|JOHN A. GREENE
ARIZONA DEPARTMENT OF INSURANCE
2910 North 44th Street, Suite 210, Phoenix, Arizona 85018-7256 · (602) 912-8456 · FAX: (602) 912-8452
|Executive Assistant Director||FOR IMMEDIATE RELEASE|
|602/912-8451||August 21, 1997|
John A. Greene, the Director of the Arizona Department Of Insurance announced today the entry of an order that includes a $100,000 civil penalty against Safeway Insurance Company for violations of Arizona's non-cancellation laws that apply to private passenger motor vehicle insurance.
Safeway permitted its agents to bind or issue insurance on behalf of the company. Safeway's agents bound insurance for people who believed that Safeway had issued coverage to them. However, Safeway later informed these agents that the coverage had not been issued, but failed to give the policyholders the notices required by law. When Safeway canceled insurance in this manner, the records examined by the Department revealed that, although required to do so by law, Safeway never:
"The non-cancellation laws that apply to private passenger motor vehicle insurance figure prominently in the operation of the state's mandatory insurance laws. Arizona has a non-cancellation law that limits the reasons an insurer may cancel a personal automobile insurance policy after the policy has been in effect for more than 60 days. Some of the allowable reasons include failure to pay premiums and having been convicted for driving under the influence of alcohol or drugs. Insurers may cancel a policy for any reason during the first 60 days after the issuance of a policy. Regardless of the timing of a cancellation, the insurer must give the policyholder notice of three things. First, insurers must give policyholders advance notice of the cancellation. Second insurers must advise consumers of their right to seek redress from the Director. Third, insurers must give notice of the opportunity to secure insurance from the state's assigned risk pool," Greene stated.
Arizona law requires insurers to notify the Motor Vehicle Division of Arizona Department of Transportation regarding each policy an insurer cancels or does not renew. This requirement serves as a key element of the state's enforcement of its mandatory insurance laws. The Department examination revealed that Safeway failed to notify the Department of Transportation's Motor Vehicles Division about the cancellation of more than half the policies examined. Further, Safeway also routinely failed to alert each affected policyholder that the cancellation of coverage could trigger the suspension of the policyholder's motor vehicle registration.
In issuing this order, Greene stated that "Most insurance companies are good corporate citizens and attempt to adhere to the letter and spirit of the law. Those who are not should be on notice that in the future not all violations of Arizona's insurance laws may be resolved through the imposition and payment of a civil penalty. The penalty for intentionally and repeatedly violating the insurance laws should not be just another cost of doing business in this state to be paid by insurers but ultimately endured by insurance consumers. In appropriate circumstances, the Department may seek to suspend or terminate an insurer's certificate of authority to transact insurance in this state for egregious violations of Arizona law." Greene noted that these circumstances include:
Safeway, which has undergone significant managerial changes since the period covered by the examination, agreed to take corrective action to remedy the violations. Safeway also agreed to contact all policyholders potentially impacted by its cancellation procedures to ensure that all who bought insurance from Safeway receive the benefit of that coverage.
"Any consumer who believes that Safeway had bound coverage between January 1, 1991 and today but had a claim denied because the company terminated the coverage is urged to contact Safeway at 602/730-0026. Consumers may also call the Consumer Services Division of the Department of Insurance at 602/912-8444 in Phoenix or 520/628-6370 in Tucson," Greene stated.