author: LEHMAN, Justice.

text:
    2003 WY 92
    Jeanne K. LEE, Appellant (Defendant), v. LPP MORTGAGE LTD., Appellee (Plaintiff).
    No. 02-25.
    Supreme Court of Wyoming.
    Aug. 12, 2003.
    Rehearing Denied Sept. 3, 2003.

      John I. Henley of Vlastos, Henley & Drell, P.C., Casper, WY, Representing Appellant. Argument by Mr. Henley.
    Dale W. Cottam and Kathleen C. Yarger of Hirst & Applegate, P.C., Cheyenne, WY, Representing Appellee. Argument by Mr. Cottam.
    Before HILL, C.J., and GOLDEN, LEHMAN, KITE, and VOIGT, JJ.
   LEHMAN, Justice.

[T1] Jeanne K. Lee (Lee) appeals the summary judgment granted to LPP Mortgage Ltd. (LPP). In 1995, Lee signed a personal guaranty for a Small Business Administration (SBA) loan taken out by her son and daughter-in-law. The SBA assigned the loan to LPP, and, in 1998, Lee's son and daughter-in-law defaulted on the loan. The district court concluded that, under the terms of the guaranty, Lee was required to pay the loan. We affirm.

ISSUES

[¶ 2] The issues presented on appeal are:

1. Whether the guaranty was obtained by illegality, misrepresentation, fraud, or mutual mistake.
2. Whether there are genuine issues of material fact as to whether the underlying debt was discharged.
3. Whether LPP failed affirmatively to show by admissible evidence the absence of any issues of material fact and that it is entitled to judgment as a matter of law.

FACTS

[¶ 3] In September 1995, Lee guaranteed an SBA loan for her son and his wife, Johnnie D. (Doug) and Shirley Lee, so that they could purchase a car wash in Lander. Doug and Shirley initially approached Key Bank of Lander about obtaining a loan, and the bank informed the couple that they might qualify for an SBA loan. On March 24, 1995, Doug and Shirley authorized financial services with Frontier Certified Development Company (Frontier CDC) to act as their agent in submitting financial data and information to the SBA to obtain a loan under the SBA 504 program. Frontier CDC is a development company authorized by the SBA to process SBA loan applications and to package SBA loans for resale once they are finalized.

[T4] Frontier CDC and the SBA agreed to approve Doug and Shirley's loan on the condition that Lee and her husband (now deceased) guarantee the loan. The total purchase price was $380,000.00, with Key Bank financing $190,000.00, Frontier CDC/SBA financing $152,000.00, and the borrowers investing $38,000.00. Lee borrowed the $38,000.00 from Key Bank in Lander and loaned it to Doug for the equity injection. The loan application listed the equity injection as a gift from Doug's parents. The annual debt service for the Key Bank and Frontier CDC/SBA loans amounted to $40,932.00.

[¶ 5] By October 1998, Doug and Shirley had defaulted on the loans. After Doug and Shirley defaulted, they each signed a deed in lieu of foreclosure in favor of Community First National Bank (Key Bank's successor). However, Community First would not record the deeds unless Frontier CDC agreed to release its second mortgage. Frontier CDC agreed to release the second mortgage provided Lee consented as the guarantor. Lee then signed a Lender Agreement that provided for the recording of the deeds and release of Frontier CDC's mortgage. Community First then sold the car wash, receiving $23,119.00 less than its first mortgage amount. No proceeds were available to be applied to Frontier CDC's second mortgage.

[¶ 6] On February 22, 2001, Lee was informed that under the terms of the guaranty, payment for the deficiency was due in full. Frontier CDC, the holder of the promissory note, mortgage, and guaranty assigned its rights to LPP on March 12, 2001, and LPP filed a complaint on March 26, 2001, seeking judgment against Lee for the amount of the loan plus interest, costs of suit, and attorney fees. Each party made motion for summary judgment. The district court entered its Order Granting Plaintiff's Motion for Summary Judgment and Denying Defendant's Motion for Summary Judgment on December 13, 2001. Judgment was entered against Lee in the amount of $178,631.62, plus attorney fees and costs. This appeal followed.

STANDARD OF REVIEW

[T7 The district court resolved this case by a grant and a denial of cross motions for summary judgment. A denial of a motion for summary judgment is an interlocutory order and is generally not subject to appeal. Wolter v. Equitable Resources Energy Co.. Western Region, 979 P.2d 948, 958 (Wyo.1999). This court has, however, recognized an exception to this rule when the district court grants one party's motion for summary judgment, denies the opposing party's motion for summary judgment, and the district court's decision completely resolves the case. In this type of situation, both the grant and the denial of the motions for summary judgment are appealable. Lieberman v. Wyoming.com LLC, 11 P.3d 353, 356 (Wyo.2000).

[T8] Rulings on summary judgment motions are governed by language found in W.R.C.P.56(c):

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

Our standard for the appellate review of a summary judgment was reiterated in Rino v. Mead, 2002 WY 144, ¶ 12, 55 P.3d 13, 112 (Wyo.2002) (quoting Hasvold v. Park County Sch. Dist. No. 6, 2002 WY 65, ¶ 11, 45 P.3d 635, 1 11 (Wyo.2002)):

Summary judgment is proper only when there are no genuine issues of material fact and the prevailing party is entitled to judgment as a matter of law.... We review a summary judgment in the same light as the district court, using the same materials and following the same standards. "We examine the record from the vantage point most favorable to the party opposing the motion, and we give that party the benefit of all favorable inferences which may fairly be drawn from the record." ... Summary judgment serves the purpose of eliminating formal trials where only questions of law are involved.... We review a grant of summary judgment by deciding a question of law de novo and afford no deference to the district court's ruling on that question....
... A material fact is any fact that, if proved, would have the effect of establishing or refuting an essential element of a claim or defense asserted by a party.

DISCUSSION

Fraud, Mistake, Misrepresentation, Illegality

[¶ 9] We begin our discussion by recognizing that federal common law governs the rights and obligations of the parties when disputes arise from SBA loan agreements. United States v. Kimbell Foods, Inc., 440 U.S. 715, 726, 99 S.Ct. 1448, 1457, 59 L.E.2d 711 (1979). However, we also recognize Kimbell Foods established that as long as a national rule is not needed to protect Federal interests, courts may look to and adopt state law in fashioning the appropriate governing law. Id. at 728-780, 99 S.COt at 1458-59. Following Kimbell Foods, it appears clear that as long as state law does not hinder the administration of the SBA loan program, courts apply state law. United States v. Agri Serv., Inc., 81 F.3d 1002, 1005 (10th Cir.1996) ("absent federal statutes to the contrary, rights arising under SBA program are determined by state law." (citing Kimbell Foods, 440 U.S. at 789-740, 99 S.Ct. at 1464-65)). Because neither party has directed us to differing federal common law and, more importantly, because the application of state law to the facts of this case presents no foreseeable hindrance to the SBA loan program, we will apply state law just as federal courts often have when presented with disputes arising from SBA loan agreements. See United States v. New Mexico Landscaping, Inc., 785 F.2d 843 (10th Cir.1986); United States v. Kelley, 890 F.2d 220 (10th Cir.1989); United States v. Stump Home Specialties Mfg., Inc., 905 F.2d 1117 (7th Cir.1990).

[T10] Lee first argues that the guaranty she executed was obtained by fraud, mistake, misrepresentation, or illegality and is therefore void. Lee alleges she felt pressured to make the guaranty and did not want to sign it, but did so because she and her husband were told that Doug and Shirley would not get the SBA loan unless they guaranteed it. Lee argues she and her husband were not advised that the business would not produce a sufficient cash flow or that the SBA was violating its own regulations. In addition, Lee contends Key Bank represented to her and her husband that the car wash was a good investment for Doug, and that Doug and Shirley's balance sheet was altered by Frontier CDC/SBA to reflect that their equity was nearly $76,000.00 rather than the original $40,761.00 reported by the couple. Lee claims documents were repeatedly modified, a loan was characterized as a gift, and misrepresentations were made so that Doug and Shirley could falsely qualify under SBA regulations.

[¶ 11] Under our standard of review, we are required to view the record from the perspective most favorable to the party opposing the motion for summary judgment. However, this review is limited by the substantive law that actions sounding in fraud must be pled with particularity and proved by clear and convincing evidence. Bender v. Phillips, 8 P.3d 1074, 1078 (Wyo.2000). W.R.C.P. 9(b) requires: "In all aver-ments of fraud or mistake, the cireumstances constituting fraud or mistake shall be stated with particularity." This requires reference to matters such as the time, place, and contents of false representations, the identity of the person making the representation, and what he obtained thereby. Johnson v. Aetna Cas. & Sur. Co. of Hartford, Conn., 608 P.2d 1299, 1302-03 (Wyo.1980).

