TO THINE OWN INSURANCE COMPANY BE TRUE
By: Kenneth S. Feraru, Esq.
It should come as no surprise to any licensed driver in the State of New York that New York Vehicle and Traffic Law Section 319 requires those owning or operating a motor vehicle to have a minimum amount of liability insurance for personal injury, death or property damage caused by the negligence of the owner or operator of that motor vehicle. I'm sure we can all agree that this is a good law, as it provides for compensation to those who have sustained damages, and affords protection to the owner and operator of the vehicle that caused the damage. However, one must be very careful when applying for insurance, and make certain that the information provided to the insurance carrier is accurate and up-to-date. Otherwise, the would-be insured could be in for a nightmare one wouldn't wish on his own worst enemy.
The downside of having automobile liability insurance, especially in urban areas like New York City, is that it is expensive. It is therefore very tempting to try to save money by registering and insuring one's vehicle in a state in which one does not reside or in a different region of the state in which one resides where the insurance premiums are cheaper. DO NOT, repeat, DO NOT ever do this!
Insurance companies are not charities; they are typically large corporations, the purpose of which is to make a profit for their shareholders. Insurance companies do not like to be taken advantage of, or lied to, and they have the money and resources to ensure that they are not taken advantage of, or lied to.
Picture these scenarios: You are responsible for a car accident with another vehicle in which one or more individuals are severely injured, possibly sustaining injuries for which a jury would award hundreds of thousands of dollars, and which also resulted in you totaling your new, leased $90,000.00 Cadillac Escalade. The accident was no one's fault but your own. Not to worry! It will be alright! You have insurance to cover it! Or do you?
Let us assume you live in a very nice and expensive residence in a trendy part of Brooklyn, near to your job in Manhattan as well as near to all the hot spots popular these days. Great! You have arrived! Except for one little thing: It will cost you a fortune to insure that beautiful Escalade you leased to get you comfortably around town, and to impress the ladies. Still not a problem! Your college roommate, who is still a good friend, landed a great job in a relatively rural section of Georgia, where the insurance rates are (you guessed it!) much cheaper than in Brooklyn. Of course, your friend, being the true friend that he is, graciously allows you to register and insure the Escalade in your name but at his address in LowInsurancePremium County, Georgia (a place famous for being the birthplace of Al Bundy's mailman, but I digress).
Back to the accident: The Escalade is towed to a body shop where it is determined to be a total loss, the driver and passengers in the other vehicle treat with their doctors while their lawyers prepare lawsuits against you. Still no problem! You're insured!
Until the unspeakable happens. The No-Pay Mutual Insurance Company of East Holeinthewall, Iowa, the entity you thought would cover you for this little mishap, sends certified letters to you at both your Brooklyn and your Georgia addresses, with copies to your body shop, to the attorneys for the injured parties, and to anyone and everyone else who could possibly be interested. The letter states, in perfect Queen's English Legalese, that because you acquired your car insurance under false pretenses, the most august No-Pay Mutual Insurance Company of East Holeinthewall, Iowa will neither defend nor indemnify you for injuries and damages sustained in this accident. Normally, your insurer would appoint attorneys to represent you (defend you) and pay any verdict or settlement to third parties (indemnify you), at least up to the dollar limits of your policy, and pay the property damage to your vehicle, providing you have such coverage. This will not happen now, because your insurer has decided to do what is called disclaiming coverage. This is a very serious development, and could result in large judgments against you, your vehicle not being repaired or replaced, and even the revocation of your driver license due to an uninsured accident! And guess what? No-Pay Mutual can do this! Insurance polices are contracts, and you have breached the terms of the contract by not being honest about your residence.
There are still things that can be done. For example, you could sue your insurance carrier seeking a Court declaration that the carrier must cover you. The bad news is that you would likely not prevail, and even if you did, it would cost you a small fortune in attorney's fees. Remember, lawsuits are time consuming, risky, expensive beasts. This is one of the many reasons why you want to have insurance; you want the defense costs to be the problem of Allstate, State Farm or GEICO. These are large organizations which are in the business of handling these matters, are paid to handle these matters, and are all set up with money and lawyers to handle these mattes. You are not!
Moral of the story: Honesty is the best policy. No one likes to pay for insurance, and many of us do not believe there is any benefit to it. But there is! I have been on both sides of lawsuits, representing both Plaintiffs and Defendants, in cases where there is no insurance to cover the event. Believe me, it is torture for the parties. Saving a few dollars is not worth the risk of being left out in the cold.