Question from an IIABNY member: We just had a carrier ask us to have our client sign an acknowledgement that all drivers are listed on the policy. We’ve never seen this before. Have you? Do you feel that the carrier could deny a claim if a driver is not listed? Also, what if we don’t return the form? Is that legal reason to cancel the insurance? I would doubt it. Please see the attached and let me know what you think.
Answer: I’ve never seen this before, and it’s interesting the way they’ve phrased it: Using unlisted drivers “may cause coverage disputes.” Here are my thoughts:
- Unless there’s an endorsement to the Business Auto Policy listing all drivers by name, there is no such thing as listing drivers on a policy. The carrier may have a list of drivers in its underwriting file, but that’s not the same as listing drivers on the policy.
- The New York Department of Financial Services (formerly the Insurance Department) has been very clear in the past that it considers “named driver exclusions” that exclude coverage required by law to be against public policy. In other words, a named driver exclusion applying to liability, PIP or UM will not hold up, but an exclusion applying to collision probably will. However, the department has said that the carrier should have the insured sign the exclusion to signify understanding.
- New York insurance law limits the reasons for which a carrier can cancel a commercial auto policy midterm. NY Insurance Law Section 3426(c) states:
After a covered policy has been in effect for sixty days unless cancelled pursuant to subsection (b) of this section, or on or after the effective date if such policy is a renewal, no notice of cancellation shall become effective until fifteen days after written notice is mailed or delivered to the first-named insured and to such insured's authorized agent or broker, and such cancellation is based on one or more of the following:
(1) With respect to covered policies:
(A) nonpayment of premium provided, however, that a notice of cancellation on this ground shall inform the insured of the amount due;
(B) conviction of a crime arising out of acts increasing the hazard insured against;
(C) discovery of fraud or material misrepresentation in the obtaining of the policy or in the presentation of a claim thereunder;
(D) after issuance of the policy or after the last renewal date, discovery of an act or omission, or a violation of any policy condition, that substantially and materially increases the hazard insured against, and which occurred subsequent to inception of the current policy period;
(E) material physical change in the property insured, occurring after issuance or last annual renewal anniversary date of the policy, which results in the property becoming uninsurable in accordance with the insurer's objective, uniformly applied underwriting standards in effect at the time the policy was issued or last renewed; or material change in the nature or extent of the risk, occurring after issuance or last annual renewal anniversary date of the policy, which causes the risk of loss to be substantially and materially increased beyond that contemplated at the time the policy was issued or last renewed;
(F) a determination by the superintendent that continuation of the present premium volume of the insurer would jeopardize that insurer's solvency or be hazardous to the interests of policyholders of the insurer, its creditors or the public;
(G) a determination by the superintendent that the continuation of the policy would violate, or would place the insurer in violation of, any provision of this chapter; or
(H) where the insurer has reason to believe, in good faith and with sufficient cause, that there is a probable risk or danger that the insured will destroy, or permit to be destroyed, the insured property for the purpose of collecting the insurance proceeds, provided, however, that:
(i) a notice of cancellation on this ground shall inform the insured in plain language that the insured must act within ten days if review by the department of the ground for cancellation is desired pursuant to item (iii) of this subparagraph (H);
(ii) notice of cancellation on this ground shall be provided simultaneously by the insurer to the department; and
(iii) upon written request of the insured made to the department within ten days from the insured's receipt of notice of cancellation on this ground, the department shall undertake a review of the ground for cancellation to determine whether or not the insurer has satisfied the criteria for cancellation specified in this subparagraph; if after such review the department finds no sufficient cause for cancellation on this ground, the notice of cancellation on this ground shall be deemed null and void.
(2) With respect to that portion of a covered policy providing motor vehicle coverage, in addition to the basis for cancellation set forth in paragraph one of this subsection, suspension or revocation during the required policy period of the driver's license of any person who continues to operate a motor vehicle insured under the policy, other than a suspension issued pursuant to subdivision one of section five hundred ten-b of the vehicle and traffic law or one or more administrative suspensions arising from the same incident which has or have been terminated prior to the effective date of cancellation.
With regard to an undisclosed driver, paragraph (1)(D) might apply. Paragraph (2) would apply if an undisclosed driver also does not have a valid license. In either of these cases, the carrier would have to pay the claim but could then legally cancel the policy. I don’t see where failure to return the form would fit within any of these reasons unless the carrier actually inserts that requirement into the policy conditions.