[T12] When determining if a genuine issue of material fact exists regarding a claim of fraud, a trial judge must bear in mind the actual quantum and quality of proof necessary to support liability. In ruling on a motion for summary judgment, "the judge must view the evidence presented through the prism of the substantive eviden-tiary burden." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254, 106 S.Ct. 2505, 2513, 91 L.Ed.2d 202 (1986). "[T}here is no genuine issue if the evidence presented in the opposing affidavits is of insufficient caliber or quantity to allow a rational finder of fact to find [fraud] by clear and convincing evidence." Id. See also Richardson v. Hardin, 5 P.3d 793, 797 (Wyo.2000).

[T183] In her memorandum supporting her motion for summary judgment and opposing LPP's motion for summary judgment, Lee alleged a federal regulation specifically prohibited the SBA from obtaining a personal guaranty from those with less than five percent equity ownership in the collateral. That regulation states:

(a) Personal guarantees. Holders of at least 20 percent ownership interest generally must guarantee the loan. SBA, in its discretion, consulting with the Participating Lender, may require other appropriate individuals to guarantee the loan as well, exeept SBA will not require personal guarantees from those owning less than 5% ownership.

18 C.F.R. § 120.160(a). However, 13 C.F.R. § 120.160(a) did not take effect until March 1, 1996. Because the regulation did not apply when Lee signed the guarantee in 1995, there can be no fraud based on a failure to abide by the regulation.

[T14] Lee next alleged that there was mutual mistake because neither she nor the SBA knew of 13 CFR. § 120.160(a). A mutual mistake is one that is reciprocal and common to both parties in which each party is under the same misconception as to the terms of the written instrument. Patel v. Harless, 926 P.2d 963, 966 (Wyo.1996). Like fraud, mutual mistake must be shown by clear and convincing evidence. Id. at 967. Again, because 13 C.F.R. § 120.160(a) was not in effect when Lee signed the guaranty, there could be no mutual mistake by the parties as to its provisions or application.

[¶ 115] We conclude that there are no genuine issues of material fact with regard to fraud or mistake. Lee failed to set forth specific facts sufficient for a fact finder to find either cause of action under the applicable clear and convincing evidence standard. The same is true of the misrepresentation and illegality claims, inasmuch as they are both premised on the same federal regulation.

[¶ 116] We note that Lee recognized that 18 C.F.R § 120.160(a) did not apply and, one day prior to the hearing on summary judgment, filed a Notice of Additional Authority in Support of Defendant's Motion for Summary Judgment and Opposing the Plaintiff's Motion for Summary Judgment. In her Notice of Additional Authority, Lee recited two portions of the 1995 C.F.R. and asserted that the guaranty was illegal under these sections. Neither the regulations cited nor the record support Lee's assertions. A plain reading of 120.103-2(c), cited by Lee, shows that regulation did not restrict the SBA's ability to obtain a guaranty from Lee. Absent further argument or specific fact, Lee's con-clusory statements regarding this regulation are not sufficient to defeat summary judgment.

[¶ 17] Lee also cited to 18 C.ER. § 120.108-2(a) (1995) which provided: "no Financial Assistance shall be extended unless there is reasonable assurance that the loan can be paid from the earnings of the business." Having been presented with a motion for summary judgment supported by affidavits, Lee was required to set forth specific facts showing that there was a genuine issue of material fact regarding whether there was a reasonable assurance that the loan could be paid from the earnings of the business. See W.R.C.P 56(e) Hunter v. Farmers Ins. Group, 554 P.2d 1239, 1242 (Wyo.1976). Lee provided no such facts in her Notice of Additional Authority or her original affidavit. Our review of the record indicates only that the loan could be repaid from the earnings of the business. Therefore, Lee's assertions on this regulation are likewise insufficient to defeat summary judgment.

[¶ 18] Lee makes additional arguments that Frontier CDC/SBA and its agents hid basic financial facts from her and that they manipulated the application documents to make it appear that Doug and Shirley were eligible for the loan. She claims she was not aware, until after discovery in the instant case, that the cash flow projections prepared by Frontier CDC revealed that the business income would actually pay only the loan amounts, leaving Doug and Shirley with less than half of their accustomed income. Lee claims that Frontier CDC/SBA and its agents owed her a duty to disclose, and their nondisclosure breached that duty. Lee essentially makes an argument for liability for nondisclosure pursuant to Restatement, Second, Torts § 551 (1977);

(1) One who fails to disclose to another a fact that he knows may justifiably induce the other to act or refrain from acting in a business transaction is subject to the same liability to the other as though he had represented the nonexistence of the matter that he has failed to disclose, if, but only if, he is under a duty to the other to exercise reasonable care to disclose the matter in question.
(2) One party to a business transaction is under a duty to exercise reasonable care to disclose to the other before the transaction is consummated,
(a) matters known to him that the other is entitled to know because of a fiduciary or other similar relation of trust and confidence between them; and
(b) matters known to him that he knows to be necessary to prevent his partial or ambiguous statement of the facts from being misleading; and
(c) subsequently acquired information that he knows will make untrue or misleading a previous representation that when made was true or believed to be so; and
(d) the falsity of a representation not made with the expectation that it would be acted upon, if he subsequently learns that the other is about to act in reliance upon it in a transaction with him; and
(e) facts basic to the transaction, if he knows that the other is about to enter into it under a mistake as to them, and that the other, because of the relationship between them, the customs of the trade or other objective circumstances, would reasonably expect a disclosure of those facts.

[¶ 19] This court has not expressly adopted a cause of action for nondisclosure pursuant to Restatement, Second, Torts § 551. In the previous cases in which we were asked to adopt § 551 we declined to do so, concluding that even if we did adopt the restatement, the party's claim would still fail. Richey v. Patrick, 904 P.2d 798, 802 (Wyo.1995); Hulse v. First American Title Co., 2001 WY 95, ¶ 48, 33 P.3d 122, ¶ 48 (Wyo.2001). In taking such action we said, "[ble-fore nondisclosure or fraudulent concealment can be considered, [the plaintiff] must show that [the defendant] had a duty to disclose the information." Hulse, ¶ 48 (quoting Sundown, Inc. v. Pearson Real Estate Co., Inc., 8 P.3d 324, 331 (Wyo.2000)).

[T20] Whether a duty exists is a question of law for the court to decide. John Q. Hammons Inc. v. Poletis, 954 P.2d 1353, 1356 (Wyo.1998). The existence of a duty is "to be determined by reference to the body of statutes, rules, principles and precedents which make up the law; and it must be determined only by the court." W. Page Keeton, Prosser & Keeton on the Law of Torts § 87 (5th ed.1984). Once it is determined that a duty exists as a matter of law, then any claimed breach of that duty presents a question of fact to be resolved by the trier of fact. John Q. Hammons Inc., 954 P.2d at 1356.

[T21] In making her argument, Lee summarizes § 551 and then asserts that the SBA and its agents represented that this was going to be a good investment and it knew that she was relying on it for analysis. Lee appears to be relying upon Restatement, Second, Torts § 551(2)(a) and (e) to show that Frontier CDC/SBA had a duty to disclose. We find that the requirements of neither of these subsections are met. For a duty of disclosure to arise under subsection (a), a "fiduciary or other similar relation of trust and confidence" must exist between the parties. Two basic types of fiduciary relationships exist. The first type is based on formal legal relationships, such as trustee-beneficiary, partnership, attorney-client, and principal-agency relationships. Martine v. Associates Financial Services Co., 891 P.2d 785, 785 (Wyo.1995). The second type is an informal fiduciary relationship, which is implied in law due to the factual situation surrounding the involved transaction, and the relationship of the parties to each other and to the transaction. Id. This second type of relationship is often called a confidential relationship and would be considered a "similar relation of trust and confidence." Associated Indemnity Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 287 (Tex.1998).

[¶ 22] We have never before held that the first type of fiduciary duty exists between a creditor and a guarantor, and Lee cites us to no authority for such a proposition. Restatement, Second, Torts § 551 emt. f states: "certain types of contracts, such as those of suretyship or guaranty, ... are recognized as creating in themselves a confidential relation and hence as requiring the utmost good faith and full and fair disclosure of all material facts." The comment however sheds no light on the parties to this confidential relationship. Many jurisdictions hold that no such relationship exists between the creditor and the guarantor. See Warner v. Clementson, 254 Va. 356, 492 S.E.2d 655, 657 (1997) (citing Manufacturers Hanover Trust Co. v. Yanakas, T F.3d 310, 318 (2d Cir.1993); Village on Canon v. Bankers Trust Co., 920 F.Supp. 520, 532 (S.D.N.Y.1996); Farmer City State Bank v. Guingrich, 139 Ill.App.3d 416, 94 Ill.Dec. 1, 487 N.E.2d 758, 763 (1985); Bank Leumi Trust Co. v. Block 3102 Corp., 180 A.D.2d 588, 580 N.Y.S.2d 299, 301 (1992); Miller v. U.S. Bank of Washington, 72 Wash.App. 416, 865 P.2d 536, 543 (1994)); Schrager v. North Cmty. Bank, 328 Ill.App.3d 696, 262 Ill.Dec. 916, 767 N.E.2d 376, 385 (2002).

