Cancellation And Nonrenewal Of Certain Liability Policies In Texas

In Texas, there are rules regulating the conditions for an insurance company to cancel certain liability policies or to opt to nonrenew the policies. These rules are found primarily in Section 551 of the Texas Insurance Code.

To begin with, one rule found in Section 551.052 says that an insurance company cannot cancel a liability policy that is a renewal or continuation policy. This makes sense, otherwise, why would anybody buy this type of policy.

Another rule in this section says that an insurance company may not cancel a liability policy during the initial policy term after the 60th following the date the policy was issued. So if you buy a one year policy on September 15, it cannot be cancelled after November 15.

The next question would be – is there ways for the insurance company to get around these rules. The answer is yes. There are four basic reasons for cancellation that get around the above rules.

The first is (1) fraud in obtaining the coverage. In other words, the person applying for insurance, lied about something. The second is (2) failing to pay premiums when due. This should not be hard to understand. You don’t pay, you lose the coverage. Third (3) there is an increase in the hazard that is within your control that would produce a rate increase. A good example here is getting a bunch of speeding tickets if the coverage is auto liability coverage. (4) The fourth has to do with reinsurance and is seldom going to apply.

Section 551.053 of the Insurance Code requires the insurance company to give at least a ten day written notice of the cancellation prior to the cancellation taking effect. This notice must be given to the first named insured person on the policy to the address shown on the policy.

On nonrenewals, Section 551.054 says the insurance company must mail the notice of nonrenewal to the first named insured under the policy at the address shown on the policy. This notice must be delivered or mailed not later than the 60th day before the date on which the policy expires. If the notice is delivered or mailed later than the 60th day, then coverage remains in effect until the 61st day after the notice is sent.

Section 551.055 requires the notice for cancellation or nonrenewal to state the reason. Further, the statement must comply with Section 551.002(b) and (c), and the rules required under 551.002(d). These rules concern increases in premium payments.

Cancellation and nonrenewal of insurance policies are prime areas of litigation. The insurance companies frequently violate the law in this area. An experienced Insurance Law Attorney can give good advise about these rules if you find your claim being denied because your policy was cancelled or nonrenewed.

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