Opinion ID: 2538609
Heading Depth: 1
Heading Rank: 1

Heading: facts

Text: RDI is a restaurant management company that was created to operate Moe's Mo-Roc-N Café, a nightclub. In 1996, RDI decided to purchase its insurance from Crusader Insurance Co. for a total of $19,747. Like many small businesses, RDI chose not to pay the annual premium with a single, lump sum payment. Instead RDI entered into an insurance premium finance agreement with Cananwill. Under this agreement, RDI made a down payment and financed the rest of the obligation through Cananwill. Cananwill paid the lump sum to Crusader and RDI agreed to repay Cananwill over the course of several months. RDI chose a specific payment plan, which included a precomputed, add-on interest rate. The add-on interest rate did not take into account the fact that the principal would decline as payments were made. RDI signed an insurance premium installment payment agreement, which set forth these terms and expressly stated that the effective APR under this payment plan would be 13 percent. Payments were completed according to the agreement. In May 2000, RDI filed this class action lawsuit, claiming that Cananwill had violated the CPA by imposing service charges above the maximum rate set forth in IPFCA. Both parties moved for summary judgment in September 2001. The trial court read IPFCA in favor of Cananwill and granted summary judgment on Cananwill's motion, dismissing the claim. The Court of Appeals concluded that the statutory language of RCW 48.56.090(3), setting the maximum service charge at ten dollars per one hundred dollars per year, allows insurance premium finance companies to charge add-on interest, rather than simple interest calculated on the declining principal. Rest. Dev., Inc. v. Cananwill, Inc., 114 Wash.App. 194, 198-99, 55 P.3d 680 (2002). The Court of Appeals noted that other state courts and industry publications have interpreted comparable language to refer to the add-on calculation. Id. at 199-200, 55 P.3d 680. Moreover, the circumstances surrounding IPFCA's enactment support this interpretation. Id. at 200, 55 P.3d 680. The Court of Appeals also read RCW 48.56.120 to require a refund of both unearned premiums and unearned interest in the event of cancellation. Id. at 201-02, 55 P.3d 680. The simple interest method charges interest as it is earned based on the declining principal, resulting in no prepayment of interest. Id. at 202, 55 P.3d 680. Therefore, the court concluded that RCW 48.56.120's refund requirement must indicate that the statutory maximum service charge allowed add-on interest because otherwise the refund provision would be unnecessary. Id. at 203-04, 55 P.3d 680. Finally, because there was no violation of IPFCA, RDI's CPA claim was rendered moot. Id. at 204, 55 P.3d 680.