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Q: Can insurance cancellation pose a threat to public safety? p2

We are talking about a small town -- not in Florida -- that recently received the bad news that its insurance company is canceling coverage for the police department and its vehicles. The town council has asked six insurance companies for quotes, but as of this writing, just two weeks away from the cancellation date, there has been no response.

The insurance company gave the town just four weeks' notice. The general rule for property/casualty insurance -- and the rule in Florida -- is 45 days' notice; some states require 60-day notice. The idea is to give the policyholder enough time to look for affordable, comparable coverage. As this town is learning, that can take a while.

States also require that the insurance company give the insured a reason for the cancellation, and insurance companies are only allowed to cancel for certain reasons. Nonpayment of premiums is right at the top of the list.

Florida law is fairly typical in rounding out the list with exceptions like material misstatements by the policyholder and a "substantial change in the risk covered by the policy."  There are times, too, when an insurance company requires a policyholder to make certain changes during the first 90 days of the policy term; if those changes are not made, the insurer can cancel -- still giving 45 days' notice and stating the reason in the notice.

In this case, the cancellation letter was not available to reporters, but the assistant police chief said the reason was twofold: The department has made an excessive number of claims, and the police chief has failed to comply with the insurer's demands regarding a few "personnel issues."

A representative from the insurance company offered a different explanation. He said that the town "failed to meet the underwriting requirements to maintain coverage," though he offered no details on what those requirements were. After a chat with the insurer, the mayor told the town council that the police department could get its coverage back if it provides a "written plan."

There may be more to this dispute than meets the eye, though. We'll explain in our next post.

Sources: 

The Advocate, "Sorrento struggles with loss of insurance for police," Kate Stevens, Nov. 9, 2013

The Advocate, "Sorrento police chief fighting efforts to oust him," David J. Mitchell, Oct. 31, 2013

The Advocate, "Sorrento may ask Ascension sheriff for law enforcement," David Mitchell, Oct. 27, 2013

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