[¶ 23] Looking for additional guidance on the subject, we find that a ereditor "is not required to search for the surety and inform him of facts affecting the risk, or warn him of the danger of the step he is about to take." 74 Am.Jur2d, Suretyship § 108 (2001). "[Ilt is not fraudulent for a creditor not to advise the guarantor of the guarantor's legal obligations, the financial condition of the principal debtor, or the value of the debtor's collateral." 88 Am.Jur.2d, Guaranty § 54 (1999) (footnotes omitted). Certainly a person who is contemplating becoming a guarantor for the loan of another is entitled to perfect good faith and full disclosure just as the comment states. However, we also consider the following explanation helpful:

It is well settled that a person proposing to become surety[] for the conduct or contracts of another has a right to be treated with perfect good faith. The law does not as a rule, however, require that the party taking the surety shall seek out the surety and explain to him the nature and extent of the obligation; nor does it hold him responsible for fraudulent misrepresentations made to the surety by the principal, or by a third party, unless such misrepresentations are made with his knowledge or consent. See Hamilton v. Wilson, 11 Clark & Fin. 109; Atlas Bank v. Brownell, 9 R.I. 168, 11 Am. Rep. 231; Griffith v. Reynolds, [45 Va. 46,] 4 Grat. 46, 49, 50; Magee v. Manhattan L. Ins. Co., 92 U.S. 93, 23 L.Ed. 699; Warren v. Branch, 15 W.Va. 21; Brandt on Suretyship, § 447; Bayless on Sureties, 293; Kerr on Fraud and Mistake, 122, 123; 1 Chitty on Contracts, pp. 772, 773.
In 1 Chitty on Contracts (11th Am. Ed.), pp. 772, 778, it is said that "although a surety is not of necessity entitled to receive, without inquiry, from a party to whom he is about to bind himself, a full disclosure of all dealings between the principal and that party, still if any material part of the transaction is, with the knowledge of the creditor, misrepresented to the surety, or if the creditor fraudulently conceal from the surety any cireumstance within his knowledge which it is material for the surety to know, although such concealment be not with a view to any advantage to himself, the guaranty will be void."

Atlantic Trust & Deposit Co. v. Union Trust & Title Corp., 110 Va. 286, 67 S.E. 182, 184-85 (1909). The discussion above indicates that it is the debtor that has the duty to assure that the guarantor has a full and fair disclosure of all material facts. The creditor certainly owes the normal contractual duty of continuous good faith and fair dealing but has no general obligation to seek out the guarantor to assure that he has been clearly informed of the risks associated with the transaction. The creditor's duty to the guarantor is to refrain from misrepresentation and fraudulent concealment and to correct such misrepresentations made with his knowledge and consent, and the creditor cannot actively conceal information. The law of contract, misrepresentation, and fraud adequately protect a guarantor against a breach of this type of duty. We therefore conclude that a fiduciary relationship does not exist between a creditor and a guarantor as a matter of law.

[T24] Whether the second type of fiduciary relationship, le., a confidential relationship or other similar duty of trust and confidence, exists must be established from the factual situations surrounding the transaction. Martines, 891 P.2d at 789. Although a confidential relationship is certainly broader in seope than the first type of fidu-clary relationship, the same general principles apply to its creation. We have said that fiduciary relationships are extraordinary and not easily created. Id. (citing Gillum v. Republic Health Corp., 778 S.W.2d 558, 567 (Tex.App.1989)). Because fiduciary relationships carry significant legal consequences, they cannot be the product of wishful thinking. Id. (citing State Farm Mut. Auto. Ins. Co. v. Shrader, 882 P.2d 813, 832-33 (Wyo.1994)).

[¶ 25] Lee seems to assert that the bank knew she was relying on it for information, and this creates the second type of fiduciary relationship, the confidential relationship. However, we have said: "Fiduciary duty is not created by a unilateral decision to repose trust and confidence; it derives from the conduct or undertaking of the purported fiduciary." Martinez, 891 P.2d at 790 (quoting Farmers Ins. Co. v. McCarthy, 871 S.W.2d 82, 87 (Mo.App.1994)). "A fiduciary is defined as: 'A person having duty, created by his own undertaking, to act primarily for another's benefit in matters connected with such an undertaking." Id. (quoting Black's Law Dictionary 625 (6th ed.1990)).

[¶ 26] Under our case law, the express reposing of trust and confidence by one party is not enough to create a fiduciary type duty. The duty arises from the conduct of the purported fiduciary. "Thus, 'the duty of honest advice and full disclosure arises where one party reposes confidence in the integrity of another and the other party in advising voluntarily assumes and accepts the confidence." " Rood v. Newberg, 48 Mass.App.Ct. 185, 718 N.E.2d 886, 893 (1999) (quoting Reed v. A.E. Little Co., 256 Mass. 442, 152 N.E. 918 (1926)). Lee alleged no facts to show that SBA had voluntarily assumed such a duty. Trust alone does not convert an ordinary arm's length transaction into a fiduciary or other similar relationship of trust and confidence.

Our case law further indicates that we have been reluctant to impose additional duties and liability on lenders in a creditor/debtor relationship. Martines, 891 P.2d at 788. We have said that the relationship between a lender and its customer is contractual in nature so we impose no duties higher than the morals of the marketplace. Id. Just as creditor/debtor relationships arise out of contract, so too do secondary obligations. A guaranty creates nothing more than a contract to pay the debt of another. Taggart v. Ford Motor Credit Co., 462 N.W.2d 498, 500 (8.D.1990). It is essentially a contingent debtor-creditor relationship. A guaranty is a contract in which the guarantor has agreed to pay the creditor any amount not paid by the primary borrower. United States v. Newton Livestock Auction Market, Inc., 336 F.2d 678, 677 (10th Cir.1964). In our past case law, we have been rightfully hesitant to find tort causes of actions where a contract exists. Eulse, 88 P.3d at 136 (when parties' difficulties arise directly from a contractual relationship, the resulting litigation concerning those difficulties is one in contract). We continue to be so hesitant today.

[T28] Furthermore, when determining whether the second type of fiduciary relationship exists, we are to consider the relationship of the parties to each other and to the transaction. Martinez, 891 P.2d at 789. The second type of fiduciary relationship exists when one party has gained the confidence of the other and purports to act or advise with the other's interests in mind. Doe v. Harts, 52 F.Supp.2d 1027, 1058-59 (Iowa 1999). We see no allegation that the bank ever purported to act for or advise with Lee's interests in mind. Instead, we are simply presented with a guarantor/ereditor relationship. This relationship is inherently antagonistic. The bank obviously wants a guaranty because it feels that the debtor's assets alone will not support the loan. The creditor is requiring a guarantor to protect the creditor from loss, not the guarantor. In that respect the creditor has not voluntarily assumed any responsibility to protect the guarantor.

[¶ 29] Additionally, Lee's relationship to CDC/SBA was simply a result of her son's loan application. Lee had no prior relationship with the creditor. Generally, a confidential relationship must exist prior to, and apart from, the agreement that made the basis of the suit. See Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 177 (Tex.1997). Lee's significant relationship in this transaction was with her son. Lee did not guarantee the loan as a favor to the bank; she did it as a favor to her son so that he could obtain a loan. Considering all these factors, we do not find a fiduciary or other similar relation of trust and confidence.

[¥30] Certainly a lender could incur additional duties by conduct that creates a special or fiduciary relationship. The party alleging such a relationship is responsible for providing facts from which the relationship may arise. As we have said "[elxtra-contrac-tual lender duties, if there are any, must necessarily be predicated upon demonstration of a special or fiduciary relationship." Martinez, at 789 (citing John M. Burman, Lender Liability in Wyoming, 26 Land & Water L.Rev. 707, 712-713, 718 & 730 (1991)). The pleadings here simply did not contain such facts.

[¶ 31] Next, upon our review, we find no duty to disclose under subsection (e). Under this subsection the duty arises if one party "knows that the other is about to enter into [the transaction] under a mistake as to [facts basic to the transaction]." Lee has failed to allege a single fact to show that SBA/Frontier CDC had knowledge that she was operating under a mistake. Under this subsection Frontiee CDC/SBA must have had some knowledge that Lee was operating under a mistake. Lee simply asserts that she was unaware of all the facts. In the Supplemental Affidavit of Diane Johnston, President of Frontier CDC, Johnston stated that Lee had full access to all documents contained within the loan file, and if she had asked to review any documents, Frontier CDC would have made them available to her.

