Sued over insurance mistake
Published:Sunday | February 20, 2011 | 12:00 AM
Insurance Helpline with Cedric Stephens
Question: In August 2010, I bought insurance through an agent. Two weeks later, I told them to cancel the coverage. I was instructed to visit their offices to do so. I was about to sell the vehicle, but the sale fell through, so I returned to reinstate coverage.
On November 24, I made a payment and collected a 30-day cover note. Seven days later, I returned to pay some more money. On December 23, I went to pick up my insurance certificate when I was told that a mechanic's report and other documents were needed in order to get the certificate. I also learnt that the insurer had decided to cancel the insurance by December 26. I said that I had received no such letter.
When I returned home that same day, the letter had arrived. It said that coverage was being cancelled due to outstanding documents and issued "10 days' notice of cancellation as per the conditions of the policy". My understanding was that the period of notice would start 10 days after December 26. The next day was Christmas Eve, and it was also a holiday weekend.
On December 30, I presented all the outstanding documents to the agent and was told that they would let me know when I could pick up the certificate. On January 5, 2011, I was involved in an accident. When I made a report on January 2, I learnt that the insurance had been cancelled on December 26. I spoke with the agent on February 6 and she told me that she would "work on the policy for me". On the following day, she said that the third party had filed a lawsuit against me. Where do I stand?
HELPLINE: Were the oral and written notice of cancellation that you received from the agent and insurers on December 23 effective? By accepting the outstanding documents on December 30, did the actions of the agents invalidate the notice of cancellation? Was the insurance actually in force when the accident occurred?
On what date did the agents submit your application for insurance to the principals, the insurers? Did you have the cover note, which expired on January 23, 2011, in your possession when the accident occurred? Did the agent exercise sufficient skill and care in the handling of your transaction?
These are a few of the questions to which I need to have answers before I can say where you stand.
Financial literacy lacking
Jamaican consumers "urgently need a national financial-literacy programme at this time", says Financial Services Commission (FSC) head, Rohan Barrett. The FSC regulates the non-bank segment, including insurance, of our financial services industry.
Such a programme "will help to ensure that consumers ... are armed with the information, knowledge, and skills to make sound financial decisions", Barrett said.
Even though his comments were made in the context of long-term investment plans, it is my opinion that they can also be applied to short-term financial products like motor insurance. Based only on your side of the story, had the agent done a better job, you would not be faced with the prospect of finding money from your own pocket to pay the third party and his lawyers.
Here are some other things that are worth bearing in mind:
Duties of an agent: An insurance agent is, according to the second edition of Carol Bennett's Dictionary of Insurance, "one who solicits, negotiates, or effects contracts on behalf of another, such as an insured or insurer. His rights to exercise various functions, his authority and obligations are subject to the terms of the agency contract and to certain legal principles such as the exercise of care and skill and observing good faith." At what stage of the transaction was the agent acting for the insurer?
Notice of cancellation: Notices of cancellation usually say something like this: "We may cancel this policy by sending 'X' days' notice by registered letter to you at your last known address". The period of notice normally starts from the date on the letter, and could be as short as 10 days, or as long as 30 days, depending on the insurer. The actual notice period is stated in the contract.
A principal - in your case, the insurer - is usually held to be responsible in law for the mistakes of his agent. Did the agent exercise sufficient care and skill in handling your transaction?
Finally, some additional questions for you: 1) What was the date of the insurer's letter of cancellation? 2) When you received oral notice from the agent that coverage would be terminated on December 26, was it explained that the notice period had already started? Did you receive any explanation as to why it took nearly four months for you to learn that you needed to submit additional documents?
I hope that I have given you some insights into the complexity of your problem and provided some direction in how you can proceed to find out where you stand.
Cedric E. Stephens provides independent information and free advice about the management of risks and insurance. aegis@cwjamaica.comSMS/text message to 812-7233