Dallas attorneys need to know the different ways that insurance policies can be cancelled and who can cancel them.
Here are a few ways of cancellation a person needs to know about.
The 1967, opinion, Ford Motor Credit Company v. Commonwealth County Mutual Insurance Company, tells us that the insured may cancel an insurance policy by giving the precise notice required by the terms of the policy. This opinion was written by the Beaumont Court of Appeals.
The Texas Insurance Code regulates cancellations by premium finance companies. A premium finance company may cancel an insurance contract only in accordance with Texas Insurance Code, Section 651.161.
Section 651.160, tells us that a premium finance agreement may contain a power of attorney enabling the premium finance company to cancel any insurance contract listed in the agreement.
The Texas Insurance Code also tells us that if the insured fails to make its payments at the time and in the amount provided in the premium finance agreement, the premium finance company must mail to the insured a notice of its intent to cancel because of the default unless the default is cured within a time stated. That time may not be earlier than the 10th day after the date the notice is mailed. The company must mail a copy to the insurance agent or broker identified in the agreement.
Section 651.161 also tells us that after the period given to cure the default has expired, the premium finance company may cancel the insurance contract by mailing notice of cancellation to the:
(1) insurer;
(2) insured at its last known address; and
(3) insurance agent or broker stated on the premium finance agreement.
The insurance contract is canceled as if the insured had submitted the cancellation notice, but without requiring the return of the insurance contract.
There are also laws dealing with letting lenders canceling a policy.
Statutory, regulatory, and contractual restrictions providing that the insurance contract may not be canceled unless notice is given to a governmental agency, mortgagee, or other third party apply when cancellation is effected under the statute. The insurance company must give the notice, on behalf of itself or the insured, to the appropriate third party on or before the second business day after the day it receives the cancellation notice from the premium finance company and must determine the effective date of cancellation, taking into consideration the number of days’ notice required to complete the cancellation.
Section 651.162 tells us that when the insurance contract is canceled and the premium finance agreement contains an assignment or power of attorney for the premium finance company’s benefit, the insurer must return whatever unearned premiums are due under the contract directly to the company within 60 days after the cancellation date. The insurance company may deduct from the unearned premium returned to the premium finance company the amount of unearned commission due from the agent or agency writing the insurance if it notifies the agent or agency that such commission should be returned to the premium finance company. The insurance company must remit the unearned commission to the company within 120 days of the cancellation date if the agent has not returned it to the company within 90 days after the policy cancellation date.
Hopefully, most people will not have to deal with the law written about here. But if they do, it is best to have an insurance attorney who knows and understands these laws. Otherwise, the adverse effects may be costly.
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