Courts rule cancel invalid

Auto cancellation does not stand up in court

A case that has been brought before the courts in regards to a registered letter cancellation of a commercial automobile insurance policy.

The insurance company denied accident benefit coverage for income replacement and housekeeping expenses due to the fact that the insured was driving without valid insurance at the time of the crash.

The insurer did notify the insured of policy cancellation by the usual registered letter. In this particular case the insured had moved from that location but did not notify the insurer of the change of address. The registered letter was delivered to the correct Canada Post Office but picked up and signed for by someone other then the insured.

The insurance company maintained that the person who picked up the registered letter appeared to have authority to act on behalf of the insured. The insured denied that he ever received the notice of cancellation.

The insurer said that the insured also should have known that he was driving without insurance as the policy had been canceled a few months before the crash. The policy was canceled for non-payment of the premiums.

An Ontario arbitrator has ruled that even though the insurance company did satisfy the legal requirement for cancellation it is not automatically proven that the insured knew his policy had indeed been canceled. The Financial Services Commission of Ontario (FSCO) found that the insurance company has to pay the income replacement benefits and housekeeping expenses.

The agent who looked after the insured's policy for the insurance company did not keep records of his/her discussions. Therefore the conflicting evidence presented in the arbitration did not confirm that the agent had ever explicitly told the insured that his policy had been canceled.

Adequate documentation is always important but obviously even more necessary when the situation involves cancellation of an insured's policy. This case emphasizes the importance of the role that the agent or broker has with the insurance company and with the insured.