Around 1,500 motorists who bought secondhand cars from Vauxhall Network Q were left without insurance following the Independent Insurance collapse.
The failed insurer underwrote the Network Q Summer Insurance Programme from July 4 to August 1 last year. It offered two-year insurance deals to motorists, charging drivers up to £4,500 for two years cover.
A source told Insurance Times that drivers were issued with a one-year cover note and promised another one would be sent out to cover the second year.
Network Q has more than 400 dealer franchises and at least half sold the insurance. Drivers were offered a choice of one or two year policies on at least seven makes of vehicle, although there was no discount for taking out the longer two year policy.
The source estimated at least 1,000 policies were being sold each month.
The cover was arranged by First Indemnity Insurance Management (FIIM), a broker which arranged the scheme through Servico UK, the intermediary group currently embroiled in a legal battle with CNA Insurance.
Servico had a binding authority agreement with Independent, which allowed it to underwrite for and on behalf of Independent.
However, the source said Independent chief executive Michael Bright cancelled the binding authority when he discovered the agreement between his underwriter and Servico. "When Michael Bright discovered one of his underwriters had given the pen to Servico UK, he invoked the cancellation clause and fired the underwriter," the source said.
CNA took Independent's place as underwriter of the scheme but cancelled the agency in January and, it is believed, also sacked the underwriter involved.
The source said motorists who signed up when Independent backed the scheme were not transferred to CNA, nor informed of the change. Servico is not believed to have found a replacement underwriter following CNA's withdrawal.
A Vauxhall spokesman said the company was taking legal advice on the issue but did not make a comment in time for publication.
FIIM's partner John Layton and Servico UK managing director Stephen Arnold refused to comment on the issue.