Posted by Guardian Risk Management & Insurance Services on
“How Divorce Affects Your Insurance”
An insured we will call Bill and Nancy own 27 cars, a “few” homes, 15 boats, and a lot of other
stuff! They are named insureds on everything. Now the kicker…Bill and Nancy are getting divorced!
Bill wants his insurance agent to remove Nancy on everything except two autos and a boat. Bill
faxes the agent documentation that shows that all the autos are registered to him alone. This is a
large and very good account for the agent that Bill controls. The struggle is to keep Bill happy
but to act legally and ethically to both parties.
If you are the insured in such a scenario, you should be aware that you MUST, for many reasons,
resolve this with your spouse…don’t put your insurance agent in the middle of a personal feud. In
the example above, he fact that the vehicles are registered in Bill’s name is probably
immaterial…we suspect, depending on applicable state laws, that an ownership interest exists
beyond registration or titling. Most important, since Nancy is a named insured (in this case), she
has equal rights under the contract which MUST be honored.
So, HOW the insurance will be restructured is a mutual decision and, like it or not, that’s the way
it’s got to be. There are potentially adverse legal and ethical ramifications if the insurance
agent handles this unilaterally with the husband…and the husband could be liable as well.
When this issue was posed to our Virtual University faculty, many who are practicing insurance
agents, here are some of the responses we received:
“As an agent, it has always been my policy to NEVER make any changes to a policy when I know
there’s a divorce going on WITHOUT GETTING THE CONSENT OF BOTH PARTIES. The questioner should start
a dialogue with the Mrs. and see what her needs are, and work it out with both of them.
“There can be a big difference in what an agent can legally do when a couple gets divorced, and
what the agent SHOULD do. Failing to do all a good agent SHOULD do will dramatically increase the
legal exposure to this agent.
“Since Nancy is a named insured, she is owed the same rights as Bill under the policy. The fact
that cars are no longer titled in Nancy’s name doesn’t mitigate the need to honor her rights under
“As an agent I faced this a lot. The first thing I tried was to contact ‘Nancy’ and have her come
in and sign the endorsements removing her from the policy. I’d provide her coverage at this point
too if needed. Then ‘Bill’ would sign the endorsement request too so that both parties knew exactly
what was happening.
“When I was an agent, I never removed or changed the policy during a divorce situation without the
consent of both parties. The insured needs to understand that, as a professional insurance agent, I
have a duty to BOTH my insureds.
“My procedure is to have both parties sign cancellation requests, preferably witnessed by the
respective attorneys. Then I have the previously insured assets insured in separate policies as
directed by the divorce decree. The parties should agree to a division of the unearned premium on
the old policies. Upon completion of
these actions, I send a certified letter to each of the parties (including the attorneys)
explaining what was agreed upon and the actions taken. During the divorce proceeding, up until
completion of all transactions, I do not take any coverage reduction action without the approval of
Agents have a good faith duty to both named insureds. They should not limit coverage for someone
without that person’s express, preferably written, permission. The agent can relay the request to
Nancy, but should also advise her of the coverage implications of removing her name.
“Bill being the only name on the title doesn’t mean he’s the sole owner of the property, especially
in community property states. So, even after they have been issued their own policies, until
there’s been a property division approved by the courts, each should be named on the other’s
policies as additional insureds. That way their interest in the property is protected and notice of
cancellation is sent if the policy is cancelled. It’s very important that all policies have both
names on them. Otherwise there could be some serious coverage gaps for the unnamed spouse.”
Copyright 2000-2015 by the Independent Insurance Agents & Brokers of America, Inc. Reprinted with
NOTE: Policy coverages and circumstances can change at any time, so the information above may not
be accurate at the time of reprinting or subsequently to that time. IIABA does not assume and has
no responsibility for liability or damage which may result from the use of any of this information.
The most current, up to date version of this article can be found at IIABA’s Virtual University at