Question: In May 2004, I bought a motor policy from a broker. Since the premium was financed, I paid it monthly. The brokers phoned me on October 14. They said I owed one month's premium and that the policy would be cancelled the same day if I did not make the payment.
I was at work and could not leave so I begged them to hold on until the next day. This did not happen; the policy was cancelled. Two days later, I bought a new policy from the same broker. The premium was paid in full.
In November of that year, I met in an accident. A man at a bus stop walked into the path of my car. I took him to the hospital. I made a report to the police. They said that I was not at fault since the pedestrian admitted that he did not look to see if anything was coming. The police told him to fix my car. I reported the accident to the broker and signed an accident report form. I paid for the repairs from my pocket, however, the other party sued me in the Supreme Court for $1.2 million.
The insurers said I do not have a policy with them. I do not have my receipts or any documents to prove that I had insurance. I was summoned to the court in May of this year, told to find $250,000 by October, and make arrangements to pay the balance. I was also told that if I was unable to pay the money that I would be sent to prison. I am in desperate need of your advice. What are my options?
- rt15531977@yahoo.com
Answer: Thank God for our lawmakers! Because of them, you are likely to avoid time in prison. It is also possible that because of them, your insurer's arm may be twisted to file an appeal against the court award.
If that action fails, your insurers may be forced to settle the third-party's claim for damages against you, even though the collision took place over five years ago and they say you did not have any insurance. Why the optimism given all these odds? Your brokers supplied information that, when added to a provision in The Insurance Act 2001, gives me hope. If the third party receives any money as a result of the accident, it should not come out of your pocket.
The CEO of your broker confirmed to me in an email dated August 24, 2009, that you had motor insurance when the accident took place in November 2004. He made this statement in response to my request to investigate the issues relating to your case and to furnish me with a written response. The coverage was for the period October 12, 2004, to March 23, 2005. It can be inferred from the information your brokers sent me that they collected premium to the insurance.
This is where our lawmakers come into the picture. Sub-section (1) of the Insurance Act says that "a broker shall, for the purpose of receiving any premium be deemed to be the insurer's agent".
Sub-section (2) continues: "An insurer on whose behalf a broker has received the premium or part thereof, shall accept liability arising under the policy, notwithstanding that the insurer has not received the premium." This law was in force when the premium was paid to the brokers.
Even if the insurers did not in fact issue a policy in your name, they cannot legally deny giving you protection. The Insurance Act says nothing about the issuance of a policy. It refers solely and specifically to "a broker (who) has received the premium or part thereof."
Since the brokers have not denied receiving a premium for the coverage, the conclusion is that the insurers are deemed to have been providing coverage at the time of the accident in the absence of a policy being issued.
Your brokers have done a Pontius Pilate with the problem. They said: "Our records do not show any reported incident."
In other words, they are denying that you completed a claim form. The inference is that although insurance was in force when the accident took place, since you failed to file a report, as was required under the terms of the coverage, the insurers are entitled to treat you as being uninsured. Stated more succinctly, the brokers are saying: Find $250,000 and spend the next several years paying off the remaining $950,000, or go to jail!
I believe that the approach of the brokers is wrong. Once again, they have ignored the work of our lawmakers. Section 8 (1) of the Motor Vehicles Insurance (Third-Party Risks) Act - which was drafted in 1989 - closes a loophole that previously allowed insurers to deny claims which were not reported to them.
It says: "Any condition in a policy, providing that no liability shall arise, or that any liability so arising shall cease, in the event of some specified thing being done or omitted to be done after the happening of the event giving rise to a claim under the policy, shall be of no effect."
Motor policies impose a duty on the insured to "give notice in writing immediately upon the occurrence of any accident".
They also say: "The due observance and fulfilment of the terms of this policy in so far as they relate to anything to be done or complied with by the Insured shall be conditions precedent to any liability of the company to make any payment."
The changes that were made to the law 20 years ago have effectively taken away the rights of insurance companies to do as they please in cases like yours.
When you and I spoke last week, I learnt that you had consulted an attorney. This was a very wise move. I have since sent you a copy of the email that I received from your brokers. Provide him/her with a copy of this article. I hope that these comments and the email will help to fast-track the process to get your insurers to take responsibility for the third-party's claim before October.
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel to help you solve a problem, email: aegis@cwjamaica.com or send text message: 812-7233.