We consider the 2005 Pontiac a newly acquired auto as it did not replace a vehicle on the policy since the insured still had possession of the 1997 Monte Carlo.  The vehicle was not reported to us within 14 days per the policy requirements.  

The insured agent considers this a replacement vehicle because it was intended to replace the 1997 Monte Carlo.  He further contends because of this change of registration, the insured was not legally able to drive the Chevrolet and as such the 2005 Pontiac should be considered a replacement auto.  

Can you offer an opinion on whether you feel this is an additional or replacement auto based on the facts above? 

Pennsylvania Subscriber

It is our interpretation that this is an additional auto, but it could depend on insured's jurisdiction, as there is a split in authority on this issue. So, we took both approaches in coming to our interpretation, as explained below.

Courts generally hold that a vehicle is a replacement if it's procured after issuance of the policy and the described vehicle is disposed of by the policyholder or is otherwise inoperable at the time of replacement. The insured acquired the Pontiac (second auto) after issuance of the policy and before the expiration of the policy; however, insured did not dispose of the Monte Carlo on the policy because insured maintained possession of the vehicle (no disposition) and it was not inoperable at the time of the replacement. Jurisdictions adopting this approach include North Carolina and Illinois, for example.

On the other hand, some courts rely on a less stringent analysis which centers on the insured's intent and conduct under the totality of the circumstances. That camp considers whether the insured intended the second vehicle to act as a replacement and acted in accordance with that stated intent. Those courts have refused to find that a vehicle can't replace another vehicle based on the fact that insured kept the covered vehicle after buying the second and the covered auto was not inoperable. Kansas, Alabama, and Washington are such jurisdictions. Under this approach, the benefit of the doubt would possibly go to the insured.  

Balancing both approaches, we believe that this is an additional auto. For us, the tipping point is that insured did not report the Pontiac within 14 days, per policy terms. Moreover, the Monte Carlo was not disposed of so the insured could have continued to use it even if it would have been illegal under state law. For these reasons, if the Monte Carlo was still on the policy, the Pontiac should be considered an additional auto since it has been added to the coverage.