Financial Institutions Commission of British Columbia

....-BR •lTISH COLUMBIA IN THE MATTER OF THE FINANCIAL INSTITUTIONS ACT R.S.B.C. 1996, C. 141

AND WORLD WIDE WARRANTIES INC. (Missouri), WORLD WIDE WARRANTIES INC. dba THE CHOICE - GOLD KEY C/O CANADIAN AUTO WARRANTY SERVICES and dba CANADIAN AUTO WARRANTY SERVICES,

AUTO WARRANTY PROTECTION SERVICES INC. (Missouri), AUTO WARRANTY PROTECTION SERVICES INC. dba THE CHOICE - GOLD KEY C/O AUTO WARRANTY PROTECTIONS SERVICES and dba THE CHOICE -GOLD KEY C/O AUTO WARRANTY PROTECTION SERVICES,

NATIONAL DEALERS WARRANTY INC. (Missouri), NATIONAL DEALERS WARRANTY INC. dba NATIONAL DEALERS WARRANTY,

RUDGE GILMAN, MARK TRAVIS, NICHOLAS HAMILTON, RICHARD BRETTELLE, and STEVE PROETZ CORRIGENDUM TAKE NOTICE that the Order issued January 8, 2009 in this matter incorrectly spelled the name of one of the individuals in some portions of the findings and Order and the following corrections are hereby made:

"Richard Bretelle" is properly spelled "Richard Brettelle". Therefore the style of cause is amended accordingly as is the body of the findings such that "Bretelle" shall now read "Brettelle".

Superintendent of Financial Institutions Mailing Address: Web Address: 1200 - 13450 102 Avenue WNW.ficombc.ca Surrey. BC V3T 5X3 Telephone~ 604 953-5300 Facsimile: 604 953-5301

2 Dated at the City of Surrey, provinte of British Columbia this It- day of January, 2009. TO: World Wide Warranties Inc., Canadian Auto Warranty Services, and The Choice - Gold Key clo Canadian Auto Warranty Services #260 -1001 Craig Road St. Louis, Missouri, U.S.A. 63146

Auto Warranty Protection Services Inc., The Choice - Gold Key clo Auto Warranty Protection Services, and The Choice - Gold Key clo Auto Warranty Protections Services 3342 Mid Rivers Mall Drive St. Peters, Missouri, U.S.A. 63376

National Dealers Warranty Inc. and National Dealer Warranty 339 Mid Rivers Mall Drive St. Peters, Missouri, U.S.A. 63376

Richard Brettelle

Rudge Gilman

Nicholas Hamilton Steve Proetz

~..-;~-." BRlTISH COLUMBIA IN THE MATTER OF THE FINANCIAL INSTITUTIONS ACT R.S.B.C. 1996, C. 141

AND WORLD WIDE WARRANTIES INC. (Missouri), WORLD WIDE WARRANTIES INC. dba THE CHOICE - GOLD KEY C/O CANADIAN AUTO WARRANTY SERVICES and dba CANADIAN AUTO WARRANTY SERVICES,

AUTO WARRANTY PROTECTION SERVICES INC. (Missouri), AUTO WARRANTY PROTECTION SERVICES INC. dba THE CHOICE - GOLD KEY C/O AUTO WARRANTY PROTECTIONS SERVICES and dba THE CHOICE -GOLD KEY C/O AUTO WARRANTY PROTECTION SERVICES,

NATIONAL DEALERS WARRANTY INC. (Missouri), NATIONAL DEALERS WARRANTY INC. dba NATIONAL DEALERS WARRANTY,

RUDGE GILMAN, MARK TRAVIS, NICHOLAS HAMILTON, RICHARD BRETELLE, and STEVE PROETZ ORDERS UNDER SECTIONS 244(2) AND 238, AND NOTICE OF RIGHT OF HEARING OR APPEAL UNDER SECTIONS 238(2) AND 242

UPON REVIEWING THE SUBMISSIONS AND EXHIBITS OF STAFF, it appears to the Superintendent of Financial Institutions (the "Superintendent") that:

Superintendent of Financial rnstitutions Mailing Address: Web Address: 1200 - 13450 102 Avenue www.ficombc.ca Surrey, BC V3T 5X3 Telephone: 604953-5300 Facsimile: 604 953-5301

2 1. World Wide Warranties Inc., ("WVVVVI") Auto Warranty Protection Services Inc., ("AWPSI"), and National Dealers Warranty Inc. ("NOWI"), are Missouri corporations which all have common officers and directors and all doing business under various names.

