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Auto Insurance

PA Auto Insurance: The Disappearing Act

By October 21, 2010February 26th, 2019No Comments

Like most people right now, Sammy and Susie Saver are looking for ways to cut costs. They have 3 cars on their auto insurance policy with one of the vehicles being inoperable. So, Sammy and Susie decide to drop the insurance on the inoperable vehicle because it doesn’t make sense to pay $500 of insurance on something they cannot even drive. Later that month, Sammy and Susie decide to go out to dinner to celebrate a successful week at work and on the way to the restaurant they get into an auto accident. Sammy and Susie are both injured and they make a first party benefit claim on their auto insurance to pay for $10,000 of medical expenses. To their surprise, the insurance company denies the claim which leaves Sammy and Susie with $10,000 in medical bills. How is this possible?

When Sammy and Susie dropped the auto insurance on the inoperable vehicle they did not realize they needed to surrender the tag to PennDot and de-register the vehicle. Thus, they owned a vehicle that is registered with the state but was not insured. According to Section 1714 of the PA Motor Vehicle Code, keeping a registered vehicle without insurance prevents the owner from being able to claim first party benefits (ex. medical bills, loss wages), even if they are injured in a vehicle that carriers insurance.

§ 1714. Ineligible claimants .An owner of a currently registered motor vehicle who does not have financial responsibility or an operator or occupant of a recreational vehicle not intended for highway use, motorcycle, motor-driven cycle, motorized pedalcycle or like type vehicle required to be registered under this title cannot recover first party benefits.

This provision is meant to ensure that “one may not receive medical and wage loss benefits unless they have the ability to provide them to another.” While the law’s intent is commendable, its application raises huge concerns for individuals who have innocently kept the tag on an inoperable vehicle during the duration of the repair. Also note that this same rule applies for recreational vehicles and motorcycles.

So, what should you do to maintain first party benefits at all times?

You have 3 options if you want to cancel coverage on a vehicle because:

  • it is inoperable or under restoration, OR
  • it is used on a seasonal basis, OR
  • it is used occasionally (such as a classic, collectible or antique car),

Option 1– You must send the tag back to PennDOT immediately. This will suspend the registration and ensure that the owner is compliant with Title 75. To return the license plate, fill out form MV-141 and send it to the Bureau of Motor Vehicles, Return Tag Unit, P.O. Box 68597, Harrisburg, PA 17106-8597. Form MV-141will be stamped by PennDOT upon receipt and returned to the sender, thus evidencing receipt. As an alternative, you may return the tag directly to any PennDOT agent. Please be aware that the agent will charge an additional fee for this service.

Option 2 – You can choose to maintain insurance on the vehicle. It is, after all, a very simple solution. If it is possible, you may be able to save money just by reducing liability limits to the minimum legal requirement on that vehicle only.

Option 3– If, and only if, you qualify, you may apply to PennDOT for seasonal registration. If properly handled, you will be able to drop Financial Responsibility (Insurance) during the off-season of a seasonal vehicle. However, due care and diligence in choosing the new expiration date for the registration is of utmost importance. The individual should be clear as to when the registration ceases and make sure the Financial Responsibility matches that date. The vehicle must never be operated during the off-season. Section 1307 will protect:

a) the insurer, who will not have to pay any claim during the “off season” (when the vehicle is considered not registered), and

b) the client, because it will maintain his first-party benefits whole.

Again, bear in mind that the majority of seasonal registration applications are incorrectly filed. Seasonal registration is more likely to be applicable when you are dealing with recreational vehicles, motorcycles, or trucks or farm vehicles with a gross weight not exceeding 9,000 pounds. It is not applicable to antique, classic and collectible vehicles, or vehicles that are inoperable or under repair/restoration.

To read PennDOT’s Fact Sheet about seasonal registration, click here.

To apply for seasonal registration, click here.

Don’t risk a lot for a little

Bottom line is that if you do not have insurance on all registered vehicles, your medical bills and loss wages as a result of an auto accident may not be covered.

If you are thinking about cancelling insurance on a vehicle make sure to contact your agent and have them verify your first party benefits will not be compromised.

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