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02/26/87 Griffin Systems, Inc., v. John E. Washburn

February 26, 1987

GRIFFIN SYSTEMS, INC., PLAINTIFF-APPELLANT

v.

JOHN E. WASHBURN, DIRECTOR OF INSURANCE, ET AL., DEFENDANTS-APPELLEES



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FOURTH DIVISION

505 N.E.2d 1121, 153 Ill. App. 3d 113, 106 Ill. Dec. 330 1987.IL.238

Appeal from the Circuit Court of Cook County; the Hon. George M. Marovich, Judge, presiding.

APPELLATE Judges:

Justice Linn delivered the opinion of the court. McMorrow, P.J., and Johnson, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE LINN

Appellant, Griffin Systems, Inc. (Griffin), brings this appeal seeking reversal of a cease and desist order issued by the Illinois Department of Insurance (the Department), and affirmed after review by the trial court. The trial court agreed with the Department's finding that Griffin was engaged in the selling of insurance without a certificate of authority.

The Department's cease and desist order prohibits Griffin from distributing its "Vehicle Protection Plan" (plan). Griffin was marketing the plan to Illinois residents who had recently purchased new automobiles. Under the plan, consumers pay a yearly fee in exchange for Griffin's promise to pay for the repair or replacement of certain automobile parts should those parts break down or fail to operate during a specified coverage period.

After a hearing on the matter, the Department ruled that the plan constituted an insurance policy and entered a cease and desist order against Griffin. Griffin appealed the Department's ruling to the trial court which, after holding its own hearing, agreed with the Department's findings.

Griffin now appeals contending: (1) that the trial court erred in ruling that the plan constitutes an insurance policy rather than a service contract; (2) that the Department's cease and desist order is not supported by the evidence; and (3) that the trial court erred in failing to find that the plan, because it is a service contract, is governed by Federal law and is therefore exempt from State regulation.

We affirm.

Background

The facts of this case are not in dispute. Griffin is an Ohio corporation which began marketing the plan in Illinois in early 1984. Griffin sent a sales brochure and a sales agreement to Illinois residents who had recently purchased new automobiles. The brochure describes the plan as "a mechanical service contract." Under the plan, Griffin agrees to repair or replace any of the specific automobile parts covered by the plan should those parts break down or fail during the coverage period.

The plan provides for a $25 deductible per part. When a customer needs mechanical service, he contacts Griffin, which then forwards the claim request to Great Plains Insurance, Inc. Only upon approval by Great Plains adjusters will a repair be covered by the plan's provisions. A customer can bring his vehicle into any facility the customer selects. Griffin itself, however, does not perform any of the repair services.

The customer is permitted to select one of four different policies. The policies differ in their length of time and with respect to the number of parts covered. The policies also contain ...


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