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Dealer in regards to this contract is acting as a
Principal and not as an Agent on behalf of any insurer.
* * * * * * *
In the event of a Breakdown, you must follow this
procedure.
1. Return your vehicle to the Dealer. If this is not
possible or practical, you must call his Claims Service
(insurer) for instructions * * *
* * * * * * *
NOTICE: If a Breakdown Claim has been filed with
the Issuing Dealer who has failed to pay the claim
within sixty (60) days after proof of loss has been
filed with the Issuing Dealer, you the Service Contract
Purchaser shall also be entitled to make a Direct Claim
against the Issuing Dealer’s insurance company, Western
General Insurance Company * * * [Emphasis in original.]
The foregoing terms contradict petitioners’ assertions and
satisfy us that petitioners remained primarily liable on the
EWA’s, notwithstanding that they had transferred the risk of loss
associated with that liability to Western General.
III. Conclusion
Because petitioners’ payments to Western General were for
the provision of multiyear insurance policies, petitioners’
method of taking a full year’s amortization of the insurance
expense in the year of a policy’s inception, irrespective of the
actual commencement date of the policy, violates the regulations.
Accordingly, petitioners’ method does not clearly reflect income,
and respondent is not proscribed from seeking to change
petitioners’ method so that it conforms with the requirements of
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