2005 Idaho Code - 41-1842 — COMMERCIAL INSURANCE -- CANCELLATION -- NONRENEWAL

                                  TITLE  41
                                  INSURANCE
                                  CHAPTER 18
                            THE INSURANCE CONTRACT
    41-1842.  COMMERCIAL INSURANCE -- CANCELLATION -- NONRENEWAL. (1)
Applicability. The provisions of this section apply only to:
    (a)  Commercial property insurance policies;
    (b)  Commercial liability insurance policies other than aviation and
    employer's liability insurance policies;
    (c)  Commercial multiperil insurance policies.
    The provisions of this section do not apply to: block cancellations or
block nonrenewals as provided in section 41-1841, Idaho Code, reinsurance,
excess and surplus lines insurance, residual market risks, worker's
compensation insurance, multistate location risks, policies subject to
retrospective rating plans, excess or umbrella policies and such other
policies that are exempted by the director of the department of insurance.
    (2)  Definitions. For the purposes of this section:
    (a)  "Cancellation" means termination of a policy at a date other than its
    expiration date.
    (b)  "Expiration date" means the date upon which coverage under a policy
    ends. It also means, for a policy written for a term longer than one (1)
    year or with no fixed expiration date, each annual anniversary date of
    such policy.
    (c)  "Nonpayment of premium" means the failure or inability of the named
    insured to discharge any obligation in connection with the payment of
    premiums on a policy of insurance subject to this section, whether such
    payments are payable directly to the insurer or its agent or indirectly
    payable under a premium finance plan or extension of credit.
    (d)  "Nonrenewal" or "not to renew" means termination of a policy at its
    expiration date.
    (e)  "Renewal" or "to renew" means  the issuance, or the offer so to
    issue, by an insurer of a policy succeeding a policy previously issued and
    delivered by the same insurer or an insurer within the same group of
    insurers, or the issuance of a certificate or notice extending the term of
    an existing policy for a specified period beyond its expiration date.
    (3)  Notice of cancellation.
    (a)  Permissible cancellations. If coverage under a policy has not been in
    effect for sixty (60) days and the policy is not a renewal, cancellation
    of such policy shall be effected by mailing or delivering a written notice
    to the first-named insured at the last known mailing address shown on the
    policy at least thirty (30) days before the effective date of the
    cancellation, provided however, if such cancellation is for the reason
    stated in subsection (3)(a)(i) of this section, the time such cancellation
    may be effective following notice shall be as provided in subsection
    (3)(b)(i) of this section. A cancellation requested  by the insured shall
    be effective on the later of the date requested by the insured or the date
    it is received by the insurer. After coverage has been in effect for more
    than sixty (60) days or after the effective date of a renewal policy,
    whichever is earlier, no insurer shall cancel a policy unless the
    cancellation is based on at least one (1) of the following reasons:
         (i)   Nonpayment of premium.
         (ii)  Fraud or material misrepresentation made by or with the
         knowledge of the named insured in obtaining the policy, continuing
         the policy, or in presenting a claim under the policy.
         (iii) Activities or omissions on the part of the named insured which
         increase any hazard insured against, including a failure to comply
         with loss control recommendations.
         (iv)  Change in the risk which materially increases the risk of loss
         after insurance coverage has been issued or renewed including, but
         not limited to, an increase in exposure to regulation, legislation or
         court decision.
         (v)   Loss or decrease of the insurer's reinsurance covering all or
         part of the risk or exposure by the policy.
         (vi)  Determination by the director that the continuation of the
         policy would jeopardize an insurer's solvency or would place the
         insurer in violation of the insurance laws of this state or any other
         state.
         (vii) Violation or breach by the insured of any policy terms or
         conditions other than nonpayment of premium.
    (b)  Notification of cancellation.
