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  1. #1
    Join Date
    Apr 2012
    Posts
    7

    Default Insurance Policy Automatically Renews/Carrier Will Not Cancel It

    My question involves business law in the state of: California

    I am an insurance Broker. A Managing General Agent (MGA) that I work with is stating that their commercial auto policy automatically renews. They state that the automatic renewal obligates the named insured (consumer and my client) to pay the policy premium or they will have a collections claim filed against them.

    They are currently trying to collect on a policy that automatically renewed back in 7/19/2019. I was just contacted by the MGA on 6/2/2020 stating the client owes the premium.

    The named insured never signed any renewal documentation, they also never submitted a payment to activate the renewal. The MGA states that this does not matter, the only way to stop the automatic renewal is to submit proof that the named insured purchased an auto insurance policy with another carrier. My client did not because he went out of business.

    I asked the MGA to send me any document or policy endorsement that allows them to auto bind a renewal, they stated that their manager emailed our office in 2017 which was the notice that auto polices under $10K in premium will auto renew.

    My question. Can an MGA or insurance company bind a renewal and compel the named insured to pay the premium for a policy they do not want, did not sign a renewal proposal for, and did not make a deposit on?

    Also, can an MGA or insurance company refuse to flat cancel a policy, with the circumstances listed above, unless proof of replacement coverage is submitted? Thank you.

  2. #2
    Join Date
    Oct 2016
    Posts
    4,106

    Default Re: Insurance Policy Automatically Renews/Carrier Will Not Cancel It

    Automatic renewal isn't unusual at all. I've not signed an auto insurance document in probably a decade even when changing cars.

    If my insurance isn't paid either in full for six months or a monthly amount they would send me notice of cancelation.

    But my state isn't your state. And you are a licensed broker in your state so you should have access to the legality of this.

  3. #3
    Join Date
    Jul 2018
    Posts
    2,441

    Default Re: Insurance Policy Automatically Renews/Carrier Will Not Cancel It

    Quote Quoting PayrolGuy
    View Post
    Automatic renewal isn't unusual at all. I've not signed an auto insurance document in probably a decade even when changing cars.

    If my insurance isn't paid either in full for six months or a monthly amount they would send me notice of cancelation.

    But my state isn't your state. And you are a licensed broker in your state so you should have access to the legality of this.
    It works the same way in California.

    That said, the notion that an insured can only cancel an auto policy by providing evidence of insurance from another carrier is absurd.

    Once the premium deadline passed without payment, the insurer should have sent out a notice of intent to cancel and then cancelled the policy. Good luck (both with the court and the CA DOI) if any effort is made to pursue collection on something like this.

  4. #4
    Join Date
    Apr 2012
    Posts
    7

    Default Re: Insurance Policy Automatically Renews/Carrier Will Not Cancel It

    Quote Quoting pg1067
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    It works the same way in California.

    That said, the notion that an insured can only cancel an auto policy by providing evidence of insurance from another carrier is absurd.

    Once the premium deadline passed without payment, the insurer should have sent out a notice of intent to cancel and then cancelled the policy. Good luck (both with the court and the CA DOI) if any effort is made to pursue collection on something like this.

    What you stated is correct and how auto renewals have always worked.

    However, this carrier auto renewed the policy but never issued a notice of intent to cancel for non-payment and they never canceled the policy. Several polices have been active without payment for almost a year. Now they are trying to collect payment and threating collections.

    There are also premiums owed on polices endorsements from 2017-2018, which they never sent an invoice for at the time. They are now saying these premiums are owed too or they will be sent to collections.

    Is a carrier required to issue a notice of cancelation if no payment is made?
    Is a carrier required to send an invoice within a specified time limit?
    Is there a statue of limitation on collecting premium?

    Thanks again for any help.

  5. #5
    Join Date
    Mar 2013
    Posts
    18,017

    Default Re: Insurance Policy Automatically Renews/Carrier Will Not Cancel It

    Is a carrier required to issue a notice of cancellation if no payment is made?
    Only if it intends to cancel for non-pay. If it doesn't intend to cancel for non-pay there's no obligation to send non-pay cancellation notice.

    Is a carrier required to send an invoice within a specified time limit?
    No. The carrier has no obligation to send an invoice at all.

    The endorsements issued from 2017-2018 showed a revised annual premium and the additional premium that was due as a result of the changes. You got copies. If it wasn't a direct bill policy, it was up to you, as the broker, to collect from your client and pay the MGA. Ditto for the renewal for which, I imagine, a new declarations page was sent to you just like the endorsements were. That was your notice to collect the premium or see that the policy was cancelled.

    Ever see one of these:

    https://www.acords.com/ACORD%20Forms/35.pdf

    That should have been done when your client went out of business and didn't need the insurance any more.

    Is there a statue of limitation on collecting premium?
    Non-payment of an insurance policy is breach of a written contract. In California the aggrieved party has 4 years to file a lawsuit against the policyholder. However if you have an agreement with the MGA that you collect and remit it is 2 years if that agreement was oral or 4 years if the agreement was in writing.

    Whether the MGA is entitled to the money depends on the terms of the insurance policy with regards to automatic renewal and the terms of your agreement with regards to collecting and remitting.

    I asked the MGA to send me any document or policy endorsement that allows them to auto bind a renewal, they stated that their manager emailed our office in 2017 which was the notice that auto polices under $10K in premium will auto renew.
    Shouldn't be too hard for the MGA to document that email and if your agreement with the MGA was oral then that email was a modification of your oral agreement that you accepted by not responding to it. If that modification occurred prior to your client's renewal, then you might be on the hook for the money since I doubt that your client, being out of business and all, is going to come up with it.

    Quote Quoting pg1067
    View Post

    Once the premium deadline passed without payment, the insurer should have sent out a notice of intent to cancel and then cancelled the policy. Good luck (both with the court and the CA DOI) if any effort is made to pursue collection on something like this.
    That's probably true in the agency side of the insurance business. This is the brokerage/MGA side of the business which is an insurance horse of an entirely different color. A broker has a different set of obligations to the MGA than an agent has to the carrier that appointed him.

  6. #6
    Join Date
    Jul 2018
    Posts
    2,441

    Default Re: Insurance Policy Automatically Renews/Carrier Will Not Cancel It

    Quote Quoting jared1981b
    View Post
    Is a carrier required to issue a notice of cancelation if no payment is made?
    Is a carrier required to send an invoice within a specified time limit?
    Is there a statue of limitation on collecting premium?
    The answer to the first and second questions is no. The answer to the third is that the statute of limitations for breach of written contract applies, and that is four years from the date of breach.

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