[¶ 32] The creditor should be able to rely on the debtor and his relationship to the guarantor to assure that the guarantor has been properly informed-especially in this situation where the debtor and the guarantor are in a familial relationship, which is widely known to be a fiduciary or confidential relationship. "[The creditor is entitled to assume that the surety is aware of all material facts ... particularly in cases where the surety assumes the risk at the debtor's request rather than at the creditor's request." Magna Bank of Madison County v. Jameson, 237 Ill.App.8d 614, 178 Ill.Dec. 285, 604 N.E.2d 541, 545 (1992). It is reasonable for a creditor to believe that the guarantor herself would ascertain whatever information she determines is important. After all, it is the guarantor that must assess the risk that the debtor will not pay when deciding whether to provide a guaranty. Because no facts were alleged that the creditor knew of a mistake, we would not find a duty under this subsection. Lee has a duty as a contracting party to inquire into the facts of the transaction. See Commercial Nat'l Bank v. Audubon Meadow Partnership, 566 So.2d 1136 (La.App.1990).

[¶ 33] Having found that no duty of disclosure will arise under § 551, we decline the invitation to adopt § 551 at this time. However, as noted by this court previously, a majority of jurisdictions have either accepted § 551 or cited it with approval. Richey, 904 P.2d at 802-03 and n. 3 (collecting cases). We are not suggesting that we reject § 551 and refuse to adopt it. However, because § 551 affects legal duties, we would prefer to fully consider its adoption when the parties have presented thorough argument on the subject and a duty of disclosure would actually exist under the restatement.

[¶ 34] We affirm the summary judgment granted to LPP on the causes of action for fraud, mistake, misrepresentation, and illegality.

Debt Discharge

[¶ 35] Lee claims that the basis of the underlying debt was a single loan of $342,000.00, which consisted of $190,000.00 from Key Bank and $152,000.00 from Frontier CDC/SBA. She argues that there was only one $342,000.00 loan made as consideration for the guaranty and that this loan was discharged by acceptance and recordation of the deeds in lieu of foreclosure. She contends the terms of the deeds were unambiguous, in that acceptance and recording of the deeds "shall constitute full satisfaction and release of the debt of the Grantors to Grantee, as evidenced by a Commercial Revolving or Draw Note in the principal amount of $342,000.00, dated June 9, 1995, and secured by Grantee's Mortgage on the property de-seribed in this Deed."

[¶ 36] According to the Lee, however, on June 9, 1995, Key Bank had extended a bridge loan to Doug and Shirley in the amount of $342,000.00 so they would have temporary financing to purchase the car wash while the processing and approval of the SBA loan was being completed. Permanent financing from the SBA (through Frontier CDC) became available on September 7, 1995. The permanent financing involved the extension of a $159,000.00 SBA loan with a second mortgage on the car wash in the same amount. With the bridge loan, Doug and Shirley were able to purchase the car wash in June rather than September 1995. The SBA loan proceeds of $152,000.00 received in September were then applied to the Key Bank bridge loan, reducing it from $342,000.00 to $190,000.00. A Modification of Mortgage was signed by Doug and Shirley on September 7, 1995. The modification states:

This constitutes an amendment to said Mortgage to show that the above-referenced Mortgage is intended to secure the amount of One Hundred Ninety Thousand Dollars ($190,000), effective as of the date of receipt by Key Bank of Wyoming-Lander of the One Hundred Fifty-Two Thousand Dollars ($152,000.00) loan proceeds, which is evidenced by the second mortgage on the above-referenced property, which mortgage is dated September 7, 1995.

A condition required by Frontier CDC/SBA for extending the permanent loan was that Lee sign a guaranty in the amount of $159,000.00, which she executed on September 17, 1995.

[¶ 37] To the extent that we must construe the agreement between the parties, our primary focus is in determining whether the language is clear and unambiguous. - Pasenelli v. Pasenelli, 2002 WY 159, 112, 57 P.3d 324, ¶ 12 (Wyo.2002). The question of whether an ambiguity exists is one of law for the court. Hayes v. American Nat'l Bank of Powell, 784 P.2d 599, 604 (Wyo.1989).

[¶ 38] Lee maintains that when Doug and Shirley deeded the car wash to Community First, and Frontier CDC released its second mortgage, the entire underlying loan was released, discharging her guaranty obligation. The guaranty, however, allowed the lender to release the security or collateral:

The Undersigned hereby grants to Lender full power, in its uncontrolled discretion and without notice to the undersigned, ... to deal in any manner with the Liabilities and the collateral, including, but without limiting the generality of the foregoing, the following powers:
*or
(d) to consent to the substitution, exchange, or release of all or any part of the collateral, whether or not the collateral, if any, received by Lender upon any such substitution, exchange, or release shall be of the same or of a different character or value than the collateral surrendered by Lender.

In addition, in 1999, Lee acknowledged and consented to the Lender Agreement between Community First and Frontier CDC, the clear intent of which was to release Frontier CDC's second mortgage for the sole purpose of facilitating sale of the premises, with no effect upon the Frontier CDC loan or the guaranty. And finally, the deed in lieu of foreclosure provided that "acceptance and recording of this Deed shall constitute full satisfaction and release of the debt of the Grantors to Grantee, as evidenced by a Commercial Revolving or Draw Note in the principal amount of $342,000, dated June 9, 1995...." (Emphasis added.) This language unambiguously satisfies the debt only of the grantee, Community First, as that debt is evidenced by the identified promissory note. It does not purport to release the debt of Frontier CDC. LPP was entitled to summary judgment on the discharge issue.

Admissible Evidence

[¶ 39] Lee's final argument is LPP had an affirmative obligation to show by admissible evidence the absence of any issues of material fact and that it was entitled to judgment as a matter of law. Lee cites to W.R.C.P 56(e), which requires that affidavits must be made on personal knowledge and must set forth facts as would be admissible in evidence, showing affirmatively that the affi-ant is competent to testify to the matters stated in the affidavit. She argues that LPP's supporting affidavit was comprised of hearsay, was conclusory, was without personal knowledge, was without foundation, and did not explain even the most basic facts, such as the amount of the debt.

[¶ 40] However, there simply is nothing in the supporting materials to substantiate Lee's claims of fraud, illegality, and mistake. This lack of supporting material creates in itself an absence of issues of material fact. We therefore conclude that the trial court was correct in granting summary judgment to LPP and denying Lee's motion for summary judgment.

CONCLUSION

[¶ 41] When viewed in the light most favorable to Lee, the evidence reveals no genuine issues of material fact as to fraud, illegality, or mistake. Nor are there genuine issues of material fact as to the discharge of the underlying debt. We, therefore, affirm the summary judgment.

      . Lee's Guaranty was for $159,000.00 because administrative costs amounted to $7,000.00.

      . Another alleged misrepresentation, that the car wash was a good investment, allegedly was made by a Key Bank employee, rather than by a Frontier CDC or SBA employee, so it is not relevant to this analysis.

      . The portion of 13 C.F.R. § 120.103-2(c) (1995) cited by Lee provides "Proprietors, partners, officers, directors, and owners of 20 percent or more of the business shall generally be required to guarantee payment of the loan and, in SBA's discretion, to pledge personal assets to secure the guarantee. - Inadequate collateral will not normally be used as the sole reason for decline unless the applicant refuses to pledge whatever worthwhile collateral is available."

      . - Net profit for the car wash for the years 1992 through 1994 - amounted - to - $23,653.00, $26,950.00, and $47,547.00 respectively. Projected net profit for 1995 amounted to $52,300.00.

      . In order to obtain the loan, Doug was required to quit his job, which paid over $35,000.00 annually, and to cash $26,000.00 in Unocal stock from his employment with Unocal to be used as working capital for first year operations. Shirley worked at Safeway, making $21,600.00 annually, and continued working there after the purchase of the car wash.

      . Lee provides us with no argument or citation to federal case law adopting this cause of action. However, even if she had, the result would be the same because we would still be unable to find the existence of a duty to disclose.

      . While there are some slight differences between a suretyship and a guaranty, the distinctions are not significant enough to warrant discussion here. Furthermore, the principles of law discussed here relate to both relationships. See 38A C.J.S. Guaranty §§ 10-12 (1996).

      . The phrases fiduciary relations and confidential relations are ordinarily used as convertible terms. Peoples Bank and Trust Co. v. Lala, 392 N.W.2d 179, 185 (Iowa App.1986) (quoting First Nat'l Bank in Sioux City v. Curran, 206 N.W.2d 317, 321 (Iowa 1973)); see also State ex rel. Shriver v. Ellis, 49 Ohio Law Abs. 161, 75 N.E.2d 704, 710 (App.1946) ("confidential and fiduciary relations are, in law, synonymous").


source: Caselaw Access Project

author: EASTAUGH, Justice.

license: Public Domain

text:
    Raymond J. THERCHIK, individually and as Personal Representative of the Estate of Isadore Therchik; Katie M. Tony, Personal Representative for the Estate of Theresa Tony and the Estate of Henry Tony; Jimmy Tony; Nick Therchik; and Laura Therchik, Appellants, v. GRANT AVIATION, INC.; R. Bruce McGlassen; and Mark W. Heikel, Appellees.
    No. S-10437.
    Supreme Court of Alaska.
    July 25, 2003.
    Daniel C. Kent, Law Office of William G. Azar, P.C., Anchorage, for Appellants.
    Daniel T. Quinn, Gregory R. Henrikson, Richmond & Quinn, Anchorage, for Appel-lees.