         (i)   A notice of cancellation of insurance coverage by an insurer
         shall be in writing and shall be mailed or delivered to the
         first-named insured at the last known mailing address as shown on the
         policy. Notices of cancellation based on subsections (3)(a)(ii)
         through (a)(vii) of this section shall be mailed or delivered at
         least thirty (30) days prior to the effective date of the
         cancellation. Notices of cancellation for the reason stated in
         subsection (3)(a)(i) of this section without regard to when such
         cancellation shall be effected shall be mailed or delivered at least
         ten (10) days prior to the effective date of cancellation. If
         delivered via United States mail, the ten (10) day notification
         period shall begin to run five (5) days following the date of
         postmark. The notice shall state the effective date of the
         cancellation.
         (ii)  The insurer shall provide the first-named insured with a
         written statement setting forth the reason(s) for the cancellation
         if: (1) the insured requests such a statement in writing; and (2) the
         named insured agrees in writing to hold the insurer harmless from
         liability for any communication giving notice of or specifying the
         reasons for a cancellation or for any statement made in connection
         with an attempt to discover or verify the existence of conditions
         which would be a reason for a cancellation under this section.
    (4)  Notice of nonrenewal.
    (a)  An insurer may decline to renew a policy if the insurer delivers or
    mails to the first-named insured, at the last known mailing address,
    written notice that the insurer will not renew the policy. Such notice
    shall be mailed or delivered at least forty-five (45) days before the
    expiration date. If the notice is mailed less than forty-five (45) days
    before expiration, coverage shall remain in effect until forty-five (45)
    days after notice is mailed or delivered. Earned premium for any period of
    coverage that extends beyond the expiration date shall be considered pro
    rata based upon the previous year's  rate. For purposes of this section,
    the transfer of a policyholder between companies within the same insurance
    group is not a nonrenewal or a refusal to renew. In addition, changes in
    deductibles, changes in premium, and changes in the amount of insurance or
    reductions in policy limits or coverage shall not be deemed to be
    nonrenewals or refusals to renew. Notice of nonrenewal is not required if:
         (i)   The insurer or a company within the same insurance group has
         offered to issue a renewal policy; or
         (ii)  Where the named insured has obtained replacement coverage or
         has agreed in writing to obtain replacement coverage.
    (b)  If an insurer provides the notice described in subsection (4) of this
    section and thereafter the insurer extends the policy for ninety (90) days
    or less, an additional notice of nonrenewal is not required with respect
    to the extension.
    (5)  Notice of premium or coverage changes. An insurer shall mail or
deliver to the named insured, at the last known mailing address, written
notice of a total premium increase greater than ten percent (10%) which is the
result of a comparable increase in premium rates, changes in deductibles,
reductions in limits, or reductions in coverages at least thirty (30) days
prior to the expiration date of the policy. If the insurer fails to provide
such thirty (30) day notice, the coverage provided to the named insured shall
remain in effect until thirty (30) days after such notice is given or until
the effective date of replacement coverage obtained by the named insured,
whichever first occurs. For the purposes of this section, notice is considered
given thirty (30) days following date of mailing or delivery of the notice to
the named insured. If the insured elects not to renew, any earned premium for
the period of extension of the terminated policy shall be calculated pro rata
at the lower of the current or previous year's rate. If the insured accepts
the renewal, the premium increase, if any, and other changes shall be
effective on and after the first day of the renewal term.
    (6)  Proof of notice. Proof of mailing of notice of cancellation, or of
nonrenewal or of premium or coverage changes, to the named insured at the last
known mailing address showing on the policy, shall be sufficient proof of
notice.
    (7)  Application, effective date and termination. The provisions of this
section shall apply only to policies with coverage effective dates after the
effective date of this section.
    (8)  Rules. The director may promulgate rules to implement the provisions
of this section. Every rule promulgated within the authority conferred by this
act shall be of temporary effect and shall become permanent only by enactment
by statute at the regular session of the legislature first following adoption
of the rule. Rules not approved in the above manner shall be rejected, null,
void and of no force and effect on July 1, following submission of the rules
to the legislature.