that the financing arrangement in question differed from that described in the Gerlach case. The declaration makes no reference to policy cancellation provisions or to what, if any, obligation rested on the insured to pay for premiums earned but remaining unpaid upon cancellation. Its limited averments indicate that the transaction was a prepayment plan rather than one in which payment of the premium was deferred. There is an insufficient showing that a debt was created and the requisite creditor-debtor relationship established so as to bring the transaction within the disclosure requirements of the act.
[Note 1] Inserted by St. 1969, c. 517, Section 1. Under Regulation Z (12 C. F. R. Sections 226.1, et seq.) of the Federal Truth-in-Lending Act (15 U.S. C. Sections 1601, et seq. ), the Federal Reserve Board has authority to grant exemptions from the Federal act for classes of transactions which, under the laws of a State, are subject to "requirements substantially similar" to those imposed under the Federal act, provided that there is adequate provision for enforcement. 12 C. F. R. Section 226.12. Massachusetts was granted such an exemption effective July 1, 1970. 35 F. R. 10358, June 25, 1970. Thus, disclosure requirements of the Massachusetts act have supplanted those of the Federal act insofar as they are material to this litigation.
[Note 2] The policy itself is not included in the declaration.
[Note 3] The premium bill requires a deposit of twenty-five percent of the premium with the application or a first monthly payment in an amount sufficient to bring the initial deposit up to twenty-five percent.
[Note 4] "Credit offered or extended to a natural person, in which the money, property or service which is the subject of the transaction is primarily for personal, family, household or agricultural purposes . . . ."
[Note 5] We do not take into consideration the letter from the Commissioner of Banks appended to the briefs dealing with the applicability of the act to instalment purchase of motor vehicle insurance since it does not have the force of a rule or regulation. Furthermore, reliance in the briefs upon previous litigation between the parties with respect to this transaction is also misplaced. Nothing in reference thereto appears upon the face of the declaration and it is not open upon demurrer. Siegel v. Knott, 316 Mass. 526 , 528 (1944). Fabrizio v. U.S. Suzuki Motor Corp. 362 Mass. 873 (1972).
[Note 6] These releases, though not legally binding, have been treated as persuasive. Stefanski v. Mainway Budget Plan Inc. 326 F. Supp. 138, 142 (S.D. Fla. 1971). Gerlach v. Allstate Ins. Co. 338 F. Supp. 642, 648-649 (S.D. Fla. 1972). Bissette v. Colonial Mortgage Corp. of D. C. 477 F.2d 1245, 1246 (D.C. Cir. 1973).

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