      Before: FABE, Chief Justice, MATTHEWS, EASTAUGH, BRYNER, and CARPENETI, Justices.
   OPINION

EASTAUGH, Justice.

I. INTRODUCTION

This case concerns the validity of a liability insurer's endorsement limiting coverage of Alaska Civil Rule 82 attorney's fees awards otherwise covered by its policy. The limiting endorsement Houston Casualty Company attached to Grant Aviation's policy deviated from the model form adopted by the Alaska Division of Insurance and had not been pre-approved by the division's director. We conclude that the endorsement did not "conform with" the model form and therefore violated 3 Alaska Administrative Code (AAC) 26.550 (2000). We also conclude that AS 21.42.220 does not render the endorsement enforceable against the insured. We therefore reverse the judgment entered against the claimants and remand for calculation of the attorney's fees recoverable under the insurance policy.

II. FACTS AND PROCEEDINGS

Raymond Therchik, Nick Therchik, Laura Therchik, Katie Tony, and Jimmy Tony sued Grant Aviation, Inc., R. Bruce McGilassen, and Mark Heikel (collectively "Grant Aviation") after an airplane owned and operated by Grant Aviation crashed near Bethel in 1999, killing family members of the plaintiffs. We refer here to the plaintiffs collectively as the "Therchiks." Houston Casualty Company had issued a policy to Grant Aviation insuring it against liability for damages. The language of the policy also covered Grant Aviation's liability for "all costs"-and therefore attorney's fees-awarded against Grant Aviation in addition to the applicable facial limit of liability. This "all costs" provision potentially required Houston Casualty to pay "unlimited" attorney's fees awarded under Alaska Civil Rule 82, ie., a Rule 82 attorney's fees award based on the full amount of all damages awarded at trial against Grant Aviation, even if those damages exceeded the policy's facial limits. The policy Houston Casualty issued to Grant Aviation also contained a separate provision that attempted to limit the Rule 82 coverage. That provision, Endorsement 8, provides that the policy only covers Rule 82 awards based on a final award not exceeding the policy's applicable facial limits of liability.

In 2001 the Therchiks and Grant Aviation entered into a partial settlement. Per the settlement agreement, Houston Casualty paid the Therchiks the facial liability limits of Grant Aviation's insurance policy-$500,000 per seat-plus $52,500 in undisputed attorney's fees per seat. Per the agreement, the parties agreed to litigate in the existing lawsuit the question whether Houston Casualty owed additional attorney's fees beyond $52,500 per seat or had successfully limited its Rule 82 coverage through Endorsement 8.

The Therchiks claimed that Houston Casualty owed unlimited attorney's fees under the policy language covering "all costs taxed against the Insured in any suit defended by the Company." Grant Aviation argued that Endorsement 8 effectively limited Houston Casualty's Rule 82 lability. The Therchiks argued that Endorsement 8 was unenforceable because it did not include the exact language of Notice A, a model form adopted by the Alaska Division of Insurance, and had not been approved in writing by the division, per the alternative requirements of 3 AAC 26.550. Notice A is one of four model notice forms the division drafted and adopted by reference in 3 AAC 26.550. It is undisputed that Notice A is the applicable notice form for the type of insurance policy at issue here.

The superior court held that although Endorsement 8 did not "conform with" Notice A, it was "substantially equivalent" to Notice A. The court accordingly enforced Endorsement 8 and granted summary judgment fo Grant Aviation. '

The Therchiks appeal.

III. DISCUSSION

A. - Standard of Review

We review grants of summary judgment de novo. We will affirm a grant of summary judgment "if there are no genuine issues of material fact and if the moving party is entitled to judgment as a matter of law." We review questions of law, including interpretation of statutes, regulations, and contracts, using our independent judgment.

B. The Therchiks May Challenge the Validity of Endorsement 8 Under 3 AAC 26.550.

Grant Aviation argues in passing that the pertinent statutes and regulations "contemplate enforcement by the director, not private parties." It notes that the Alaska Division of Insurance may impose penalties on insurers that fail to file required forms.

But Grant Aviation points to no statute or regulation that prevents private litigants in civil actions from challenging the validity of insurance policy provisions that conflict with substantive requirements of state statutes or regulations. Nor does it refer us to any opinion in which we have prevented civil litigants from doing so.

The issue ultimately before us is whether a policy provision that attempts to limit coverage is enforceable if it differs from the form required by a state regulation. Our opinions have often dealt with elaims brought by private partiés challenging the validity of policy provisions that arguably conflict with state statutes or regulations. We have never intimated that private parties are unable to litigate the validity of those limiting provisions. Our opinions holding that particular provisions do not comply with statutory and regulatory standards tacitly acknowledge that private litigants can obtain rulings about the validity of such provisions.

Although 3 AAC 26.550 is silent on the issue of private enforcement, we have approved private actions to enforce Title 21 requirements on several occasions. For example, in Peter v. Schumacher Enterprises, Inc., we held that an insured could bring a private cause of action in tort alleging that an insurer violated AS 21.89.020(c) and (e). We recognized that the statutory remedy in Title 21 for violation of AS 21.89.020(c) and (e) was a civil penalty of not more than $2,500 assessed by the state in administrative proceedings before the Division of Insurance. We observed that the $2,500 penalty was relatively modest, and that the enforcement resources of the Division of Insurance were necessarily limited. We further observed:

- Without a tort remedy it seems likely that many violations of the requirements of subsections (c) and (e) would go unre-dressed. Further, it is difficult to see how providing an implied tort remedy could interfere with state enforcement. The tort action should provide a meaningful incentive to insurance companies to comply with the statutory requirements.[]

Similarly, allowing private parties to litigate the enforceability of provisions such as Endorsement 8 gives insurance companies an incentive to comply with the notice requirements of 3 AAC 26.550 if they wish to limit their Rule 82 coverage and expose their insureds to attorney's fees awards that may not be fully covered under their policies.

Grant Aviation relies on Harper v. K & W Trucking Co., in which we rejected an employee's claim to recover a statutory penalty for an insurer's violation of former AS 21.89.0830. That statute required insurance companies to pay settlements or judgments with negotiable bank checks. The employee in Harper received a settlement payment for a workers' compensation claim in the form of a "payable through" draft instead of a bank check, in violation of that statute. We held that the employee was not entitled to recover the statutory penalty because AS 21.89.0830 "is an administrative tool for use of the division of insurance, not private parties."

Harper does not control here. In denying a private right of action, we differentiated between a statute that "directly addresses the effect of negotiable instruments on underlying obligations" and AS 21.89.080, which "concerns only the form of payment which must be used for settling insurance claims, not its effect on an underlying obligation." We reasoned that a private cause of action was not necessary to enforce a statute that was primarily an administrative tool for the division.

Unlike AS 21.89.030, 3 AAC 26.550 is not merely an administrative tool employed to facilitate insurance transactions. Rather it is intended to force insurers to comply with proper notice requirements to protect insureds' reasonable expectations. It therefore properly bears on the validity of a policy provision that limits coverage.

Because a dispute about whether a limiting endorsement "conforms with" Notice A necessarily assumes that the director did not approve the limitation before the insurer issued the endorsement, it almost inevitably will arise only after an accident occurs. Post-accident agency enforcement will provide little relief to insureds whose rights may have been fixed when the loss occurred. Allowing the interested private parties to litigate the validity issue is a useful way to encourage compliance. We therefore hold that private parties may litigate whether an endorsement attempting to limit attorney's fees coverage is enforceable if it arguably does not comply with 3 AAC 26.550.

Grant Aviation also argues that the Ther-chiks are not the assignees of Grant Aviation's rights against Houston Casualty. But Grant Aviation does not argue that the absence of an assignment altogether prevents the Therchiks from seeking a declaration that Endorsement 8 is invalid. Such an argument would be inherently inconsistent with the terms of the settlement, which Grant Aviation characterizes on appeal as providing that "the settling parties will abide by the ultimate court ruling on the one remaining issue-the extent of attorney fees owed under the policy." The Therchiks and Grant Aviation (and, we assume, Houston Casualty) agreed to settle on terms that expressly permitted the lawsuit to determine "whether there are any additional amounts in ... Rule 82 attorneys' fees within the coverage of the Houston Casualty Company policy which will be paid by Houston Casualty Company should the Bethel Superior Court award additional funds." No argument is asserted by the Therchiks or Grant Aviation that Houston Casualty should have been a named party in the continuing litigation or that its absence somehow affects the outcome of this appeal.

