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Judge: Insurer must report policy cancellation
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Posted on Sep 12 2005
The Superior Court yesterday upheld that an automobile liability insurance policy remained effective despite its cancellation by the insured party due to the insurer’s failure to report the cancellation to the government.
Associate Judge David Wiseman said that the CNMI Mandatory Liability Auto Insurance Act requires an automobile insurer to notify the appropriate government officials when the mandatory liability policy has been cancelled.
Wiseman effectively declared Royal Crown Insurance Corp. liable to the third parties, Babauta family members Ian Joseph, Engracia, Allen John and Meghan.
Court records showed that Deborah Stephanus obtained mandatory liability insurance from RCIC for a 1991 Toyota Camry in August 2003. Soon after obtaining the policy, Stephanus registered the vehicle in the CNMI and later cancelled the policy days after registration.
On March 28, 2004, the Babautas were all riding in a vehicle when it became involved in an accident with Stephanus’ car. The Babautas sued Stephanus, one Vic W. Jack and the insurance company, asserting that the insurance policy was still in effect at the time of the accident.
Wiseman explained that the intent of the law mandating reporting of insurance policy cancellation to the government was to reduce the likelihood of a third party being uncompensated for injuries and damages following a vehicular accident. The judge said the law even provides for severe penalties for violation of the notification requirement.
The judge ruled in favor of the Babautas and rejected the insurance company’s request for summary judgment.
