August 4, 2020

Volume X, Number 217

August 03, 2020

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State Insurance Departments Issue Rules on Policy Cancellations/Renewals During COVID-19

Your business is in the midst of the COVID-19 pandemic, applying for loans, revisiting your business model, and struggling to keep your employees retained and working remotely. You may be spending your time determining how the business will survive in the new normal. The renewal of your commercial policies of insurance may be the last thing on your mind.

Several state departments of insurance (DOIs) have issued notices regarding the cancellation or nonrenewal of personal and commercial policies of insurance that may help you. The states in Jones Walker’s footprint fall into two camps. Some departments have very strict rules in place suspending the cancellation of insurance policies during this time. Other DOIs simply recommend that insurance companies work with policyholders to avoid cancellations for nonpayment. Below is a summary of the actions taken by several DOIs.

A. Louisiana: The Louisiana DOI has issued an “Emergency Rule” that applies to all types of insurance — life, auto, liability, fidelity, title, fire, crop, marine, homeowners, property and casualty, annuity, and surety. The Emergency Rule suspends any notice of cancellation, nonrenewal, or non-reinstatement that was in effect on March 12, 2020. So, if an insurer issued a notice of cancellation prior to March 12, 2020, with the cancellation effective after March 12, 2020, then such notice is void and will have to be reissued after the Emergency Rule expires.

Insurance companies may issue notices of cancellation for nonpayment during the pendency of the Emergency Rule. The period required by statute or the applicable policy will begin to run, but the policy cannot be canceled until after the Emergency Rule expires. Further, the only reason for cancellation while the Emergency Rule is in effect is for fraud or intentional misrepresentation on the part of the policyholder.

Importantly, in Louisiana, if your policy is up for renewal during the pendency of this Emergency Rule, then the policy “shall continue in full force and effect at the previously established premium under the expiration of Emergency Rule 40 ….” This would include surplus lines policies which are deregulated by the Department of Insurance. However, new policies of insurance issued on or after March 12, 2020, are not subject to the Emergency Rule.

Louisiana’s Emergency Rule provides that it does not excuse an insured from making premium payments. And any claim paid by the insurance company during the pendency of the Emergency Rule can be offset by the premiums due and owing from the insured.

B. Alabama, Florida, and Texas: These states have entered similar bulletins recommending that all insurance companies work with policyholders to avoid cancellation of all property, casualty, disability, accident, and health and life insurance policies. In general, these bulletins ask insurance companies to consider relaxing dates for premium payments, extending grace periods for payment, waiving late fees and penalties, and accepting payment plans with policyholders to avoid lapses in coverage. The import of these notices is that insurance companies should work with policyholders during this time of financial uncertainty.

C. Mississippi: The Mississippi DOI has adopted a hybrid approach. It has imposed a 60-day moratorium beginning on March 24, 2020, for any cancellation or nonrenewal of insurance policies. As under Louisiana’s Emergency Rule, insurance companies may issue cancellation notices during the moratorium, but such cancellations are not effective until after the moratorium has expired.

© 2020 Jones Walker LLPNational Law Review, Volume X, Number 108

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About this Author

Emily Sides Bonds Litigation Practice Attorney Jones Walker Law Firm Birmingham, Alabama
Partner

Emily Bonds is a partner in the Litigation Practice Group, focusing heavily on insurance-related disputes. She also represents clients in a broad spectrum of commercial matters.


Emily represents agents and brokers, directors and officers, other professionals, and business entities in professional liability, products liability, mass tort, class action, banking and financial services, insurance coverage, and other litigation. Her practice extends to all state and federal courts in Alabama and Mississippi.

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205.244.5235
J. David Moore Litigation Jones Walker Birmingham, AL
Partner

David Moore is a partner in the firm’s Litigation Practice Group. He focuses primarily on insurance coverage, commercial litigation, and professional liability.


David represents individual and corporate clients in state and federal courts throughout Alabama and Mississippi. He has represented plaintiffs and defendants in a variety of complex state and federal litigation, including matters involving, insurance coverage, professional liability, commercial contracts, toxic tort, products liability, mass tort, personal injury and wrongful death, and trucking. David has handled appellate proceedings in related matters in the Supreme Court of Alabama, the Supreme Court of Mississippi, and the US Court of Appeals for the Fourth and Eleventh circuits.

David serves as co-leader of the firm’s insurance coverage litigation team. He regularly advises clients with respect to pre-litigation insurance coverage issues and provides effective representation in insurance-related litigation, focusing on obtaining the best possible results with the highest level of efficiency. His experience has demonstrated that even familiar litigation problems often are best solved with new strategies and he believes that a creative and proactive approach to each matter is the best — and most efficient — way to reach the client’s goals.    

Since 2013, David has served on the editorial board of the International Risk Management Institute’s CGL Reporter and Insurance Law Reporter. He regularly contributes articles and analysis to those publications concerning the latest decisions from courts across the country in various areas of insurance coverage.

205.244.5287