FINAL BILL REPORT

SHB 1320

                                  C 249 L 88

BYHouse Committee on Financial Institutions & Insurance (originally sponsored by Representatives Lux, Chandler, Nutley, Betrozoff, Peery and Meyers; by request of Office of Insurance Commissioner)

Revising provisions on the cancellation and renewal of insurance policies.

House Committe on Financial Institutions & Insurance

Senate Committee on Financial Institutions & Insurance

SYNOPSIS AS ENACTED

BACKGROUND:

In 1986 the Legislature substantially amended the statutes governing cancellation and nonrenewal of property and casualty insurance policies. The law generally requires 45 days notice to the insured and to the insured's representative prior to cancellation of a policy. An insurer may give 10 days notice if the policy is being cancelled for nonpayment of premium and may give five days notice if the policy is being cancelled in accordance with the anti- arson statute. Similarly, if the insurance company has issued a binder, a temporary contract of insurance until the application for insurance is accepted or denied, the company must give 45 days notice prior to cancellation.

If a policy covers property that is mortgaged, pledged or subject to an interest other than the named insured the insurer must send notice of cancellation to the mortgagee, pledgee or other interested person not less than 45 days prior to cancellation. No exception is made for cancellation based upon nonpayment of premium or for cancellation based upon the anti-arson statute.

An insurance company must renew a policy unless the insurer provides notice that the insurer does not intend to renew the policy at least 45 days prior to the expiration date of the policy; the insurer has provided notice at least 20 days prior to the policy expiration date that the policy will be renewed and the insured does not pay the renewal premium; or the insured's agent has obtained other coverage acceptable to the insured prior to the expiration date of the policy.

Finally, the insurer must renew the policy based upon the old rates and contract terms unless the insurer gives the policyholder 20 days advance notice of proposed changes in rates or terms.

SUMMARY:

If an insurer is providing insurance coverage under a binder agreement that contains a clearly stated expiration date, the insurer need not provide 45 days notice of cancellation to the insured; the coverage ends on the expiration date stated in the binder agreement.

A copy of notice of cancellation, nonrenewal or renewal must be sent to the insured's agent or broker.  The same notice of cancellation and nonrenewal must be given to mortgagees and pledgees as is given to the insured.  The insurer may send notice of renewal directly to the insured or through the insurer's agent.

An insurer who is required to renew a policy at the old rate and terms because the insurer failed to provide adequate notice of proposed changes in rates or terms may change the rates and/or terms once during the new policy period after the insurer provides 20 days advance notice of the proposed changes.

VOTES ON FINAL PASSAGE:

      House 95   0

      Senate    44     0 (Senate amended)

      House 93   0 (House concurred)

EFFECTIVE:September 1, 1988