2. The common officers and directors are Rudge Gilman of O'Fallen, Missouri ("Gilman"), Mark Travis of O'Fallen, Missouri (''Travis''), and Nicholas Hamilton of St. Peters, Missouri ("Hamilton").

3. \/IMIWI is registered with the State of Missouri Secretary of State to do business in Missouri under the following fictitious names:

(a) The Choice - Gold Key clo Canadian Auto Warranty Services ("TCGK1"). (b) Canadian Auto Warranty Services, ("CAWS"). 4. AWPSI is registered with the State of Missouri Secretary of State to do business in Missouri under the following fictitious names:

(a) The Choice - Gold Key clo Auto Warranty Protections Services ("TCGK2").

(b) The Choice - Gold Key clo Auto Warranty Protection Services ("TCGK3"). 5. NOWI is registered with the State of Missouri Secretary of State to do business in Missouri under the fictitious name of National Dealers Warranty ("NOW').

6. WWWI, CAWS, TCGK1, TCGK2, TCGK3, AWPSI, NOWI and NOW are not incorporated companies in British Columbia nor are they registered to do business in British Columbia.

7. Richard Brettelle ("Brettelle"), Gilman, Travis, and Hamilton are not licensed agents in British Columbia and therefore are not permitted to sell warranty insurance products in the Province of British Columbia.

8. \/IMNVI, CAWS, TCGK1, TCGK2, TCGK3, AWPSI, NOWI, and NOW, are not licensed insurance agencies in British Columbia and therefore are not permitted to sell vehicle warranty insurance products in the Province of British Columbia.

9. \/IMNVI, CAWS, TCGK1 , TCGK2, TCGK3, AWPSI, NDWI, and NOW are not authorized insurance companies in British Columbia, and therefore are not permitted to conduct insurance business in the province.

10. Between December 6, 2008 and January 7, 2009, the Superintendent of Financial Institutions (the "Superintendent") received a total of 20 complaints from the British Columbia residents indicating they had received unsolicited telephone calls from companies selling extended vehicle warranty insurance.

3 11. Information from the complainants indicated that: (a) The telephone calls originated from various area codes. (b) The two most common originating telephone numbers were 1-800-559-0408, and 443 270-9451.

(c) Four of the complainants indicated they had purchased extended vehicle warranty insurance, however one of them indicated they had cancelled their credit card before the company in question was able to process it.

(d) Four of the complainants indicated the company which called them was CAWS.

12. The Superintendent was advised that on December 15, 2008, the Saskatchewan Financial Services Commission issued a Cease and Desist Order against World Wide Warranty Inc. The supporting documentation indicated that:

(a) World Wide Warranty Inc, also known as CAWS, had telephoned consumers advising their vehicle manufacturer's warranty was expiring, and attempted to sell them an extended warranty.

(b) World Wide Warranty Inc. has not applied nor has it been approved for, a licence to sell insurance in the Province of Saskatchewan.

13. It was later determined from the investigation that the Cease and Desist Order had been issued against the wrong company, as the Order should have named World Wide Warranties Inc., not Worl d Wide Warranty Inc. which is a properly licensed General Insurance Corporate Agent with the Insurance Council. It was further confirmed that the company World Wide Warranty Inc. was not involved in any way with making unsolicited telephone calls.

14. The website for CAWS, www.ecaws.com represents the following: "At Canadian Auto Warranty Services, our goal is to provide our customers with an extended vehicle warranty customer to their needs. We have many different warranties available whether you have a new vehicle or used."

15. Under the heading "Extended Warranty Options" it states: "Canadian Auto Warranty Services started so we could provide fellow Canadians with better and more affordable options when it comes to an extended vehicle warranty."

16. CAWS has a registered office of #260 -1001 Craig Road, St. Louis, Missouri. 17. TCGK1 has a registered office of #260 -1001 Craig Road, St. Louis, Missouri.

4 18. W\NVVI of #260 - 1001 Craig Road, S1. Louis, Missouri has registered to do business under the name of CAWS and TCKG1. The officers of \N\N\NI are Gillman as Director and President, Travis as Director and Vice President, and Hamilton as Director and Secretary.

19. The www.ecaws.com website is registered by NOW. 20. NDWI is registered to do business in Missouri as NOW. NOW and NDWI have a registered address of 339 Mid Rivers Mall Drive, S1. Peters, Missouri. The officers of NDWI are Gillman as Director and President, Travis as Vice President, and Hamilton as Secretary.

