You would think that a contract is a contract is a contract. We expect parties to uphold their ends of a contract whenever they enter into them.
Unfortunately, that is not the case with some insurance companies.
I will not mention specific insurance companies, but some insurance companies try to weasel out of claims by using a process called “void ab initio.”
Void ab initio is a legal fiction that allows one party to a contract to pretend that the contract never existed. Some insurance companies use this legal fiction in order to avoid an insurance contract rather than paying the value of claims when they occur.
What happens in a void ab initio action is the insurance company returns all your policy premiums and then pretends that your insurance policy never existed because it supposedly never would have written your policy if it had known about certain facts.
Those insurance companies will happily take your insurance premium monies for years until you or somebody else makes a claim. After you or someone else makes a claim, the insurance company holds what is called an Examination Under Oath (“EUO”) EUO in order to discover something that would allow them to void your policy contract. The insurer is often looking for a way to deny your claim if it holds an EUO.
Sometimes they will do it based upon just a recorded statement.
So what do the insurance companies look for?
Well, it can be as simple as somebody who lives in your home that you did not disclose to your insurance agent when you got the policy. I have seen insurance companies deny coverage because the insured party did not disclose that they had children of 15 years or older living with them, live with their parents, had roommates, or anything else that would raise the premium by such an insignificant amount is $10 (or maybe less) per policy period.
I have also seen this occur once somebody has changed their address without notifying the insurance company.
One insurance underwriter admitted during her deposition that her insurance company was engaging in what is called “post-claims underwriting.” All that means is the insurance company is trying to reach back in time in order to say they would not have underwritten your policy had they known about some fact.
So you didn’t tell your insurance company that you drive for Uber or Lyft when you took out the policy? Get ready for a denial. Nothing is covered. Your policy is voided. It’s as if it never existed.
In my opinion is that it’s an underhanded way of denying claims instead of paying them. It is usually the lower-tier insurance companies that act this way. They will literally try to void your policy for any reason they can rather than paying thousands of dollars to pay your claims.
However, many times it is the insurance agent who fills out the insurance company’s initial policy application. This is particularly true when it comes to immigrants, poor people, and others who do not have the best reading skills. Sometimes the insurance agent, claims adjuster, or underwriter do themselves not understand questions the these applications ask. If the insurance company representatives do not understand their own applications, then how are common citizens expected to do so?
Here is how to avoid the most common void ab initio traps:
- List everybody who lives in your household. It does not matter that they have their own insurance. It does not matter if they will never drive your car.List them anyway. You can exclude those people from your policy, but they can never drive your car, even in an emergency. You can also list some people as what are called “permissive drivers” if they drive your car on a frequent basis.
- Tell your insurance company if somebody moves in with you too. You can add or exclude them from your policy. You can’t ever let an excluded person drive you car, though, because that will result in a denial or reduction of coverage.
- Make sure that your insurance company knows exactly where you live. I am frequently surprised when my clients do not update their insurance companies about their addresses. An insurance company will Void ab Initio your policy in a heartbeat when you move to a higher risk area, and there is no way for you to tell if you live in a higher risk area. This is called “garaging.”
- You must tell your insurance company if you drive or start driving for Uber or Lyft (even part-time), deliver food or people for money, or otherwise use your car for any business other than driving to and from work.
- Please tell your insurance company about all crashes that you have been in. One favorite tactic is for your insurance company to run a report on you after somebody makes a claim in order to say they would not have issued a policy to you had they known about your loss history.
Void ab initio is a tool that insurance companies often use in order to deny claims that they should have paid. Do not give the insurance company any ammunition to claim that it would not have written your policy if it had known about some circumstance that you do not think is important.
It’s all important.
The insurance company denying your claim is bad enough, but it gets even worse, because the State of Florida can suspend your license because you got into a crash and did not have insurance—even though you did. How unfair is that? Yet it happens frequently in Florida.
Avoid a void ab initio problem by following my advice.
Christopher R Dillingham II, Esquire