Finance company's cancellation of policy pre-emptsinsurer's
(Like insurance policies, premium finance contracts are almostnever read by the parties to the agreement. Often, insuredsauthorize their agent or broker to sign the contract and bind themto terms of which the insureds are unaware. This practice isfraught with danger to the agent or broker.

The basic premium finance contract appoints the finance companyattorney-in-fact for the insured. That allows it to exercise theinsured's right to immediately cancel the policy by giving writtennotice to the insurer. When the insured fails to make payments onthe premium finance contract, the finance company demands immediatecancellation and obtains a return of the unearned premium from theinsurer.
An agent or broker who does not explain the terms andconditions of the premium finance contract to an insured can beliable if a loss occurs after a premium finance cancellation. Thefollowing case illustrates why every agent or broker who arrangespremium financing for clients should have a detailed procedure forexplaining the implications of the finance company's power to actas the insured's attorney-in-fact. Whenever a notice of intent tocancel is issued by a finance company, the agent or broker shouldadvise the insured that the finance company can and will cancel thepolicy if the payment is not made promptly. )






(Pacific Auto. Ins. Co. v. Wolff (1977), 72 Cal.App.3d 537,540-541.)
Holland v. Sterling Casualty Ins. Co.(1994),


Pacific Business Connections Inc. v. St. Paul Surplus LinesInsurance Co., No. B188714 2007.CA.0002842 (www.versuslaw.com)(Cal.App. Dist.2 04/04/2007)
Agents must take care in describing clients' risks toinsurance companies
(In Texas, a U.S. District Court held an insurance agent toaccount in a case that teaches every agent and broker to carefullyreview coverages with clients each year, and to inter-rogate theinsured to determine the coverages needed and any changes in theinsured's business that might affect the coverage.)






not,

























Aspen Specialty Insurance Co. v. Muniz Engineering, Inc., No.H-05-0277 (S.D.Tex. 03/30/2007)
When is delay in reporting or denying a claimunreasonable?







Temple Construction Corp. v. Sirius America Insurance Co., No.2006-07698 (N.Y.App.Div. 05/29/2007)
Barry Zalma, Esq., CFE is a California attorney. His practiceemphasizes the representation of insurers and others in thebusiness of insurance. He founded Zalma Insurance Consultants in2001 and serves as its senior consultant. He provides expertwitness testimony and consults with plaintiffs and defendantsconcerning insurance coverage, insurance claims handling and badfaith. He has qualified as an expert in state and federal courts inCalifornia, Mississippi, Texas and New Mexico, as well as in theGrand Caymans. He can be reached at[email protected]. Hisconsulting practice's Web site iswww.zic.bz.