Originally published by Christina Phillips.
Automatic payments have become a norm, including automatic payments for insurance premiums. But what happens when the automatic or scheduled payment amount is insufficient to cover an increased premium charge? That is the situation which occurred in Owners Insurance Company v. Sikanovski.1
The insured elected to finance the yearly premium with Owners and make scheduled monthly payments. Following the policy’s inception, repeated cancellation notice and reinstatements were issued due to an insufficient amount of time between receipt of the premium bill and its due date. Following reinstatement, the insured “padded” her payment to cover any future premium increases. Knowing at some point that the “padding” would run out, the insured periodically spot checked her invoices to make sure that the payment amount was sufficient. For three years the automatic payments were sufficient to cover the premium owed.
Eventually, the automatic payments were no longer…
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