21. AWPSI of 3342 Mid Rivers Mall Drive, S1. Peters, Missouri, is registered to do business as TCGK2 and TCGK3. Both TCGK2 and TCGK3 have a registered business address of #260 -1001 Craig Road, S1. Louis, Missouri. The officers for AWPSI are Gillman as Director and President, Travis as Director and Vice President, Hamilton as Director and Secretary, Brettelle as Director and Treasurer, and Steve Proetz as Director.

22. A press release dated March 6, 2008, issued by the Attorney General's Office for the State of Missouri, indicated that NDWI had sent out postcards and letters informing residents of Missouri that:

(a) Customers had a limited time to purchase extended warranties for their vehicles.

(b) NDWI did not inform its customers that it was not affiliated with any dealer or manufacturer of the vehicles, nor that it was actually offering motor vehicle extended service contracts instead of warranties.

The Attorney General filed a lawsuit against NDWI regarding its alleged unlawful actions.

23. A press release dated December 17, 2008, was issued by the Motor Vehicle Sales Authority of British Columbia, warning the public against unsolicited telephone calls for the sale of extended vehicle warranties. The press release indicated that:

(a) A United States company called Warranty Centre or World Wide Warranty Inc. was soliciting the sale of extended warranties by telephone.

(It was later determined that the name should have read World Wide Warranties Inc., not World Wide Warranty Inc. )

(b) The caller would advise the consumer that according to the vehicle manufacturer their vehicle warranty was about to expire in two days.

(c) The caller invited the consumer to purchase a five-year extended warranty for $175, and at that time the customer's credit card is requested.

5 24. One complainant advised Staff that: (a) He purchased an extended vehicle warranty from CAWS. (b) As he felt concerned about his purchase, he contacted CAWS at 1-800-559-0408.

(c) The representative for CAWS assured him the warranty was legitimate. (d) The representative provided the website address of www.ecaws.com. (e) His credit card transaction was processed by NOW of 339 Mid Rivers Mall Drive, S1. Peters, Missouri, U.S.A., 63376, telephone 1-800-436-3185.

25. Since the credit card transaction was processed by NOW and the representative indicated he was calling from CAWS, I find that NOW and CAWS are working together in the provision and sale of vehicle warranty insurance.

26. Another complainant advised that: (a) Her husband received a telephone call soliciting the sale of extended vehicle warranties.

(b) The caller provided the telephone number of 1-800-559-0408. (c) Her husband agreed to purchase the product and provided a credit card number. However upon his request to purchase a warranty for their second vehicle, the caller was unable to provide any information regarding a warranty for a second vehicle.

(d) As a result her husband became suspicious and declined the purchase. Subsequently he cancelled the credit card transaction which was not processed.

27. Yet another complainant advised that: (a) He received a telephone call on January 5, 2009, soliciting the sale of an extended vehicle warranty.

(b) The caller advised they were calling on behalf of "The Choice". (c) The caller provided a telephone number of 1-800-559-0408. (d) The caller offered to sell him a five-year or 160,000 kilometre warranty on his vehicle for $195 down and $99.89 per month for 18 months.

(e) He provided his credit card information, and the transaction was processed.

6 (f) He subsequently confirmed with his credit card provider that the credit card transaction originated from \J\MIWI of P.O. Box 456, Niagara Falls, Ontario, L2E 6V2.

28. I find that since the credit card transaction was processed by \NWWI and the representative indicated he was calling from "The Choice", WVVWI doing business as TCGK1, and AWPSI doing business as TCGK2 and TCGK3, are working together in the sale and provision of vehicle warranty insurance.

29. Between January 6 and January 7, 2009, Staff called nine different telephone numbers provided by the complainants from where the solicitations had originated, and the following was determined:

(a) Telephone numbers 234567-8900,410367-3714,207925-1732,817 444-5194, and 604270-7289, were no longer in service.

Staff believes these numbers were "spoofed" using the services of companies such as www.telespoof.com and www.spoofcard.com which allow the caller to display a different telephone number other than their own.

(b) Telephone numbers 203 638-1170,443270-9451, and 267 773~4768, contained messages which did not indicate the name of the company who owned the telephone number. However the instructions stated the customer should press 1 to be added to their Do Not Call List.

(c) Telephone number 1-800-559-0408 contained a message which indicated the telephone number belonged to CAWS.

