Opinion ID: 69784
Heading Depth: 2
Heading Rank: 1

Heading: The Vehicle Service Contract Business

Text: Marathon is a Risk Retention Group (RRG) insurer that insures payment for repairs on vehicle service contracts (VSCs), also known as extended service contracts. VSCs are contracts that cover the cost of repairs after the original manufacturer's warranty on a vehicle expires; Marathon provides coverage in the event that the contract's seller cannot meet its obligations. Marathon insured VSCs sold by API. API's VSCs, and Marathon's accompanying insurance, were sold at dealerships marketing various vehicle brands, including Ford's brands. Ford also sold insured VSCs, in competition with API and Marathon. Ford finances transactions involving combined purchases of Ford-brand vehicles and VSCs, which could be from Ford, API, or other providers. These financing transactions do not take the form of a direct loan of cash to consumers. Rather, Ford purchases retail installment sales contracts from dealers. Once it purchases the contract, Ford pays the dealer and then bears the risk of collecting the payments from the vehicle purchaser. Before January 1, 2005, Ford regularly financed vehicle purchases that included the sale of a VSC if the VSC in question was backed by an insurance company with an A.M. Best rating of A- or better, or if the insurer of the contract was backed by a reinsurer with an A.M. Best rating of A- or better. A.M. Best is a recognized insurance rating agency, and its ratings are widely used to assess the financial strength and stability of insurance companies. Under that policy, Ford regularly financed vehicle purchases that included the sale of API VSCs insured by Marathon.