Opinion ID: 1734436
Heading Depth: 1
Heading Rank: 8

Heading: Implied Coverage

Text: But Markel Ford further urges that if the endorsement does not by its express terms obligate Auto-Owners to defend and indemnify Markel Ford, the language is ambiguous and must be construed so as to provide such coverage. In this latter connection, Markel Ford argues that the failure of Auto-Owners to have placed a closing parenthesis in the portion of the errors and omissions endorsement describing the source of the damages it would pay renders the language ambiguous and such as to not limit the obligation of Auto-Owners to pay only those damages arising in an action brought solely under § 1640. This argument requires a phrase-by-phrase analysis of the subject language thusly: (1) [Auto-Owners] will pay on behalf of [Markel Ford] (2) all sums which [Markel Ford] shall become legally obligated to pay as damages (3) in an action brought solely under 15 U.S.C. Sec. 1640 (4) (Consumer Credit Protection Act Public Law 90-321, Title I, as amended, (5) because of error or omission during the policy period in complying with any requirement imposed under 15 U.S.C., Section 1631 et seq. The first phrase unambiguously declares that Auto-Owners will pay on behalf of Markel Ford that which is described in the second phrase. The second phrase unambiguously declares that Auto-Owners will pay on behalf of Markel Ford all damages Markel Ford is legally required to pay. As noted earlier, the third phrase limits the type of damages that Auto-Owners will pay on behalf of Markel Ford to those resulting from an action brought solely under § 1640. The fourth phrase modifies § 1640 by describing the act of which § 1640 is merely a part. Public Law 90-321 encompasses the entire Consumer Credit Protection Act and has been amended several times. See, e.g., § 1640 of Consumer Credit Protection Act, Pub.L. No. 90-321, 82 Stat. 146 (1968) (amended 1974, 1976, 1980, and 1994). The fifth phrase modifies the word action in the third phrase. While the action under which Markel Ford is required to pay damages must be brought under § 1640, the action is brought because Markel Ford failed to comply with the requirements of § 1631 et seq. We therefore have a situation in which (1) Auto-Owners promises to pay any damages Markel Ford is required to pay (2) as a result of a suit brought by a consumer pursuant to § 1640 which (3) alleges that Markel Ford failed to comply with the Truth in Lending Act. That is not the situation at hand. Here, the Iowa attorney general brought suit against Markel Ford for alleged violations of the Iowa Consumer Fraud Act and the Iowa Consumer Credit Code. Even assuming, but not deciding, that alleging violations of state law in a suit is the same thing as alleging violations of federal law, the suit brought by the Iowa attorney general is not one brought solely under § 1640, for, as noted previously, at the relevant time the federal act treated enforcement by consumers separately from enforcement by governmental agencies. Compare § 1607 with § 1640(a). While Markel Ford urges that the Iowa attorney general could be viewed as stepping into the shoes of Iowa consumers, the same could be said of the Federal Trade Commission. In addition, Markel Ford does not meet the definition of creditor in the suit brought by the Iowa attorney general, and therefore, such a suit could not have been brought pursuant to § 1640. That section provides in part that any creditor who fails to comply with any requirement imposed under this part ... with respect to any person is liable to such person.... (Emphasis supplied.) Creditor is defined in the federal act as referring only to a person who both (1) regularly extends ... consumer credit ... and (2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by agreement. (Emphasis supplied.) § 1602(f). In this situation, there is no consumer credit transaction between Markel Ford and the Iowa attorney general, there is no debt between them, there is no evidence of indebtedness, and there is no agreement. Plainly, Markel Ford is not a creditor in this situation, and for that additional reason, the suit by the Iowa attorney general could not have been brought pursuant to § 1640. While it is true that an ambiguous insurance contract will be construed in favor of the insured, it is also true that an ambiguity will not be read into insuring language which is plain and unambiguous in order to construe it against the preparer of the contract. See Winfield v. CIGNA Cos., 248 Neb. 24, 532 N.W.2d 284 (1995).