# Petition — Community Loan Corp. v. Cody

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1980
- **Citation:** 446 U.S. 988

## Text

Bupreme Court, U. &
Ein & D

FEB 20 1980

OcTrosBER TERM, 1979

=

No.'f 9 - 1290.

CoMMUNITY LOAN CorRPORATION OF RICHMOND COUNTY,
Petitioner,

Vv.

JESSIE Copy, SALLIE MAkE Copy, and all others
similarly situated,
Respondents.

CoMMUNITY LOAN & INVESTMENT CORPORATION
oF AUGUSTA,
Petitioner,

¥.

JAMES TOUCHSTONE, GLENDA TOUCHSTONE, INEZ
SINGLETON, and all others similarly situated,
Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

W. Ruetr TANNER

RicHarp M. Kirpy
HANSELL, Post, BRANDON & DorRSEY
3300 First National Bank Tower
Atlanta, Georgia 30303
(404) 581-8000

MIcHAEL J. HENKE
JOHN D. TauRMAN
Vinson & ELKINS
1101 Connecticut Avenue, N.W.
Suite 900
Washington, D. C. 20036
(202) 862-6500

February 20, 1980

PRESs OF BYRON S. ADAMS PRINTING, INC., WASHINGTON, D. C.

TABLE OF CONTENTS

Page
ee ec leks adeeseccene soe aeses 2
i cic es th ecneds ase esen ve 2
SI NINO sig v sv acencccsesesacvccccese 2
evades aces swteevewsyss 3
STATEMENT OF THE CASE .... 1.0... ccc cc cece ccccces 3

Reasons For GRANTING THE Writ

I. The Court of Appeals’ Decision Has Created
An Intercircuit Conflict As To Whether The
McCarran-Ferguson Act Exempts Credit Sales
Of Insurance Policies By Insurance Agents
From The Requirements Of ‘The Truth-In-
a oo og 4b 6 65's won bv 0.000 6

II. By Misapplying The Applicable Decisions Of
This Court, Including Securities and Exchange
Commission v. National Securities, Inc., 393 U.S.

453 (1969), The Court of Appeals’ Decision
Has Emasculated Section 2(b) Of The McCar-
ee 7

III. The Court of Appeals’ Decision Overlooks A
Specific Provision Of Regulation Z Of The
Board of Governors Of The Federal Reserve
Re 15

IV. The Court of Appeals’ Decision Awarding Mul-
tiple Penalties On A Single Transaction Has

Created A Second Intercireuit Conflict ........ 17

V. The Issues Presented By This Case Are Signi-
ficant Questions of Federal Law .............. 19
a ies sso wdbeeeececvece 21

Appenpvix A—Order of the United States District Court
for the Southern District of Georgia, Augusta
Division (February 28, 1975) ...........ccece0. la

ii Table of Contents Continued
Page

Appenpix B—Memorandum Opinion of the United
States District Court for the Southern District of
Georgia, Augusta Division (February 4, 1976) .. 19a

Appenpix C—Findings and Conclusions and Final
Judgment of the United States District Court for
the Southern District of Georgia, Augusta Divi-
sion (February 5, 1976) .........ccccsecesceces 29a

Apprenpix D—Opinions of the United States Court of
Appeais for the Fifth Circuit ...............--- 39a

Apprenpix E—Judgment of the United States Court of
Appeals for the Fifth Circuit ................5. 63a

Appenpix F—Order of the United States Court of Ap-
peals for the Fifth Circuit Denying Petition for
SO eave re Terres errr ere eee 65a

Appenpix G—McCarran-Ferguson Act .............: 67a
Appenpix H—Excerpts from the Truth-in-Lending Act 69a
Appenpix I—Excerpts from Regulation Z of the Board

of Governors of the Federal Reserve System .... 79a
Appenpix J—Insurance Premium Finance Company
Ret of the Bibi of GeOrW. vii vcd cee cwseness 85a
Aprenpix K—Excerpts from Georgia Insurance Code
2 | PPR Peevey ry tee ee ee eee 97a
Appenpix L—Excerpts from Georgia Insurance Code
oe 2) Pe rere Tee rere crore err Tre 101la
Appenpix M—Excerpts from Georgia Insurance Code
8 BURT Pere ey rr Tere err Tee 105a

Aprrenpix N—Georgia Insurance Code Chapter 56-30
(Individual Accident and Sickness Insurance) ...109a

Apprenpix O—Regulations of the Georgia Insurance
Commissioner Governing the Advertising of Acci-
dent and Sickness Insurance ................05: 1338a

Appenpix P—Opinion of the United States Court of
Appeals for the Fifth Circuit in Cochran v. Paco ..15la

Appenpix Q—Opinions of the United States Court of
Appeals for the Fifth Circuit in Perry v. Fidelity
COn TAFE TNMMTONEE CE. occa cccveccccreeccsens 167a

TABLE OF AUTHORITIES iil
CasEs: Page

Addrist v. Equitable Life Assurance Soc’y, 503 F.2d
725 (9th Cir. 1974), cert. denied, 420 U.S. 929

eter Ree RP NAD SEINE SAIC OMIT WA chats Hove Ata 12
Bowles v. Seminole Rock & Sand Co., 325 U.S. 410
See ert ree ery oT CN tay eee 16

Cochran v. Paco, Inc., 606 F.2d 460 (5th Cir. 1979) .5, 11, 20
Dexter v. Equitable Life Assurance Soc’y, 527 F.2d

MUP RE, CAU, POTOE sich vik ¢ Schad cece ein diws 12
FTC v. National Casualty Co., 357 U.S. 560 (1958) ...9, 12
FTC v. Travelers Health Ass’n, 362 U.S. 293 (1960) .. 9

Group Life d& Health Ins. Co. v. Royal Drug Co., 440
U.S. 205 (1979) y ug Co.,

Hooper v. California, 155 U.S. 648 (1895) ............ 7
Lowe v. Aarco-American, Inc., 536 F.2d 1160 (7th Cir.

DE aa nies aces CER Poe ae a 6
Paul v. Virginia, 75 U.S. (8 Wall) 168 (1868) ........ 7
Perry v. Fidelity Union Life Ins. Co., 606 F.2d 468

SUN a oe gar Oe ig ret ao 5,11
Powers v. Sims and Levin, 542 F.2d 1216 (4 i

ee er ee aioe 7 - = 18

Prudential Ins. Co. v. Benjamin, 328 U.S. 408 (1946) .. 7,8

St. Paul Fire & Marine Ins. Co. v. Ba 438
apr) 0 arry, U.S. 531

SEC v. National Securities, Inc., 393 U.S. 453 (1969) .. 7,9,

10, 14

Udall v. Tallman, 380 U.S. 1 (1965) ............005. 16
United States y. South-Eastern Underwriters Ass’

se... CUS

iv Table of Authorities Continued

Page
STATUTES:
Georgia Code Annotated
eS S Peeeeererrrrer ry 15
6 56-701 of Sg... .. occ cdecneneucasseteneeeenes 3, 11
ff) eereereree te ee 3, 11
CSO DED onic ciccccecayaccecnnweege ee erenerees 3, 11
ES Br oe 3, 11
§ 56-3001 ef seq. 20.0.0 ccccccccccesccccsssceces 3,11
§ 84-5301 cf 20g. 2. ccc ccsctcccccsscenesssssnsss 3, 10
McCarran-Ferguson Act, 15 U.S.C. § 1011 et seg. ...passim
Truth-in-Lending Act, 15 U.S.C. § 1601 et seq. ..... passim
9B U.S.C. § 1254E) oo cecncc cc ccccctiscsspencesaues 2

REGULATIONS:

Regulation Z of the Board of Governors of the Federal
Reserve System

Sh re 3
yt Se IR 18
St eer 4,15
Rules and Regulations of the Insurance Commissioner
of the State of Georgia, Chapter 120-2-12 ........ 3, 11
MISCELLANEOUS:
Administrative Office of the United States Courts,
1976 Annual Report .....ferred commissions to any incorporated insurance
agency solely because any of its stockholders has ceased
to hold a license to act as an insurance agent.

(d) Provided, further, that the provisions of this section
shall not prevent the payment or receipt of any commission
or any other valuable consideration to or by a person who
has applied for a temporary license pursuant to section
56-8lla, subsection (3), pending issuance of such tempo-
rary license.

56-813a Refusal, suspension or revocation of license; notice:
hearing: revocation as bar to issuance of new license: appeal

(1) A license may be refused, or a license duly issued
may be suspended or revoked or the renewal thereof re-
fused by the commissioner if, after notice and hearing as
hereinafter provided, he finds that ~ applicant for, or
liolder of such license:

(a) Has wilfully violated any provision of the insurance
laws of this State; or

(b) Has intentionally made any material misstatement in
the application for such license; or

(c) Has obtained, or attempted to obtain, such license
by fraud or misrepresentation; or

(d) Has misappropriated or converted to his own use
or illegally withheld money belonging to an insurer or an
insured or beneficiary; or

(e) Has otherwise demonstrated lack of trustworthiness
or competence to act as an agent or counselor; or

103a

(f) Has been guilty of fraudulent or dishonest practice ;
or

(g) Has materially misrepresented the terms and con-
ditions of insurance policies or contracts; or

(h) Has made or issued, or caused to be made or issued,
any statement misrepresenting or making incomplete com-
parisons regarding the terms or conditions of any insur-
ance or annuity contract legally issued by any insurer, for
the purpose of inducing or attempting to induce the owner
of such contract to forfeit or surrender such contract or
allow it to lapse for the purpose of replacing such contract
with another; or

(i) Has obtained, or attempted to obtain such license,
not for the purpose of holding himself out to the general
public as an agent or counselor, but primarily for the pur-
pose of soliciting, negotiating or procuring insurance or
annuity contracts covering himself or members of his fam-
ily, or the officers, directors, stockholders, partners, em-
ployees, of a partnership, association, or corporation cof
which he or a member of his family is an officer, director,
stockholder, partner or employee.

105a
APPENDIX M

Excerpts from Georgia Insurance Code Chapter 56-24
Ga. Code Aan. §§ 56-2410-11, 56-2413

Cuapter 56-24. Tue Insurance Contract In GENERAL
2 se _ e a eo oe oe e es

56-2410 Filing aad approval of forms

(1) No basic insurance policy or annuity contract form,
or application form where written application is required
and is to be made a part of the policy or contract, or
printed rider or endorsement form or form of renewal cer-
tificate, shall be delivered or issued for delivery in this
State, unless the form has been filed with and approved
by the commissioner. This provision shall not apply to
surety bonds, or to specially rated inland marine risks, nor
to policies, riders, endorsements, or forms of unique char-
acter designed for and used with relation to insurance
upon a particular subject, or which relate to the manner
of distribution of benefits or to the reservation of rights
and benefits under life or accident and sickness insurance
policies and are used at the request of the individual pol-
icyholder, contract holder, or certificate holder.

(2) Every such filing shall be made not less than 90 days
in advance of any such delivery. At the expiration of such
90 days the form so filed shall be deemed approved unless
prior thereto it has been approved or disapproved by the
commissioner. Approval of any such form by the commis-
sioner shall constitute a waiver of any unexpired portio
of such waiting period. The commissioner may extend by
not more than an additional 90 days the period within
which he may so approve or disapprove any such form by
giving notice of such extension before expiration of the
initial 90-day period. At the expiration of any such period
as so extended, and in the absence of such prior approval
or disapproval, any such form shall be deemed approved.
The commissioner may at any time, after notice and for

106a

cause shown, withdraw any such approval after notice and
hearing as provided in sections 56-218 through 56-227.

(3) Any order of the commissioner disapproving any
such form or withdrawing a previous approval shall state
in reasonable detail the grounds therefor.

(4) The commissioner may by order, in exceptional
cases, exempt from the requirements of this section for so
long as he deems proper any insurance document or form
or type thereof as specified in such order, to which, in his
discretion, this section may not practicably be applied,
or the filing and approval of which are, in his discretion
not desirable or necessary for the protection of the public.

(5) This section shall apply also to any such form used
by domestic insurers for delivery in a jurisdiction outside
this State, if the insurance supervisory official of such
jurisdiction informs the commissioner that such form is
not subject to approval or disapproval by such official, and
upon the commissioner’s order requiring the form to be
submitted to him for the purpose. The applicable stand-
ards shall apply to such forms as apply to forms for do-
mestic use.

56-2411 Grounds for disapproval of forms

The commissioner shall disapprove any such form filed
under section 56-2410, or withdraw any previous approval
thereof only:

(1) If it is in any respect in violation of or does not
comply with this Title;

(2) If it contains or incorporates by reference any in-
consistent, ambiguous, or misleading clauses, or exceptions
and conditions which deceptively affect the risk purported
to be assumed in the general coverage of the contract;

(3) If it has any title, heading, or other indication of its
provisions which is misleading;

107a

(4) If it is printed or otherwise reproduced in such man-
ner as to render any provision of the form substantially
illegible or not easily legible to persons of normal vision;
or

(5) If it contains provisions which are unfair or in-
equitable or contrary to the public policy of this State, or
would, because such provisions are unclear or deceptively
worded, encourage misrepresentation.

