By Greg Johnson. In 2013, Insurance Services Office (“ISO”) rolled out its new Auto Dealers Coverage Form (CA 00 25) (“ADCF” policy) The ADCF policy replaces the Garage Liability (“GL”) policy which had been available for decades. One of the most major differences between the GL policy and the new ADCF policy is the addition of “Acts, Errors or Omissions” coverage in Section III of the policy. This optional liability coverage is primarily designed to protect the auto dealer against claims resulting from the dealer’s violation of certain specifically described consumer protection laws.

Prior to the ADCF, most auto dealer insurers provided a similar type of “statutory errors and omissions” coverage which provided protection against suits for violations of the Federal Used Car Buyer’s Guide Regulation (16 C.F.R. § 455.2(a)) and similar state laws. However, the “Acts, Errors or Omissions” coverage of the ADCF omits coverage for this risk.

The regulation requires dealerships to affix the Federal Trade Commission’s Buyer’s Guide (a/k/a “window sticker”) to any used vehicle offered for sale. It specifically requires that before a used vehicle is offered for sale, a seller must prepare, fill in as applicable, and display on the vehicle a “Buyer’s Guide.” 16 C.F.R. §455.2(a). “The Buyers Guide shall be displayed prominently and conspicuously in any location on a vehicle and in such a fashion that both sides are readily readable.” 16 C.F.R. § 455.2(a)(1).

A cause of action for violation of the regulation exists under the Magnuson– Moss Warranty Federal Trade Commission Improvement Act (“MMWA”), 15 U.S.C. §2301 et seq. The MMWA is designed to “improve the adequacy of information available to consumers, prevent deception, and improve competition in the marketing of consumer products.” 15 U.S.C. § 2302(a). Under15 U.S.C. § 2310(d) (1), a consumer is entitled to recover when s/he is “damaged by the failure of the supplier to comply with any obligation under this title.” See e.g., Tague v. Autobarn Motors, Ltd., 394 Ill. App. 3d 268, 279, 914 N.E.2d 710, 718 (Ill. App. Ct. 2009) (rejecting claim that dealership did not properly display or provide him Buyers Guide); Schultz v. Burton-Moore Ford, Inc., 2008 WL 5111897 (E.D. Mich. Dec. 2, 2008) (factual dispute existed as to whether dealership violated 16 C.F.R. § 455.2(2)(b), and thus MMWA, by not completing widow sticker).

Some states incorporate the Federal Used Car Buyer’s Guide Regulation by reference in their state laws (which, among other things, authorizes state and local law enforcement officials to ensure that dealers post Buyers Guides and to fine them if they do not comply). See, e.g., California Vehicle Code §11713.1(t) (“it is a violation of this code for the holder of a dealer’s license issued under this article . . . [d]isplay or offer for sale a used vehicle unless there is affixed to the vehicle the Federal Trade Commission’s Buyer’s Guide as required by Part 455 of Title 16 of the Code of Federal Regulations”); California Vehicle Code §11614 (“[n]o lessor- retailer licensed under this chapter may do any of the following in connection with any activity for which this license is required: (v) To display or offer for sale any used vehicle unless there is affixed to the vehicle the Federal Trade Commission’s Buyer’s Guide as required by Part 455 of Title 16 of the Code of Federal Regulations”).

Perhaps auto dealer insurers who utilize the ISO-based Auto Dealer Coverage Form will offer a manuscript endorsement to cover this risk.