C. Endorsement 8 Does Not Satisfy 3 AAC 26.550.

The primary issue on appeal is whether Endorsement 8 satisfies the requirements of 3 AAC 26.550. The Therchiks argue that the superior court erred in declaring valid an endorsement that neither conformed with Notice A nor had received the director's approval, as 3 AAC 26.550 alternatively requires. The regulation requires an insurer seeking to limit coverage for Civil Rule 82 attorney's fees awards against its insured to include a "policyholder notice" that must either:

(1) conform with the division's
(A) Attorney Fees Coverage Notice A, dated March 29, 1996, and hereby adopted by reference, for a policy with a duty to defend in addition to its limit of liability;
... or
(2) be approved in writing by the director upon a determination that the proposed notice is substantially equivalent to the division's Attorney's Fees Coverage Notice A. ., , []

It is undisputed that the director had not approved Endorsement 8 before it was issued to Grant Aviation. The controlling question therefore is whether Endorsement 8 satisfied the alternative requirement that it "conform with" Notice A.

The superior court held that Endorsement 8 did not "conform with" Notice A but was nonetheless "substantially equivalent" to it. The court defined "conform with" as being "very close to identical [to]," and described "substantially equivalent" as a "lesser standard." In holding that Endorsement 8 validly limited the coverage, the court observed, "although there's different wording used, different form used ... it seems to me that it is at least as good as Notice A in informing an insured about the limitation and putting the insured on notice that part of the attorneys' fees will not be covered under the policy."

Grant Aviation first asserts that the endorsement need not comply with the letter of 3 AAC 26.550, but must only satisfy the notice requirements established in Russell v. Criterion Insurance Co.-a case in which we upheld the validity of an endorsement limiting an insurer's obligation to pay prevailing party attorney's fees awarded against the insured. There we relied on 3 AAC 29.010, and interpreted that regulation to require that an insurer limiting coverage "must clearly disclose the limitation itself," and "must clearly disclose the insured's potential liability for attorney's fees if the judgment exceeds the lability limits of the policy." Grant Aviation argues that Endorsement 8 is valid because it satisfies the requirements we discussed in Russell.

Grant Aviation's reliance on Russel! is misplaced. The regulation on which we relied there, 3 AAC 29.010, was repealed in July 1996, after we decided Russell The Division of Insurance replaced 3 AAC 29.010 with 3 AAC 26.500-.550. Division of Insurance Bulletin 96-04 gave notice to insurers of "new requirements regarding coverage for Alaska Rule of Civil Procedure 82." The bulletin informed insurers that after July 1, 1996 the division required that policies limiting Rule 82 coverage "must satisfy the minimum standards" of the newly promulgated regulations. In an order announcing the adoption of 3 AAC 26.500-.550, the Alaska Director of Insurance explained the 1996 amendments as follows:

[Llimitations of coverage for attorney fees taxable as costs against an insured according to Alaska Rule of Civil Procedure 82 that do not address an insured's reasonable expectations for coverage or do not provide adequate disclosure of the insured's potential uninsured lability constitute an unfair or deceptive trade act. Therefore, the adoption or repeal of regulations under this order is appropriate.

The Russell criteria are therefore inapplicable to questions arising under the new regulations. To be effective, Endorsement 8 had to comply with 3 AAC 26.550.

The superior court held that Endorsement 8, which had not received director approval, was valid because it was "substantially equivalent" to Notice A. A post-accident judicial determination of substantial equivalence to Notice A is not sufficient to satisfy 3 AAC 26.550. Per the regulation, the director must determine that the proposed notice is "substantially equivalent" to Notice A and then approve the proposed notice in writing. The director did not approve Endorsement 8 before it was issued. Therefore Endorsement 8 could satisfy 3 AAC 26.550 only if it "conforms with" Notice A.

The regulation does not explicitly define "conform with." That the alternative provision allows the director to preapprove "substantially equivalent" proposed language suggests that the "conform with" provision contemplates a higher standard. - There would, after all, be no need or incentive to seek preapproval if the two standards meant the same thing. Likewise, the opportunity to seek preapproval implies that the director has the administrative expertise to distinguish between those deviations that provide insureds with adequate notice of the proposed limitations and those that do not. No such disinterested expert review occurs when an insurer issues a limiting endorsement without seeking the director's preap-proval. It is logical to require something more than mere "substantial equivalence" to Notice A in the absence of administrative review.

The superior court recognized that "conform with" must mean something "very close to identical," rather than "word-for-word identical." We agree with this observation but disagree with superior court's ultimate findings. The court's "very close to identical" definition is workable because it accounts for minute deviations, such as immaterial punctuation errors, that would not diminish the quality of notice or the substantive message. The standard must be stringent, because anything less would denigrate the administrative expertise that fashioned Notice A as a model for adequate disclosure and eviscerate the alternative requirement for preapproval. Moreover, any dispute about conformity under subsection .550(b) will almost inevitably arise after a loss occurs. It is by then too late for the insurer to invoke ageney expertise.

Endorsement 8 does not "conform with" Notice A because we conclude that the endorsement alters the model form's language in ways that go beyond being "minute deviations." For example, Notice A directly and forcefully informs an insured of its exposure to an award of Rule 82 attorney's fees, and its obligation to pay any fees not covered by the policy. Notice A provides in part:

Alaska Rule of Civil Procedure 82 provides that if you are held liable, some or all of the attorney fees of the person making a claim against you must be paid by you. The amount that must be paid by you is determined by Alaska Rule of Civil Procedure 82. We provide coverage for attorney fees for which you are liable under Alaska Rule of Civil Procedure 82 subject to the following limitation:
We will not pay that portion of any attorney's fees that is in excess of fees calculated by applying the schedule for contested cases in Alaska Rule of Civil Procedure 82(b)(1) to the limit of liability of the applicable coverage.
This Emitation means the potential costs that may be awarded against you as attorney fees may mot be covered im full. You will have to pay any attorney fees mot covered directly.

(Italics in original; underline emphasis added.) The underlined language is far more direct than the language in Endorsement 8, which provides in part:

Contrary to the general rule applicable in the United States, Rule 82 of the Alaska Rules of Court awards attorneys fees to the party which prevails in bringing, or defending against, a claim. [Houston Casualty] will only pay a limited amount of attorney's fees an insured is required to pay under Rule 82 of the Alaska Rules of Court.
The most [Houston Casualty] will pay for attorney's fees the insured is liable to pay under Rule 82 of the Alaska Rules of Court ("Rule 82") is that amount of attorney's fees the insured would be liable to pay under Rule 82 if the claim was a contested claim and the amount of the final award was equal to the limit of liability for the applicable coverage stated in the policy.
The limit of liability for Rule 82 attorney's fees described in this section is the absolute maximum and will not change based upon the number of insured persons, vehicles, aircraft, number of injured persons, number of claimants, or number of claims arising out of the relevant occurrence.
WARNING OF EXPOSURE TO UNINSURED ATTORNEY FEES
The amount of attorney's fees the insured is liable to pay under Rule 82 may be greater than the amount [Houston Casualty] is agreeing to pay under this policy. The insured will have to pay the excess attorney's fees charged under Rule 82.

(Emphasis added.)

The differences are partly a matter of emphasis ("you," rather than "the insured") and partly a matter of directness ("must be paid by you" and "you will have to pay," rather than "the insured is required to pay"). Endorsement 8 and Notice A are similar in substance. But the text of Endorsement 8 is longer than the text of Notice A. Its sentence structure is more complex, and it is harder to read and understand. Each sentence in the quoted passage from Notice A averages about twenty-five words. Each sentence from the quoted Endorsement 8 passage averages about thirty-eight words. The division promulgated section .550 to increase notice and to reduce disputes about the adequacy of notice provided. In this context and given these purposes, sentence structure and word choice are important. And, had Houston Casualty wanted to limit its attorney's fees coverage using its own language, it could have complied with the regulation by submitting its endorsement to the director for preapproval. Had it done so, the director might have required Houston Casualty to simplify or alter its text and message.

We do not read Endorsement 8 to be "very close to identical" to Notice A. The differences in substance, tone, clarity, and directness convince us that Endorsement 8 does not "conform with" Notice A. And because these differences diminish the adequacy of the notice given, we hold that Endorsement 8 does not satisfy 3 AAC 26.550.

D. Alaska Statute 21.42.220 Does Not Save Endorsement 8.

Grant Aviation argues that even if Endorsement 8 does not "conform with" Notice A, AS 21.42.220 saves the endorsement from invalidity. That statute provides in pertinent part:

An insurance policy, rider, or endorsement issued and otherwise valid that contains a condition or provision not in compliance with the requirements of this title, is not thereby rendered invalid but shall be construed and applied in accordance with the conditions and provisions as would have applied had the policy, rider, or endorsement been in full compliance with this title.

