Auto Insurance Claims: No comprehensive coverage for unpaid car, agency rep, collision coverage

Question
Hi! I would like to find out, please, what to do in the next situation. We have this auto insurance since April 2005. It was no comprehensive or collision coverage on them, just liability. When we signed the contact with agency, we told them them one car was paid off and another was not yet. In June, 2008 my unpaid car got on fire at front hood on its own and we called 911 - fire to help and they also registered about incident.  When we called our insurance about coverage they told that we don't have any coverage for it. This car has been staying like that on our driveway.  At that time I didn't know that any car has to have comprehensive and collision coverage if it not paid.  This year I was doing a quote on line trying to find another insurance. And any insurance I filled an application for, asked me the same question about which car is paid and which is not.  And when I tried to decline comprehensive and collision on both of them to see how much other insurance will quote us, the program didn't give me a chance to decline on the unpaid car. I understood that there is something wrong with our insurance and the next day we called the agency. The agency rep told us that it was our fault that we never told them about unpaid car (which is not true) and now they have to add extra for the rest months before a renewal for the unpaid car for comprehensive and collision. Then I asked if they are going to fix it. They said no, since the fire happened when we didn't have the comprehensive coverage. I told that I can try to prove that we never covered the info about unpaid and it was clearly their fault. Then, they said the insurance company may make you pay for the 4 years we has not had the coverage. I think there is something they are trying to cover and we should be told at the beginning about everything. Now we still have the same insurance, they added comprehensive and collision on the unpaid car, but no coverage would be done for the fire in 2006. What should we do? Thank you very much in advance. Sincerely, Irina

Answer
Irina,

  Sorry for the delayed response.  Your situation can become very complicated very quickly.  First of all, it is the underwriting rules and bank that will determine whether you can insure a paid off vehicle and a financed vehicle in the same manner.  Most banks will require that you maintain comprehensive and collision coverage.  Also, the fire is mysterious.  It may be caused by a defect and could be under warranty.  I hate to say it, but I think your situation calls for a very detailed analysis.  There is a possibility that there is some negligence on a third party, but I just don't have enough information to determine that.  I will try and help your figure out your options, but you'll have to provide me with details like the make and model of the car, the insurance company, whether you bought the policy from an agent or directly from the insurance carrier and a multitude of other questions.  

   I am sorry I had to be so broad in this answer.

Justin