Richardson, Richardson, & Campbell
Automobile Insurance Policies: Refusals to Insure
An automobile insurance company has the right to choose whom it will insure. If an applicant for automobile insurance is deemed to be a bad risk, the insurance company can refuse to issue an insurance policy. Ordinarily, the insurance company does not have to give the applicant a reason for refusing to insure him or her. However, insurance companies must act in good faith in their dealings with insureds and applicants. Although an insurance company can refuse to insure someone, they cannot refuse to insure a person for an improper reason. The same applies to the cancellation of an insurance policy.
If an applicant has been refused insurance coverage, that refusal follows him or her. It will affect the applicant's insurability. Other insurance companies will ask in their applications whether the applicant has been refused insurance coverage. A positive response could cause subsequent insurance companies to also refuse to insure the applicant. Similarly, the cancellation of an insurance policy places the insured in a bad position. When an automobile insurance policy is canceled, an insured's driving privileges can be lost in states that require car insurance.
If an insurance company wrongfully refuses to insure or cancels an insurance policy, the affected persons may be able to recover special damages or losses incurred by their inability to obtain other insurance coverage. An insurance company's bad faith refusal to insure or to renew can be proven by evidence of irregular procedures, opportunity, and motive. Some courts have held that an insured can recover damages for the loss of driving privileges due to the improper cancellation of an automobile insurance policy.The cancellation of an insurance policy or the refusal to insure an applicant cannot be based on discriminatory factors. It is an abuse of an insurance company's power to cancel an insured's automobile liability insurance policy because the insured wanted a larger amount of money for a claim under the uninsured motorist coverage provision than the insurance company wanted to pay. An insurance company cannot refuse to insure an applicant based on his or her gender, race, marital status, nationality, or religion. If age is a legitimate risk factor, an insurance company can require a larger premium to cover the higher risk it assumes based on the insured's age.