56-2413 Contents of policies in general

(1) The written instrument in which a contract of insur-
ance is set forth is the policy.

(2) Every policy shall specify:

(a) The names of the parties to the contract;
(b) The subject of the insurance;

(c) The risks insured against;

(d) The time when the insurance thereunder takes effect
and the period during which the insurance is to continue;

(e) The premium; and
(f) The conditions pertaining to the insurance.

(3) If under the policy the exact amount of premium is
determinable only at stated intervals or termination of the
contract, a statement of the basis and rates upon which the
premium is to be determined and paid shall be included.

(4) Subsections (2) and (3) of this section shall not
apply as to surety contracts, or to group insurance policies.

(5) All policies and annuity contracts issued by domes-
tic insurers, and the forms thereof filed with the commis-
sioner, shall have printed thereon an appropriate designat-
ing letter or figure, or combination of letters or figures or
terms identifying the respective forms of policies or con-

108a

tracts. Whenever any change is made in any such form,
the designating letters, figures or terms thereon shall be

correspondingly changed.

(6) All policies and annuity contracts shall contain such
standard or uniform provisions as are required by the
applicable provisions of this Title pertaining to contracts
of particular kinds of insurance.

109a
APPENDIX N

Georgia Insurance Code Chapter 56-30
Ga. Code Ann. §§ 56-3001-3018

Cuapter 56-30. InprvipvaL AccIpENT AND SICKNESS
INSURANCE

56-3001 Definition of accident and sickness insurance policy

The term “accident and sickness policy” as used in this
Chapter includes any policy insuring .gainst loss resulting
from sickness, or from bodily injury or death by accident,
or both, or any contract to furnish ambulance service in
the future. Nothing in this Chapter shall apply to or affect:

(1) Any policy of workmen’s compensation insurance or
any policy of workmen’s insurance or any policy of liability
insurance with or without supplementary expense cover-
age thereon; or

(2) Any policy or contract of reinsurance; or

(3) Any policy, the renewal of which is subject to con-
tinuation of employment with a specified employer, or any
blanket or group policy of insurance, or any policy issued
pursuant to the exercise of conversion privileges provided
for in group insurance policies; or

(4) Life insurance, endowment or annuity contracts, or
contracts supplemental thereto which contain only such
provisions relating to accident and sickness insurance as:
(a) provide additional benefits in case of death or dismem-
berment or loss of sight by accident; or as (b) operate to
safeguard such contracts against lapse, or to give a special
surrender value or special benefit or an annuity in the
event that the insured or annuitant shall become totally
and permanently disabled, as defined by the contract or
supplemental contract; or

(5) Companies, organizations or associations provided
for in Chapters 56-17 and 56-18; or to any policy of acci-

110a

dent, sickness or hospitalization insurance issued prior to
the effective date of this Act.

56-3002 Scope and formai of policy

No policy of accident and sickness insurance shall be de-
livered or issued for delivery in this State unless it meets
the following requirements:

(1) The entire money and other considerations therefor
are expressed therein;

(2) The time at which the insurance takes effect and
terminates is expressed therein;

(3) It purports to insure only one person, except that a
policy may insure, originally or by subsequent amendment
upon the application of an adult member of a family who
shall be deemed the policyholder, any two or more eligible
members of that family, including husband, wife, depend-
ent children or any children under a specified age which
shall not exceed 19 years and any other person dependent
upon the policyholder ;

(4) The style, arrangement and over-all appearance of
the policy given no undue prominence to any portion of the
text, and every printed portion of the text of the policy
and of any endorsements or attached papers is plainly
printed in light-faced type of a style in gereral use, the size
of which shall be uniform and not less than 10 point with a
lower case unspaced alphabet length not less than 120 point
(the “text” shall include all printed matter except the name
and address of the insurer, name or title of the policy, the
brief description, if any, and captions and subcaptions),
when a policy is renewable only at the option of the in-
surer, such fact shall be made known in prominent lettering
on the face of the policy.

(5) The exceptions and reductions of indemnity are set
forth in the policy and, except those which are set forth in

llla

sections 56-3004 and 56-3005, are printed, at the insurer’s
option, either included with the benefit provisions to which
they apply, or under an appropriate caption such as “ex-
ceptions,” or “exceptions and reductions”: Provided, that
if an exception or reduction specifically applies only to a
particular benefit of the policy, a statement of such excep-
tion or reduction shall be included with the benefit provis-
ion to which it applies;

(6) Each such form, including riders and endorsements,
shall be identified by a form number in the lower left-
hand corner of the first page thereof; and

(7) It contains no provision purporting to make any
portion of the charter, rules, constitution, or bylaws of the
insurer a part of the policy unless such portion is set forth
in full in the policy, except in the case of the incorporation
of, or reference to, a statement of rates or classification of
risks, or short-rate table filed with the commissioner.

56-3003 Age limit

If any accident and sickness policy delivered or issued
for delivery in this State contains a provision establishing
as an age limit or otherwise, a date after which the cover-
age provided by the policy will not be effective, and if such
date falls within a period for which premium is accepted
by the insurer or if the insurer accepts a premium after
such date, the coverage provided by the policy will continue
in force until the end of the period for which premium has
been accepted. In the event the age of the insured has been
misstated and if, according to the correct age of the in-
sured, the coverage provided by the policy would not have
become effective, or would have ceased prior to the accept-
ance of such premium or premiums, then the liability of
the insurer shall be limited to the refund, upon request, of
all premiums paid for the period not covered by the policy.

112a

56-3004 Required policy provisions

Each accident and sickness policy delivered or issued for
delivery in this State shall contain the provisions specified
in this section in the words in which the same appear in
this section, except that the insurer may, at its option, sub-
stitute for one or more of such provisions corresponding
provisions of different wording approved by the commis-
sioner which are in each instance not less favorable in any
respect to the insured or the beneficiary. Such provisions
shall be preceded individually by the caption appearing in
this section, or, at the option of the insurer, by such appro-
priate individual or group captions or subcaptions as the
commissioner may approve. If any such provision is in
whole or in part inapplicable to or inconsistent with the
coverage provided by a particular form of policy, the in-
surer, with the approval of the commissioner, shall omit
from such policy any inapplicable provision or part of a
provision, and shall modify any inconsistent provision or
part of a provision in such manner as to make the provi-
sion as contained in the policy consistent with the coverage
provided by the policy.

(1) Entire contract; changes. This policy including the
endorsements and the attached papers, if any, constitutes
the entire contract of insurance. No change in this policy
shall be valid until approved by an executive officer.of the
insurer and unless such approval be endorsed hereon or
attached hereto. No agent has authority to change this pol-
icy or to waive any of its provisions.

(2) Time limit on certain defenses. (a) After two years
from the date of issue of this policy no misstatements made
by the applicant in the application for such policy shall be
used to void the policy or to deny a claim for loss incurred
or disability (as defined in the policy) commencing after
the expiration of such two year period.

(The foregoing policy provision shall not be so construed
as to affect any legal requirements for avoidance of a pol-

1l3a

icy or denial of a claim during such initial two year period,
nor to limit the application of subsections (1), (2), (3),
(4) and (5) of section 56-3005 in the event of misstatement
with respect to age or occupation or other insurance. )

(A policy which the insurer has the right to continue in
force subject to its terms by the timely payment of pre-
mium: (i) until at least 60; or (ii) in the case of a policy
issued after age 54, for at least five years from its date of
issue, may contain in lieu of the foregoing the following
provision (from which the clause in brackets may be omit-

ted at the insurer’s option) under the caption “incontest-
able”:

After this policy has been in force for a period of two
years during the lifetime of the insured [excluding any pe-
riod during which the insured is disabled] it shall become
incontestable as to, the statements contained in the appli-
cation. )

(b) No claim for loss incurred or disability (as defined
in the policy) commencing after two years from the date
of issue of this policy shall be reduced or denied on the
ground that a disease or physical condition not excluded
from coverage by name or specific description effective on
the date of loss had existed prior to the effective date of
coverage of this policy.

(3) Grace period. A grace period of days will be
granted for the payment of each premium falling due after
the first premium, during which grace period the policy
shall continue in force. The insurer shall insert in the blank
space a number not less than “7” for weekly premium
policies, “10” for monthly premium policies and “30” for
all other policies. A policy in which the insurer reserves
the right to refuse renewal shall have at the beginning of
the above provision: “unless not less than thirty (30) days
prior to the premium due date the insurer has delivered
to the insured or has mailed to his last address as shown

1l4a

by the records of the insurer written notice of his inten-
tion not to renew this policy beyond the period for which
the premium has been accepted .. .”

(4) Reinstatement. If any renewal premium be not paid
within the time granted the insured for payment, a subse-
quent acceptance of any premium by the insurer or by any
agent duly authorized by the insurer to accept such per-
mium, without requiring in connection therewith an appli-
cation for reinstatement, shall reinstate the policy: Pro-
vided, however, that if the insurer or such agent requires
an application for reinstatement and issues a conditional
receipt for the premium tendered, the policy will be rein-
stated upon approval of such application by the insurer,
or lacking such approval, upon the 45th day following the
date of such conditional receipt unless the insurer has pre-
viously notified the insured in writing of its disapproval
of such application. The reinstated policy shall cover
only loss resulting from such accidental injury as may be
sustained after the date of reinstatement and loss due to
such sickness as may begin more than 10 days after such
date. In all other respects the insured and insurer shall
have the same rights thereunder as they had under the
policy immediately before the due date of the defaulted
premium, subject to any provisions endorsed hereon or
attached hereto in connection with the reinstatement. Any
premium accepted in connection with a reinstatement shall
be applied to a period for which premium has not been
previously paid, but not to any period more than 60 days
prior to the date of reinstatement.

The last sentence of the above provision may be omitted
from any policy which the insured has the right to continue
in force subject to its terms by the timely payment of pre-
miums (i) until at least age 60, or (ii) in the case of a pol-
icy issued after age 54, for at least five years from its date
of issue.

1ll5a

(5) Notice of claim. Written notice of claim must be
given to the insurer within 20 days after the occurrence or
commencement of any loss covered by the policy, or as soon
thereafter as is reasonably possible. Notice given by or on
behalf of the insured or the beneficiary to the insurer at

(insert the location of such office as the insurer
may designate for the purpose), or to any authorized
agent of the insurer, with information sufficient to identify
the insured, shall be deemed notice to the insurer.

In a policy providing a loss-of-time benefit which may
be payable for at least two years, an insurer may at its
option insert the following between the first and second
sentences of the above provision:

“Subject to the qualifications set forth below, if the in-
sured suffers loss of time on account of disability for which
indemnity may be payable for at least two years, he shall
at least once in every six months after having given notice
of claim give to the insurer notice of continuance of said
disability, except in the event of legal incapacity. The pe-
riod of six months following any filing of proof by the in-
sured or any payment by the insurer on account of such
claim or any denial of liability in whole or in part by the
insurer shall be excluded in applying this provision. Delay
in the giving of such notice shall not impair the insured’s
right to any indemnity which would otherwise have accrued
during the period of six months preceding the date on
which such notice is actually given.”

(6) Claim forms. The insurer, upon receipt of a notice
of claim, will furnish to the claimant such forms as are
usually furnished by it for filing proofs of loss. If such
forms are not furnished within 15 days after the giving of
such notice the claimant shall be deemed to have complied
with the requirements of this policy as to proof of loss
upon submitting, within the time fixed in the policy for
filing proofs of loss, written proof covering the occurrence,

1l6a

the character and the extent of the loss for which claim
is made.

(7) Proofs of loss. Written proof of loss must be fur-
nished to the insurer at its said office in case of claim for
loss for which this policy provides any periodic payment
contingent upon continuing loss within 90 days after the
termination of the period for which the insurer is liable
and in case of claim for any other loss within 90 days after
the date of such loss. Failure to furnish such proof within
the time required shall not invalidate nor reduce any claim
if it was not reasonably possible to give proof within such
time, provided such proof is furnished as soon as reason-
ably possible and in no event, except in the absence of legal
capacity, later than one year from the time proof is other-
wise required.

(8) Time of payment of claims. Indemnities payable un-
der this policy for any loss other than loss for which this
policy provides any periodic payment will be paid immedi-
ately upon receipt of due written proof of such loss. Sub-
ject to due written proof of loss, all accrued indemnities
for loss for which this policy provides periodic payment
will be paid ————— (insert period for payment whivh
must not be less frequently than monthly) and any balance
remaining unpaid upon the termination of liability will
be paid immediately upon receipt of due written proof.

