Comstock Insurance agreed Thursday not to cancel most of the liability policies that it issued to about 500 California auto repair shop owners and tire dealers.
A lawyer for Comstock said, however, that the company wants to reinsure with other companies policies that cover large liability and property damage claims and may consider canceling these large policies, which make up only a small proportion of the total.
The agreement by Comstock was disclosed in Los Angeles Superior Court, where Comstock is being sued by the repair shop owners and tire dealers. The businesses filed suit several weeks ago after Comstock sent letters stating that their insurance would be canceled even though the policies had not expired.
Comstock sought to cancel the policies since it no longer offers liability and property damage insurance to auto repair shops and tire dealers.
Comstock's lawyer, Paul Richler, said the insurance company changed its mind about the cancellations after out-of-court negotiations with the state Department of Insurance. Discussions with the department are continuing, he said.
The Department of Insurance is interested in the Comstock case because a ruling would set a California precedent on whether an insurance company may cancel a policy midterm--an issue that is becoming more important as insurance companies seek to shed unprofitable classes of risk.
Richler said Comstock wants to reinsure with other insurance companies any of the policies that include property damage coverage of more than $250,000 for each location and liability coverage of more than $500,000. A small number of the repair shop owners and tire dealers hold policies that large, the attorney said.
If no reinsurer can be found, Comstock may maintain such policies, or it may seek to cancel them, raise the premiums or lower the coverage limits, Richler said.
Superior Court Judge Jack M. Newman declined to issue a preliminary injunction against Comstock on Thursday. The repair shop owners and tire dealers requested the injunction, which would have barred Comstock from canceling the policies.