Car insurance claim reporting obligation

On Aug 9, 7:47 am, A Michigan Attorney <miattor...@gmail.com> wrote:

> How is the insurer's ox being gored by an unreported collision?

If the insurer sets its rates based on the policyholder's actual accident experience and moving-violation experience, failure to report an accident (by not making a claim) deprives the insurer of information they are entitled to have when it comes time to set the renewal premium for that policyholder.

Depending on the insurer and the language of their policy and the law of the state where it was written, they may only care about "claims" experience and not "accident" experience per se, and in that case, I would agree there is "no harm, no foul" by failing to report an accident to one's own insurer if one does not intend to make a claim.

But I suspect most insurers, in assessing the risk and setting their rates to match, _do_ care not only about actual past losses claimed by their customer which an insurer may have had to pay, but also about the customer's risk-taking behavior, his actual accident experience, and his risk exposure relative to the environment where he usually keeps the car, the uses to which it is put, and so on, all of which are factors that reasonably could make it more likely he will have a payable claim in the future (which is why they care about things like moving violations that don't result in any accident or claim but nevertheless enhance the risk that the driver may have an accident during the policy period).

Failing to timely report a minor accident during a particular policy period is not insurance fraud, and will generally not get your policy cancelled before it naturally expires in any state I'm familiar with; but it may affect whether the insurer is obligated to cover you for _that_ accident, if that fender-bender later turns out to be more serious than you had originally thought when you swept it under the rug (frex, if the other guy makes a personal injury claim, months or years later, and your insurer is unable to do a complete investigation because the evidence has already been lost or changed and memories have faded).

But failing to reveal the existence of a prior accident at the inception of a policy period, one that occurred previous to the time when the applicant is specifically asked about his accident experience on a renewal questionnaire or when the agent interviews him to rate a new policy, could well rise to the level of insurance fraud and give the insurer grounds to rescind _ab_initio_ the policy that it wrote based on those false representations, and that in turn could leave the putative policyholder without any coverage for a subsequent accident he _did_ promptly report and make a claim for, under the fraudulently-obtained, therefore rescinded policy.  That's the difference. 

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Mike Jacobs
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