Switching Car Insurance with an Open Claim: Will my prior insurer pay injury claims on an accident I caused while covered?
UPDATED: July 22, 2020
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The least you should know...
- Insurance companies are required to cover drivers for any accidents that occur during the term of the coverage
- Any obligations they have to you or to drivers you harm only ends after the termination date of the coverage
- Even if that termination date has passed, any incidents that occurred before that date must be covered by the company
Switching car insurance with an open claim does not end the insurer's obligation to pay covered losses or claims occurring while their policy was in effect. What a car insurance policy covers after an accident doesn't change just because you get a new insurance company. The claim should be paid by your then-insurer.
If your previous insurance company is refusing to pay on claims that happened before coverage was terminated, you may need to consult an auto accident attorney. If you need to contact an experienced car insurance lawyer in your area, you can enter your ZIP code in our free search tool above to get started.
Will your old insurance company have to pay for injuries claims arising from an accident you caused while covered?
Saving money by changing your car insurance is not uncommon. In fact, it's often recommended, since the longer you are with an insurer, the more they tend to "take you for granted" and less they give you a good deal.
There are other reasons you may switch car insurance with an outstanding claim, too. So the question is: what happens if you had an accident while covered by Insurer A, but then changed to insurer B?
Does A still have to cover that accident? The short answer to this question is: yes, a prior insurer must cover claims arising during the time period you were covered by them, even if they are no longer your insurer when the claim is submitted or comes up for resolution.
When you buy insurance, you purchase coverage for claims arising while that policy is in force or effect. That has two corollaries relevant to this question:
- Your second or later insurer has no responsibility for, or obligation, in regards to claims arising prior to the start date of its policy. So you cannot look to your new insurer for coverage.
- The prior insurer is responsible for all claims which did arise while you were covered by them (i.e., while your policy with them was in effect), even if you later changed insurers. If the accident occurred while your policy with the first insurer was in force, they have to cover it (subject to the terms and limitations of the policy, of course.) If they will not pay out (or defend you against) a claim arising during their period of coverage, you can sue them for "breach of contract," or violating their contractual obligations, since an insurance policy is really nothing more or less than a contract.
As said above, the short answer is "yes, a prior insurer must cover claims" arising while they covered you.
However, the longer answer is that if your policy with the prior insurer was voided due to some misrepresentation you made on it or while applying for it — for example, claiming that your car was used for personal use only, while you actually use it for business (e.g., making deliveries), or omitting to list some of the drivers in your household (including particularly the one who had the accident) — they can deny coverage.
When a contract, including an insurance policy, is voided for a misrepresentation (fraud), the voiding is generally retroactive back to when the policy began. It is essentially "wiped out" back to the start. So if your policy did not expire or was not terminated for some lawful reason (like switching insurance companies with an open claim), but rather was voided due to something improper you did in regards to applying for it, then the former insurer would not have to cover the claim.
There are a number of defenses to an alleged breach of contract, but failing to prevail would essential render the contract void, like it never existed.
Switching Car Insurance: Frequently Asked Questions
While the above provides a lot of information about this specific situation, there are some other common questions people have about switching auto insurance that you may also be wondering about.
Below are some short answers to many of those questions.
Can you switch auto insurance anytime?
You have the option to switch car insurance at any time, whether it's in the middle of a policy or the day after your policy began. Many drivers consider changing car insurance policies after an accident to offset the increase in premiums with incentives from another company for new business.
You can switch insurance companies in the middle of a policy for any reason, though. There is no penalty for switching and it's understood in the industry that customers often shop around for better coverage or better deals.
Is there a penalty for switching auto insurance?
There is no penalty for switching, and, as mentioned above, it is often a smart move. Sometimes, companies begin to "take you for granted." Moving your business to another company may involve promotional rates or other incentives to get new business.
It may also make sense to switch your car insurance to the same provider as your homeowners insurance after buying a home.
As established above, switching car insurance with a pending claim is permitted, and changing car insurance companies at any time is permitted without penalty.
can I change car insurance before the renewal date?
In most circumstances, you can change or end your car insurance policy at any time, including before the renewal date. Not only that, but you can get a refund if you cancel auto insurance early, assuming you have paid for a full month and cancel before the month is through.
Switching car insurance companies midpolicy is not just permitted but very common.
Can I cancel my car insurance with an open claim?
We've already answered the question "can I switch insurance companies with an open claim?" In our example above, that's precisely what happened. You can switch insurance during a claim.
Canceling your insurance during a claim is no different. Not only is it allowed, but it may be essential. Imagine if your car was totaled during an accident that also resulted in you being injured. If the injury made it impossible for you to drive and your vehicle was destroyed, it would be absurd if you couldn't cancel your policy even though the accident resulted in claims.
Do you have to cancel car insurance when you switch?
Typically this will be done for you by the two companies. It may be worthwhile to call your previous insurer to confirm, but in most instances, the new company will contact your old policy-holder and arrange cancelation for you.
You may also wonder, do you have to notify the DMV when you switch insurance. In most states, as long as you have proof of a valid insurance policy, the DMV doesn't care who your policy is with. Any notice that the DMV may need will come from your insurer directly to the state.
The Last Word
Switching car insurance companies does not change the obligations your old provider had for any covered events that happened before the policy was terminated. The prior insurer has to cover valid claims that arose during the time you were covered, even if the claims aren't known until after you have a new insurer and the old policy is over.
This is true except if the old insurer is able to show that you had misrepresented something in your application to get insurance or were in some way violating the terms of the insurance contract.
Have we answered your questions about switching car insurance and open claims?
If you need more specific answers, you can often get a free consultation from a car accident attorney. Start your search for one in your area by entering your ZIP code in our tool below.