(9) Payment of claim. Indemnity for loss of life will be
payable in accordance with the beneficiary designation and
the provision respecting such payment which may be pre-
scribed herein and effective at the time of payment. If no
such designation or provision is then effective, such in-
demnity shall be payable to the estate of the insured. Any
other accrued indemnities unpaid at the insured’s death
may, at the option of the insurer, be paid either to such
beneficiary or to such estate. All other indemnities will be
payable to the insured.

117a

The following provisions, or either of them, may be in-
cluded with the foregoing provisions at the option of the
insurer.

If any indemnity of this policy shall be payable to the
estate of the insured, or to an insured or beneficiary who
is a minor or otherwise not competent to give a valid re-
lease, the insurer may pay such indemnity, up to an
amount not exceeding $—————- (insert an amount which
shall not exceed $1,000) to any relative by blood or connec-
tion by marriage of the insured or beneficiary who is
deemed by the insurer to be equitably entitled thereto. Any
payment made by the insurer in good faith pursuant to
this provision shall fully discharge the insurer to the ex-
tent of such payment.

Subject to any written direction of the insured in the
application or otherwise all or a portion of any indemni-
ties provided by this policy on account of hospital, nursing,
medical services, may at the insurer’s option and unless
the insured requests otherwise in writing not later than the
time of filing proof of such loss, be paid directly to the
hospital or person rendering such services; but it is not re-
quired that the service be rendered by a particular hospital
or person.

(10) Physical examinations and autopsy. The insurer at
its own expense shall have the right and opportunity to
examine the person of the insured when and as ofter as it
may reasonably require during the pendency of a claim
hereunder and to make autopsy in case of death where it
is not forbidden by law.

(11) Legal action. No action at law or in equity shall be
brought to recover on this policy prior to the expiration of
60 days after written proof of loss has been furnished in
accordance with the requirements of this policy. No such
action shall be brought after the expiration of three years

after the time written proof of loss is required to be fur-
nished.

1188

(12) Change of beneficiary. Unless the insured makes an
irrevocable designation of beneficiary, the right to change
of beneficiary is reserved to the insured and the consent of
the beneficiary or beneficiaries shall not be requisite to
surrender or assignment of this policy or to any change
of beneficiary or beneficiaries, or to any other changes in
this policy.

The first clause of this provision, relating to the irre-
vocable designation of beneficiary, may be omitted at the
insurer’s option.

56-3005 Optional policy provisions

No accident and sickness policy delivered or issued in
this State shall contain provisions respecting the matters
set forth in this section unless such provisions are in the
words in which the same appear in this section, except that
the insurer may, at its option, use in lieu of any such pro-
vision a corresponding provision of different wording ap-
proved by the commissioner which is not less favorable in
any respect to the insured or the beneficiary. Any such pro-
vision contained in the policy shall be preceded individu-
ally by the appropriate caption appearing in this section
or, at the option of the insurer, by such appropriate indi-
vidual or group captions or subcaptions as the commis-
sioner may approve. If any such provision is in whole or
in part inapplicable to or inconsistent with the coverage
provided by a particular form of policy, the insurer, with
the approval of the commissioner, shall omit from such
policy any inapplicable provision or part of a provision,
and shall modify any inconsistent provision or part of a
provision in such a manner as to make the provision as
contained in the policy consistent with the coverage pro-
vided by the policy.

119a

(1) Change of occupation. If the insured be injured or
contract sickness after having changed his occupation to
one classified by the insurer as more hazardous than that
stated in this policy or while doing for compensation any-
thing pertaining to an occupation so classified, the insurer
will pay only such portion of the indemnities provided in
this policy as the premium paid would have purchased at
the rates and within the limits fixed by the insurer for such
more hazardous occupation. If the insured changes his oc-
cupation to one classified by the insurer as less hazardous
than that stated in this policy, the insurer, upon receipt of
proof of such change of occupation, will reduce the premium
rate accordingly, and will return the excess pro rata un-
earned premium from the date of change of occupation or
from the policy anniversary date immediately preceding re-
ceipt of such proof, which ever is the more recent. In apply-
ing this provision, the classification of occupational risk and
the premium rates shall be such as have been last filed by
the msurer prior to the occurrence of the loss for which
the insurer is liable or prior to date of proof of change
in occupation with the State official having supervision of
insurance in the state where the insured resided at the time

_ this policy was issued; but if such filing was not required,

then the classification of occupational risk and the premium
rates shall be those last made effective by the insurer in
such state prior to the occurrence of the loss or prior to
the date of proof of change in occupation.

(2) Misstatement of age. If the age of the insured has
been misstated, all amounts payable under this policy shall
be such as the premium paid would have purchased at the
correct age.

(3) Other insurance in this insurer. If an accident or
sickness or accident and sickness policy or policies pre-
viously issued by the insurer to the insured be in force
concurrently herewith, making the aggregate indemnity for

(insert type of coverage or coverages) in excess

120a

of $—————. (insert maximum limit of indemnity or in-
demnities) the excess insurance shall be void and all pre-
miums paid for such excess shall be returned to the in-
sured or to his estate.

or, in lieu thereof:

Insurance effective at any one time on the insured under
a like policy or policies in this insurer is limited to the one
such policy elected by the insured, his beneficiary or his
estate, as the case may be, and the insurer will return all
premiums paid for all other such policies.

(4) Insurance with other insurers. If there be other valid
coverage, not with this insurer, providing benefits for the
same loss on a provision of service basis or on an expense
incurred basis and of which this insurer has not been given
written notice prior to the occurrence or commencement
of loss, the only liability under any expense incurred cov-
erage of this policy shall be for such proportion of the loss
as the amount which would otherwise have been payable
hereunder plus the total of the like amounts under all such
other valid coverages for the same loss of which this in-
surer had notice bears to the total like amounts under all
valid coverages for such loss, and for the return of such
portion of the premiums paid as shall exceed the pro rata
portion for the amount so determined. For the purpose of
applying this provision when other coverage is on a pro-
vision of service basis, the “like amount” of such other cov-
erage shall be taken as the amount which the services
rendered would have cost in the absence of such coverage.

If the foregoing policy provision is included in a policy
which also contains the policy provision set out in subsec-
tion (5) of this section there shall be added to the caption
of the foregoing provision the phrase “expense incurred
benefits.” The insurer may, at its option, include in this
provision a definition of “other valid coverage,” approved
as to form by the commissioner, which definition shall be
limited in subject matter to coverage provided by orga-

12la

nization subject to regulation by insurance law or by in-
surance authorities of this or any other State of the United
States or any province of Canada, and by hospital or
medical service organizations, and to any other coverage
the inclusion of which may be approved by the commis-
sioner. In the absence of such definition such term shall not
include group insurance, automobile medical payments in-
surance, or coverage provided by hospital or medical serv-
ice organizations or by union welfare plans or employer or
employee benefit organizations. For the purpose of apply-
ing the foregoing policy provision with respect to any in-
sured, any amount of benefit provided for such insured

- pursuant to any compulsory benefit statute (including any

workmen’s compensation or employer’s liability statute)
whether provided by a governmental agency or otherwise
shall in all cases be deemed to be “other valid coverage”
of which the insurer has had notice. In applying the fore-
going policy provision no third party liability coverage
shall be included as “other valid coverage.”

(5) Insurance with other insurers. If there be other valid
coverage, not with this insurer, providing benefits for the
same loss on other than an expense incurred basis and of
which this insurer has not been given written notice prior
to the occurrence or commencement of loss, the only lia-
bility for such benefits under this policy shall be for such
proportion of the indemnities otherwise provided here-
under for such loss as the like indemnities of which the in-
surer had notice (including the indemnities under this
policy) bear to the total amount of all like indemnities for
such loss, and for the return of such portion of the pre-
mium paid as shall exceed the pro rata portion for the in-
demnities thus determined.

If the foregoing policy provision is included in a policy
which also contains the policy provision set out in sub-
section (4) of this section, there shall be added to the cap-
tion of the foregoing provision the phrase “other benefits.”

122a

*

The insurer may, at its option, include in this provision a
definition of “other valid coverage,” approved as to form
by the commissioner, which definition shall be limited in
subject matter to coverage provided by organizations sub-
ject to regulation by insurance authorities of this or any
other State of the United States or any province of Can-
ada, and to any other coverage the inclusion of which may
be approved by the commissioner. In the absence of such
definition such term shall not include group insurance, or
benefits provided by union welfare plans or by employer
or employee benefit organizations. For the purpose of ap-
plying the foregoing policy provision with respect to any
insured, any amount of benefit provided for such insured
pursuant to any compulsory benefit statute (including any
workmen’s compensation or employer’s liability statute)
whether provided by a governmental agency or otherwise
shall in all cases be deemed to be “other valid coverage”
of which the insurer has had notice. In applying the fore-
going policy provision no third party liability coverage
shall be included as “other valid coverage.”

(6) Relation of earnings to insurance. If the total
monthly amount of loss of time benefits promised for the
same loss under all valid loss of time coverage upon the
insured, whether payable on a weekly or monthly basis,
shall exceed the monthly earnings of the insured at the
time disability commenced or his average monthly earnings
for the period of two years immediately preceding a dis-
ability for which claim is made, whichever is the greater,
the insurer will be liable only for such proportionate
amount of such benefits under this policy as the amount
of such monthly earnings or such average monthly earn-
ings of the insured bears to the total amount of monthly
benefits for the same loss under all such coverage upon the
insured at the time such disability commences and for the
return of such part of the premiums paid during such two
years as shall exceed the pro rata amount of the premiums
for the benefits actually paid hereunder; but this shall not

123a

operate to reduce the total monthly amount of benefits pay-
able under all such coverage upon the insured below the
sum of $200 or the sum of the monthly benefits specified in
such coverages, whichever is the lesser, nor shall it operate
to reduce benefits other than those payable for loss of time.

The foregoing policy provision may be inserted only in a
policy which the insured has the right to continue in force
subject to its terms by the timely payment of premiums;
(i) until at least age 60 or; (ii) in the case of a policy is-
sued after age 54, for at least five years from its date of
issue. The insurer may, at its option, include in this pro-
vision a definition of “valid loss of time coverage,” ap- -
proved as to form by the commissioner, which definition
shall be limited in subject matter to coverage provided by
governmental agencies or by organizations subject to regu-
lation by insurance law or by insurance authorities of this
or any other State of the United States or any province of
Canada, or to any other coverage the inclusion of which
may be approved by the commissioner or any combination
of such coverages. In the absence of such definition such
term shall not include any coverage provided for such in-
sured pursuant to any compulsory benefit statute (includ-
ing any workmen’s compensation or employer’s liability
statute), or benefits provided by union welfare plans or by
employer or employee benefit organizations.

(7) Unpaid premium. Upon the payment of a claim un-
der this policy, any premiums then due and unpaid or cov-
ered by any note or written order may be deducted there-
from.

(8) Return of premium on cancellation. If the insured
cancels this policy, the earned premium shall be computed
by the use of the short-rate table last filed with the state
official having supervision of insurance in the state where
the insured resided when the policy was issued. Cancella-
tion shall be without prejudice to any claim originating
prior to the effective date of cancellation.

124a

(9) Conformity with state statutes. Any provision of
this policy which, on its effective date, is in conflict with
the statutes of the state, District of Columbia or territory
in which the insured resides on such date is hereby amend-
ed to conform to the minimum requirements of such
statutes.

(10) Illegal occupation. The insurer shall not be liable
for any loss to which a contributing cause was the in-
sured’s commission of or attempt to commit a felony or to
which a contributing cause was the insured’s being engaged
in an illegal occupation.

(11) Intoxicants and narcotics. The insurer shall not be
liable for any loss sustained or contracted in consequence
of the insured being intoxicated or under the influence of
any narcotic unless administered on the advice of a physi-
cian.

(12) Cancellation of travel accident policies. As respects
only travel accident insurance policies the following op-
tional provisions may be inserted in the policy: “The in-
surer reserves the right to cancel this pvlicy under the pro-
visions set forth in section 56-2430 cf the Georgia Insur-
ance Code.”

56-3006 Renewability

Each policy, covered by this Chapter, except accident in-
surance only policies, in which the insurer reserves the
right to refuse renewal on an individual basis shall pro-
vide, the substance, in a provision thereof (entitled “re-
newability”), that subject to the right to terminate the
policy upon nonpayment of premiums when due, such right
to refuse renewal shall not be exercised before the renewal
date occurring on, or after and nearest, each anniversary,
or in the case of lapse and reinstatement at the renewal
date occurring on, or after and nearest, each anniversary
of the last reinstatement, and that any refusal or renewal

125a

shall be without prejudice to any claim originating while
the policy is in force. The insurer shall not amend or en-
dorse the policy prior to the anniversary date in a manner
tending to restrict or lower the benefits, add exclusions, or
increase the premium.