30. On January 6, 2009, Staff called 1-800-559-0408, and the following took place: (a) The person answering the telephone indicated Staff had reached the Warranty Division.

(b) When asked what company Staff had contacted, the representative asked where Staff was calling from. Staff indicated he was calling from British Columbia, at which time the representative advised Staff had reached CAWS.

31. A press release dated August 27,2008 was issued by the Attorney General's Office for the State of Missouri which indicated that:

(a) NOW must cease from using the tactic of misrepresenting an extended vehicle warranty to sell motor vehicle service contracts to Minnesota residents.

(b) NOW materials had been used to lead customers to believe the manufacturer or dealer of their automobiles had made the solicitation, when in fact NOW had no relation to any vehicle manufacturer or dealer.

7 (c) "Minnesotans received mailings indicating that their vehicle warranty expired, is about to expire, or that their vehicle is subject to a manufacturer recall. They feel intimidated into calling and then be sold a product that they don't want or need."

32. On January 6, 2009, Staff contacted the Attorney General's Office of the State of Missouri and received the following information from staff of the Attorney General:

(a) The Attorney General's Office had sued NOW in 2008, which action was settled on October, 2008.

(b) They were aware of a similar action against NOW by the State of Minnesota.

33. Section 168 of the Act defines insurance agent for licensing purposes as follows: 168 In this division, unless the context otherwise requires,

"insurance agent" means a person, other than an insurance company or an extraprovincial insurance corporation, who solicits, obtains or takes an application for insurance, or negotiates for or procures insurance, or signs or delivers a policy, or collects or receives a premium;

34. Section 1 of the Act defines "insurance business" as follows: "insurance business" means the business of (a) undertaking or offering to undertake to indemnify another person against loss or liability for loss in respect of a certain risk or

peril to which the object of the insurance may be exposed,

(b) soliciting or accepting any risk, (c) soliciting an application for a contract of insurance, (d) issuing or delivering a (i) receipt for any contract of insurance, or (ii) contract of insurance, (e) in consideration of any premium or payment, granting an annuity on a life or lives,

(t), collecting or receiving any premium for a contract of insurance,

8 (g) adjusting any loss covered by a contract of insurance, or (h) advertising for any business described in paragraphs (a) to (g), whether or not the person undertaking an activity or activities set out in paragraphs (a) to (h) can or does distribute any gain, profit or dividend, or otherwise disposes of the person's assets, to a member or shareholder of

the person other than during winding up or on dissolution;

35. Section 75 of the Act prohibits unauthorized insurance business in British Columbia:

75 A person must not carry on insurance business in British Columbia unless the person is

(a) an insurance company or extraprovincial insurance corporation that has a business authorization to carry on

insurance business,

(b) a company registered under the Insurance (Captive Company) Act,

(c) a member of a reciprocal exchange as defined in section 186 for which a permit under section 187 has been issued

and is in effect,

(d) licensed under Division 2 of Part 6 as an insurance agent, insurance salesperson, insurance adjuster or employed insurance adjuster and is carrying on the insurance business only in that capacity,

(f) an insurer (i) [Repealed 2004-48-48.J (ii) that administers an insurance compensation plan designated by regulation for the purpose of section 66 (2),

(g) a society described in section 193 (1) (a) to (g) that, immediately before September 15, 1990, was carrying on the business of insurance,

(h) a credit union that is carrying on insurance business only by making or participating in contracts of insurance as permitted by section 82 of the Credit Union Incorporation Act, or

(i) a central credit union that is carrying on insurance business only by providing or arranging insurance as permitted by section 90 (2) of the Credit Union Incorporation Act.

9 36. Section 171 prohibits unlicensed insurance agent activity in British Columbia: 171 (1) [Repealed 2004-48-79.] (2) A person must not act in British Columbia as an insurance agent or insurance salesperson unless the person is licensed as an insurance agent or insurance salesperson, as the case may be.

(3) Subsection (2) does not apply to a person or class of persons exempted by the regulations.

37. None of the companies and individuals involved qualifies for any of the legislative exemptions from licensing or business authorizations under the Act.

