The headline of this post essentially describes one insurance company's request for "certain underwriting information" to policyholders in Mills v. AAA Northern Cal., Nev. & Utah Ins. Exch., 3 Cal. App. 5th 528, 207 Cal. Rptr. 3d 626 (Cal. 3d DCA 2016).
With one crucial added insert in the envelope, so to speak, that determined the outcome in this case regardless of the words used by the California courts here.
The insurance company offered the policyholders a choice: Exclude their son from coverage under their automobile insurance policy by filling out and returning the enclosed form, or add him to their policy by calling the carrier. If the carrier did not get either the filled-out form or a call, the carrier announced in the letter that it would cancel the policy.
The parents-policyholders did not call the carrier. The carrier cancelled the policy. Then another child of the policyholders had an auto accident. She made a claim for Uninsured Motorist benefits. The auto carrier denied coverage because the policy was not in effect. The injured daughter continued to claim coverage under the auto policy and sued.
The case dealt with statutory interpretation. California Regs explain a California Statute which allows for early cancellation of an insurance policy so long as there is "a substantial increase in the hazard insured against."
The Regs classify a non-response by the insured as a substantial increase in the hazard, after 30 days have passed following a "reasonable written request to the insured, [for] information necessary to accurately underwrite or classify the risk."
Four judges in California said that the carrier's letter and enclosure in this case was a "reasonable request" before the carrier cancelled the policy early. (This was the view of three judges on the DCA and one trial judge.)
The rulings on appeal and in the trial court in this case were so specific to the California Statute and Regs on early cancellation, that they may not affect the outcome of requests for information on an ordinary application for insurance in the first place. On the other hand, it is not difficult to foresee future insurance applications in California and elsewhere in which the carrier includes a question following the rulings in this case:
We need further information from you in order to process your application. Want to know what we need from you? Call us and we'll tell you. Otherwise, we might issue the policy and then deny coverage because you didn't tell us what we want to know.
It can't happen here, right? Maybe in California. Maybe not. But not anywhere else, right?
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