Question

Allison's auto insurance policy is due on the 10th of each month. Ever since she has had the policy, she has sent the premium in on the 16th of the month. The insurer has been accepting the premium this way for the past 5 years. A new CEO takes over and decides to cancel Allison's policy for a nonpayment of premium. Allison contests this decision and legally gets the policy reinstated. The decision to reinstate the policy is an example of

A) An exception to the policy cancellation rules.
B) A change in the insurer's policy.
C) A legal requirement to reinstate the policy.
D) A negotiation between Allison and the insurer.

Answer 1

The reinstatement of Allison's policy is an example of an exception to the policy cancellation rules, reflecting a likely reliance on the legal principle of estoppel due to the insurer's history of accepting late payments.

Step-by-step explanation:

The decision to reinstate Allison's policy after paying her premium on the 16th for 5 years and then being cancelled for nonpayment by a new CEO can be seen as an example of an exception to the policy cancellation rules. Given that the insurance company had consistently accepted the late payment without prior issues, Allison might have established a precedent or an implied agreement for the acceptance of her payment terms. This situation does not reflect a change in the insurer's overall policy, nor a specific legal requirement to reinstate, and although it could be seen as a negotiation, the available information does not specify any negotiation took place. Instead, it appears that Allison's legal challenge to the cancellation likely relied on the principle of estoppel, which prevents a party from going back on a previously accepted arrangement.