Bismarck Tribune - Bismarck News - Bankruptcy trickles down to local customers

Bankruptcy trickles down to local customers

Dec 05, 2003 - 23:10:26 CST

By MARK HANSON, Bismarck Tribune

The ripple effect of a number of small problems turned into a tidal wave for a national insurance company. The conditions created what one person described as the perfect storm.

Left in the wake are thousands of consumers and thousands of auto dealers across the country.

And across North Dakota.

Holders of a Smart Choice extended service warranty, insured by National Warranty Insurance Co., are finding that claims aren't being covered by NWIC. In North Dakota, that covers about 2,500 contract holders. Across the country, the number could be as high as a million.

The warranties are no longer valid because the company that wrote the policy has filed for bankruptcy. NWIC, incorporated in the Cayman Islands and headquartered in Nebraska, has been selling and administering automotive service contracts since 1984.

But in June 2003, the company filed for provisional liquidation in the Cayman Islands and bankruptcy protection in the United States. That means NWIC is no longer issuing the Smart Choice policies, paying claims or approving repairs for future claims.

There are 20 franchise dealerships, and five used car dealers, in North Dakota -- three in Bismarck-Mandan -- that sold the Smart Choice service warranty, which were written for high-mileage vehicles. Legally, the dealers are not obligated to do anything for those holding a Smart Choice contract, but those in North Dakota are doing something for customers who come in for repairs, said Tom Herman, president of Dealer Development Systems Inc. in Bismarck.

Herman, an independent agent, sells such services as extended warranty contracts to auto dealers, which included Smart Choice. There also are a number of types of extended warranties. Smart Choice made up a very small percentage, and the Smart Choice warranties are the only ones affected.

Local dealers Wilhelm Buick Olds, Ressler Chevrolet and Schwan Pontiac GMC sold Smart Choice. Wilhelm had fewer than 100 customers and quit selling the product about three years ago, Herman said. Representatives from Ressler and Schwan said they are taking care of their customers, but did not want to elaborate.

While the downfall of NWIC means consumers may have to pay for repairs that would have been covered by the warranty, the bigger victims to date are the auto dealers. Herman estimates that in the six months since the company filed for bankruptcy, the state's auto dealers who carried Smart Choice have lost about $250,000 in either warranty work already approved and completed, good-will work done for customers and warranty refunds.

In Bismarck, a unique case has some customers getting a double whammy. Bismarck Honda, which changed ownership nearly three years ago, does not carry Smart Choice and did not buy the liabilities of the previous owner, who did carry Smart Choice.

Joseph Norris of Bismarck is one of the customers who bought from the previous owner. He brought his vehicle in on Monday after a "check engine" light came on, and learned his transmission needs either repairs or to be replaced. Then he learned his warranty is no longer valid.

"It was a total surprise to me," he said.

Herman said there are about 25 Smart Choice holders from the previous Honda owner.

The state attorney general's office has received about 10 telephone calls and two complaints regarding Smart Choice. Parrell Grossman, director of the Consumer Protection and Antitrust Division of the AG's office, said the law doesn't speak to one solution, but said it's the attorney general's position that a dealer, at the minimum, either honor the warranty or give customers a refund on the portion of the warranty cost that the dealer kept -- usually just a few hundred dollars on a policy that's $1,000 or more.

Grossman said the AG's office would like dealers to notify all who carry Smart Choice about the situation, but Herman said that request isn't reasonable. It's impossible to know, he said, if warranties have expired because of mileage, if a car has been sold or traded or if someone has moved.

Grossman said extended warranties are not regulated as insurance so there are no specific laws that apply to them. Herman said that any extended warranty contract written after Aug. 1, 2001, falls under regulations that state an administrator -- in this case NWIC -- is obligated to cover claims, not the dealer.

The reason NWIC caught so many off guard is because the company carried an A-rating from A.M. Best, the company that rates insurance firms, up until March of this year. The rating then dropped to a B, and further, before the company folded.

And the companies that underwrote NWIC claim they received no premium payments, so they claim they aren't liable, Herman said. In other words, things quickly unraveled at many levels.

"It's like the perfect storm," he said.