We have never before cited this statute. Alaska Statute 21.42.220 was enacted in 1966, when the Alaska Legislature completely revised Title 21, the state's insurance code. Nothing analogous to AS 21.42.220 existed before 1966. The legislative history of the 1966 revision indicates that the legislature modeled the revised insurance laws after Montana's insurance code. That code contains a "validity of noncomplying forms" provision virtually identical to AS 21.42.220. However, there is no Alaska legislative history specifically addressing AS 21.42.220.

Montana and other states with savings statutes similar to AS 21.42.220 interpret these provisions to save policy provisions that do not conform with their insurance codes by replacing the inconsistent policy terms with statutory provisions. This usually, but not always, has the effect of reforming the poli-cles in favor of coverage.

In Sagan v. Prudential Insurance Co. of Americe the Montana Supreme Court applied the Montana "validity of noncomplying forms" statute to save a suicide exclusion that did not comply with the state insurance code. Under the authority of the savings statute, the court substituted the relevant statutory provision into the policy rather than invalidating the entire exclusion. The court observed that the plain meaning of the statute is "to give effect to insurance policies and provisions to the fullest extent possible by reading statutory provisions into them to achieve full compliance with the insurance code. Nothing in the plain language of the statute supports applying it to invalidate policy provisions." Sagan may seem to use Montana's savings statute to validate a nonconforming policy provision, to the beneficiary's detriment. But in reality, the only inconsistency between the policy provision and the insurance code concerned the amount of refund payable if the insured died by suicide within two years after the policy was issued. The policy was actually more favorable to Sagan than the code. The court rejected Sagan's attempt to invalidate the entire suicide exclusion on Sagan's theory that the refund provision deviated from the code. The deviation was immaterial to the validity of the entire exelusion.

Virginia applies its "validity of noneomply-ing forms" statute to save nonconforming insurance policies when they impermissibly restrict the seope of coverage mandated by statute. When an insurance policy grants more coverage than that prescribed by statute, the terms of the policy control. In Hill v. State Form Mutual Insurance Co., the Virginia Supreme Court observed that "[the superseding provisions of ... [Code § 88.2-318] take effect only where an insurer seeks, by policy language, to narrow, avoid, vary or restrict the coverage the legislature has required,"

Grant Aviation argues that AS 21.42.220 saves Endorsement 8 from invalidity even though Houston Casualty did not obtain the insurance director's written preapproval for Endorsement 8. In support, Grant Aviation cites cases holding that an insurer's failure to follow a statute requiring the insurer to file all policy forms before issuing the policy does not invalidate that policy. But the problem here is not that the insurer failed to obtain preapproval, but that its limiting provision did not "conform with" Notice A. Grant Aviation cites only two cases that mention statutes providing for the validity of noncomplying forms.

Those two cases-Highlands Insurance v. American Marine Corp. and Williaoms v. Metropolitan Life Insurance Co.-are inap-posite. The courts there cited "validity of noncomplying forms" statutes in rejecting insureds' attempts to void otherwise valid policy forms merely because insurers failed to file and obtain approval for the policy forms.

Our case does not concern an insurer's failure to file or obtain approval for an otherwise valid policy. It involves an insurer's failure to comply with a regulation promulgated for the purpose of giving insureds adequate notice of potential attorney's fees liability. The division adopted 3 AAC 26.,500-550 and Notice A because it found that inadequate disclosure constituted an unfair or deceptive trade act. Grant Aviation cites no cases in which a court has held that a provision that materially deviates from the insurance code and that restricts or excludes coverage is effective under a "validity of noncomplying forms" statute.

There are other reasons not to apply AS 2142.220 to validate Endorsement 8. First, applying the statute as Grant Aviation proposes would effectively deprive the Division of Insurance of authority to prevent noneon-forming provisions from becoming effective. On its face, Grant Aviation's reading of the statute would validate provisions that depart from any minimum requirements that the division, in legitimate exercise of its expertise, might require. This would be an unusual result given the extensive regulation of the insurance industry and the regular practice of states requiring insurance policies to include particular provisions or model forms.

Second, Grant Aviation's reading of the statute would undermine the regulation's critical purpose-to give insureds adequate notice of a provision limiting coverage. Reading the noncomplying form as though it does give the insured the required notice would defeat the division's purpose in promulgating the notice regulation and model form. Applied as Grant Aviation proposes, AS 21,42.220 would validate endorsements limiting Rule 82 coverage notwithstanding a complete failure to satisfy the regulation.

We decline to read AS 21.42.220 to uphold a defective provision that attempts to limit coverage. We will therefore not apply it to save Endorsement 8.

E. The Division of Insurance Had Authority To Promulgate 3 AAC 26.510.

Grant Aviation also asserts that 3 AAC 26,510 is invalid because the Division of Insurance did not have authority to promulgate that regulation. That regulation applies to insurance policies with duty-to-defend provisions. It provides in relevant part that "a policy under which an insurer has a right or duty to provide a defense for an insured must provide coverage for the payment of attorney fees taxable as costs against the insured under Alaska Rule of Civil Procedure 82." The regulation further requires an insurance carrier to cover additional attorney's fees,

The division cited several statutes from Title 21 as its authority for promulgating 3 AAC 26.510. Title 21 deals with insurance generally. Grant Aviation claims that the Title 21 statutes cited as authority for 3 AAC 26.510 only "govern matters of procedure, not substance." - Grant Aviation further contends that Title 2 of the Alaska Statutes contains the provisions that regulate the aviation industry.

Grant Aviation directs us to no provision in Title 2 that expressly or impliedly makes 3 AAC 26.510 inapplicable to air carriers. Title 21 gives the director authority to "adopt reasonable regulations" to effectuate the purposes of the title. And 3 AAC 26.510 represents a justifiable exercise of the director's authority. One section in Title 2, which governs aeronauties, specifies minimum insurance limits for air carriers, but it does not purport to render Title 21 altogether inapplicable to insurance for air carriers. It does not address coverage for attorney's fees. Nothing Grant Aviation has argued would justify a conclusion that the Director of Insurance had no authority to promulgate 3 AAC 26.510.

IV. CONCLUSION

Because we conclude that Endorsement 8 does not "conform with" the model form and thus violates 3 AAC 26.550 and because AS 21.42.2220 does not save the endorsement, we REVERSE the judgment and REMAND for calculation of the attorney's fees recoverable under the policy.

      . Raymond Therchik sued Grant Aviation individually and as personal representative of Isa-dore Therchik's estate. Katie Tony sued individually and as personal representative of Theresa and Henry Tony's estates. The other plaintiffs sued in their individual capacities.

      . This provision of the policy Houston Casualty issued to Grant Aviation states in part:
      During such time as [Houston Casualty] is obligated to defend a claim or claims under the provisions of the preceding paragraph, [Houston Casualty] will pay with respect to such claim, in addition to the applicable limit of liability:

      2. [Alll costs taxed against the Insured in any suit defended by [Houston Casualty]....

      . Endorsement 8 provides in part:
      [Houston Casualty] will only pay a limited amount of attorney's fees an insured is required to pay under Rule 82 of the Alaska Rules of Court.... The most [Houston Casualty] will pay for attorney's fees the insured is liable to pay under Rule 82 of the Alaska Rules of Court ("Rule 82") is that amount of attorney's fees the insured would be liable to pay under Rule 82 if the claim was a contested claim and the amount of the final award was equal to the limit of liability for the applicable coverage stated in the policy.

      . - Simmons v. Ins. Co. of N. Am., 17 P.3d 56, 59 (Alaska 2001).

      . Id.

      . Holderness v. State Farm Fire & Cas. Co., 24 P.3d 1235, 1237-38 (Alaska 2001); Russell v. Criterion Ins. Co., 917 P.2d 664, 666 (Alaska 1996).

      . See, eg., Holderness, 24 P.3d at 1238; State Farm Mut. Auto. Ins. Co. v. Harrington, 918 P.2d 1022, 1025 (Alaska 1996); Hughes v. Harrelson, 844 P.2d 1106, 1106-07 (Alaska 1993).

      . See cases cited supra note 7.

      . See, e.g., Peter v. Schumacher Enters., Inc., 22 P.3d 481, 488-89 (Alaska 2001) ("[PJrivate actions to enforce the requirements of [AS 21.89.020] have been maintained and approved by this court"); Harrington, 918 P.2d at 1025-26; Burton v. State Farm Fire & Cas. Co., 796 P.2d 1361, 1363 (Alaska 1990).

      . Peter, 22 P.3d at 490; see also AS 21.89.020(c) (requiring automobile liability insurers to offer coverage prescribed in AS 28.20.440 and 28.20.445 or AS 28.22 for "protection of persons insured under policy who are legally entitled to recover damages for bodily injury or death from owners or operators of uninsured or underin-sured motor vehicles"); AS 21.89.020(e) (allowing waiver of the coverage in AS 21.89.020(c) and (d)).

