Auto Insurance: Frequently asked questions

A personal auto policy holder decides to withhold notice of a claim because he feels that an outstanding claim (still in the processing stage) might be affected by the notification of another loss. In between the two claims, notice of cancellation of the auto policy for nonpayment of premium is sent to the insured. Two weeks after the effective date of the cancellation, the insured notifies the insurer of the second claim. Would this second claim be covered under the auto policy?

What has to be checked here is the time when the second accident occurred. The personal auto policy applies to accidents that occur during the policy period as shown in the declarations. There is no reporting period such as might be found in a claims-made policy. So, if a loss occurred during the policy period, even if the policy was in the process of being cancelled, the policy will respond.

If there is a question of whether the policy was in force, that depends on the circumstances of the case. If the policy was cancelled in accordance with state law, and the loss occurred after the effective cancellation date, then the policy was not in force and the policy does not cover the loss. If the cancellation was not effective at the time of the loss, the policy will respond (unless there is some exclusion that applies to the claim). This means two things for you to check. One, were the state cancellation requirements met by the insurer? And two, exactly when did the second accident occur? The insured will have to prove the loss occurred while the policy was in effect and if he does that, the policy will apply. It would be treated as a separate claim since it occurred after the one claim that was still in process.

For informational purposes, Minnesota allows cancellation of personal auto policies for nonpayment of premium. Ten days notice is required and the reason for the cancellation must be shown on the notice. Proof of mailing is required.

Back to frequently asked auto insurance questions