Which is why I like to backlog interesting claims questions from other times of the year for summer review. That way we can't assume the perpetrator was merely succumbing to heatstroke but was theoretically in his or her right mind.
Proceeding on that theory, I can categorically state that anyone who does what the following insured did can safely be categorized under Are you insane???
Edited for length and clarity, and to preserve the privacy of the hapless, here is an e-mail that crossed the Ask the Experts desk at the IIABA Virtual University one day last spring. It was submitted by an employee at an IIABA state affiliate, who was trying to answer a coverage question for an agent.
"A retiree owns two cars but has plates on only one at a time. He keeps full coverage on one; the other has comprehensive only. The insured informs his agent that he will transfer the plates from one car to the other on the following Friday. He asked that the coverages be changed accordingly, and the carrier made the change.
"I'm sure you can guess what happened next. That Friday, on his way to the Dept. of Motor Vehicles to change the registrations, the insured got into an at-fault accident. The carrier, of course, had removed all coverages except comp from Vehicle 1 (the one he was driving) and put them on Vehicle 2, effective that day. The carrier denied coverage on the grounds that as of 12:01 a.m. on Friday, Vehicle 1 had no coverage for either liability or collision. As far as they were concerned, he was driving an uninsured vehicle.
"The agent asked me if I had any research, court precedents, etc., that he could use to argue with the carrier. He pointed out that what his insured did is not uncommon. I blew the better part of an afternoon scouring every resource I could find to determine what specific time a midterm policy change takes effect. I came up empty.
"I suspect the company was correct from a legal standpoint, but this means that there is probably an epidemic of unintentionally uninsured vehicles on the road on any given day."
Where to begin untangling this sordid web? My first reaction to the assertion that what the insured had done was "not uncommon" is, "You've got to be kidding me." To my chagrin, however, a brief perusal of the Virtual University's library revealed similar queries. For reference, let's call the above Scenario 1 and now consider a few others.
Scenario 2: An insured flying to Florida for the winter suspends all coverage on his car except comprehensive. The agent asks if the insured has any non-owned coverage under the personal auto policy (PAP) if he rents a car for a week in Florida.
Scenario 3: An insured takes his car off the road for the winter and deletes liability coverage. Once in awhile he starts the car to keep the fluids circulating and the engine in shape. On one such occasion, the car catches fire, and the fire spreads to the insured's home and two others. The carrier denies the claim under the homeowners policy's liability coverage, saying it meets none of the exceptions to the auto exclusion. The agent is incredulous that the homeowners policy won't respond to this or similar claims–for instance, from a classic car, which the insured may be fixing up in his garage.
Scenario 4: Another snowbird goes to Florida for three months each winter, after deleting all coverage except comprehensive on his auto policy. The agent wants to be sure the PAP's out-of-state coverage provision will provide Part A and Part C coverage if the insured operates a non-owned auto in Florida.
I must apprise any E&O carrier representatives reading this column that I have kept none of the identifying information for these agencies, so quit hyperventilating. Yet I share their anguish that the agents involved in these queries seem as clueless as their insureds.
The point of being a trusted agent is not to accompany insureds on the road to perdition, but rather to show them the light. Plus, "the better part of an afternoon" is far too much time to spend trying to save unwise planters of problems from reaping their inevitable harvest. So why do otherwise intelligent agents get drawn into such pointless pursuits? The clue is in the last sentence of the original e-mail: "I suspect the company was correct from a legal standpoint, but this means that there is probably an epidemic of unintentionally uninsured vehicles on the road on any given day."
Ah, grasshopper, your empathetic soul was moved by the plight of those poor innocents driving "unintentionally uninsured vehicles" out there. But here's where my compassionate compatriot and I part ways: There is nothing innocent or unintentional about those uninsured vehicles, often referred to as "lay-ups." All of the insureds in the above-cited situations knew exactly what they were doing–trying to save a buck. Nobody thought, "Gee, I'll save all this premium and yet still keep the same coverage"–except possibly their agents, whose job is to know better.
Simply put, those insureds bet on a horse that didn't win. The bet was completely intentional; it was the failure to win that surprised them.
If you'd like a detailed explanation of the answers to each of the above scenarios, I refer you to the Virtual University library or any other reference source you find useful. Here, in brief, is my coverage analysis take on each.
Scenario 1: With few exceptions, coverage forms designate 12:01 a.m. on the date requested as the time at which all policy additions and deletions take effect, unless specified otherwise (in binders, underwriting guidelines, etc.). Evidently the insured and agent were somehow under the impression that coverage continued on the first vehicle until the moment he didn't need it, and then magically transferred to the other vehicle. Even if the carrier honored this fantasy-world request for coverage to cease when the tags were registered to the second vehicle, wouldn't that take place at the DMV? How was the insured planning to get home? What if he'd found the DMV lines to be around the block (as usual) and decided, "Oh, heck, I'll just come back early Monday when they first open." Should the carrier have kindly continued coverage over the weekend?
Can we agree that the problem is not effective-date provisions, but an insured playing games with his liability coverage? Or try this: Why didn't he just go on Thursday?
A similar critique applies to Scenarios 2 and 4. In both cases, the insureds dropped their liability coverage but wanted it back on an "as needed" basis. The PAP doesn't work that way. What part of "no liability coverage" did they miss?
What of the out-of-state coverage provision in the PAP? Note that this provision isn't in the general policy provisions–it only appears under "Part A–Liability Coverage." If Part A is activated, this out-of-state coverage can be broad, providing whatever financial responsibility or compulsory insurance laws require in the state in which an accident takes place. But the snowbird has dropped Part A coverage. Thus he has no out-of-state liability coverage for any vehicle he operates, whether it's rented, borrowed or stolen. (As an aside, Part C concerns uninsured/underinsured motorists coverage, not liability, and there is no out-of-state UM/UIM coverage provision under that section.)
Scenario 3 is the nail in the coffin of this entire "drop liability if I'm not regularly running all over town in the car" nonsense. The only homeowners provision that may create coverage for such lay-ups is the exception for vehicles "in dead storage." "Dead" doesn't mean "currently not being driven." If it did, the homeowners policy would take over the minute the insured parked the car in the driveway. "Oh, but these cars aren't going to be driven for months!" some may protest. But "dead" doesn't apply to things that are taken out of service for some limited period of time. A vehicle is "in dead storage" when its tags are removed, it's inoperable and its registration has been canceled to meet the homeowners requirement that a vehicle be not only not registered, but also not be required to be registered. Such vehicles are common in countless backyards the South. They're referred to as "cars on blocks."
Oh, if only this were all due to fried brains. Remember, as agents we stand in the stead of parents to our insureds. As I learned, sometimes the hard way, my kids' actions may be innocent, but that doesn't mean they aren't intentional. Even the youngest kids know what they're doing. What they don't understand are the possible consequences. As parents, we (at least theoretically) do understand. We allow them free expression and room for growth in decision-making, while still reining in their most self-destructive tendencies.
Or, as my sainted mother used to say, don't be penny-wise and pound-foolish. Remind your insureds–and sometimes yourself, if these cases are any indication–that insurance exists for a reason: Bad things happen. And when they do, just like BBQ and iced tea, it's always better to have a little more than you might need, rather than a little less.
Chris Amrhein is an insurance educator and speaker with more than 30 years in the industry. He is also chief fun officer of www.insuranceisfun.com, where his newest book of insurance musings, "Yes, Virginia, There Is Insurance," is now available. Readers may contact Chris at chris@insuranceisfun.com.

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Policy Issues: Delusions of insureds who drop auto liability coverage

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