56-3007 Refund upon examination

Every individual accident and sickness policy or con-
tract, except single premium nonrenewable policies or con-
tracts, issued for delivery in this State on or after the ef-
fective date of this Act by an insurer shall have printed
thereon or attached thereto a notice stating in substance
that the person to whom the policy or contract is issued
shall be permitted to return the policy or contract within
10 days of its delivery to said purchaser and to have the
premium paid refunded if, after examination of the policy
or contract, the purchaser is not satisfied with it for any
reason. If the insured or purchaser pursuant to such no-
tice, returns the policy or contract to the insurer at its
home or branch office or to the agent through whom it was
purchased, it shall be void from the beginning and the
parties shall be in the same position as if no policy or con-
tract had been issued.

56-3008 Outline of coverage

Every insurer shall furnish to any applicant for accident
and sickness insurance in this State a written outline show-
ing the major coverage of the policy applied for, the major
exclusions of the policy applied for, the renewal provisions
of the policy applied for, and a reference to the policy as
respects further provisions. Such written outline shall be
given to the applicant at the time of signing the applica-
tion for such policy and the forms of such outlines shall be
subject to the same requirements for filing and approval
as are set forth for the filing and approval of policy forms
as required in sections 56-2410 and 56-2411.

126a

56-3009 Renewal premiums

(a) Except as provided below, every insurer delivering
or issuing for delivery in this State policies of accident
and sickness insurance which are renewable at the option
of the insurer or cancellable at the option of the insurer
shall provide in said policies a provision as follows: If the
company cancels or refuses to renew this policy except
for nonpayment of premiums prior to age (insert age which
shall not be less than 60), it will refund 75 per cent. of the
premiums paid in excess of the benefits received. The
requirements of this provision shall not apply to cancella-
tion or refusal to accept renewal premiums because of
change in occupation of the insured to an occupation gen-
erally classified by the insurer as to all applicants as un-
insurable.

(b) This section shall not apply to, and the provisions
quoted in the preceding paragraph need not be included in
any major medical policy which provides that the insurer
may cancel or refuse to renew the policy as of an anniver-
sary date when also cancelling or refusing to renew all
policies with the same provisions and premium rate basis
in the jurisdiction in which the insured resides and then
only if either or both of the following conditions are appli-
cable:

(1) the insured is or could be covered by benefits, sub-
stantially similar in both kind and amount to those of the
policy, in accordance with any Federal or State govern-
mental health insurance program, or

(2) the insurer is prevented by any law or any regula-
tion or ruling of a governmental agency from applying to
the policy a table of premium rates which the insurer
certifies, based on its experience, is reasonable in relation
to the benefits provided.

For the purpose of this section, a major medical policy
is any policy which provides benefits of at least 75 per

127a

cent. of necessary, reasonable and customary charges for
medical care including hospitalization in semi-private ac-
commodations, with maximum lifetime benefit of at least
$100,000, subject only to such exceptions, restrictions, limi-
tations and deductibles as the commissioner may deem
reasonable.

56-3010 Reference to noncancellable nature or renewability
option

No policy of accident or sickness insurance shall refer
to its noncancellable nature without at the same time dis-
closing all options the insurer may have in regard to re-
newability, and the guaranteed renewable nature of any
such policy shall not be referred to unless the reference at
the same time discloses the qualifications on the guarantee
of renewability (including any age limits, any right to
change premium rates by class, any aggregate provisions,
and any other limitations on the right to renewal) in a
manner which shall not minimize or render obscure the
qualifying conditions.

56-3011 Order of certain provisions

The provisions which are the subject of sections 56-3004
and 56-3005 or any corresponding provisions which are
used in lieu thereof in accordance with such sections, shall
be printed in consecutive order of the provisions in such
sections or, at the option of the insurer, any such provisions
may appear as a unit in any part of the policy, with other
provisions to which it may be logically related, provided
the resulting policy shall not be in whole or in part unin-
telligible, uncertain, ambiguous, abstruse, or likely to mis-
lead a person to whom the policy is offered, delivered or
issued.

56-3012 Third party ownership

The word “insured” as used in this Chapter, shall not be
construed as preventing a person other than the insured

128a

with a proper insurable interest from making application
for and owning a policy covering the insured or from being
entitled under such policy to any indemnities, benefits and
rights provided therein.

56-3013 Requirements of other jurisdictions

(1) Any policy of a foreign or alien insurer, when de-
livered or issued for delivery to any person in this State,
may contain any provision which is not less favorable to
the insured or the beneficiary than the provisions of this
Chapter and which is prescribed or required by the law
of the state under which the insurer is organized.

(2) Any policy of a domestic insurer may, when issued
for delivery in any other state or country, contain any
provision permitted or required by the laws of such other
state or country.

56-3014 Conforming to statute

(1) No policy provision which is not subject to this
Chapter shall make a policy, or any portion thereof, less
favorable in any respect to the insured or the beneficiary
than the provisions thereof which are subject to this
Chapter.

(2) A policy delivered or issued for delivery to any per-
son in this State in violation of this Chapter shall be held
valid but shall be construed as provided in this Chapter.
When any provision in a policy subject to this Chapter is
in conflict with any provision of this Chapter, the rights,
duties, and obligations of the insurer, the insured and the
beneficiary shall be governed by the provisions of this
Chapter.

56-3015 Exemption of individual accident and sickness insurance
proceeds from creditors

The proceeds or avails of all accident and sickness poli-
cies and of provisions providing benefits. on account of the

129a

insured’s disability which are supplemental to life insur-
ance or annuity contract, except credit accident and sick-
ness and credit life policies, shall be exempt from all liabil-
ity for any debt of the insured, and from any debt of the
beneficiary existing at the time the proceeds are made
available for his use. The exemption of income benefits
payable as the result of disability shall not exceed an
average of $250 of such benefits per month of the period
of disability.

56-3016 Medical or surgical policies

The benefits on account of medical or surgical services
provided by an individual policy cf accident and sickness
insurance issued after the effective date of this Act may be
limited by its terms to services performed by specifically
defined professions: Provided, that in the absence of such
definitions the term “physician” or “surgeon,” as used in
such a policy shall not be deemed limited solely to medical
practitioners licensed under Code Chapter 84-9. When
an individual policy of accident and sickness insurance,
except policies providing special coverage for limited di-
seases, accident protection only or dental policies, provides
for hospital care, there may be included within the scope of
coverage (1) hospital care rendered on account of mental
illnesses and (2) hospital care when rendered by any psy-
chiatric hospital duly licensed by the State of Georgia. If
such coverage is not included in the policy, a statement that
the policy does not cover mental illnesses shall be (1)
printed in the policy in bold-type or stamped on the face
of the policy and (2) printed or stamped on any identifica-
tion card issued pursuant to any such policy.

Any other laws to the contrary notwithstanding, when-
ever the term “physician” or “surgeon” is used in any
policy of health or accident insurance issued in this State
or in any contract for the provision of health care, services,

130a

or benefits issued by any health, medical or other service
corporation existing under, and by virtue of, any laws of
this State, said term shall include, within its meaning,
medical practitioners licensed under and in accordance with
Code Chapter 84-7, relating to dentists, as now or hereafter
amended, in respect to any care, services, procedures or
benefits covered by said policy of insurance or health care
contract which the said persons are licensed to perform,
any provisions in any such policy of insurance or health
care contract to the contrary notwithstanding. This para-
graph shall be applicable to all policies in this State, re-
gardless of date of issue, on the effective date of this
paragraph.

56-3017 Compliance by rider or indorsement

The recuirements of this Chapter may be complied with
by the insurer, by attaching to the policy such rider or in-
dorsement as may be necessary for the purpose.

56-3018 Franchise accident and sickness insurance

Accident and sickness insurance on a franchise plan is
hereby declared to be that form of accident and sickness
insurance issued to:

(1) Four or more employees of any corporation, co-
partnership, or individual employer or any governmental
corporation, agency or department thereof; or

(2) Ten or more members, employees or employees of
members of any trade or professional association or of a
labor union or of any other association having had an
active existence for at least two years where such associa-
tion or union has a constitution or bylaws and is formed in
good faith for purposes other than that of obtaining insur-
ance ; where such persons, with or without their dependents,
are issued the same form of an individual policy varying
only as to amounts and kinds of coverage applied for by
such persons under an arrangement whereby the premiums

13la

on such policies may be paid to the insurer periodically
by the employer, with or without payroll deductions, or by
the association or union for its members, or by some
designated person acting on behalf of such employee or
association or union. The term “employees” as used herein
shall be deemed to include the officers, managers and em-
ployees and retired employees of the employer and the
individual proprietor or partners if the employer is an
individual proprietor or partnership.

133a
APPENDIX O
Effective July 1, 1973

Regulations of the Georgia Insurance Commissioner Governing
the Advertising of Accident and Sickness Insurance
Chapter 120-2-12

120-2-12-.01 Statutory Authority

This Regulation is made and promulgated by the under-
signed Insurance Commissioner pursuant to the authority
set forth in Section 56-216 of the Insurance Laws of this
State, and especially Chapter 56-7 of the Georgia Insurance
Code.

120-2-12-.02 Purpose
The purpose of this Regulation is:

1. To implement the Insurance Laws of the State of
Georgia with respect to advertising and sale of Accident
and Sickness Insurance in this State, as defined in Section
56-404 of the Georgia Insurance Laws, and included in
Section 56-408.

2. To protect the interests of the Accident and Sickness
Insurance Public of this State by:

(a) The establishment of minimum standards of conduct
to be observed by advertisers and sellers of Accident and
Sickness Insurance;

(b) Requiring truthful, complete, clear and accurate dis-
closure of all material and relevant information in the
advertising and sale of accident and sickness insurance so
that members of the insurance public can adequately make
a decision in their own best interest.

3. To prevent the use of unfair methods of competition
and unfair practices among insurers with regard to the
advertising, promotion and sale of accident and sickness
insurance in this State.

134a

120-2-12-.03 Applicability

These Rules shall apply to any accident and sick «ess in-
surance “advertisement” as that term is hereinafter de-
fined, intended for presentation, distribution or dissemina-
tion in this State when such presentation, distribution or
dissemination is made either directly or indirectly by or on
behalf of an insurer, agent, broker, or solicitor as those
terms are defined in the Insurance Code of this State and
these Rules.

120-2-12-.04 Definitions

1. Advertisement, for the purpose of these Rules, shall
include:

(a) Printed and published material, audio visual mate-
rial, and descriptive literature of an insurer used in direct
mail, newspapers, magazines, radio scripts, TV scripts,
billboards and similar displays; and

(b) descriptive literature and sales aids of all kinds
issued by an insurer, agent, solicitor or broker for presenta-
tion to members of the insurance buying public, including
but not limited to, circulars, leaflets, booklets, depictions,
illustrations, and form letters; and

(c) prepared sales talks, presentations, and material for
use by insurers, agents, brokers and solicitors.

Advertisements of insurers for the sole purpose of ob-
taining employees, agents, agencies or brokers are among
those not to be considered within the definition of an
advertisement.

2. Policy, for the purpose of these Rules, shall include
any Policy, Plan, Certificate, Contract, Agreement, Outline
of Coverage, Rider, or Endorsement which provides acci-
dent or sickness benefits or medical, surgical or hospital
expense benefits; whether on an indemnity, reimburse-
ment, service, or prepaid basis, except when issued in con-

135a

nection with another kind of insurance other than life, and
except disability, waiver of premium, and double indem-
nity benefits included in life insurance and annuity con-
tracts.

3. Insurer, for the purpose of these Rules, shall include
any individual, corporation, association, partnership, recip-
rocal exchange, inter-insurer, Lloyds, fraternal benefit so-
ciety, and any other legal entity defined as an “insurer”
in the Insurance Code of this State, which is engaged in,

or responsible for, the advertisement of a policy as herein
defined.

4. Exception, for the purposes of these Rules, shall mean
any provision in a policy whereby coverage for a specified
hazard is entirely eliminated; it is a statement of a risk not
assumed under the policy.

5. Exclusion, for the purpose of these Rules, shall be con-
strued to mean the same as “Exception”, as defined herein
in Rule 120-2-12-.04(4).

6. Reduction, for the purpose of these Rules, shall mean
any provision which reduces the amount of the benefit to be
received, or the period of time in which such benefits would
be payable.

7. Limitation, for the purpose of these Rules, shall mean
any provision which restricts coverage under the policy,
other than an “Exception” or a “Reduction” as defined
herein.

120-2-12-.05 Form and Content of Advertisements

1. The format and content of an advertisement of an
accident or sickness insurance policy shall be accurate and
shall be sufficiently complete and clear to avoid deception
or the capacity or tendency to mislead or deceive. Whether
an advertisement has a capacity or tendency to mislead or
deceive shall be determined by the Insurance Commissioner
from the overall impression that the advertisement may

136a

be reasonably expected to create upon a person of average
education or intelligence, within the segment of the public
to which it is directed, or within a segment of the public
to which such advertisement may be reasonably calculated
to reach.

2. Advertisements shall be truthful and not misleading
in fact or in implication. Words or phrases, the meaning
of which is clear only by implication or by familiarity with
insurance terminology, shall not be used.

