Ian,

You will actually find that that statement is 100% incorrect, if there is an insurance policy in force and a certificate has been issued then the insurance company must by law honour their liability to any third party that can prove a claim. Even if the policyholder has compromised his policy.

They can however refuse to pay out for their policyholders vehicle and can also claim back any costs that they incur settling a thrid party claim from their policyholder.

Hope that helps.

Dibs