Legal Question in Credit and Debt Law in Arizona

Auto repossession due to lapse on insurance coverage

My stepson purchased a used truck in Arizona where he recently relocated. It is financed through a local bank. During the course of moving his family from out of state, the insurance coverage lapsed for 2 months. Loan payments were never late and are current to date. The finance company assinged him insurace during the lapse unknown to him and now wants $2000.00 or the truck back. Is it leagal to assign inurance without consent? Is it legal to repossess a vehicle if the loan premiums are current and have never been late?

Thank you


Asked on 1/26/04, 10:04 am

1 Answer from Attorneys
Sharon Campbell Sharon K. Campbell

Re: Auto repossession due to lapse on insurance coverage

In most motor vehicle installment contracts, there is a provision that, if the debtor's insurance lapses, the finance company has the option of adding on what is called single interest insurance which protects the finance company only and the premium for which is added to the debt. Failure to keep insurance coverage is a breach of the contract so is technically default. One of the remedies for default is to declare the debt accelerated and repossess the vehicle. So, to answer the question, they may demand either the insurance premium or return of the truck. It is all perfectly legal.

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Answered on 1/26/04, 10:50 am


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