Part IV – Exclusions and General Provisions

Topics covered in this article:

Cancellation, Nonrenewal, and Renewal

Fraud or Misrepresentation

VI. Cancellation, Nonrenewal, and Renewal

1. You may cancel this Policy at any time by notifying Us in writing of the date cancellation is to take effect.

2. We may cancel this Policy only for the reasons stated below by letting You know in writing of the date cancellation takes effect. This cancellation notice may be delivered to You electronically, or mailed to You at the Address shown in the Declarations. Proof of mailing will be sufficient proof of notice.

(a)When You have not paid the correct premium within 10 days of the Effective Date or 10 days of any premium installment due date. (b) When this Policy has been in effect for less than 60 days and is not a renewal with Us, We may cancel for any reason by letting You know at least 10 days before the date cancellation takes effect."

ANALYSIS: If an insured needs to cancel the parametric policy for any reason, all he or she needs to do is contact the carrier and specify the date the insured would like the cancellation to be effective.

Most states have strict laws on the reasons an insurer may cancel a policy. In this case, the insurer may only cancel a policy mid-term if the insured doesn't pay the correct premium within 10 days of a due date; if the policy has been in effect fewer than 60 days, an insurer can cancel the policy for any reason so long as the insured receives a minimum of 10 days notice before the cancellation date. The insertion of the word 'correct' when stating the premium requirement would indicate that the specific premium requirement must be met, and not just any amount paid can be used as justification for preventing cancellation. For example, if the correct premium requirement is $5,000 and the insured has paid $4,500 by day 11, the insurer may notify the insured on day 11 that the policy will be canceled effective day 21.

The reasons for which the insurer may cancel the policy are different from other policies. Under this policy, coverage is based on a specific triggering event. The insured does not have to meet certain qualifications for coverage; if the specified event occurs, coverage is automatic once the insured submits an eligible claim. Other types of policies often allow for cancellation for lapse or loss of a license or certification required by the policy, or if certain property isn't up to code or kept in good repair.

3. When this Policy is canceled, the premium for the period from the date of cancellation to the expiration date will be refunded pro rata.

4. If the return premium is not refunded with the notice of cancellation or when this policy is returned to Us, We will refund it within a reasonable time after the date cancellation takes effect.

ANALYSIS: If the policy is canceled mid-term by either party, the insured will receive a return of any premium that has not been earned, based on the amount of time between the effective date of cancellation and the end of the policy period.

Sometimes the carrier will send this premium refund with the notice of cancellation or when the insured sends back the policy. If not, then the refund will be issued within a reasonable time. Exactly how long is reasonable will most likely be determined on a case-by-case basis.

5. Nonrenewal. Either party may elect not to renew this Policy by providing written notice to the other. We may do so by delivering to You electronically, or mailing to You at the Address shown in the Declarations, written notice at least 75 days before the expiration date of this Policy. Proof of mailing will be sufficient proof of notice.

6. Renewal. Unless You give Us notice of Your intent not to renew the Policy prior to the end of any Policy Period in accordance with Section VI.5, We may elect to renew Your policy at the end of each Policy Period in accordance with this Section VI by providing You written notice of renewal at least 45 days before the expiration date of this Policy.

ANALYSIS: Nonrenewal may only occur on the policy's anniversary date. The coverage will remain in effect until the policy expires, but it will not continue past the expiration date. Should the carrier choose not to renew the policy, the carrier must give a minimum of 75 days notice to the insured.

Unless the insured notifies the insurer that he or she wishes to discontinue coverage, the insurer may assume continuation and send notice of renewal to the insured within 45 days of the policy's expiration date

VII. Fraud or Misrepresentation

We issued this Policy in reliance upon the truth of all representations made by You. This Policy shall be void if You have concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof or a claim under this Policy.

We reserve the right to and will randomly audit claims and Loss Report Forms. For Your protection, California law requires Us to provide the following notice:

Any person who knowingly presents false or fraudulent claim for the payment of a loss is guilty of a crime and may be subject to fines and confinement in state prison.

ANALYSIS: An insured's misrepresentation in obtaining coverage or fraud involving the policy can void coverage. A material fact or circumstance is one that would have had an impact on the decision making and premium setting processes for the carrier. If an insured lied or skewed any of the information in the application, then the policy will be void. If an insured falsified or inflated any part of a claim, the policy will be void. Courts generally uphold these provisions in insurance policies.

The carrier also reserves its right to inspect claims at random. Insurers often take this step as a means of deterring insurance fraudsters and possibly catching fraudulent claims before they are paid out. The statement concerning insurance fraud and its penalties gives the insured notice of what insurance fraud is and how it will be punished. Ignorance is not a defense.