3. The advertising of hospital or medical policies or
plans shall clearly and accurately state the dollar limits of
benefits where applicable, and time limits of benefits where
applicable, in lieu of, or in conjunction with descriptive
words which might imply “full coverage” for all expenses
normally related to hospitalization or medical care.

4. An advertisement for a policy providing benefits for
specified illnesses only, such as cancer, or for specified
accidents only, such as automobile accidents, shall clearly
and conspicuously in prominent type state the limited na-
ture of the policy. The statement shall be worded in lan-
guage identical to, or substantially similar to the following:
“THIS IS A LIMITED POLICY”; “THIS IS A CANCER
ONLY POLICY”; “THIS IS AN AUTOMOBILE ACCI-
DENT ONLY POLICY”.

5. If a policy provides different benefits as to amount or
time for the same loss occurring under different circum-
stances or from different causes, the smaller benefits pay-
able shall be given the same prominence as the larger
benefits.

6. All policies advertised shall be correctly identified by
names reasonably calculated to describe their contents.
FOR EXAMPLE: Hospital and Surgical Expense Policy;
Hospital Income Policy; Hospital Confinement Policy ; Dis-
ability Income Policy; Senior Citizen Hospital Expense
Policy; Medical Care Accident and Health Policy; . . . ete.

137a

The use of such terms as “Pay Check Plan”; “Hospital
Dollars”; “Extra-income Plan”; “Extra Cash Plan”; “Ex-
tra Pay Plan”; “Hard Cash Plan”; “White Cross Plan”;
“Doctors’ Plan”; or similar words or phrases which do not
correctly identify the policy, shall be prohibited.

In addition, all advertised policies must be identified by
Form Number.

7. Any Optional Benefit advertised shall be captioned as
“Optional Benefits” and shall be prominently and con-
spicuously displayed in immediate conjunction with the
conditions to qualify for such Optional Benefits. And adver-
tisement must contain a statement that in order to obtain
such optional benefits there will be an additional premium
charged for each optional benefit desired. A statement must
also be included in the advertisement as to what condi-
tions, if any, must be met to qualify for such benefits.

8. All advertisements of accident and sickness insurance
in this State shall include the name, address and phone
number of the Home or Principal Office and/or of the
nearest representative or representatives of the insurer
authorized to handle claims and to provide service and in-
formation to applicants and/or insureds.

9. Any advertisement making reference to “Medicare
Supplement Insurance” or to coverage designed to supple-
ment “Medicare”, shall contain a clear, prominent and con-
spicuous statement in language identical to or substantially
the same as the following: “THIS IS A LIMITED POLICY
DESIGNED TO COVER ONLY THOSE EXPENSES
WHICH MEDICARE DOES NOT COVER”. Furthermore,
such advertisements must clearly, prominently and con-
spicuously disclose the exact benefits payable under such
advertised policy.

If such advertised Medicare Supplement Policy supple-
ments only Medicare Part A (or hospital benefits only),
this shall be clearly, prominently and conspicuously dis-

138a

played in the advertisement; nor shall such advertisements
use the maximum amount payable without giving an exact
example of the conditions which must be met in order for a
policyholder to collect the maximum amount.

10. Any advertisement which refers to maximum dollar
amount of benefits which can be paid for any period greater
than one day shall disclose at the same time, in an equally
prominent, frequent, and conspicuous manner, and in im-
mediate conjunction therewith, the daily rate of benefits,
and when applicable, the fact that said benefits are payable
only for the actual number of days of hospital confinement
and, when applicable, the limit on the number of days for
which coverage is provided.

11. Words and phrases used in an advertisement to de-
scribe policy limitations, exceptions, and reductions shall
fairly, accurately, and clearly describe in understandable
terms the negative features of such limitations, exceptions
and reductions of the policy.

120-2-12-.06 Deceptive Words, Phrases, or Illustrations Prohibited

1. No advertisement shall omit information or use
words, phrases, statements, references or illustrations if
the omission of such information or use of such words,
phrases, statements, references or illustrations has the
capacity, tendency or effect of misleading or deceiving pur-
chasers or prospective purchasers as to the nature or ex-
tent of any policy benefit payable, loss covered or premium
payable. The fact that the policy offered is made available
to a prospective insured for inspection prior to consumma-
tion of the sale, and/or offer is made to refund the pre-
mium if the purchaser is not satisfied, does not remedy
misleading statements.

2. No advertisement shall state or imply that ail costs of
hospitalization or medical expense will be paid, or that all
income will be replaced by benefits, unless the policy is
without limitation or restriction in any form. No advertise-

139a

ment shall contain or use words or phrases such as: “all”;
“full”; “complete”; “comprehensive”; “liberal”; “unlim-
ited”; “as high as”; “fills all gaps”; “full coverage”; “com-
plete protection”; “all coverage”; “deductibles covered”;
“this policy will help pay your hospital and surgical bill”;
“this policy will help fill some of the gaps that Medicare and
your present insurance leave out”; “this policy will help
to replace your income” (when used to express loss of
time benefits! ; “salary replacement”; “wage continuation” ;
or similar words and phrases, to imply generosity or lib-
erality or in a manner which exaggerates any benefits be-
yond the terms of the policy.

3. No advertisement shall contain descriptions of a policy
limitation, exception, or reduction worded in a positive
manner to imply that it is a benefit, such as: describing
@ waiting period as a “benefit builder”, or stating “even pre-
existing conditions are covered after two years”.

4. No advertisement shall contain or use identifying
terms, words, or phrases which do not correctly identify
the policy. (See Rule 120-2-12-.05(6).)

5. No advertisement of a benefit for which payment is
conditional upon the incurrence of any medical expenses
shall use words or phrases such as “tax free”; “extra cash”;
“extra income”; “extra pay”; or substantially similar
words or phrases that might have the capacity, tendency or
effect of misleading the public into believing that the policy
advertised will, in some way, enable them to make a profit
from any illness, injury, condition, or confinement in a
hospital or similar facility.

6. No advertisement of a hospital or other similar facility
confinement benefit shall advertise that the amount of bene-
fit is payable on a monthly or weekly basis when, in fact,
the amount of the benefit payable is based upon a daily pro
rata basis relating to the number of days of actual confine-
ment.

140a

7. No advertisement of a policy covering only one disease
or list of specified diseases shall imply coverage beyond the
terms of the policy. Synonymous terms shall not be used to
refer to any disease so as to imply broader coverage than
is the fact.

8. An advertisement or a direct response insurance
product shall not state or imply that because “no insurance
agent will call and no commissions will be paid to agents’,
that it is a “low cost plan”, or use other similar words or
phrases.

9. No advertisement shall contain or use any statement
relating to time within which claims are paid (within 24 to
48 hours, ete.), unless the policy being advertised actually
requires and guarantees payment within such designated
period.

10. No adveritsement shal! imply that a company fre-
quently and routinely pays specified sums for any type of
accident or sickness when, in fact, only certain specified
accidents or illnesses are covered.

120-2-12-.07 Exceptions, Reductions and Limitations

1. Exceptions, reductions and limitations shall be promi-
nently and conspicuously displayed in the same style type
and in a type size equal to, or larger than, that used to
describe the benefits. Furthermore, a multi-color scheme
shall not be used in such a manner as to render such
terms obscure.

2. Any advertisement which refers to either a dollar
amount, or a period of time for which any benefit is pay-
able, or the cost of the policy, or specific policy benefit, or
the loss for which such benefit is payable, shall also disclose
those exceptions, reductions and limitations affecting the
basic provisions of the policy without which the advertise-
ment would have the capacity or tendency to mislead or
deceive.

l4la

3. When a policy contains a waiting, elimination, proba-
tionary or similar time period between the effective date of
the policy and the effective date of coverage under the
policy or a time period between the date a loss occurs and
the date benefits begin to accrue for such loss, an advertise-
ment which is subject to the requirements of the preceding
paragraph shall clearly, prominently and conspicuously dis-
close the existence of such periods.

4. An advertisement shall not use the words “only”;
“just”; “merely”; “minimum”; or similar words or phrases
to describe the applicability of any exceptions and reduc-
tions, such as: “This policy is subject to the following mini-
mum exceptions and reductions”.

120-2-12-.08 Pre-Existing Conditions

1. An advertisement which is subject to the requirements
of these Rules shall, in negative terms, clearly, prominently
and conspicuously disclose the extent to which any loss is
not covered if the cause of such loss is traceable to a physi-
cal condition, injury or disease existing before issuance of
the policy. If the term “pre-existing condition”, or similar
words or phrases are used in an advertisement, they must
be accompanied by an appropriate definition or description
which states exactly what conditions are included as “pre-
existing conditions” for the purposes of the policy.

2. When a policy does not cover losses resulting from
pre-existing conditions, no advertisement of the policy shall
state or imply that the applicant’s physical condition or
medical history will not affect the issuance of the policy or
payment of a claim thereunder. This rule prohibits the use
of the phrase “no medical examination required”, and

phrases of similar import, but does not prohibit explaining
“automatic issue”.

3. If an insurer requires a medical examination for a
specified policy, the advertisement shall prominently dis-
close that a medical examination is required.

142a

4. In the event any advertisement contains an applica-
tion form to be completed by the applicant and returned
by mail for a direct response insurance product, such ap-
plication form shall contain a question which reflects the
pre-existing condition provisions of the policy, immediately
preceding the blank space for the applicant’s signature.
For example, such an application form must contain a ques-
tion identical to or substantially similar to the following:
“Do you understand that this policy will not pay benefits
during the first —— year(s) after the issue date for a
disease or physical condition which you now have, or have
had in the past?

OC I do understand C1 I do not understand.”
No policy shall be issued unless the question is answered

affirmatively.

120-2-12-.09 Necessity for Disclosure of Policy Provisions Relating
to Renewability, Cancellability and Termination

1. Any advertisement of a policy or’plan of benefits con-
tained therein must not imply that the policy or plan is
guaranteed renewable at the discretion of the insured unless
the renewability of such policy or plan of benefits is, in
fact, guaranteed.

2. Any advertisement which refers to:

(a) dollar amounts,

(b) periods of time for which any benefit is payable,
(c) costs of the policy,

(d) specifie policy benefits,

(e) loss or losses for which benefits are payable,

(f) time or age limitations,

(g) or any other limiting or qualifying conditions in con-
nection with eligibility of applicants or continuation of the
policy, renewability, cancellability or termination, shall

143a

clearly, prominently and conspicuously disclose said provi-
sions and any modification, cancellation or termination of
benefits, of losses covered, or of premiums, which may
occur (because of age or for other reasons), in a manner
which shall not minimize or render obscure the qualifying
conditions.

120-2-12-.10 Testimonials or Endorsements by Third Parties

1, Testimonials used in advertisements must be genuine,
represent the current opinion of the author, be applicable
to the policy advertised, and be accurately reproduced. The
insurer, in using a testimonial, makes as its own all of the
statements contained therein, and the advertisement, in-
cluding such statement, is subject to all the provisions of
these Rules.

2. If the person making a testimonial, an endorsement,
or an appraisal has a financial interest in the insurer or a
related entity as a stockholder, director, officer, employee,
or otherwise, such fact shall be prominently disclosed in the
advertisement.

3. If a person is compensated for making a testimonial,
endorsement or appraisal, such fact shall be prominently
disclosed in the advertisement by language identical to, or
substantially similar to the following: “THIS IS A PAID
ENDORSEMENT”. (This Rule does not require disclosure
of union scale wages required by union rules if the payment
is actually for such scale wages for TV or radio perform-
ances). For the purposes of these Rules, the payment of
substantial amounts, directly or indirectly, to an endorser
for “travel and entertainment” in connection with the film-
ing or recording of TV or radio advertisements constitutes
compensation, and disclosure of such compensation is re-
quired.

4. An advertisement shall not state or imply that an
insurer or a policy has been approved or endorsed by any
individual, group of individuals, society, association or

144a

other organization, unless such is the fact; and unless any
proprietary relationship between an organization and the
insurer is clearly, prominently and conspicuously dis-
closed. If the entity making the endorsement or testimonial
has been formed by the insurer, or is owned or controlled
by the insurer, or the person or persons who own or con-
trol the insurer, such fact shall be disclosed in the advertise-
ment.

5. When a testimonial refers to benefits received under a
policy, the specific claim data, including claim number, date
of loss, and other pertinent information shall be retained
by the insurer for inspection for a period of four years, or
until the filing of the next regular report of examination of
the insurer, whichever is the longer period of time.

6. For the purposes of these Rules, with regard to testi-
monials and endorsements by third parties, “Endorser”
shall mean any individual, group of individuals, society,
association or organization that endorses, approves or
recommends an insurer, a policy, or plan of benefits.

7. No such testimonial, endorsement or appraisal shall
be made in any form which constitutes a solicitation of in-
surance in this State, unless such endorser is currently
licensed in Georgia to solicit insurance.

