Breaking up is hard to do: Agency Contract TERMINATIONS and “Act 143” Co-Presented by: Breaking up is hard to do: Agency Contract TERMINATIONS and “Act 143” www.hmslegal.com Christopher J. Knight, Esq. Hawke McKeon & Sniscak, LLP Jan Kozlowski Vice President, Insurance Programs, Regulatory & Compliance Services MSO, Inc. Policy Cancellations: easier said than done

Statutes & regs & rules: oh my P & C policy cancellations governed by: RESIDENTIAL = “UIPA” or “ACT 205” COMMERCIAL = “ACT 86” AUTO = “ACT 68” Statutes compiled by “Purdon’s” Regulations found in the Pa. Code Published by NILS

“ACT 205” – Residential Property Prohibits mid-term cancellation or non-renewal of a policy: insuring an owner-occupied private residential or personal property in place for 60 days or more where the insured has paid premium when due UNLESS obtained through material misrepresentation, fraudulent statements, omissions or concealment of material fact OR substantial increase in hazards, by willful or negligent acts or omissions by insured

Residential Cancellation Notice Requirements Form approved by Commissioner Cancellation effective at least 30 DAYS after notice State the SPECIFIC REASON(s) cancellation or refusal to renew Advise of right to request Commissioner review Advise possible eligibility for “Fair Plan” or Assigned Risk Plan Must be “commonly understandable” as to effective date, reasons and right to Commissioner review Advise of procedures followed in prosecuting an appeal

“ACT 86” – Commercial Property Mid-term cancellation/non-renewal prohibited unless: Policy in effect less than 60 days (30 days’ notice) Substantial change or knowledge of material condition, factor or loss experience Loss or decrease in reinsurance Material misrepresentation by insured Policy obtained through fraudulent statements, omissions or concealment of material fact Insured has failed to pay premium when due Insured requests cancellation Insured failed to comply with policy terms, conditions or contract Other reasons approved by Commissioner

Commercial Cancellation Notices Mailed or delivered at least 60 days in advance unless Material misrepresentation by insured – 15 days’ notice Failure to pay premium when due – 15 days Cancelled by insured – no notice Labeled “Notice of Cancellation” or Notice of Nonrenewal” State specific reasons: the condition, factor or loss causing the cancellation or nonrenewal & sufficient data to correct State that upon request will provide 3 years loss history Loss request must be within 10 days of insured’s receipt. 30 days for insured to provide it.

ACT 86 - Regulation   “The reason given for nonrenewal or cancellation shall be clear and complete. It shall be stated so that a person of average intelligence and education can understand it. Phrases such as ‘‘losses’’ or ‘‘underwriting reasons’’ are not sufficiently specific reasons for nonrenewal or cancellation.” 31 Pa. Code § 113.88

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