Idaho retailer Chalfant Corp. and Edmark Auto Inc. are suing insurance giant Zurich and its Universal Underwriters Service Corp. affiliate for misrepresenting and mismanaging a “No Charge Back Program” and then billing them for the resulting $230,000 deficit.
The original compliant was filed in the U.S. District Court for the District of Idaho in November 2015. A proposed amended compliant, replacing Zurich Inc. with Zurich American Insurance Co. as defendant, was submitted to the court this month. The dealerships involved are the former Edmark Superstore in Nampa, Idaho, now owned by Kendall Auto Group, and Chalfant’s Boise Volkswagen, Audi Boise and former Saturn store.
Edmark participated in the “No Charge Back Program” from 1996 to 2015 and Chalfant’s stores from 2009-15, according to court documents. The program set out a strategy for handling customer refunds, or charge backs, on vehicle service contracts canceled before the expiration date.
Under the program, Edmark and Chalfant paid Zurich an amount determined by Zurich for each service contract sold. Zurich was to place the payment in a designated refund account that it would manage and use to cover Edmark’s and Chalfant’s future charge backs. Zurich was to adjust the plaintiffs’ remittance amounts if necessary.
But that didn’t happen, according to plaintiffs’ attorney, Erik Stidham of Holland & Hart in Boise, Idaho.
“Based on the documents produced and depositions taken in the litigation, Zurich never set up, invested, or managed a fund for my clients as promised,” he said. “Instead, Zurich just commingled the funds with other revenue and paid the charge backs from Zurich’s general funds.”
The defendants also never asked Edmark and Chalfant to increase the remittance paid per transaction, according to the amended complaint.
Zurich eventually caused the “No Charge Back Program” to go into a deficit, the complaint says.
Edmark and Chalfant are suing because they believe that Zurich misled them and jeopardized their future with unknown “ongoing liability,” Stidham said.
They “don’t believe they should pay $230,000 and [believe] that they are entitled to damages beyond that,” he said.
A spokeswoman for Zurich North America said the company does not comment on pending litigation but looks forward “to defending this matter vigorously in the proper forum.”