GEICO sues Oakland County woman for not listing her 12-year-old daughter on car insurance policy GEICO sues Oakland County woman for not listing her 12-year-old daughter on car insurance policy
I think this belongs in the News that makes you say WTF thread.
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The letter from GEICO included in the policy claims that insureds are required to list all resident relatives on the policy.
Is that a Michigan thing (Michigan auto insurance is weird), just a GEICO thing, or…? (The documents in the article suggest it would have made a difference in the rate charged.)
(For those who haven’t read the article, it looks like the legal action is just seeking to avoid paying the claim.)
That’s what it looked like to me as the letter seems to claim they are looking at retroactively cancelling the policy to avoid paying claims.
I know nothing about Michigan car insurance law.
The appendix to the legal filing includes a document from the policy, listing the one family member in the household, and their health insurance policy.
It’s been a couple of decades since I worked with personal auto in the US, and even then I managed to avoid having anything to do with Michigan. However, I do know that PIP is a problem in Michigan, in part because PIP limits can be high-to-unlimited…in which case I can see why an insurer might want to know about everybody in a household, regardless of age.
I have no clue as to whether that’s common in Michigan.
In this case, I generally side with GEICO with the exception of how they’re treating the cancelation of the policy.
GEICO needs to be better at asking up front about things like this . . . and explaining why they need the information. PIP is a coverage for medical costs of all passengers in your (insured) vehicle due to a covered accident regardless of fault. So it doesn’t matter if the household resident can drive.
In addition, the doctor’s office NOT seeking indemnification from GEICO is irrelevant to the situation (here, we see extreme ignorance by the media, so they’re sensationalizing the situation). If any injuries in this case are paid to the doctor’s office by a health insurance policy, I’ll guarantee you that that insurance company is going to subrogate against the auto policy because the injuries were caused by an auto accident–which PIP has primary coverage responsibility (i.e., PIP pays first up to any stated limits).
GEICO would be right to deny any coverage for the daughter’s injury. But GEICO should cover the collision damage if the person had that coverage (which is optional). GEICO should still cover the injuries of the unrelated passenger. And then cancel the policy as of the day of the accident with all premiums forfeited (that is, the customer is not due any refunds on the unexpired portion of the policy) due to the intentional misrepresentation on the policy.
But given the nature of today’s society, GEICO would be better served to cancel the policy and issue the refund because the customer could sue for that refund and likely win and GEICO would then have to also pay the plaintiff’s legal costs and get more bad publicity.
But MI is a state with considerable PIP fraud. While the customer likely did not do this intentionally, but the situation would be classified as insurance fraud.
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Gieco may very well be within their legal rights. But stories like this are why a lot of people hate insurance companies.
Also from the article it seems like the other driver was at fault. I don’t know Michigan insurance law regarding fault/no fault but it would seem that the other driver’s insurance is the one who would be responsible but maybe they were uninsured, if that came up in the article I missed it or maybe the version of event presented in the article isn’t what really happened. I don’t know.
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PIP is a no-fault coverage (it’s in many states). So unless there’s significant injuries, PIP covers any medical claims of occupants of the insured vehicle.
ITA that stories like that are what make many people hate insurance companies, but that article is also written and presented with that goal in mind. It goes beyond a “reporting of the facts” since it clearly ignores how insurance “payments” actually take place (which I outlined in some degree in the prior post with one insurer subrogating a payout with the party that is actually responsible for the claim).
GEICO is shooting themselves in the foot in how they’re dealing with the cancellation of the policy FAR MORE than their denial of the claim.
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If the child had been listed on the original application, would GEICO have refused to issue the policy, or at least charged a different premium?
probably would have charged a different premium. I have in the back of my head from one of the online courses that if someone accidentally omits something on the declarations page the insurer can retroactively charge the correct premium.
Under contract law, a contract is void “ab initio” where fraud can be proven. Sounds like GEICO is taking a hard line here.
Fraud requires intent to gain unfair financial advantage via false/misleading statements. Intent is hard to prove; it’s unclear how material the missing information was to the quoted rate.
Plus it looks like GEICO are denying the property claim on the basis of the missing dependent information (which is only a relevant rating factor for the PIP coverage). Unclear how much (if anything) was claimed under the PIP coverage.
Seems a strange fight to pick, with a lot of downside risk for GEICO.
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The legal filing indicates that there would have been a different rate had the child been listed on the policy.
I don’t think there’s an actual allegation of fraud; GEICO just wants off the policy and claim due to the incident of material misrepresentation. Assuming the premium impact really is material, this is one of those “it’s perfectly kosher per the contract; it just looks really bad” situations. I’d think for reputational risk reasons, it would be better to pay the claim, recover the additional premium, and nonrenew the contract.
Actually, this looks so bad that I wonder if there’s some suspicion of fraud in the claim itself (since Michigan has had problems with PIP fraud). I can imagine someone at GEICO saying “there’s something wrong with this claim; rather than try to prove fraud in court, we can legitimately not pay on the grounds of material misrepresentation”.
I’m skeptical that the consumer would have had an intent to deceive in the application…but that’s part of why I was wondering about whether listing all household family members on the application is a “Michigan thing” or just a “GEICO thing”…or perhaps a “GEICO in Michigan thing”. Until this incident, I would never have thought about there being a need to list anyone under 15 on an auto insurance application. If, hypothetically, I had kids of that age and moved to Michigan, I could very easily have not noticed that I needed to list the kids on the application due to my expectations, rather than an actual intention to deceive.
If this were common practice in Michigan, my “reasonable expectation” defense might be harder to sell. But if this is just something that GEICO does (and perhaps only in Michigan), perhaps this is an indication that even if it’s predictive of the cost of the transfer of risk, that variable is flawed.
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The PIP rate would have been different, though it is not clear by how much. And there’s no indication of what, if any, PIP claims in are play here. As such, it’s unclear whether GEICO has experienced any harm that could not be cured by restating the PIP premiums and a payment of the missing back premium.
On the other hand it appears the insured was charged the correct rate for the rest of their coverage, so denying the non-PIP claims because of the missing dependent (which does not appear to be a permitted rating factor for non-PIP premium in Michigan) is a bad look.
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Doesn’t GEICO have form for this sort of thing?
Trying to keep the expense and claim ratios as low as possible.
I’m not sure what the question is here . . .
We are an audience of relatively sophisticated insureds here and we seeem largely surprised that this is a material omission. I’d think unless they REALLY highlight the need to list all household members on their forms, GEICO is gonna have to pony up.
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