Question: I bought a car from a friend last October. He transferred the insurance to me. The vehicle, a 2003 Toyota Corolla, was involved in an accident two weeks ago. When the accident was reported to the insurance company they said I was not covered. My friend paid the premium in September. The certificate of insurance expires on September 15, 2006. Why is the company treating me so unfairly?
- R. G., Ocho Rios P.O.,
St. Ann.
Answer: Sellers of property have no authority to transfer insurance to buyers. All such rights reside solely with insurers. This basic rule is well known to judges, lawyers, some consumers and many insurance company employees. Sadly, neither you nor the person who sold the car was aware of this fact. The certificate of insurance that you got from the person who sold the car is not worth the paper on which it is written.
DON'T BUY A PIG IN A POKE!
The certificate of insurance provides some evidence of insurance. In a legal sense, however, proof of the agreement between the buyer and the insurer is found in the policy. The real test of whether an event is covered is stated in the contract.
This explains why I keep saying that insurance buyers should read their policies. When they don't, they end up buying a pig in a poke!
Some certificates of insurance say that insurance is not transferable to a new owner of the vehicle. This means that the sale of A's car to B gives the latter no rights to A's insurance. In other cases, the non-portability of coverage is stated or implied. One policy says: "You must notify us of any changes affecting your policy or risk that have occurred either since the policy started or since the last renewal date. If you are not sure whether certain facts are relevant please ask us. If you do not tell us about relevant changes, your policy may not be valid or the policy may not cover you fully." A duty is clearly placed on the insured to tell insurers about changes 'affecting the policy or risk.'
MOST INSURANCE CONTRACTS ARE NOT PORTABLE
Where the non-portability of motor coverage is implied it gets a little more complicated. The type-written part of the contract (the schedule) provides clues. Parts of it apply to one person. Look at: the name of the Insured, his/her age and profession/occupation/business. The person's gender, age and business/job, among other things, are used to calculate how much premiums insurers charge. His or her driving experience, insurance and claims histories, and type of driving permit also affect the premium. Change of ownership materially alters the nature of an existing insurance contract.
Insurable interest is one of the planks of insurance law. It should exist at the start of the insurance contract and at the time of loss. That interest arises from the expectation of loss if property is lost or destroyed. It stems from ownership. In your case the insurable interest of your friend in the Toyota ended when the car was sold to you. The coverage he had came to an end at the moment of the sale. The fact that his insurers were unaware of the sale is neither here nor there. The only thing which was transferred to you was ownership of the car. If, on the other hand, the insurers were informed of the sale of the vehicle and agreed to transfer the insurance to you things would have turned out very differently.
Even though most insurance contracts tend to be silent on the question of portability, they are not transferable on the sale of the asset. The insurer is definitely not being unfair to you in my humble opinion.
Cedric E. Stephens provides independent information and advice about the management of risks and insurance. If you need free information or counsel to help you solve a problem write to The Financial Editor or contact Mr. Stephens directly at aegis@cwjamaica.com.
