Cancellation Of Insurance Policy

Insured persons in Grand Prairie, Frisco, Arlington, Aledo, Fort Worth, Dallas, Mesquite, Garland, and other places in the state may be adversely affected when an insurance company cancels a policy. If no claim is being made, or in the process of being made, then it may be a case of “no harm, no foul.” But what if the cancellation is first brought up when a claim is made?
This is what happened in a 2001, case styled, Lois Jones v. Ray Insurance Gency a/k/a Azteca Insurance and / or Alamo Insurance, and Collision Clinic, Inc., State & County Mutual Fire Insurance Company and Harbor Insurance Managers. This is a Corpus Christi, Court of Appeals case that was affirmed in 2002 by the Texas Supreme Court.
Here are the facts:
Jones purchased a new 1998 Pontiac automobile and purchased a State & County Mutual Fire Insurance Company (insurer) insurance policy from Ray Insurance Agency a/k/a Azteca Insurance and/or Alamo Insurance (agent) and Harbor Insurance Managers, Inc. (Harbor) covering the automobile. She discussed with the agent that her sister lived with her, and was advised by him that would not be a problem, and as long as she paid the premiums on time she would have insurance. The policy excluded coverage for anyone residing with her age fourteen or over unless listed. She paid the November and December premium payments. The policy was effective from November 7, 1997 through May 7, 1998.
On December 28, 1997, the auto was severely damaged when hit by another auto driven by an uninsured drunk driver. Her auto was towed to Collision Clinic, Inc. The day after the accident, Jones was told by the insurer that she was in the computer and was fully covered by the insurance policy. Thirty minutes later she was called and told she was not covered. At first she was told the policy was cancelled because she had not excluded her sister as a driver. Later she was told that the cancellation was because she had not provided a copy of her driver’s license. The insurer alleged the notice of cancellation was sent by letter on November 25, 1997, but Jones denies receiving the letter and notice of cancellation. The letter allegedly advised Jones that her insurance policy would be cancelled on December 4, 1997.
This case discusses may aspects of “bad faith” insurance law.
One of the arguements by Jones and the only one discussed here is that the insurers accepted and retained the December premium payment. In ruling in favor of Jones the court cited the following;
If the policy was truly about to be cancelled why could Ray Insurance accept payment on behalf of Harbor? More importantly, why would Ms. Jones not receive refund check immediately? Instead Harbor processed the payment, thereby confirming that the policy was still in effect, and indicated to Ms. Jones that she had liability insurance. The course of conduct on the part of Ray Insurance and Harbor was completely inconsistent with any cancellation of the policy and effectively operated as a revocation of any purported cancellation.
As stated earlier, this case discusses many aspects of insurance law. It is a good read for an experienced Insurance Lawyer as well as for any other person who wants something to think about related to how some “cancellation” isssues are handled by the courts.