When is your automobile insurance company entitled to raise your premium? Can the company completely cancel your coverage?
Pennsylvania law provides consumers with some firm protections against premium increases and policy cancellations. Your premium can be increased by the company if you or someone else in your household insured under the policy is involved in an accident and is at fault for the accident or is convicted of moving traffic violations, However, your insurance company may not increase your premium just because a claim is made against someone insured under your policy.
If your premium is validly increased, your insurance company can add an extra charge, called a surcharge, onto your premium for a chargeable accident or moving traffic violation. Your insurance company has a “surcharge disclosure plan” that it must make available to you when you first purchase the policy. If you want to know more about the potential consequences for accidents, ask your insurer for a copy of its plan,
When an insurance company increases a premium due to the insured’s at-fault accidents or moving violation convictions, the insurance company must provide the insured with a detailed summary of how the premium increase was calculated and how long it will be imposed.
If you are in an accident but are not at fault, the insurance company cannot use the accident as the sole reason to cancel or refuse to renew your policy. While the law permits an insurance company some leeway in deciding whether you were at fault, there are certain kinds of accidents which give rise to the presumption that the insured was not at fault. Those include (1) accidents where your vehicle is parked when struck; (2) accidents where you are struck from behind and are not cited for a motor vehicle violation; (3) accidents where the other driver is convicted of a moving violation and you are not; (4) accidents in which you are struck by a hit-and-run vehicle; (5) accidents in which you recover monetary Compensation from the other driver; (6) and accidents in which you hit an animal. You can also avoid cancellation if you were involved in an accident while responding to an emergency and you are a paid or a volunteer member of a police or first responder squad.
If your accident does not fall within one of the exclusions listed above, your insurance company has a fairly broad right to cancel your coverage if you are involved in an accident, especially if you are involved in two or more accidents, Your insurance company may always cancel your policy if you breach the policy by failing to pay your premiums or if your driver’s license or vehicle registration is suspended or revoked.
Your insurance company may also cancel your policy if the company discovers that you made false statements about important facts. Insureds are expected to complete the policy application and any subsequent questionnaires truthfully and accurately. Failing to disclose a speeding ticket or a physical disability in response to a question on an application or an inquiry from the company can lead to cancellation if the company discovers your omission. An insured’s innocent omission on an application or questionnaire is not enough to support policy cancellation. The company must prove that the insured knew that he or she was acting dishonestly and also must prove that the misrepresentation relates to an issue that the company regularly considers when deciding whether to issue a policy of insurance.
The law specifically prohibits insurance companies from canceling your insurance based on your age, your residence in a certain community, your race, sex, occupation, religion, or marital status. If a husband and wife are insured on the same policy, facts which justify canceling as to one spouse do not entitle the company to cancel the policy. Instead, the company may cancel coverage only as to one spouse,
Some protections against cancellation by the company do not apply if you are already in an insurance high-risk pool, if you have more than four cars on your policy, or if you have certain kinds of commercial insurance for service stations or parking garages. Some extra protections exist if you have been insured for more than three years without problems or if the accident is your very first accident. The insurance laws and administrative regulations are complex, and they provide procedures by which premium increases, cancellations, and refusals to renew can be challenged by insureds. Before considering any challenge, it is wise for insureds to secure as much information as possible from their insurance company in support of the company’s decision.
Resolution of legal issues depends upon many factors, including variations of facts and interpretations of Pennsylvania law. This newsletter is not intended to provide legal advice on specific subjects, but rather to provide insight into legal developments and issues. The reader should always consult with legal counsel before taking action on matters covered by this newsletter,