      . Peter, 22 P.3d at 488; see also AS 21.90.020, which provides in part that "[a] person, determined by the director, following an appropriate hearing ... to have violated a provision of this title, is subject to a civil penalty of not more than. $2,500."

      . Peter, 22 P.3d at 489.

      . Harper v. K & W Trucking Co., 725 P.2d 1066 (Alaska 1986).

      . AS 21.89.030 (1968), amended by ch. 62, § 106, SLA 1995. Before it was amended in 1995, AS 21.89.030 provided:
      No insurance company doing business in this state may pay a judgment or settlement of a claim in this state for a loss incurred in this state with an instrument other than a negotiable bank check payable on demand and bearing even date with the date of writing.

      . Harper, 725 P.2d at 1068.

      . Id.

      . Id.

      . Id.

      . Id.

      . The Alaska Director of Insurance observed in Order R 96-03 that "limitations of coverage for attorney fees taxable as costs against an insured according to Alaska Rule of Civil Procedure 82 that do not address an insured's reasonable expectations for coverage or do not provide adequate disclosure of the insured's potential uninsured liability constitute an unfair or deceptive trade act."

      . 3 AAC 26.550(b) (emphasis added).

      . Russell v. Criterion Ins. Co., 917 P.2d 664 (Alaska 1996).

      . Former 3 AAC 29.010 (1982) read in pertinent part:
      (a) Any policy form subject to the requirements of AS 21.42 which provides defense, settlement, or supplementary payments, may limit payments of attorney fees taxed against the insured as costs under Rule 82 of the Alaska Rules of Civil Procedure. The limit may not be less than the amount which would be allowed under Civil Rule 82(a)(1) to the prevailing party in a contested case if the amount recovered were equal to the liability limit of the policy. This limit must be in addition to the otherwise applicable limit of Liability of the policy.

      (d) An insurer limiting coverage as permitted in (a) of this section must clearly disclose to its insured the limitation and the insured's potential liability for attorney fees if judgment exceeds the liability limits of the policy.

      . Russell, 917 P.2d at 666.

      . The division promulgated 3 AAC 26.500-.550 in 1996. Houston Casualty issued the insurance policy at issue here for the policy period of December 15, 1998 to December 15, 1999. The air crash occurred on December 7, 1999.

      . Ch. 120, § 1, SLA 1966.

      . Analysis of House Bill No. 313 (Proposed State Insurance Code), House Journal Supp. No. 12 at 3, 1966 House Journal 431 ("After careful study, it was determined that the insurance code of the State of Montana, enacted in 1961 by the Legislature of that State, would serve as a good model for the revision of Alaska's insurance laws. . .. [The Montana Code was the most modern and up-to-date body of insurance regulation of any of the fifty states.").

      . Section 33-15-315 of the Montana Code provides:
      Any insurance policy, rider, or endorsement hereafter issued and otherwise valid which contains any condition or provision not in compliance with the requirements of this code shall not be thereby rendered invalid but shall be construed and applied in accordance with such conditions and provisions as would have applied had such policy, rider, or endorsement been in full compliance with this code.
      Mont.Cope Amn. § 33-15-315 (2002).

      . Arizona, ArmRevSrar § 20-1118 (2002); Georgia, Ga.Cope Ann. § 33-24-12(a) (2002); Ha-wail, Haw.Rev.Smt. § 431:10-238 (2002); Kentucky, Ky.Rev.Star. Amn. § 304.14-210(2) (2002); Louisiana, LaRevSrat Ann. § 22:653 (2002); Montana, Mont.Copz § 33-15-315 (2002); Oklahoma, Oxa. Stat. Ann. tit. 36, § 3620 (2002); Virginia, Va Cope Ann. § 38.2-318(A) (2002); Virgin Islands, 22 V.LCope Amn. § 845 (2002); Washington, Wase. Rev.Cope Ann. § 48.18.510 (2003); West Virginia, W. Va.Copr, § 33-6-17 (2002).

      . See Taylor v. MFA Mut. Ins. Co., 322 So.2d 842, 845-46 (La.App.1976) (holding that three-month policy had to be considered as if issued for statutory requirement of six months where insurer issued three-month policy and terminated policy for failure to pay renewal fee without providing notice of cancellation); USAA Cas. Ins. Co. v. Yaconiello, 226 Va. 423, 309 S.E.2d 324, 325 (1983) (holding that statute's more inclusive term "motor vehicle" superseded policy's term "automobile" because statute would also include motorcycles); Adkins v. Meador, 201 W.Va. 148, 494 S.E.2d 915, 920-24 (1997) (holding that statute's more inclusive requirement that insured be "using" vehicle superseded policy's requirement that insured be "occupying" vehicle).

      . Sagan v. Prudential Ins. Co. of Am. 259 Mont. 506, 857 P.2d 719, 722 (1993); see also Georgeson v. Fid. & Guar. Ins. Co., 48 F.Supp.2d 1262, 1266 (D.Mont.1998) (applying MCA § 33-15-315 and ruling that when language of insurance policy is contrary to statute, and therefore void, policy should be construed to contain coverage mandated by law).

      . Sagan, 857 P.2d at 722.

      . Id.

      . Section 38.2-318(A) of the Virginia Code is substantially similar to AS 21.42.220. It provides: "Any insurance policy or form containing any condition or provision that is not in compliance with this title shall be valid, but shall be construed and applied in accordance with the conditions and provisions required by this title." Va.Cope Ann. § 38.2-318(A) (2002).

      . See Yaconiello, 309 S.E.2d at 325.

      . See Hill v. State Farm Mut. Ins. Co., 237 Va. 148, 375 S.E.2d 727, 729 (1989) (holding that uninsured motorist endorsement, which afforded broader coverage than that mandated by statute, was not superseded by more restrictive term in statute); Interstate Van Lines, Inc. v. Artis, No. LS 4398-2, 1991 WL 835002, at *6 (Va. Cir. June 5, 1991) (holding that "validity of noncomplying forms" statute did not apply because policy's definition of insured afforded broader coverage than that mandated by statute).

      . Hill, 375 S.E.2d at 729; see also 1 Lme R. Russ, Couce on Insurance § 17: 14 (3d ed.1998). It provides:
      Where the statutes specify certain provisions which must form a part of a contract of insurance, and further provide that a policy issued in violation thereof should be valid, a policy which does not contain the statutory provisions is valid and must be given effect, but the provisions of the statute must be substituted for those of the policy where the two conflict. However, where the provisions of the policy are more favorable to the insured than are the statutory requirements, the policy provisions will be enforced. In any event, the insured is not in a position to accept standard provisions in his or her favor and reject those which are unfavorable to him or her.
      (Footnotes omitted.)

      . Great Lakes Container Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA., 727 F.2d 30, 32 (1st Cir.1984) (holding that insurer's failure to follow statute requiring policies be approved by insurance commissioner did not void policy); Resolution Trust Corp. v. Hedden, 879 F.Supp. 600, 602-03 (N.D.Miss.1995) (insurer's failure to submit exclusion for approval did not invalidate exclusion); Gary v. Am. Cas. Co. of Reading, Pa., 753 F.Supp. 1547, 1551 (W.D.Okla.1990) (holding that failure to file endorsement does not render it void); Cage v. Litchfield, 45 Conn.Supp. 298, 713 A.2d 281, 289 (1997) (holding that endorsement not filed with commissioner was valid and that "the imposition of a monetary fine or a penalty other than voidance is sufficient to protect the efficacy of [filing statute]"); Home Indem. Co. v. Hoechst Celanese Corp., 128 N.C.App. 226, 494 S.E.2d 768, 773 (1998) (holding that insurer's failure to get form approval for pollution exclusions did not void exclusions because, among other reasons, statute that provides for penalties for insurers does not mention voiding policy as remedy).

      . See Highlands Ins. v. Am. Marine Corp., 607 F.2d 1101, 1104 (5th Cir.1979) (holding that insureds could not avoid paying premiums due under policy by claiming that insurer's failure to file policy made it void); Williams v. Metro. Life Ins. Co., 10 Wash.App. 600, 519 P.2d 1310, 1313 n. 2 (1974) (holding that insured's beneficiary could not collect on life insurance policy because policy never became effective because insured misrepresented his health on application form, even though application amendment slightly differed from form approved by insurance commissioner).

      . See Highlands, 607 F.2d at 1104; Williams, 519 P.2d at 1313 n. 2.

      . 3 AAC 26.510.

      . The division cited AS 21.06.090; AS 21.36.150; AS 21.42.120, .130, and .160 as authority for 3 AAC 26.510. See 3 AAC 26.510.

      . See AS 21.06.090.

      . - See AS 02.40.010(a).