Massachusetts Auto insurance Companies May Cancel Your Policy Without Notification: McCarthy v. Commerce Insurance Company

When most people are in a car accident, they expect that their automobile insurance will cover their injuries. However, when an accident happens, some people are surprised to learn that their own insurance company might try to deny payments.

Insurance companies consider their shareholders and the bottom line. They know how to manipulate the law in order to reduce the amount of money they must pay. If you have been in a car accident, it is to your advantage to be represented by a Cape Cod personal injury lawyer experienced in dealing with insurance companies.

Last month, an appeals court of Massachusetts ruled on a payment dispute between a policy holder and his insurance provider in an unpublished opinion, McCarthy v. Commerce Insurance Company.

Facts Of The Case

After purchasing a BMW, the plaintiff contacted his insurance agent to purchase an insurance policy. The agent gave the plaintiff the mandatory pre-insurance form, stating that the policy holder had seven days to get the vehicle inspected. The plaintiff, due to other obligations, did not have the vehicle inspected, and the insurance provider cancelled the policy. However, neither the plaintiff, agent, or lien holder ever received a notice of cancellation. The BMW subsequently ran off the road, struck a fire hydrant, and was totalled. When requesting property damage coverage, the insurance company sent plaintiff a letter denying coverage because the policy had been cancelled. The plaintiff brought a breach of contract claim and a § 93A claim.

A jury found that the insurance company had breached the contract by failing to send a notice of cancellation. The trial judge ruled that the insurance company was liable under § 93A and doubled damages for the wilful and knowing violation of § 93A.

An appellate division court dismissed the trial court’s ruling, stating that failing to send notice did not cause the plaintiff’s loss and should not be the basis for a breach of contract or § 93A claim. The plaintiff appealed.

Applicable Statutes

211 Code Mass. Regs. § 94.00 (“§ 94”) requires an insurance policy purchaser to have their car inspected within seven days or have the policy cancelled. The insurance provider is required to furnish the policy holder with a notice of the requirement to get the vehicle inspected. If the provider fails to provide the form, the policy will not be considered cancelled. In the current case, the plaintiff signed the form at the time of purchase.

§ 94 further requires that the insurance provider notify the policy holder, agent, and lien holder of a suspension or cancellation. However, failure to send notice of cancellation will not restore the coverage. Nevertheless, failure to send notice of cancellation does not prevent the policy holder from pursuing other remedies, including a breach of contract or § 93A violation.

We have discussed § 93A violations in previous posts. Under § 93A, if an insurance company finds that the insured is not at fault and delays settlement in order to obtain a smaller settlement, the insurance company will be liable under § 93A. The judge can treble the damages if he finds the delay to be wilful and knowing.

Question For The Court

The question for the appeals court was whether the insurance provider’s failure to send a cancellation notice prevented the plaintiff from bringing a breach of contract or § 93A lawsuit.

Courts Ruling: § 93A, Breach Of Contract, and Willful Violation

Causation Under § 93A

Examining Lord v. Commercial Union Insurance Company, the court noted that failure to send a notice of cancellation is not a per se violation of § 93A. However, failure to send a cancellation notice does not prevent a plaintiff from bringing a lawsuit for damages caused by the failure to provide cancellation notice. The court cited several cases where a driver continued to drive an uninsured vehicle where they would not have had the insurance provider sent them a notice of cancellation.

Although the court found that a failure to provide a cancellation notice could be a § 93A violation, the court noted that the trial judge failed to show a causal connection between the failure to provide notice of cancellation and the damages that the policy holder suffered. The court remanded the case back to the trial court for a new trial.

Breach Of Contract

Looking at § 94.00, the court noted that failure to send a cancellation notice does not reinstate a policy. The court recognized that nothing in § 94.00 prevents a policy holder from pursuing other claims including a breach of contract.

Again, the court recognized that the trial judge failed to show a causal connection between failure to send the cancellation notice and the injuries suffered by the policy holder. The jury instructions should have requested a finding of causation. The breach of contract claim was also remanded back to the trial court for a finding of cause.

Wilful Violation § 93A

As previously noted, § 93A requires an insurance provider to timely settle when it becomes reasonably clear that the insured is not liable. It is an objective test where reasonable people would not disagree. The trial judge’s based his decision based upon a per se violation of § 93A of which reasonable people could not disagree. As stated above, the trial judge erred in failing to find a causal connection of which reasonable people could disagree. Since the judges ruling on § 93A was a misapplication of § 93A, the court vacated the § 93A doubling of damages.

What You Should Do If You Have Been In An Accident

Insurance companies hire large teams of adjusters and lawyers to settle an accident claims for as little as possible. If you have been injured in a car accident, it is recommended that you speak with a local car accident attorney so that you can protect your rights and get the compensation you deserve.

Local attorney, John C. Manoog III, has extensive experience handling motor vehicle accident claims. For a free initial consultation, call the office at 888-262-6664 or reach us by email. There is always someone available to talk to you about your case. Related Blog Posts: Massachusetts Insurance Company Liable for All Tort-Related Costs in Unfair and Deceptive Settlement Case — Rivera v. Commerce Ins. Co., Nov. 12, 2013, Cape Cod Injury Lawyer Blog

Massachusetts Supreme Court Upheld $18 Million Punitive Damages Award in Wrongful Death Action, Sep. 19, 2013, Cape Cod Injury Lawyer Blog