38. An extended warranty for an automobile is "vehicle warranty insurance" and as such it is an insurance contract under the Act and Insurance Classes Regulation:

"vehicle warranty insurance" means insurance, not being insurance included in or incidental to vehicle insurance, against loss of or damage to a motor vehicle arising from mechanical failure, that is contracted between

the purchaser of the motor vehicle and an insurer whereby the insurer undertakes for a specific period to assume the cost of repairs or replacement, towing fees, car rentals and accommodation as a result of a

covered mechanical failure. (Section 1 of the Insurance Licensing Exemptions Regulation)

39. Section 244 of the Act states: 244 (1) In this section, "committing an act or pursuing a course of conduct" includes failing or neglecting to perform an act or failing or neglecting to pursue a course of conduct.

(2) If, in the opinion of the commission, a person is committing an act or pursuing a course of conduct that

(a) does not comply with this Act, the regulations or the Company Act as it applies for the purposes of this Act,

(c) might reasonably be expected to result in a state of affairs not in compliance with this Act or the regulations, with the Company Act as it applies for the purposes of this Act or, in the case of an extraprovincial corporation, with the Business Corporations Act,

10 then, the commission may (f) order the person to (i) cease doing the act, (ii) cease pursuing the course of conduct, or (iii) do anything that the commission considers to be necessary to remedy the situation, or...

40. I find that the following companies have been offering to provide and are providing vehicle warranty insurance in British Columbia, soliciting British Columbia residents by direct telephone solicitation to provide insurance and accepting risk in British Columbia, issuing receipts for contracts of insurance in British Columbia, collecting premiums in British Columbia and advertising for insurance business in British Columbia through direct telephone solicitation to British Columbia residents without proper licensing and authorization under the Act:

(a) World Wide Warranties In c. (Missouri), and World Wide Warranties Inc. doing business as Canadian Auto Warranty Services, and The Choice-Gold Key cIa Canadian Auto Warranty Services;

(b) Auto Warranty Protection Services Inc.(Missouri), and Auto Warranty Protection Services Inc. doing business as The Choice - Gold Key clo Auto Warranty Protections Services, and The Choice - Gold Key cIa Auto Warranty Protection Services; and

(c) National Dealers Warranty Inc. (Missouri), and National Dealers Warranty Inc. doing business as National Dealers Warranty.

41. I find that the following individuals, as directing and controlling minds of the companies referenced above are conducting the affairs of their companies such that might reasonably be expected to result in non compliance with the Act by conducting unauthorized insurance business in British Columbia:

(a) Rudge Gilman, as a directing and controlling mind of World Wide Warranties Inc., Auto Warranty Protection Services Inc., and National Dealers Warranty Inc.;

(b) Mark Travis, as a directing and controlling mind of World Wide Warranties Inc., Auto Warranty Protection Services Inc., and National Dealers Warranty Inc.;

(c) Nicholas Hamilton, as a directing and controlling mind of World Wide Warranties Inc., Auto Warranty Protection Services Inc., and National Dealers Warranty Inc.;

11 (d) Richard Brettelle, as a directing and controlling mind of Auto Warranty Protection Services, Inc.; and

(e) Steve Proetz, as a directing and controlling mind of Auto Warranty Protection Services, Inc.

42. I agree with Staff that a hearing would require ten to twenty witnesses and would take at least four days to complete, and could 110t be held for at least six months due to scheduling of parties who reside out of the country, witnesses, counsel and the hearing officer.

43. The unauthorized conduct of the parties is recent and ongoing. As a result, a summary order to cease and desist is warranted pursuant to section 238(1)(b) of the Act since the length of time that would be required to hold a hearing would be detrimental to the due administration of the Act and would likely result in further non-compliance with the Act, which would harm the reputation of the British Columbia insurance industry and would be detrimental to the public interest.

WHEREAS the Financial Institutions Commission has delegated to the Superintendent the powers and duties under section 244 of the Act in the Instrument of Delegation executed June 2, 2005;

NOW THEREFORE the Superintendent orders pursuant to Sections 244(2)(a),(c) and (f), and 238 of the Act that:

1) The following companies cease from the conduct of insurance business in the Province of British Columbia, including insurance business related to vehicle warranty insurance:

(a) World Wide Warranties Inc. (Missouri), and World Wide War ranties Inc. doing business as Canadian Auto Warranty Services, and The Choice - Gold Key clo Canadian Auto Warranty Services;

(b) Auto Warranty Protection Services Inc. (Missouri), and Auto Warranty Protections Services Inc. doing business as The Choice -Gold Key clo Auto Warranty Protections Services, and The Choice - Gold Key clo Auto Warranty Protection Services; and

(c) National Dealers Warranty Inc. (Missouri), and National Dealers Warranty Inc. doing business as National Dealers Warranty; and