It is no secret in the insurance industry that the widespread damage caused by Hurricane Andrew, Hurricane Hugo, and the Northridge Earthquake changed the way insurers do business. While the claims handling process was forever changed by the internal programs instituted by large insurers like State Farm, Allstate, and Farmers, many companies also began to re-think the coverages. Meaningful mold coverage has all but disappeared, the definition of what constitutes a collapse has been significantly changed, and strict co-insurance provisions and large hurricane and earthquake deductibles are becoming more and more common.
Generally, an insurer has a number of ways to make changes to its policies. The most common is through an endorsement issued at renewal. Endorsements, however, are not always the appropriate way to make changes and failure to follow the proper procedures can leave an insurer without the ability to enforce the attempted change.
The main question to analyze is whether the insurer’s endorsement creates a material change to the terms and conditions of the policy. For a policy to be truly “renewed”, it must be based on and subject to the same terms and conditions as the policy in place. Hartford Accident & Indem. Co. v. Sheffield, 375 So.2d 598 (Fla. 3d DCA 1979). If the added endorsement causes the policy to be materially changed, it is considered a “nonrenewal”. U.S. Fire Ins. Co. v. Southern Sec. Life Ins. Co., 710 So.2d 130 (Fla. 5th DCA 1998).
In Florida, like many states, there are specific procedures that must be followed if a policy is nonrenewed. Florida Statute 627.4133 provides:
An insurer issuing a policy providing coverage for workers’ compensation and employer’s liability insurance, property, casualty, except mortgage guaranty, surety, or marine insurance, other than motor vehicle insurance subject to s. 627.728, shall give the named insured at least 45 days’ advance written notice of nonrenewal or of the renewal premium. If the policy is not to be renewed, the written notice shall state the reason or reasons as to why the policy is not to be renewed. This requirement applies only if the insured has furnished all of the necessary information so as to enable the insurer to develop the renewal premium prior to the expiration date of the policy to be renewed.
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If an insurer fails to provide the 45-day or 20-day written notice required under this section, the coverage provided to the named insured shall remain in effect until 45 days after the notice is given or until the effective date of replacement coverage obtained by the named insured, whichever occurs first. The premium for the coverage shall remain the same during any such extension period except that, in the event of failure to provide notice of nonrenewal, if the rate filing then in effect would have resulted in a premium reduction, the premium during such extension of coverage shall be calculated based upon the later rate filing.
In regards to property insurance contracts, Florida Statute 627.4133 also provides:
With respect to any personal lines or commercial residential property insurance policy, including, but not limited to, any homeowner’s, mobile home owner’s, farmowner’s, condominium association, condominium unit owner’s, apartment building, or other policy covering a residential structure or its contents:
The insurer shall give the named insured at least 45 days’ advance written notice of the renewal premium.
The insurer shall give the named insured written notice of nonrenewal, cancellation, or termination at least 100 days prior to the effective date of the nonrenewal, cancellation, or termination. However, the insurer shall give at least 100 days’ written notice, or written notice by June 1, whichever is earlier, for any nonrenewal, cancellation, or termination that would be effective between June 1 and November 30. The notice must include the reason or reasons for the nonrenewal, cancellation, or termination, except that:
The insurer shall give the named insured written notice of nonrenewal, cancellation, or termination at least 180 days prior to the effective date of the nonrenewal, cancellation, or termination for a named insured whose residential structure has been insured by that insurer or an affiliated insurer for at least a 5-year period immediately prior to the date of the written notice.
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If the insurer fails to provide the notice required by this subsection, other than the 10-day notice, the coverage provided to the named insured shall remain in effect until the effective date of replacement coverage or until the expiration of a period of days after the notice is given equal to the required notice period, whichever occurs first. The premium for the coverage shall remain the same during any such extension period except that, in the event of failure to provide notice of nonrenewal, if the rate filing then in effect would have resulted in a premium reduction, the premium during such extension shall be calculated based on the later rate filing.
The purpose of the statute is quite simple. An insured should be given notice of changes to the terms and conditions of the policy and should be given an opportunity to find coverage elsewhere before being left with no coverage. Failing to follow the specific steps necessary to nonrenew a policy will likely cause the material changes to not take effect and the original provisions prevailing until an insurer complies with its statutory requirements.