Insurance Provider Fails to Cancel Customer’s Coverage after NonPayment, Must Pay Damages

accident_car_accident_car-scaledComplex insurance issues can add more hassle to the damage from a car accident. What happens if you’re in an automobile accident after failing to pay your insurance premium? Can you still get coverage for your claims? The following case out of Baton Rouge shows why insurance companies must follow proper procedure and offer evidence of cancellation or suffer consequences.

On July 27, 2010, Beverly Smith and Darlene Shelmire were involved in a vehicle collision in Baton Rouge when Shelmire entered an intersection without yielding. Smith sustained injuries due to the accident and filed a claim against Shelmire and her insurer, Gramercy Insurance Company. The insurance company asked the court for summary judgment, claiming that Shelmire did not have insurance coverage at the time of the accident due to the cancellation of her policy for nonpayment. The court held a hearing on the motion and denied it.

The legal entity representing Gramercy Insurance Company, GoAuto, filed a new motion for summary judgment, asserting the same claim that Shelmire’s policy had been canceled before the accident. The trial court again denied this motion. In a bench trial, GoAuto filed a motion for involuntary dismissal, which the court denied. During the trial, the court heard evidence that Shelmire had paid her insurance premium on the afternoon of the accident and reported the accident a few hours later. GoAuto paid Shelmire for the damage to her vehicle the next day, despite their claim at trial that her insurance policy had been canceled by that point. Therefore, the trial ordered GoAuto to pay $15,000 in damages to Smith. GoAuto appealed this judgment. 

GoAuto alleged that the trial court erred on two grounds: 1. In dismissing its motion for involuntary dismissal and 2, in determining that Shelmire had insurance coverage at the time of the accident. 

On the second allegation of error, GoAuto claimed that Shelmire’s insurance policy had been canceled at the time of the accident. In Louisiana, the insurer has the burden of proof when claiming that a customer’s policy was canceled for nonpayment before an accident occurred. Direct General Insurance Company of Louisiana v. Mongrue, 04-248, p. 6 (La. App. 5th Cir. 8/31/04), 882 So. 2d 620, 623

Under La. R.S. 9:3550(G)(3)(b)(i), an insurer must affirmatively act to cancel a customer’s policy even after an insurance premium financing company has asked them to do so after a customer’s nonpayment. GoAuto presented the testimony of an employee in their claim that they affirmatively canceled the policy. However, the employee’s testimony was not backed up by any other evidence in the record. This absence of evidence, coupled with evidence that GoAuto paid Shelmire’s filed claim after the accident, led the trial court to conclude that GoAuto never canceled Shelmire’s coverage. The appellate court affirmed this finding and dismissed GoAuto’s appeal. 

Even when a plaintiff has a viable claim for damages, insurance issues can stand in the way of a successful claim. This case displays the importance of hiring a personal injury lawyer who knows how to fight insurance companies who refuse to pay. 


Article Written by Berniard Law Firm

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