120-2-12-.11 Use of Statistics

1. Any advertisement relating to the dollar amounts of
claims paid, the number of persons insured, or similar
statistical information relating to any insurer or policy,
must not contain irrelevant facts and must not be used un-
less it accurately reflects all of the relevant facts. Further-
more, such advertisements must not contain irrelevant
facts; nor shall it imply that statistics used therein are
derived from the policy advertised unless such is the fact.
When statistics used in an advertisement are applicable
to other policies or plans, it shall specifically be so stated.

145a

2. An advertisement shall not represent or imply that
claim settlements by the insurer are “liberal” or “gener-
ous”, or use words of similar import; or that claim settle-
ments are or will be beyond the actual terms of the contract.

3. An unusual amount paid for a unique claim for the
policy advertised is misleading and shall not be used.

4. The source of any statistics used in an advertisement
must be clearly, prominently and conspicuously identified
in the advertisement.

120-2-12-.12 Identification of Plan or Number of Policies

1. When a choice of the amount of benefits is referred to,
an advertisement shall disclose that the amount of benefits
provided depends upon the plan selected and that the pre-
mium will vary with the amount of the benefits selected.

2. An advertisement listing the benefits of two or more
policies different in their content should identify each
policy with the benefits whic’ it offers. Group Master Poli-
cies are not included for the purposes of this Rule. In such
cases, the advertisement shal] disclose that these benefits
are provided only through a combination of policies.

120-2-12-.13 Disparaging Comparisons and Statements

An advertisement shall not directly or indirectly make
unfair or incomplete comparisons of policies or benefits, or
comparisons of non-comparable policies of other insurers,
and shall not disparage competitors, their policies, services,
or business methods, and shall not disparage or unfairly
criticize competing methods of marketing insurance.

120-2-12-.14 Jurisdictional Licensing and Status of Insurer

1. An advertisement which is intended to be seen or
heard beyond the limits of the jurisdiction in which the
insurer is licensed shall not imply licensing beyond those
limits.

146a

2. An advertisement shall not create the impression di-
rectly or indirectly that the insurer, its financial condition
or status, or the payment of its claims, or the merits, de-
sirability, or advisability of its policy forms or kinds or
plans of insurance are approved, endorsed, or accredited
by any division or agency of this State or the United
States Government.

120-2-12-.15 Identity of Insurer

1. The name of the actual insurer advertised shall be
properly identified and prominently, clearly and conspicu-
ously displayed in all of its advertisements. An advertise-
ment shall not refer to the parent company of the insurer
without clearly disclosing that it is a separate legal entity
and not responsible for the insurer’s financial condition or
contractual obligations.

2. An advertisement shall not include a trade name, an
insurance group designation, or the name of any division,
affiliate or subsidiary of the insurer, or any service mark,
trade mark, slogan, symbol, or other device which has the
capacity or tendency to deceive an individual as to the true
identity of the insurer or the policy being advertised.

3. No advertisement shall use any combination of words,
symbols, or physical materials which by their content,
phraseology, shape, color, or other characteristics are so
similar to combination of words, symbols, or physical ma-
terials used by agencies of the Federal Government, or of
this State, or otherwise appear to be of such a nature that
it tends to confuse or mislead prospective insureds into
believing that the solicitation is in some manner connected

with an agency of the municipal, State or Federal Govern-
ment.

120-2-12-.16 Group or Quasi-Group Implications

An advertisement of a particular plan or policy of insur-
ance shall not state or imply that prospective insureds

147a

become “group” or “quasi-group” members covered under
a group policy, and as such enjoy special rates or under-
writing privileges, unless such is the fact.

120-2-12-.17 Introductory, Initial or Special Offers

1. (a) An advertisement of an individual policy shall not
directly or by implication represent that a contract or
combination of contracts is an introductory, initial, or spe-
cial offer or that applicants will receive substantial ad-
vantages not available at a later date or that the offer is
available only to a specified group of individuals, unless
such is the fact.

(b) An advertisment shall not contain phrases describ-
ing an enrollment period as “special”, “limited”, or use
similar words or phrases when the insurer uses such enroll-
ment periods as the usual method of advertising accident
and sickness insurance.

(c) An enrollment period during which a particular in-
surance product may be purchased on an individual basis
shall not be offered within this State unless there has been
a lapse of not less than six (6) months between the close
of the immediately preceding enrollment period for the
same product and the opening of the new enrollment period.

(d) The advertisement shall indicate the date by which
the applicant must mail the application, which shall not be
less than ten (10) days and not more than forty (40) days
from the date that such enrollment period is advertised
for the first time. This Rule applies to all advertising
media; including, but not limited to: mail, newspapers,
radio, television, magazines, periodicals, personal solici-
tations, and telephone solicitations.

(e) This Rule prohibits any statement or implication to
the effect that only a specific number of policies will be sold,
or that a time is fixed for the discontinuance of the sale of

148a

the particular policy advertised because of special advan-
tages available in the policy, unless such is the fact.

(f) This Rule prohibits the use of minor variations in
the form or contents of a plan or policy in order to avoid or
circumvent the provisions of paragraph (c) of this Rule.
Mere variations of the terms of renewability, increases or
decreases in the dollar amounts of benefits, or increases or
decreases in any elimination or waiting period from those
available during an enrollment period for another policy,
shall not be sufficient to establish it as a new or different
“particular insurance product” not subject to the provisions
of paragraph (c).

2. An advertisement shall not offer a policy which utilizes
8. reduced initial premium rate in a manner which over-
emphasizes the availability and the amount of the initial
reduced premium. When an insurer charges an initial pre-
mium that differs in amount from the amount of the re-
newal premium payable on the same mode, the advertise-
ment shall not display the amount of the reduced initial
premium either more frequently or more prominently than
the renewal premium, and both the initial reduced pre-
mium and the renewal premium must be stated in juxta-
position in each portion of the advertisement where the
initial reduced premium appears.

3. Special awards, such as a “safe drivers’ award”, or
special classes such as “non-drinkers” or “non-smokers”
shall not be used in connection with advertisements of acci-
dent or accident and sickness insurance, unless premiums
are, in fact, reduced on the basis of statistical information
showing reduced risk based on membership in such class.
Such statistics shall be on file in the Home or Principal
Office of the insurer.

120-2-12-.18 Statements About an Insurer

An advertisement shall not contain statements which are
untrue in fact, or by implication misleading, with respect

149a

to the assets, corporate structure, financial standing, age,
or relative position of the insurer in the insurance business.
An advertisement shall not contain a recommendation by
any commercial rating system unless it clearly indicates
the purpose of the recommendation and the limitations of
the scope and extent of the recommendation.

120-2-12-.19 Insurers’ Responsibility and Control; Advertising
File: Certificate of Compliance

1. All advertisements, regardless of by whom written,
created or designed, shall be the responsibility of the
insurer sponsoring the same. Every insurer shall at all
times maintain complete control over the content, form and
method of dissemination of all advertisements of its con-
tracts.

2. Each insurer shall maintain at its home or principal
office a complete file containing every printed, published or
prepared advertisement of individual policies and typical
printed, published or prepared advertisements of blanket,
franchise and group policies hereafter disseminated in this
State, with a notation attached to each such advertisement
which shall indicate the manner and extent of distribution
and the form number of any policy advertised. Such file
shall be subject to regular and periodic inspection at the
discretion of this Department. All such advertisements
shall be maintained in said file for a period of not less
than five (5) years.

3. Each insurer required to file an Annual Statement
with this Department must file, together with its Annual
Statement, a Certificate executed by an authorized officer
of the insurer wherein it is stated that to the best of his
knowledge, information and belief, the advertisements dis-
seminated by the insurer during the preceding calendar
year complied, or were made to comply in all respects, with
the provisions of the Insurance Laws of this State as im-
plemented and interpreted by this Regulation.

150a

120-2-12-.20 Severability Provision

If any Section or portion of a Section of this Regulation,
or the applicability thereof to any person or circumstance
is held invalid by a Court, the remainder of the Rules, or
the applicability of such provision to other persons or cir-
cumstances, shall not be affected thereby.

120-2-12-.21 Penalties

Any insurer, agent, representative, officer, or employee
of such insurer failing to comply with the requirements of
this Regulation shall be subject to such penalties as may be
appropriate under the Insurance Laws of the State of
Georgia.

120-2-12-.22 Effective Date
This Regulation shall become effective July 1, 1973.

15la
APPENDIX P
UNITED STATES COURT OF APPEALS, FIFTH CIRCUIT
January 2, 1979
Nos. 76-1956, 76-2675.

DorgeN M. Cocuran, Plaintiff-Appellant,
v.

Paco, Inc., Defendant-A ppellee.

Ciara M. Jones, Plaintiff-Appellant,
v.

Paco, Inc., Defendant-A ppellee.

Appeal from the United States District Court for the
Northern District of Georgia

Before Brown, Chief Judge, THorNBERRY and Morean,
Circuit Judges.

THORNBERRY, Circuit Judge:

These consolidated cases, along with two others also de-
cided this day,’ require us to examine the relationship be-
tween the McCarran-Ferguson Act (“McCarran Act”), 15
U.S.C. §§ 1011 et seg., and the Truth in Lending Act
(“TIL”), 15 U.S.C. §§ 1601 et seq. Here we must decide
whether the McCarran Act precludes application of TIL’s
disclosure requirements to a credit agreement between a
lending institution and a borrower who had obtained the
loan to purchase automobile insurance.

1 Perry v. Fidelity Union Life Ins. Co., 606 F.2d 468 (5 Cir.
1978) ; Cody v. Community Loan Corp., 606 F.2d 499 (5 Cir.
1978).

152a

The district court, faced with the borrower’s suit alleg-
ing violations of TIL, held that the lender was engaged in
the business of insurance within the meaning of the McCar-
ran Act and entered summary judgment in favor of the
lender. For the reasons stated below, we reverse.

I. Factual Background

Paco, Inc. is a premium finance company licensed by the
Georgia Insurance Commissioner under the state’s Insur-
ance Premium Finance Company Act, Ga. Code Ann. §§ 84-
5301 et seq. In March 1975, Doreen Cochran entered into
a contract with Paco whereby Paco agreed to finance the
premiums on an automobile insurance policy that Cochran
purchased from Cotton States Mutual Insurance Company.
This premium financing agreement contained disclosures’
mandated by Georgia law, as well as others that are per-
missible but not required.* Paco took a security interest
in the policy and was granted a power of attorney, enabling
it to cancel the insurance if the installment payments were

? The following information was dis«losed :

Cash price (total premiums) ................-+.+4-- $151.00
NE as. wo iiiuan an ad sé teeqekanedes $ 53.00
Unpaid balance (amount financed) ................ $ 98.00
he ode cn cha seh ssberekoewe seen ok $ 14.28
ES ey Oe eee ee $112.28
MEE ‘MOPONMERRD TORE 6.onc cnc cccscscsccecceseece 67.96%
OU bois cscnewadasvensbsctencn $165.28
ee es aie been webs obU0ed Cnbee eee 4

ok oe ee kinaweseeeeusi be xe $ 28.07
Se PE CD oi ip sccn scent cach nadédasene 4-12-75

> Under Ga. Code Ann. § 84-5309, a premium financing agree-
ment must contain the total premiums, the amount of the down
payment, the principal balance, the amount of the service charge,
the balance payabie by the insured, the number of payments re-
quired, the amount of each payment in dollars, and the due date.
The statute specifically provides that ‘‘additional items may be
ineluded,’’ and here the agreement showed the ‘‘annual percent-
age rate.’’

153a

not made. See Ga. Code Ann. § 84-5312(a). When Cochran
defaulted, Paco cancelled the policy.

Cochran brought this action, alleging that Paco had vio-
lated the disclosure requirements of TIL and Regulation
Z, 12 C.F.R. § 226.‘ Paco moved to dismiss on the basis of
the McCarran Act and later moved for summary judgment.
The case was referred to a special master, who recom-
mended that Paco’s motion be denied. However, the district
judge rejected that recommendation and entered summary
judgment in favor of Paco, holding that the lender was
engaged in the business of insurance which is regulated
by the State of Georgia and that application of TIL to the
premium financing agreement would supersede Georgia
law, in contravention of the McCarran Act. Cochran’s sub-
sequent motion to alter or amend this decision was denied.
Cochran v. Paco, Inc., 409 F.Supp. 219 (N.D.Ga.1976).

