Section 40. Cancellation of insurance

A. No licensee shall cancel a policy of insurance unless the insurance premium finance contract contains an authorization for the licensee to cancel any insurance policy listed therein. Except as provided in subsection C of this section, no licensee shall cancel a policy of insurance for any default other than a default in the payment of money due the licensee or a default consisting of the transfer of the policy of insurance to a third party.

B. No notice of intent to cancel may be given prior to default in the insurance premium finance contract. Prior to any cancellation, the licensee shall advise the insured and the agent in writing of its intent to cancel insurance policies referred to in the notice, unless all payments in default are received within 10 days of the date the notice is mailed or delivered; or, if the default consists of a transfer of the policy, unless the transferee, within 10 days of the date the notice is mailed or delivered, assumes or discharges the transferor's debt to the licensee.

C. After providing the appropriate notice of intent to cancel, the licensee may exercise its right to cancel if the default has not been cured or if the additional premium has not been financed or otherwise paid. A copy of the notice of cancellation shall be mailed or delivered to the insured and insurance agent with an effective date of cancellation no earlier than five days after its mailing or delivery. No later than the effective date of cancellation, the licensee shall send the notice of cancellation to the insurer, provided the default remains uncured. If more than one insurance policy is listed on an insurance premium finance contract, a licensee shall not cancel one insurance policy without cancelling all such policies listed thereon.

D. Every insurer, upon receipt of such notice, shall, subject to subsection E hereof, cancel such insurance policy or policies as of the date specified in such notice and shall promptly notify, in writing, the insured, the insurance agent and the licensee of such cancellation. Such notification shall include but not be limited to the following information:

1. Insured's complete name;

2. Producer's name;

3. Policy number;

4. Effective date of the policy;

5. Effective date of cancellation;

6. Total policy premium;

7. Reason for cancellation.

No insurer shall cancel any insurance policy when notified by the licensee unless such insurer has received a copy of a power of attorney signed by the insured authorizing such cancellation. No insurer shall require the return or surrender of the insurance policy as a prerequisite to such cancellation.

E. Notwithstanding the provisions of subsection D, where notice and a period of time is a prerequisite to cancellation under any statutory, regulatory, or contractual restriction, no insurance policy shall be cancelled until the required notice shall have been given by the insurer and the requisite period of time shall have elapsed, and the insurer shall then cancel the policy as soon as it legally may.

F. Except as provided in § 38.2-1806 of the Code of Virginia, upon any cancellation whenever the insurer has received notice that the return premium has been assigned to a licensee, the insurer shall return any gross unearned premium to the licensee within 30 days after the effective date of cancellation or within 30 days after the completion of any audit whichever is later. If the amount returned is in excess of the amount due the licensee, the excess shall be remitted within 10 business days by the licensee to the insured.

No insurer or agent shall apply any return premium due as a result of a cancellation of a particular policy to any outstanding balance on another policy of the insured.

G. If a balance remains due to the licensee after cancellation of the insurance premium finance contract, such outstanding balance may earn interest at a rate no greater than the rate stated in the insurance premium finance contract.

H. When there is more than one insured, all notices required hereunder shall be given to each insured, unless they reside at the same address.

I. The provisions of this section hereof shall not apply to the financing of life insurance and annuity premiums by licensees.

Historical Notes

Derived from Regulation 6, Case No. INS890007, § 4, eff. September 1, 1989; amended, Volume 18, Issue 12, eff. February 1, 2002.

Statutory Authority

§§ 12.1-13 and 38.2-223 of the Code of Virginia.