Can The Insurer Refuse to Renew My Policy?
Non-Renewals Are Governed by State Laws
Like any business, you could receive a letter from your insurance company stating it's non-renewing one of your business insurance policies. Such letters aren't uncommon. Thus, it's important to understand why your insurer might decide to discontinue your coverage and the obligations it must fulfill when notifying you.
Non-Renewal Versus Cancellation
Note that a non-renewal notice is not the same thing as a notice of cancellation. When your insurer cancels your coverage it terminates your policy mid-term, before the expiration date listed in the declarations. When your insurer non-renews your policy, it allows your coverage to lapse after it has expired. In either case, your insurer must comply with state notification laws. It may also be obligated to provide a reason why your coverage is being terminated.
While many states impose tight restrictions on mid-term cancellations, they generally permit non-renewals as long as insurers provide proper notice.
Why Insurers Non-Renew Policies
One of the most common reasons for a non-renewal notice is the insurer's withdrawal from the market. For example, your insurer might non-renew your business auto policy because it no longer wants to write commercial auto coverage in your state (or at all). Alternatively, your insurer may have decided it no longer wants to insure a certain type of business or industry.
Some non-renewals are specific to the business. For instance, your insurer may have concluded that you have incurred too many accidents or losses, have not maintained your property, or have failed to comply with its loss control recommendations.
Virtually all states have laws that dictate what steps insurers must take if they intend to non-renew your business insurance coverage. Generally, an insurer may non-renew a commercial policy as long as it notifies the policyholder within the number of days specified by law. The number of days' notice required varies from state to state. For instance, Colorado law requires 30 days while Texas demands 60 days'.
Special rules may apply if an insurer initiates a mass non-renewal because it no longer wants to write a particular type of coverage. For example, insurers doing business in New York must submit a withdrawal plan to the regulatory authority 45 days before issuing any non-renewal notices. The plan must explain the reasons the insurer is withdrawing and the steps it will take to minimize disruption in the marketplace. Insurers must also notify policyholders of the upcoming non-renewal at least 60 days (but no more than 120 days) before their policy expiration date.
Virtually all commercial insurance policies contain provisions regarding non-renewal. These may include generic conditions that are built into a policy form and state-specific provisions that are added to your policy via an endorsement.
Many policy forms contain a generic provision regarding non-renewal of the policy. For example, the standard ISO commercial general liability(CGL) form contains a clause in the Conditions section entitled When We Do Not Renew. It states that if your insurer elects not to renew your policy, it will notify you 30 days before your policy expires. Some policy forms are silent on the subject of renewal. In this case, renewal should be addressed in a separate form or endorsement attached to your policy.
The rules your insurer must follow if it non-renews your policy are typically explained in a state-specific endorsement attached to your policy. An example is the California Changes endorsement, which stipulates at least 60 (but not more than 120) days' notice if a policy is non-renewed. Special rules apply to certain residential properties. If you do business in more than one state, a separate endorsement should be attached for each of those states.
State non-renewal requirements are incorporated into endorsements that must be included in insurance policies.
A state-specific endorsement supersedes any generic provisions in your policy. For example, suppose the Conditions section of your liability policy states that the insurer must provide 30 days' advance notice in the event of non-renewal. If a state endorsement attached to your policy requires the insurer to give you 45 days' notice, your insurer is obligated to notify you 45 days in advance.
Extended Notice of Non-Renewal
Some insurers will provide, as a coverage extension, earlier notice of non-renewal (and cancellation) than is required by state law. For example, an insurer may provide 90 days' or 120 days' notice. This coverage may be provided separately or in combination with other coverage extensions.
Insurance Information Institute, "What's the Difference Between Cancellation and Non-Renewal?" accessed February 10, 2020.
Justia, "2016 Colorado Revised Statutes, Title 10 - Insurance Property and Casualty Insurance," accessed February 7, 2020.
Independent Insurance Agents of Texas, "Policy Cancellation and Non-Renewal," accessed February 7, 2020.
New York State Senate, "Section 3426, Commercial Lines Insurance; Cancellation and Renewal Provisions," accessed February 7, 2020.
North Star Mutual Insurance Co., Commercial General Liability Coverage Form, page 13, accessed February 10, 2020.
H2O Insurance, "California Changes - Cancellation and Non-Renewal", accessed February 10, 2020.
Zalma On Insurance, "Endorsement Supersedes Policy Wording," accessed February 10, 2020.