Christina Phillips | Property Insurance Coverage Law Blog | March 12, 2017
In August, I wrote a blog post about an insurer who had violated section 143.17a(a) of the Illinois Insurance Code by failing to provide adequate notice of their intention to non-renew a policy. As a result of its failure to timely provide notice of the intent to non-renew, the insurer was required to renew the expiring policy under the same terms and conditions for an additional year. Two days after issuing the renewal policy, the insurer issued a Notice of Cancellation citing the reason for the cancellation as “Underwriting Reasons: Measurable increase in risk.” This notice provided more than 60 days’ notice.
Under section 143.23 of the Illinois Insurance Code, we requested a hearing with the Department of Insurance to determine if the insurer had cancelled the insured’s commercial lines policy, in violation of the Illinois Insurance Code. On February 7, 2017, I appeared for a hearing before the Illinois Department of Insurance. At the hearing, representatives of both the insured and insurer were called to testify.
Ultimately, the Illinois Department of Insurance concluded that the initial notice of intention to non-renew failed to comply with the Illinois Insurance Code because it only provided 34 days’ notice. Regarding the notice of cancellation, the Department of Insurance concluded that the insurer’s attempt to cure its defective notice also did not comply with the Code. The Department of Insurance concluded that the insurer’s reference to “Measurable increase in risk” was a conclusory statement which did not point to any specific facts for the basis of cancellation. While the Department of Insurance concluded that an “exhaustive explanation of the reason for cancellation” was not necessary, more specific facts were required to put the insured on notice as to what sort of facts or events caused the measurable increase in risk. Notably, the Department of Insurance pointed out that the insurer at the hearing could not even provide a specific explanation for the cancellation.
Ultimately, the Illinois Department of Insurance concluded the cancellation violated the Code and ordered that the policy remain in effect. The Illinois Department of Insurance, however, provided that the insurer could again attempt to cure their notice by reissuing it prospectively so as to comply with the provisions of the Code. Perhaps the third time will be a charm for the insurer!