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What does the law say about Non-Renewal?

The applicable law goes back to Act 6 of 1986. At that time, PA had no consumer protections in place for policyholders. It also coincided with the “liability crisis” hard market. Insurance companies routinely were refusing to renew with no notice or doubling or tripling premiums etc. The PA legislature came up with this act and really went overboard in the process. It is the same act that is responsible for the intent to increase letters that have always sent.

The first point stems with the Pennsylvania statutory definition of non-renewal:

Nonrenewal—The failure by an insurer to issue and deliver a policy superseding at the end of the policy period one previously issued and delivered by the same insurer or affiliated insurer, where the renewal policy provides types and limits of coverage substantially equivalent to those contained in the policy being superseded. The term also includes the failure to issue and deliver a certificate or notice extending the term of a policy beyond its policy period or term with types and limits of coverage substantially equivalent to those contained in the policy being extended. The term does not include coverage provided under a policy of insurance that is renewed by the insurer under a new policy form approved by the Department if an appropriate disclosure notice is forwarded to the first named insured.  ref. PA Code Chapter 113.81

As you can see, it is very different than the commonly held definition of a non-renewal within the industry.  The key words are “failure by an insurer to issue and deliver….”  Sending a renewal quote does not constitute issue and deliver.   Sending a closing your file letter with no coverage bound does not constitute issue and deliver.  This definition also makes it clear that not only does it have to be issued and delivered, but the terms and conditions must be substantially equivalent to those contained in the policy being extended.

Secondly, there is broad applicability in the law for commercial lines with very few specific exemptions. Surplus lines companies sometimes think they are exempt, but they are not.

GENERAL RULE - This act applies to insurance policies, exclusive of reinsurance policies, covering commercial property and casualty risks located in this Commonwealth.  ref. PA Statute Title 40 Chapter 14 Section 3407

The piece that ties all of this together is at the very bottom of the notice requirements section in the Act: 

(b) EFFECTIVE NOTICE - Until an insurer issues a nonrenewal or cancellation notice that complies with the provisions set forth in this act, insurance coverage will remain in effect. However, if the insured obtains replacement coverage, the noncomplying insurer's obligation to continue coverage ceases.  ref. PA Statute Title 40 Chapter 14 Section 3403

This reinforces the “failure to issue and deliver” part of the non-renewal definition. The PA Law effectively makes all commercial policies continuous until cancelled.

Why don’t I see my other carriers sending Non-Renewal?

The advent of direct bill circumvented the whole issue of nonrenewal and was largely welcomed by agents as a convenience. Carriers issue and deliver the policy or renewal certificate directly to the insured with an invoice and then cancel the renewal if not taken. This way, it gives the insurance company certainty of knowing they are no longer on the risk.

 Why don’t I see other wholesalers sending Non-Renewal?

The wholesale and brokerage market has largely ignored or were ignorant of the issue altogether. In a few instances we do see brokerage markets or E&S carriers attempting to comply with the law. Whether anyone else in our peer group has also been burned and accepts the risk of another burn as a cost of doing business, or if they are unaware of the issue is a question we cannot answer.

 Why scare insureds away by calling it a Non-Renewal?

PS 40 3403 is very specific on what has to be in the notice. First on the list is that to be legal, the notice must clearly be labeled “Notice of Cancellation” or “Notice of Nonrenewal. The law also mandates we provide information to the insured about their right to request and receive loss information from the carrier in a timely manner. As long as those 2 items appear in our notice, we are free to format the notice in any way we want. Our goal is to be technically correct while still communicating that we want to renew your business and that a renewal quote will be forthcoming.

How will you deliver the notice to the insured and when we will get our copy?

We will mail the insured copy of the notice via first class mail with a proof of mailing. Your copy of the notice will be emailed on the same day the insured copy is mailed. Your copy will be emailed to the contact we show in our policy file.

 Who should I call if I have questions or concerns?

Your feedback is welcome and valued. Rob Tuscano, ext. 200, Jinny Tuscano, ext. 724 or Jeff Johnson, ext. 102 are all willing and available to speak with you about your concerns. We know our peers do not do this and it will cause some disruption. However, the last thing we want is to cause panic. Please feel free to let us know what impact this has on your business.