Is an at fault accident covered by an insurer if there was a brief lapse in coverage on a long term contract?

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Is an at fault accident covered by an insurer if there was a brief lapse in coverage on a long term contract?

My wife has monthly payments drafted from her acct for a 6 month policy with an insurer that she has had coverage with for 2 years. She was involved in an at fault accident, at which time she discovered that she was not covered due to a payment that did not clear her bank account. Her policy was canceled 6 days prior to this accident. She made her payment and her policy was reinstated. However the accident wasn’t covered. She now has a judgement against her for damages to the other parties vehicle in excess of $7500. Should this be covered under her policy? What other options does she have?

Asked on August 5, 2012 under Insurance Law, Texas

Answers:

S.L,. Member, California Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Unfortunately, since your wife's auto insurance had lapsed when the accident occurred, the accident would not be covered.

If your wife can't pay the judgment, you and she could file bankruptcy because the creditor will be going after both of you to enforce the judgment.  Depending on income and other factors, you and your wife may be eligible to file Chapter 7 bankruptcy which is straight liquidation and would eliminate the debt.  If you and your wife are not eligible to file Chapter 7, filing Chapter 13 bankruptcy would be an alternative;  however, Chapter 13 requires a plan (budget) for repayment of creditors.


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