LEGAL, LEGISLATIVE AND REGULATORY SUMMARY

April 2007

While the war in Iraq, various appropriations Bills and the Attorney General’s firing of a number of U.S. Attorneys have the attention of Congress, with gasoline prices averaging $2.85 a gallon, our Nation’s energy policy is also back at the forefront.

On Monday, April 2, 2007, the Supreme Court Ruled that the Environmental Protection Agency has the authority under the Federal Clean Air Act, to regulate heat trapping gases in automobile emissions.  This is the first Supreme Court case involving the issue of global warming.  The court also ruled that the EPA, which previously refused to regulate greenhouse gas pollutants that contribute to global climate changes must do so and can no longer side step its authority unless it could provide a scientific basis for its refusal.

Total Loss Vehicles are also receiving some attention on the Hill following Senator Lott’s recent testimony on the subject.  Titled the Passenger Vehicle Loss Disclosure Act, Senate Bill 545 would require insurance companies to disclose vehicles declared to be a total loss to the public in a commercially reasonable and electronically accessible manner. In addition to Senator Lott’s testimony, the Salvage Auto Fraud Reform Coalition, of which the NIADA is a member, also reiterated its support for total loss legislation and its implementation due to the importance of the issue to our industry.

The stalemate regarding the implementation of the Real ID Act is coming to an end, but a final resolution is still a ways off.  To refresh your memory, the Real ID Act of 2005 requires states to include a laundry list of items on driver’s licenses in order for them to be valid for federal identification purposes.  Implementation was required by May 2008 but the States have requested a delay of the because of the high cost to implement the Act.  In response to the States request, the US Department of Homeland Security issued a temporary reprieve to the states allowing them to delay implementation of the strict requirements until December 31, 2009.

The automobile industry’s battle to overturn California’s Greenhouse Gas Emissions Rule on cars and trucks shifts to a new venue - a Vermont courtroom.  The Automobile Industry began its Federal lawsuit challenging the adoption of strict limits on vehicle emissions of carbon dioxide, a main greenhouse gas.  Vermont is one of 9 states that followed California’s lead in mandating that automakers meet tailpipe emissions limits beginning in 2009 that increase annually to cut emissions up to 40 percent by 2016. The central issue in this case is whether states have the power to regulate carbon dioxide emissions in motor vehicles or whether they can only be regulated on a federal level.  The entire industry will be keeping a close eye on this case as it progresses.

Case of the Month
Our case of the month is Wendy’s vs. Illinois Union Insurance Company. Although this case comes from the fast-food industry, it illustrates a very important point that impacts all motor vehicle dealers.   In this case Wendy’s seeks coverage from Illinois Union for the costs of defense and a settlement resulting from an Arbitration proceeding.  Wendy’s had a “claims made” insurance policy, which set a specific time limit (60 days from the time of notice) when they could make a claim.  Wendy’s received notice of the potential claim on April 16, 2004, yet failed to bring it to the Insurance Company’s attention until February of 2006, some 8 months later.  As a result, the Federal Court held that Wendy’s failed to give Illinois Union timely notice of claims, contrary to its policy, and dismissed the case.

Insurance policies issued to motor vehicle dealerships are very similar to the one issued to Wendy’s, and frequently contain “claims made” language.  The lesson to be learned from this case is a simple, but extremely important one:  how you handle a dispute, or a potential dispute for that matter, can be just as important as the dispute itself.