When a parent places insurance on a child’s car, both the parent and child must be advised of any cancellation in the policy

When a father purchases automobile insurance for himself and his children, the father is entitled to notice when the insurance on any of the vehicles is cancelled.  In this case, the child failed to provide a mechanical inspection report requested by the insurer and was notified that the insurance was cancelled.  Since the father was not notified of the cancellation, the policy remained valid.

Co-Operators General Insurance Company v. Carter, [2008] A.J. No. 457, Alberta Court of Queen’s Bench, D.L. Shelley, J., April 22, 2008

The applicant insurance company sought a declaration that an automobile insurance policy sold to the respondent had been effectively cancelled prior to an accident involving the defendant.  The policy had been sold to the respondent’s father as part of the applicant’s marketing strategy to insure all of a family’s vehicles under one policy.  The premiums for all the family vehicles, including the respondent’s, were automatically deducted from the father’s bank account.

The respondent failed to deliver a copy of a mechanical inspection report to the applicant, as was required by the policy.  As a result, the applicant issued a letter to the respondent that his policy would be cancelled within thirty days.  The applicant did not notify the respondent’s father of the cancellation, and in fact provided a renewal notice to the father, for all three family policies, without mention of the imminent cancellation of the respondent’s policy.

The applicant took the position that the termination was effective, because the respondent’s father had no insurable interest in the respondent’s vehicle, and was therefore not entitled to termination of coverage on it.  The respondent took the view that “where one policy number is issued with respect to a number of family vehicles, it is reasonable for the average person applying for insurance to understand that” the overall policy holder is entitled to notice of cancellation.  The court agreed with the respondent’s position, holding at para. 40 that:

[the respondent’s father] would have had an expectation that matters related to coverage under his Policy (including that related to the [respondent]) would be brought to his attention, consistent with his past dealings with his insurance company.

This case was originally summarized by W. Jay Havelaar and originally edited by David W. Pilley.

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