August 15, 2015 • By Dennis Beaver

Have you ever wondered what happens if you are one day late with your auto insurance payment?

It would be logical to think, “Well there must be a grace period in which to make a catch-up payment, say five or 10 days,” but reality is something else. One day late has led to cancellation of auto insurance policies. While there are often grace periods for homeowners and health insurance, auto insurance is a different critter.

With auto insurance, carriers expect policyholders to pay premiums on time and do not want to be in the business of providing “free” insurance – even for just a few days. They have zero tolerance for bounced checks, non-functioning automatic withdrawals, or simply, “I forgot.” Considering the potential cost of a bad accident, “pay on-time or you are cancelled” makes sense.

But what if the shoe is on the other foot and it’s the insurance agent who “forgot,” and now you’ve got no coverage? The answer to that question would lead to sleepless nights for Silvia and Richard, and as this story goes to press, their nightmare continues.

In 2010, the couple was dating, looking toward marriage, but wanted to be sure they were a good match. So, Richard moved into Silvia’s home which was insured by “Big Insurance” as well as her car. “I wanted everything to be with one insurance company,” she explained, “to take advantage of the various discounts available.”

Richard owned an older car which was insured by a different carrier, but had two speeding tickets. When Silvia met with “Ted” her agent with “Big Insurance,” he suggested excluding Richard from her policies due to his ticket. “He can always be added later, but this will save you money now,” was Ted’s advice.

“I agreed,” Silvia told You and the Law, “because Richard had his own auto policy which would cover him if he should be in an accident driving my car. But I never really understood the full meaning of ‘excluded,’ at that time.”

She was sent and acknowledged receiving a California State required notice that Richard was indeed excluded from her 100/300 insurance policy. After that, she received nothing further from “Big Insurance” reminding her of the exclusion.

Wedding bells ring in 2012 – Two meetings with Ted

In 2012, within days of their marriage, they had two separate meetings with Ted, reviewing what was now their insurance. Sylvia added Richard to the homeowners, but for some very odd reason which Ted has refused to explain, there was no discussion of the 2010 exclusion from the auto policy.

Richard’s driving record was clean in 2012 and he should have been added — which would have even meant a larger commission for Ted. He clearly failed to closely examine Sylvia’s coverages. Her memory – of the exclusion – Ted as well — had long since evaporated.

By this time, Richard had sold his car, so if he were to have an accident in Sylvia’s vehicle, there would be no insurance coverage at all, Sylvia as registered owner and hubby responsible for all damages.

In early July, driving his wife’s car, Richard caused a four-vehicle rear-end collision, damages expected to be in the hundreds of thousands of dollars.

‘You have no coverage’

Within days of reporting the accident, Sylvia was informed, “By a sarcastic claims adjuster, that we were not covered and they were closing their file. Trying to help our readers, we had what can only be described as an unbelievably frustrating conversation with a claims supervisor who maintains that Ted did nothing wrong.

“Don’t you think that during just one of those in-person meetings he should have raised the exclusion issue?” we asked. “No, that’s not his job, besides they had notice of the exclusion,” she replied.

Agents and attorneys across the country all agree

We spoke with insurance agents and attorneys across the United States. All agreed that the agent was negligent in failing to discuss the 2010 exclusion.

“Marriage is considered a change in circumstance and has a significant impact on insurance and rates,” commented Hanford attorney Rissa Stuart.

“The agent’s failure to review the exclusion can’t be justified. ‘Big Insurance’ should step up to the plate and protect this couple.”

Chicago attorney David Axelrod agrees:

“At the very least, the agent had a legal obligation of advising the couple that they had no coverage, especially where it seems clear that Richard could easily have been included on his wife’s policies. ‘Big Insurance’ needs to do the right thing, or risk an expensive lawsuit.”

Silvia and Richard have retained an attorney and we will follow this story closely. But in the meantime, what’s in your policy?

Dennis Beaver practices law in Bakersfield and enjoys hearing from his readers. Contact Dennis Beaver.