On the basis of this decision, Paco’s motion to dismiss
was granted in a similar case, Jones v. Paco., Inc., No.
C76-90A (N.D.GA., May 5, 1976). Appeals were taken in
both cases, which were then consolidated. Because the facts
in Jones are substantially the same as those in Cochran,

* Specifically, Cochran alleged that Paco failed to: (1) disclose
using the appropriate term, the ‘‘unpaid balance of cash price,”’
in violation of 12 C.F.R. § 226.8(c)(3); (2) disclose, using the
appropriate term, the ‘‘total down payment,’’ in violation of
§ 226.8(c)(2); (3) make the required disclosures clearly and in
meaningful sequence, in violation of § 226.6(a); (4) print the
term ‘‘fiaance charge’’ more conspicuously than other terminology,
in violation of § 226.6(a) ; (5) disclose adequately default charges
payable in the event of late payments in violation of § 226.8(b) (4) ;
(6) adequately disclose the security interest it purports to hold,
in violation of § 226.8(b) (5) ; (7) disclose the ‘‘total of payments, ’’
using that term, in violation of § 226.8(b) (3) ; (8) identify the
method of computing any unearned portion of the finance charge
in the event of prepayment, in violation of § 226.8(b)(7); and
(9) furnish a duplicate of the disclosure statement at the time
disclosures were made, in violation of § 226.8(a).

Record at 42, 72-73.

154a

we will not recite them. The legal issues in the two cases
are identical.®

Il. The McCarran-Ferguson Act

These cases call into play the first two sections of the
Act, 15 U.S.C. §§ 1011 & 1012, which provide as follows:

§1011. Declaration of policy

Congress declares that the continued regulation and
taxation by the several States of the business of insur-
ance is in the public interest, and that silence on the
part of the Congress shall not be construed to impose
any barrier to the regulation or taxation of such busi-
ness by the several States.

§ 1012. Regulation by State law; Federal law relating
specifically to insurance; applicability of certain Fed-
eral laws after June 30, 1948

(a) The business of insurance, and every person en-
gaged therein, shall be subject to the laws of the sev-
eral States which relate to the regulation or taxation
of such business.

(b) No Act of Congress shall be construed to in-
validate, impair, or supersede any law enacted by any
State for the purpose of regulating the business of in-
surance, or which imposes a fee or tax upon such
business, unless such Act specifically relates to the
business of insurance; Provided, That after June 30,
1948, the Act of July 2, 1890, as amended, known as the
Sherman Act, and the Act of October 15, 1914, as
amended known as the Clayton Act and the Act of
September 26, 1914, known as the Federal Trade Com-
mission Act, as amended, shall be applicable to the

° The Board of Governors of the Federal Reserve System, charged
with the responsibility of prescribing regulations for the imple-
mentation of TIL, has filed an amicus curiae brief in Cochran
urging reversal of the district court’s decision.

155a

business of insurance to the extent that such business
is not regulated by State law.

The legal climate surrounding the Act’s passage was
neatly summarized by Justice Marshall in Securities &
Exchange Comm’n v. National Securities, Inc., 393 U.S.
453, 458, 89 S.Ct. 564, 567-68, 21 L.Ed.2d 668 (1969):

[The Act] was passed in reaction to this Court’s deci-
sion in United States v. South-Eastern Underwriters
Assn., 322 U.S. 533, 64 S.Ct. 1162, 88 L.Ed. 1440 (1944).
Prior to that decision, it had been assumed, in the
language of the leading case, that “[i]ssuing a policy
of insurance is not a transaction of commerce.” Paul
v. Virginia, 8 Wall. 168, 183, 19 L.Ed. 357 (1869).
Consequently, regulation of insurance transactions was
thought to rest exclusively with the States. In South-
Eastern Underwriters, this Court held that insurance
transactions were subject to federal regulation under
the Commerce Clause, and that the antitrust laws in
particular, were applicable to them. Congress reacted
quickly. Even before the opinion was announced, the
House had passed a bill exempting the insurance in-
dustry from the antitrust laws. 90 Cong.Rec. 6565
(1944). Objection in the Senate killed the bill, 90 Cong.
Rec. 8054 (1944), but Congress clearly remained con-
cerned about the inroads the Court’s decision might
make on the tradition of state regulation of insurance.
The McCarran-Ferguson Act was the product of this
concern. Its purpose was stated quite clearly in its
first section; Congress declared that “the continued
regulation and taxation by the several States of the
business of insurance is in the public interest.” 59 Stat.
33 (1945), 15 U.S.C. § 1011. As this Court said shortly
afterward, “[o]bviously Congress’ purpose was broadly
to give support to the existing and future state systems
for regulating and taxing the business of insurance.”
Prudential Insurance Co. v. Benjamin, 328 U.S. 408,
429, 66 S.Ct. 1142, 90 L.Ed. 1342 (1946).

156a

Congress thus returned to the states the plenary power
to regulate the business of insurance that they had enjoyed
prior to the South-Eastern Underwriters decision.® If Con-
gress intended to invoke its Commerce Clause powers to
occupy part of the field of insurance regulation, it would
expressly say so. Congress wanted to ensure that no future
federal legislation enacted under the Commerce Clause and
not specically related to insurance would be construed as
an implied repeal of the McCarran Act. 15 U.S.C. § 1012
(b).7

Finally, although the Act was passed primarily in re-
sponse to South-Eastern Underwriters, an antitrust case,
there is no doubt that its scope is much broader than the
antitrust area. For example, state tax laws relating to the
business of insurance are expressly covered by 15 U.S.C.
§§ 1011 & 1012. In addition, these two sections speak of
“regulation” of the insurance business, and that term is
certainly not limited to antitrust regulation. Although de-
bate naturally focused for the most part on the Act’s anti-

*This power was understood to be constitutionally limited by
the states’ inability to regulate outside their borders. See FTC v.
National Cas. Co., 357 U.£. 560, 78 S.Ct. 1260, 2 L.Ed.2d 1540
(1958) ; 91 Cong.Rec. 487 (1945) (remarks of Senator Ellender).

* Senator Ferguson stated :

If there is on the books of the United States a legislative act
which relates to interstate commerce, if the act does not spe-
cifically relate to insurance, it would not apply at the present
time. Having passed the bill now before the Senate, if Con-
gress should tomorrow pass a law relating to interstate com-
merce, and should not specifically apply the law to the busi-
ness of insurance, it would not be an implied repeal of this
bill, and this bill would not be affected, because the Congress

had not . . . said that the new law specifically applied to
insurance. i

91 Cong.Rec. 481 (1945). See also id. at 1487 (remarks of Senator
Ferguson) ; Prudential Ins. Co. v. Benjamin, supra, 328 U.S. at
429-30, 66 S.Ct. 1142.

157a

trust implications,* Congress was clearly concerned with
the overall regulatory picture, including “collection of pre-
miums, general regulations, the issuing of licenses, and
many other aspects of the business.” 91 Cong. Rec. 481-82
(1945) (remarks of Senator Radcliffe).° Moreover, 15
U.S.C. § 1014 makes the National Labor Relations Act and
the Fair Labor Standards Act specifically applicable to
the business of insurance, also demonstrating Congress’ in-
tent to leave the states free to regulate insurance in areas
having no relationship to antitrust.

Not surprisingly, the bulk of McCarran Act jurispru-
dence involves the Act’s application in the antitrust con-
text. While the antitrust cases are not dispositive of the
issues presented in the instant cases, they do serve as useful
guides for construing the terms of the statute, and where
appropriate we shall feel free to borrow prior construc-
tions of the Act’s language from the antitrust cases.

Ill. Discussion

The initial question is whether TIL “specifically relates
to the business of insurance” within the meaning of 15
U.S.C. § 1012(b). If it does, the McCarran Act defense is
automatically defeated and gur inquiry is at an end. If it
does not, then we must decide whether Paco’s premium
financing activities, carried out in connection with Coch-
ran’s purchase of an insurance policy from another com-
pany, constitute the “business of insurance” for purposes
of § 1012(b). If those activities are not a part of the busi-
ness of insurance, TIL would apply. If they are a part of
such business, we must then determine whether Georgia
has “enacted by any [law] ... for the purpose of regulat-
ing’’ such activities. If the state has not done so, TIL would
apply. If it has, we must finally decide whether TIL would
“invalidate, impair, or supersede” such state law. See SEC

® See 91 Cong.Rec. 1442-44, 1477-89 (1945).

® See also 91 Cong.Rec. 483 (remarks of Senators Radcliffe and
Ferguson) ; 1480 (remarks of Senator Pepper).

158a

v. National Securities, Inc., supra; Lowe v. Aarco Ameri-
can, Inc., 536 F.2d 1160 (7 Cir. 1976); Gerlach v. Allstate
Ins. Co., 338 F.Supp. 642 (S.D.Fla.1972); Krischer,
“Truth” in Insurance Premium Financing, 30 Bus.Lawyer
969 (1975).

A. “Specifically Relates”

Nowhere in TIL is there a provision that specifically
relates the legislation to the business of insurance. In con-
trast, the McCarran Act itself contains a section that “spe-
cifically relates” the National Labor Relations Act and the
Fair Labor Standards Act to the business of insurance.
15 U.S.C. § 1014."° Moreover, TIL contains no other indica-
tion that we should construe it as an implied repeal of the
McCarran Act, even if we were so inclined as to ignore the
Act’s legislative history and judicially recognize such an
implied repeal. See footnote 7, supra. & accompanying text.

Although TIL does not exempt insurance transactions
from its coverage, 15 U.S.C. § 1603,"" we cannot twist this

2015 U.S.C. § 1014 provides:

Nothing contained in this chapter shall be construed to
affect in any manner the application to the business of in-
surance of the Act of July 5, 1935, as amended, known as the
National Labor Relations Act, or the Act of June 25, 1938,
as amended, known as the Fair Labor Standards Act of 1938,
or the Act of June 5, 1920, known as the Merchant Marine
Act, 1920.

15 U.S.C. § 1603 provides :
This subchapter does not apply to the following:

(1) Credit transactions involving extensions of credit for
business or commercial purposes, or to government or govern-
mental agencies or instrumentalities, or to organizations.

(2) Transactions in securities or commodities accounts by
a broker-dealer registered with the Securities and Exchange
Commission. .

(3) Credit transactions, other than real property transac-
tions, in which the total amount to be financed exceeds $25,000.

0 EEE
;
'
j

159a

omission into an affirmative provision that “specifically re-
lates” TIL to the business of insurance. Similarly, Con-
gress’ consideration of at least some aspects of the insur-
ance business in the passage of TIL™ is insufficient. An
express application of a federal statute to the insurance
business is required before TIL would automatically defeat
a McCarran Act defense. We thus agree with the district
court and others that TIL does not “specifically relate” to
such business. Cochran v. Paco, Inc., supra, 409 F.Supp. at
224; Ben v. General Motors Acceptance Corp., 374 F.Supp.
1199, 1201 (D.Colo.1974); Gerlach v. Allstate Ins. Co.,
supra, 338 F.Supp. at 649; In re Providence Washington
Ins. Co., 89 F.T.C. 345, 354 (1976); Krischer, supra, 30
Bus.Lawyer at 975.

B. “Business of Insurance”

Having concluded that TIL does not “specifically relate”
to the business of insurance, we must now determine
whether the district court properly concluded that Paco’s
premium financing in connection with Cochran’s purchase
of an automobile insurance policy from Cotton States con-
stitutes the “business of insurance”. The McCarran Act
itself contains no definition of the “business of insurance,”
and the courts have not yet established the precise metes
and bounds of the term. The Supreme Court provided

(4) Transactions under public utility tariffs, if the Board
determines that a State regulatory body regulates the charges
for the public utility services involved, the charges for de-
layed payment, and any discount allowed for early paymert.

(5) Credit transactions primarily for agricultural purposes
in which the total amount to be financed exceeds $25,000.

* For example, 15 U.S.C. § 1605(a) defines ‘‘finande charge’’ as
**the sum of all charges’’ imposed directly or indirectly ‘‘as an
incident to the extension of credit, including any of the following
types of charges which are applicable: * * * (5) Premium or other
charge for any guarantee or insurance protecting the creditor
against the obligor’s default or other credit loss.’’

160a

some guidance in Securities and Exchange Commission v.
National Securities, Inc., supra, in which Justice Marshall
wrote:

The statute did not purport to make the States su-
preme in regulating all the activities of insurance
companies; its language refers not to the persons or
companies who are subject to state regulation, but to
laws “regulating the business of insurance.” Insurance
companies may do many things which are subject to
paramount federal regulation; only when they are
engaged in the “business of insurance” does the stat-
ute apply. Certainly the fixing of rates is part of this
business; that is what South-Eastern Underwriters
was all about. The selling and advertising of policies,
FTC v. National Casualty Co., 357 U.S. 560, 78 S.Ct.
1260, 2 L.Ed.2d 1540 (1958), and the licensing of com-
panies and their agents, cf. Robertson v. People of
State of California, 328 U.S. 440, 66 S.Ct. 1160, 90
L.Ed. 1366 (1946), are also within the scope of the
statute. Congress was concerned with the type of state
regulation that centers around the contract of insur-
ance, the transaction which Paul v. Virginia held was
not “commerce.” The relationship between insurer and
insured, the type of policy which could be issued, its
reliability, interpretation, and enforcement—these
were the core of the “business of insurance.” Un-
doubtedly, other activities of insurance companies re-
late so closely to their status as reliable insurers that
they too must be placed in the same class. But what-
ever the exact scope of the statutory term, it is clear
where the focus was—it was on the relationship be-
tween the insurance company and the policyholder.
Statutes aimed at protecting or regulating this rela-
tionship, directly or indirectly are laws regulating the
“business of insurance.”

