An auto accident claim by a West Virginia woman, who paid for her policy with a “rubber” check, has been upheld by the state Supreme Court, leaving Charleston insurance agents bewildered.
The Charleston Herald-Dispatch reported the high court’s 4 to 1 ruling last week during which the court upheld a 2004 Cabell County Circuit Court ruling that found West Virginia National Auto Insurance Company at fault for not giving Stephanie Michelle Conley 10 days’ notice when it rescinded her policy.
Justice Elliott “Spike” Maynard dissented, calling the ruling “one of the most outrageous court decisions in the history of American jurisprudence” in his written opinion.
“It’s such a poor decision,” C.E. Smith, an agent with Allstate Insurance in Barboursville told the Herald-Dispatch. “This person paid nothing and a bad check should have voided her transaction. This just fits right into the handout mentality that so many people have now in this state.”
Conley wrote a worthless check for $174 to open an auto insurance policy with West Virginia National on Aug. 15, 2001. On Aug. 30, 2001, the insurance company issued the policy, effective Aug. 15, 2001, through Feb. 15, 2002.
The next day, Conley was involved in an automobile accident.
According to the lawsuit, her negligence caused injury to three people.
On Sept. 11, 2001, West Virginia National sent a letter to Conley saying her check had bounced and that it had terminated her policy as of Aug. 15, 2001.
Dairyland Insurance Co., which paid nearly $26,000 to the three people injured in the accident, filed a complaint against Conley for subrogation, or the substitution of one creditor for another.
Conley, in turn, filed a third-party complaint against West Virginia National, claiming the company canceled her policy without giving her proper notice.
Cabell Circuit Court Judge David Pancake ruled in favor of Conley in November 2004, and West Virginia National appealed to the state Supreme Court.
Justice Larry Starcher, who wrote the majority opinion, said an insurance company has the right to rescind policies if the customer fails to make the initial payment.
“However, the cancellation of the policy can take effect no earlier than 10 days after notice of the cancellation is provided to the insured,” Starcher wrote.
West Virginia National now must cover the costs of the automobile accident, or attempt to prove that Conley was not at fault.
In his dissenting opinion, Maynard wrote that the case is an example of many other “something for nothing” cases filed by plaintiffs in West Virginia, “where someone, somewhere, somehow must owe them money simply because they have suffered an injury.”
“The majority had to work hard to write an opinion that actually does everything that the law should not do,” Maynard wrote. “It punishes the innocent by causing honest, hard-working West Virginians to pay higher auto insurance premiums. At the same time, it rewards the guilty by providing a windfall to those who never paid for insurance coverage.”
Maynard’s written opinion is mirrored by Mike McAlister, an agent with Maynard Insurance in Barboursville. The ruling could encourage some to take advantage of the state’s insurance laws, which McAlister says are rarely enforced.
For example, McAlister told the Herald-Dispatch, auto insurance companies are not required to notify the state Division of Motor Vehicles when a policy is rescinded for nonpayment.
“If someone has to renew their driver’s license and has no insurance, all they have to do is come in and take out an insurance policy,” he said. “In the past, people have gotten by with one month’s payment and then we won’t see or hear from them again until they have to renew their license. It now appears they can get by with a bad check.”
McAlister said he also fears that the ruling will prompt some insurance companies to adopt 10-day waiting periods for new policies so a customer’s check can clear.
“That would punish the honest customer who might not want to wait and look to other carriers” he said.
David Caudill, an agent with First City Insurance in Huntington, said the ruling sends a disturbing message to consumers that they can get auto insurance by passing a bad check. It also is discouraging to insurance carriers who are thinking about setting up shop in West Virginia, he said.
“But I’m not surprised by the ruling, because a lot of companies authorize their agents to bind coverage without payment (up front),” Caudill said. “Once you do that, the insurance policy is a legal contract until the requirements of cancellation are fulfilled. It’s up to the agent, the insurance carrier, or both, to notify the customer when that happens.”
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