## Facts

- The Ohio Attorney General filed an original quo warranto action seeking to oust Western Auto Supply Co., a Missouri corporation doing retail business in Ohio, from engaging in the business of insurance without statutory compliance.
- Western Auto sold automobile tires in Ohio stores and issued written “guarantees” with each sale.
- The guarantees included (1) coverage against defects in material or workmanship, and (2) broader coverage for a specified period against tire failure caused by blowouts, cuts, bruises, rim-cuts, under-inflation, misalignment, faulty brakes, and other road hazards (excluding fire or theft).
- The Attorney General alleged the broader risk assumption was a contract “substantially amounting to insurance” under § 665 of the Ohio General Code, triggering Ohio insurance regulation.

## Issues

1. Whether Western Auto’s tire guarantees were merely product warranties or, in substance, contracts of insurance.
2. Whether issuing such broad guarantees constituted engaging in a business “substantially amounting to insurance” under § 665 of the Ohio General Code, requiring compliance with Ohio’s insurance laws.

## Decision

- The court held the guarantees, taken as a whole, were contracts “substantially amounting to insurance” under § 665.
- The court ruled that Western Auto was engaging in the business of insurance in Ohio without authorization.
- The court determined Western Auto was subject to a judgment of ouster in quo warranto from exercising the privilege of conducting such insurance business unless it complied with Ohio insurance laws.

## Legal Principles

- Insurance is affected with a public use and may be regulated to protect the public and interested parties.
- Insurance (property and liability) is a contract in which one party, for consideration, promises to compensate or indemnify another for loss from specified causes.
- A warranty indemnifies against defects in the article sold; insurance indemnifies against loss from perils external to, and unrelated to, defects in the article itself.
- Courts look to the substance and legal effect of the undertaking, not the label “guarantee” or “warranty,” when determining whether a contract is insurance.
- A vendor’s promise to indemnify purchasers for product failure from external hazards, in exchange for consideration embedded in the sale, may be regulated as insurance under statutes covering contracts “substantially amounting to insurance.”

## Conclusion

Because Western Auto’s guarantee extended beyond defects to cover loss from external road hazards and other causes of tire failure for consideration, it functioned as insurance and fell within § 665, allowing the state to seek ouster unless the company complied with Ohio insurance regulation.


State ex rel. Duffy v. W. Auto Supply Co., 134 Ohio St. 163 (1938)