The opinion of the court was delivered by: Judge George M. Marovich
MEMORANDUM OPINION AND ORDER
Plaintiffs Robert T. Kennedy ("Kennedy"), JoAnn Mick ("Mick") and Charles C. Mitschow ("Mitschow") filed a purported class action complaint against defendants Butler Financial Solutions, LLC ("Butler"), Heritage Warranty Risk Retention Group, Inc. ("Heritage") and Warrantech Mutual Insurance Risk Retention Group, Inc. ("Warrantech").*fn1 In Count I, plaintiffs allege that the defendants violated the Magnuson-Moss Warranty Act. In Count II, plaintiffs allege that Butler breached its contracts with plaintiffs. In Count III, plaintiffs assert that their contracts are voidable. In Count IV, plaintiffs assert a third-party beneficiary claim against Heritage. In Count V, plaintiffs seek declaratory relief from defendants.
Each defendant has filed a separate motion to dismiss. Butler seeks to dismiss Counts I, III and V against it. Heritage seeks to dismiss Counts I and III. Warrantech seeks to dismiss Counts I, III and V. For the reasons set forth below, the Court grants in part and denies in part Heritage's motion to dismiss. The Court grants in part and denies in part Butler's motion. The Court grants in part and denies in part Warrantech's motion to dismiss.
The Court takes as true the allegations in plaintiffs' first amended complaint.
This case arises out of the alleged failure of defendants to comply with their obligations under vehicle service contracts ("VSCs") entered into by plaintiffs Kennedy, Mick and Mitschow. A VSC is akin to an extended warranty for an automobile. The automobile-purchaser has the option, when purchasing a car, to enter into an agreement whereby the purchaser pays a premium and the obligor agrees to pay for the cost of certain repairs that become necessary during the time period set out in the VSC.
In December 2002, Kennedy paid $1,332.00 for a VSC that was to cover his vehicle for 84 months or 100,000 miles. In November 2002, Mick paid $1,270.00 for a VSC that was to cover her vehicle for 60 months or 100,000 miles. In June 2003, Mitschow paid $1,500.00 for a VSC that was to cover his vehicle for 72 months or 100,000 miles. Plaintiffs allege that the defendants collected more than $25,000,000.00 in premiums for VSCs.
The VSCs signed by Kennedy, Mick and Mitschow are standard-form contracts. Each says, among other things, "We will pay or reimburse You for reasonable costs to repair or replace any Breakdown of a part listed under Mechanical Coverage." (Emphasis in original.) The VSC defines "We" or "Our" as Butler Financial Solutions, LLC. The VSCs also say, "Our obligations under this Vehicle Service Contract are insured by a policy issued by Heritage Warranty Mutual Insurance Risk Retention Group, Inc. [address omitted] under a motor Vehicle Service Contract reimbursement policy . . . If a covered claim is not paid within sixty (60) days . . . You may file a claim directly with the Insurance Company. Please call 1-800-543-8801 for instructions."
In addition to Heritage and Butler, a third entity--Warrantech--is involved with the VSCs. Warrantech designed, priced, marketed, distributed and administered the VSC program. The three defendants are contractually linked by an Administrative Agreement, which the defendants signed in 2001. Heritage and Butler each signed the Administrative Agreement as "COMPANY". The Administrative Agreement says, among other things, that "WARRANTECH shall serve as COMPANY's administrator of Vehicle Service Contracts which are provided by COMPANY." According to the Administrative Agreement, the VSCs are actually sold by car dealers. For each VSC sold, a car dealer remits to Warrantech some amount (which is not set out in the Administrative Agreement). Warrantech, in turn, remits a "premium" to COMPANY. In addition to the premium, Warrantech is supposed to pay COMPANY $40 for each VSC.
Warrantech settles all claims made under the VSCs. The Administrative Agreement says that "WARRANTECH shall maintain a COMPANY funded controlled disbursement claim payment bank account at Bank One located in Texas. This account shall be used solely for loss transactions specified under the AGREEMENT between COMPANY and WARRENTECH."
COMPANY is to pay WARRENTECH $20 for each claim, according to the Administrative Agreement.
A third contract is relevant to this case. In December 2001, Heritage and Butler signed an insurance agreement (the "Insurance Policy"). Under the Insurance Policy, Heritage and Butler agreed, among other things:
[Heritage] will indemnify [Butler] against Loss, subject to the Loss Reserve Fund provision herein, arising out of the reasonable and customary cost of repair or replacement under and in accordance with all the terms of the Service Contracts issued by [Butler] on or after the inception date of this Policy, as follows:
UPON FAILURE OF [BUTLER] TO PERFORM UNDER THE SERVICE CONTRACTS, HERITAGE WARRANTY MUTUAL INSURANCE RISK RETENTION GROUP, INC., SHALL PAY ON BEHALF OF [BUTLER] ANY SUMS [BUTLER] IS LEGALLY OBLIGATED TO PAY OR SHALL PROVIDE THE SERVICE THAT [BUTLER] IS LEGALLY OBLIGATED TO PERFORM ACCORDING TO [BUTLER'S] CONTRACTUAL OBLIGATION UNDER THE SERVICE CONTRACTS ISSUED BY [BUTLER], And HERITAGE WARRANTY MUTUAL INSURANCE RISK RETENTION GROUP, INC. WILL PAY CLAIMS AGAINST THE INSURED FOR RETURN OF THE UNEARNED PURCHASE PRICE OF THE SERVICE CONTRACT.
Coverage hereunder shall be provided on a claims made basis.
Upon failure of [Butler] to pay or provide service on a valid claim within sixty (60) days after proof of loss has been filed with [Butler], coverage hereunder shall be provided directly to the service contract holder claimant. (Insurance Policy at 1-2) (emphasis in original). The Insurance Policy says Heritage's liability is limited to the loss in excess of any "Loss Reserve Fund" that "may be established from time to time by the Administrator on behalf of [Butler]". The Insurance Policy also makes it clear that Heritage approved the content of the VSCs. (Insurance Policy at 5 ("It is a condition of this insurance that the Service Contract(s) issued by [Butler] are identical to the specimen copy(s) on file with and ...