When does an auto insurance policy cancellation become effective?

Under California law a notice of cancellation of an auto policy must go to all insureds identified on the declarations page of the policy, not only the “named insureds.” That was the ruling in the recent California Court of Appeals case, Molinar v. 21st Century Insurance.

In Molinar, 21st Century Insurance canceled plaintiffs’ auto insurance policy for nonpayment of premiums by giving timely notice of cancellation to the two named insureds on the policy (a husband and wife) but not to the named insureds’ 21-year-old daughter, who was a “Rated Driver” identified on the declarations page.

Four days after the policy was canceled, the daughter caused a serious automobile accident. After the insurer denied coverage for the accident, the daughter and her parents sued. The trial court granted summary judgment for the insurer, concluding that the cancellation was effective because the governing statute (Insurance Code section 662) required the company to give notice to “the named insured,” which did not include the daughter.

The Court of Appeal (Fourth Dist., Div. One) reversed in a published opinion. Insurance Code section 662 requires notice of cancellation to be provided to all insureds covered by the policy and specifically named on the declarations page, not simply those identified under the heading “named insured.” This result was supported by the public policy of ensuring that drivers have the ability to protect themselves from becoming unknowingly uninsured. The court rejected the notion that it would be burdensome to notify all insureds named on the declarations page since the statute permits cancellation to be sent to them either at the address shown in the policy or their last known address–information the insurer should have.

If you did not receive notice of cancellation of an auto insurance policy in which you were named as an insured on the declarations page and are in an accident, you may be covered under the policy. We recommend you contact an attorney to review the matter before you contact the insurer.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.