393 U.S. at 459-60, 89 S.Ct. at 568-69.

16la

In applying National Securities, we must keep in mind
that Paco is not an insurance company.” In premium financ-
ing agreements such as the one between Paco and Cochran,
Paco advances the premiums to the insurance company and
Cochran, the insured, pays Paco in periodic installments.
In case of default, Paco can exercise its power of attorney
and cancel the policy. In this limited sense, Paco steps
into the shoes of the insured and gives notice of cancella-
tion to the insurance company and the insured, and upon
such cancellation, both the insurance company and the pre-
mium finance company must credit unearned premiums
to the insured. See Ga.Code Ann. §§ 84-5312, 84-5313. Thus,
as the district court acknowledged, Paco is performing the
same role in the “insurance business” as do other financing
companies in the consumer sales business. 409 F.Supp. at

18 At the outset we reject Paco’s argument that under National
Securities the McCarran Act exemption extends to people who
are neither the insurance company nor the insured. Paco points
to the following language in the National Securities case:

The [McCarran Act] did not purport to make the States su-
preme in regulating all the activities of insurance companies;
its language refers not to the persons or companies who are
subject to state regulation, but to laws ‘‘regulating the busi-
ness of insurance.’’

393 U.S. at 459, 89 S.Ct. at 568 (emphasis original). The Seventh
Circuit accepted this contention in Lowe v. Aarco-American, Inc.,
supra, but we reject it, finding the analysis of the administrative
law judge in In re Providence Washington Ins. Co., supra, more
persuasive. There the judge said:

[T]he language relied on by respondents did not purport to
expand the ‘‘business of insurance’’ concept beyond the ac-
tivities of insurance companies, but limited that concept to
recognize that not all activities of insurance companies con-
stitute the ‘‘business of insurance.’’

89 F.T.C. at 358. The full text of the Supreme Court’s analysis
in National Securities, set out above, makes this obvious. It is
noteworthy that the Court in the same paragraph mentioned
‘‘insurer’’ or ‘‘insurance company’’ in five subsequent sentences.

162a

221. See generally Comment, Insurance Premium Financ-
ing, 19 Buff.L.Rev. 656 (1970).

Beyond the National Securities case, there is precious
little judicial authority to aid us. The only appellate deci-
sion touching the issue is Lowe v. Aarco-American, Inc.,
supra. Relying on National Securities and Gerlach v. All-
state Ins. Co., supra, the court held that the credit sale of
insurance policies by an insurance broker and a premium
finance company was part of the business of insurance and
that the transaction was thus outside the purview of TIL.
The court also held that since the relevant activities were
regulated extensively by the Illinois Insurance Code and
the state’s Premium Financing Companies Act, application
of TIL would supersede Illinois law. Interestingly, there
was no inconsistency between the disclosure provisions of
TIL and the applicable Illinois requirements. 536 F.2d at
1162.

In Gerlach the plaintiff had purchased an Allstate auto-
mobile insurance policy on terms—10% down, balance in
10 installments with a flat 50¢ service fee per installment.
Premium financing was not involved, since the plaintiff
was not contractually obligated to pay the premiums; the
single consequence of default was cancellation of the policy.
The court held that Allstate’s activities with respect to its
premium payment plan and service charge were part of
its rate structure and thus subject to regulation by the
state of Florida. However, in rather sweeping dictum the
court also stated that a premium financing arrangement
would also have constituted the business of insurance and
would have thus precluded application of TIL. 338 F.Supp.
at 650. The Lowe court relied on this dictum.

We decline to follow these decisions, which contain no
reasoned discussion of the National Securities standard and
which, in our view, misconstrues the test. Under National
Securities, the key factor is the relationship between the
insurer and the insured, and statutes “aimed at protecting

163a

or regulating this relationship, directly or indirectly are
laws regulating the ‘business of insurance.’” 393 U.S. at
460, 89 S.Ct. at 568-69. In explaining that relationship, the
Court focused on “the type of policy which could be issued,
[and] its reliability, interpretation, and enforcement.” Id.
at 459, 89 S.Ct. at 568.

We fail to see how these elements in the insurer-insured
relationship are affected to any significant extent by pre-
mium financing arrangements. Premium financing has little
—if any—effect on an insurance company’s ability to pay
claims or on the nature of the policies it issues. Further,
the activity could affect a policy’s enforceability only in
terms of whether the policy was in effect at a particular
time, a question that might arise in the event of a payment
error. Such a dispute, however, does not concern the details
of the policy, its terms, or its coverage. We thus agree with
the administrative law judge in In re Providence Washing-
ton Ins. Co., supra, a case in which a premium finance com-
pany—a wholly owned subsidiary of an insurance company
—unsuccessfully defended charges of TIL violations on the
basis of the McCarran Act. The administrative law judge
said:

[T]he credit transactions here involved do not per-
tain to the particular details of the policy being pur-
chased. The policy is purchased from [the insurance
company], or such other insurance company as may
be involved. The credit, as extended by [the premium
finance company] to the insured, does not purport to
involve the insurer regarding any of tne policy’s de-
tails. The policy is a self-contained document quite
apart from the credit arrangement.

(The premium finance company] is not an insurance
company. It is in the business of extending consumer
credit, and, in the course of that business, it. collects
outstanding obligations to it. It is not engaged in the

164a

business of insurance simply because its loans are
limited for the purpose of financing insurance premi-
ums. It is no more in the business of insurance than a
company which lends money for a number of purposes,
including the financing of insurance premiums.

89 F.T.C. at 355-56.

In short, Paco cannot be said to be in the “business of
insurance” simply because an insurance policy is tangen-
tially involved. Although the borrower may appoint the
premium finance company as his attorney to cancel the
insurance in the event of default by the borrower, this does
not make the lender-borrower relationship a part of the
relationship between the insurer and the insured. Nor does
the fact that the premium finance company takes a security
interest affect the insurer-insured relationship. Paco’s rela-
tionship to the business of insurance is much like that of an
“ordinary” commercial lender to the business that receives
the funds obtained by the borrower. When a bank repos-
sesses and sells a car in which it has a secured interest to
collect on a defaulted loan, it would be ludicrous to assert
that the bank is in the automobile business. Similarly, a
savings and loan association that lends money to the pur-
chaser of a home is not in the business of selling real
estate merely because it can exercise certain rights with
respect to the property in the event of default. The lender’s
connection with the businesses involved in each of these
situations is simply too tenuous, and similarly, premium
financing has only a peripheral connection with the busi-
ness of insurance.

Furthermore, even if we agreed with the district court
that premium financing has a “considerable impact on the
cost of the insurance,” 409 F.Supp. at 223, that impact is
insufficient to sustain a McCarran Act defense. “An activity
is not a part of the business of insurance solely because it
has an impact, favorable or otherwise, upon premiums

165a

charged by the insurer.” Royal Drug Co. v. Group Life &
Health Ins. Co., 556 F.2d 1375, 1386 (5 Cir. 1977).

Accordingly, we hold that premium financing by an in-
dependent premium finance company dves not constitute
the “business of insurance” for purposes of the McCarran
Act.** Therefore, the McCarran Act does not preclude the
application of TIL’s disclosure requirements to the trans-
actions in the cases before us. The McCarran Act is to be
“narrowly construed in the face of valid federal regulatory
interests,” Securities and Exchange Comm'n v. Republic
Nat'l Life Ins. Co., 378 F.Supp. 430, 436 (S.D.N.Y.1974),
and it is obvious that TIL reflects such interests.”

The judgments in both Cochran and Jones are thus re-
versed and the cases remanded to the district court for
further proceedings consistent with this opinion.

RevERSED and REMANDED.

Brown, Chief Judge, concurs in the result.

** At least one commentator has reached this conclusion. Krischer,
supra, 30 Bus.Lawyer at 976. See also Comment, Federal Regula-
tion of Insurance Companies; The Disappearing McCarran Act
Exemption, 1973 Duke L.J. 1340, 1347-48 (exemption applies only
when insurance company is engaged in an activity falling within
Supreme Court’s ‘‘restrictive definition’’ of the business of insur-
ance).

** Because of our holding that Paco’s premium financing activi-
ties do not constitute the ‘‘business of insurance,’’ our inquiry
proceeds no further, and we need not consider whether Georgia
has ‘‘enacted any law . . . for purposes of regulating’’ such ac-
tivities or whether TIL would ‘‘invalidate, impair, or supersede’’

such state law.

167a
APPENDIX Q

UNITED STATES COURT OF APPEALS,
FIFTH CIRCUIT.

Jan. 2, 1979.
No. 76-2709.

Syivia Perry, Individually and on behalf of all others
similarly situated, Plaintiffs-A ppellants,

V.

Fipeuity Union Lire Insurance Company,
Defendant-A ppellee.

Appeal from the United States District Court for the
Northern District of Alabama.

* * *

Before Brown, Chief Judge, THornsperry and Morgan,
Circuit Judges.

THornBeERRY, Circuit Judge:

In Cochran v. Paco, Inc., 606 F.2d 460 (5th Cir. 1978),
we held today that the lending activities of a premium
finance company do not constitute the “business of insur-
ance” and that the McCarran-Ferguson Act (“McCarran
Act”), 15 U.S.C. §§ 1011 et seq., does not preclude appli-
cation of the disclosure requirements of the Truth in
Lending Act (“TIL”), 15 U.S.C. §§ 1601 et seq., to the
transaction.

The instant case, the second in today’s triology,’ presents
a related question: whether the McCarran Act bars TIL’s
application when an insurance company provides premium
financing in connection with the sale of an insurance policy.

The third case is Cody v. Community Loan Corp., 606 F.2d
499 (5th Cir. 1978).

168a

The district court held that the McCarran Act was a good
defense to plaintiff's TIL action and granted summary
judgment for the defendant insurance company. We
reverse.

I. Factual Background

Sylvia Perry was a college student in Alabama when a
salesman from Fidelity Union Life Insurance Co. sold her
a life insurance policy in June, 1974. To obtain the policy,
which had annual premiums of $295, she made a $10 down
payment and executed a promissory note to Fidelity for
the remainder of the first year’s premium. Fidelity pro-
vided Perry a form entitled “Disclosure Statement and
Acceptance of Policy,” * which stated that she would be
paying $134 in interest over the five-year life of the note.
Perry made no further payments on the note, which was
ultimately assigned to a bank.

2 This statement provides, in pertinent part:

(3) Cash Price of Policy (Annual Premium) ..... $295.58
CB). Coat. TRO © ow. oo 'ee cv on ss enn coewewes $ 10.00
(5) Unpaid Balance of Cash Price ............-. $285.58
eee eee (Same as Item 5)
CT) RE ONE ons sing ove andes (Same as Item 5)
(8) Total FINANCE CHARGE (interest) ...... $134.03
(9) Deferred Payment Price (3 + 8) ........... $429.61
(10) Total of Payments (5 + 8) ............-8-. $419.61

The Total of Payments is payable in a single payment due
6-13-79, except if the above Policy terminates, the Note may
be declared immediately due and payable.

(11) ANNUAL PERCENTAGE RATE ........... 8.00%

Ce Ge OE UU CaN ah ackakeuckea Shanda Gece ee eum 6-13-74

(13) Finance Charge Accrues From .............. 6-13-74
Record at 46.

Had Perry paid later premiums, she would have received a cash
payment at the end of the fifth year (the policy’s fifth anniversary
endowment) that would have covered a substantial portion of. the
first year’s premium.

169a

On June 24, 1975, Perry, on behalf of herself and all
persons similarly situated, filed this suit, alleging that she
had entered into contractual relations with Fidelity in the
nature of a consumer credit transaction and that Fidelity’s
disclosure forms violated TIL and Regulation Z, 12 C.F.R.
§ 226.1 et seq.* She sought the statutory penalty for herself
and the class, costs, and attorneys’ fees.‘ Following dis-
covery, Fidelity successfully moved for summary judg-
ment on the ground that the McCarran Act barred appli-
cation of TIL to the Perry transaction.

The district court, in an unreported opinion, held that
(i) the disclosure of credit information of a premium

5 Perry alleged the following violations of TIL:

(1) failure to disclose the finance charge as an accurate an-
nual percentage rate computed in accordance with the pro-
visions of 15 U.S.C. §§ 1606, 1638(a)(7), and 12 C.F.R. §§
226.5(b), 226.8(b) (2);

(2) failure to furnish a completed, duplicate copy of the dis-
closure statement containing all the required disclosures prior
to the consummation of the consumer credit transaction

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_1723%3A1. Public record. Not legal advice.