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Kris Konecki v. GEICO Indemnity Company

Docket No. INS-06-2105, Decision Issued October 19, 2006.

The insured requested a hearing following receipt of a notice of cancellation of automobile insurance coverage citing misrepresentation in the sales application and lack of disclosure of a driver on the policy as the grounds for cancellation. At hearing, the company alleged that it paid three at fault accidents in which the insured was not a driver of one of the insured vehicles. The company representative argued that the other driver should be insured by the substandard market and that the insured knowingly obtained this insurance for him without disclosure to the company. The company also alleged that the insured’s failure to disclose the other driver constitutes a violation of the policy terms and conditions. The insured denied the company’s allegations.

Held: For the insured. Under the Maine Automobile Cancellation Control Act, 24-A M.R.S.A. § 2914(2) permits cancellation for fraud or material misrepresentation affecting the policy or the presentation of a claim. Section 2914(3) permits cancellation for the violation of terms or conditions of the policy. However, at hearing, an insurer must prove the existence of the reason given for cancellation. See Bureau of Insurance Rule Chapter 355 § 7(A).
Although the company maintained that the insured knowingly obtained insurance for the other person, there is insufficient evidence to demonstrate the company’s theory. There is nothing in the record that points to a misrepresentation in the sales application as alleged by the company in its reason for cancellation.
The record shows that at some point after she obtained the insurance the insured permitted the other person to take possession of a vehicle insured under the policy. The evidence indicates that the other person may have been a regular driver of that vehicle for a period of time. Although the insured’s failure to notify the company when the other person became a regular driver may have been a violation of the terms and conditions of the policy, that reason was not articulated in the notice of cancellation. The cancellation notice referenced the failure to disclose another driver; however, in light of the punctuation and word choice, the failure to disclose clearly refers to the sales application. Because the company did not prove that the person was a driver at the time the insured executed the sales application, the company has not established “the existence of the proof or evidence given by the insurer in its reason for cancellation…” 24-A M.R.S.A. § 2920. Therefore, this cancellation action fails.