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Realistically, however, the sale of credit insurance is part of
the dealership's function. Dealerships perform a variety of
services, including selling cars, arranging financing, and
fulfilling warranty obligations as defined in service contracts.
Among these services, offering credit insurance is a subservice
of arranging financing.
Credit insurance is offered on the installment sale purchase
agreement filled out by employees of the dealerships. Since the
installment agreement offers credit insurance, the dealerships,
through their employees, must be able to explain the purpose of
credit insurance and calculate its cost. Moreover, the dealers
collect payment for credit insurance when the dealer-arranged
financing is completed. Although the commissions paid by the
insurance companies are paid to the dealer-related agencies, it
is clear from the record that the dealerships earn such
commissions. And those commissions are paid to the dealer-
related agencies only because Michigan law mandates that result.
However, the agencies have no employees and take no initiative in
selling the credit insurance. The only role the dealer-related
agencies play is as repositories of commissions paid by the
insurance companies. There is nothing in the record to indicate
that the agencies played any part whatsoever in earning the
commissions paid to them. The agencies are owned (directly or
indirectly, e.g., through a corporation) by relatives of the
dealerships' owners with the result that the dealerships'
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Last modified: May 25, 2011