A New Brunswick judge ruled last week in favor of a guaranteed asset protection (GAP) insurance provider that dismissed a claim by a motorist who had borrowed money to purchase a vehicle that was then was destroyed by fire.
In 2017, Jason Larsen bought a Chevrolet Cruze. Around this time, Larsen also purchased a policy called True Gap Insurance from the Assureway Group.
In 2019, Larsen’s Chevrolet was destroyed by fire and declared a total loss. His own auto insurance covered the purchase price of nearly $ 25,000. But when he originally bought the Chevrolet, Larsen traded in his old vehicle. In 2017, Larsen still owed money on the loan he took to buy his previous vehicle, so he had negative equity.
The dealership that sold Larsen the Chevy agreed in 2017 to pay off the outstanding loan on the previous vehicle. This current loan repayment has been added to the balance of the purchase price of his Cruz 2017.
As a result, Larsen borrowed approximately $ 39,000 to purchase the Chevrolet. When the Chevrolet was written off and he was reimbursed almost $ 25,000 of the original purchase price of that Chevrolet, he still owed an additional $ 7,200. That’s why Larsen made a claim with Assureway about the True Gap policy.
Assureway rejected this request on the grounds that the GAP policy excludes a negative equity payment added to the purchase price of the car.
Guaranteed asset protection helps protect motorists against the rapid depreciation of newly purchased vehicles, The Associated Press reports. This is because some customers may owe more on their car loan than the actual value of the car, measured by the actual cash value.
In Larsen’s case, he took his dispute with Assureway to the New Brunswick Court of Queen’s Bench and lost.
In Larsen Group vs. Assureway, published on October 1, 2021, Judge Jean-Paul Ouellette ruled that Assureway owed Larsen no money. Larsen must now pay Assureway $ 250 for the fees it paid to defend the coverage dispute.
Assureway argued that the terms of its policy were clear, in that the vehicle covered in the policy means the passenger car listed in the policy schedule. Thus, the GAP policy only covers the loan to finance the covered vehicle. GAP insurance would pay if the vehicle was a total loss for auto insurance purposes, plus the outstanding loan balance of the purchased car.
Larsen, who paid $ 1,458 for his GAP insurance, told the court he had not read the policy. He had previously purchased GAP fonts and anyway Larsen claimed the terms and conditions were in fine print and he couldn’t read them.
The dealership Larsen bought his car from testified on Larsen’s behalf. But in cross-examination, the dealer admitted that he explained the terms and conditions of the policy to Larsen, such as being able to cancel the policy within 30 days of signing. The dealership also agreed, in cross-examination, that although the original version of the GAP insurance policy was on legal-sized paper, it was readable when printed on 8.5 â³ X 11 â³ paper. .
This testimony “clarifies the fact that Mr. Larsen was offered all the possibilities to exercise his right and to bail out his insurance contract, within 30 days of its issuance, the offer a 1-800 number and giving it the opportunity for Mr. Larsen to get used to its content, âJudge Ouellette wrote.
In court, the dealership that sold the Chevrolet to Mr. Larsen apologized for not being able to cover up the negative equity in the car’s purchase price so that GAP insurance company did not. did not know, wrote Judge Ouellette.
The dealer told the court that it was practice across Canada to hide negative equity, and that in any event, other providers of such a service would not question negative equity as long as it it was not equity resulting from the payment of other debts not associated with a car loan.
Justice Ouellette rejected Larsen’s argument that the GAP insurance policy was unreasonable, as well as his argument that the contra proferentem rule means that the court should rule in favor of the plaintiff.
Ouellette J. found that Larsen did not adduce in evidence that the contract was not clear on the relevant terms. Essentially, the contra proferentem rule means that if an insurance policy is ambiguous, a court could rule against the party who drafted the contract. But the contra proferentem rule only comes into play when a court finds that a policy is ambiguous.
Feature image via iStock.com/shaunl