Do you think this is a loss as defined by the policy? If so, do you think it is a loss caused by false pretense?

Georgia Subscriber

Loss is defined in the policy as direct and accidental loss or damage. Since the comprehensive coverage applies to loss from any cause, we see this as a loss as defined. The vehicle is gone so the loss is direct and from the insured's point of view, the loss is accidental.

False pretense coverage is for loss to a covered auto caused by someone causing the named insured to voluntarily part with the covered auto by trick, scheme or under false pretense. None of these terms are defined on the policy, but the facts certainly equate with a loss by a trick or under false pretenses by the customer.

However, the problem is that the insured paid the balance owed to the lender and is seeking indemnity for this action. The duties of the insured after a loss states that the named insured must assume no obligation, make no payment, or incur any expense without the consent of the insurer, except at the insured's own cost. So, while the loss should be covered under the false pretense coverage, the insured made a mistake by paying the lender up front. This violates the insurance contract and the insurer has the right to void the contract. You may want to contact an attorney who is familiar with the law in your area on this point, but if the insurer were to deny coverage, there is a basis for that denial.