The bankruptcy court hasn't issued any final rulings, so Herman said customers may be eligible for some type of compensation down the road, if they haven't accepted any other buyout, for example, from a dealership.

(Reach reporter Mark Hanson at 250-8264 or mark.hanson@bismarcktribune.com.)

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Comments

sister wrote on Dec 12, 2007 11:03 PM:

" your missed dearly buddy. "

guess wrote on Feb 13, 2007 12:19 PM:

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Alyssa Roller wrote on Jan 1, 2007 10:27 PM:

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Question? wrote on Dec 30, 2006 9:52 AM:

" How come is the school improvement director for DPI not a licensed teacher? Is this a patern the State Superintendent of Public Instruction has been doing for years? I've heard rumors to that effect. It would be nice if someone would check this out - and not only in the school improvment department. I think the State Superintendent should be held to the same standard as public schools are held to in North Dakota. Currently when schools hire teachers who do not have a current North Dakota Teacher's License, someone (the teacher) pays a fine ( I think it is about $ 100. per day.) I think what is good for the goose is good for the gander. DPI should be held to the same standard as teachers and the schools. "

Correction wrote on Dec 30, 2006 9:38 AM:

" The article states that "The plan provides further details to state assessments, which are currently given to fourth-, eighth- and 12th-graders and will eventually be expanded to other grades." This is incorrect. For the past 2 years the state assessments were administered to students in grades 3, 4, 5, 6, 7, 8, and 11. Twelfth grade students haven't been assessed for 3 years. "

Let's do it!! wrote on Oct 19, 2006 5:34 PM:

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Kristin wrote on Aug 24, 2006 2:09 AM:

" Well i was searching for my friend Kelly Winn the snow boarder i meant from the max air show at a Carnival in Carbondale IL... i use to work with Harris Exoitics and we were set up right behind him... Kelly and i kept in touch for a while after but i guess i know why the letters stopped now. you know it sucks to have had to find out this was. i still thought of him from time to time hoping one day we'd see eachother again i cant believe i had to find out this way years later what had a happen. RIP Kelly. Im just sorry it took me this long to find out.. "

ummyeah wrote on Aug 16, 2006 10:39 AM:

" These comments aren't even about the article. Wow. "

washingtongirl1 wrote on Aug 3, 2006 3:30 AM:

" Wow! These comments don't even seem to apply...? Far too confusing for those who read, to even try to care. Hmmm, who screens this anyway? "

L33tmaster wrote on Jul 28, 2006 7:51 AM:

" I hate the government. They have no right to tell me what I can or can't do. I'll gamble online whenever i damn please. "

hunkpapa wrote on May 24, 2006 9:32 AM:

" The Gaming Division of North Dakota need to furhter investigate this man. He has been given a license to steal just as he did at Standing Rock. Banks accounts and other financial information needs to be collected and examined on how he was able to obtain the funds to purchase the establishment in Fargo. One would believe it was from the money that was obtined from the Standing Rock Tribe. Be where of this individual. "

Shannon wrote on May 16, 2006 11:49 AM:

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berber wrote on May 8, 2006 6:50 PM:

" what is another bird in the pelican family "

kathy toohey wrote on May 4, 2006 12:26 AM:

" I never fully understood the vital lifeline that Greyhound is, or was according to the article. It is somewhat confusing, you don't know if they are going or coming back. All of the stories are everyday stories and these are the ones that should be heard, and considered in such a decision, community, and communities that were all connected by this one bus line, and the jobs that were connected with this company, to rid these individuals of this one required mode of transportation is totally uncalled for and should be rectified immediately. We have to remember what we are dealing with here, humans who by helping them, they help one another, and it continues on,and all concerned will benefit and they will make their money, they have to remember maybe their pockets are to full and might need some individuals to be held accountable for the reasons that this is happening at all. "

Bob Armentrout wrote on Apr 17, 2006 9:21 AM:

" Just a quick note, my wife (who is from the La Crosse, WI area) and I saw about 200 white pelicans on the Mississippi River, just south of Stoddard WI. She told me she had never seen pelicans in this area before. We saw the flock first on Easter Sunday, April 16, 2006. Today, April 17, the flock has scattered some, mostly appearing to be in breeding pairs. If we see any nesting, we will post additional comments. "

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