Insurance companies have many tactics they use when acting in bad faith. One of the most objectionable actions that an insurer can take is to cancel a policy after having received premium payments for years. The attorneys at Millin & Millin Attorneys recognize such bad faith insurance tactics for what they are and fully believe that no policyholder should ever be subjected to such deceitful behavior.
While insurance companies do have certain rights when canceling a policy, they also have duties to policyholders, must follow policy terms, and must act in good faith. If your insurer has canceled your policy without providing written notice explaining their reasoning, you should immediately contact a bad faith insurance law firm to ensure you can access whatever coverage you may be owed.
For insurance policyholders who have been informed that their coverage has been cancelled, it’s important to understand when insurers can rightfully cancel policies and when cancellations may be bad faith. Keep reading to learn more about why your policy may have been canceled and when to get legal advice.
In order to effectively understand when an insurer is acting in bad faith, it is important to first recognize when they DO have the right to cancel a policy. First and foremost, it is vital that you as the policyholder always read the contract you are signing, or obtain assistance from an experienced lawyer to help you understand the provisions of the policy. It is your responsibility as the consumer to be as informed as possible.
Depending on the provisions of the contract, most insurance companies are usually allowed to cancel a policy within the first 60 days. During this period, the insurer has more leeway when it comes to reneging on the policy. Justifications for cancellations should be laid out in your policy and are restricted by state laws. Some of the legitimate reasons an insurance agency can cancel your policy include:
Just like your insurer is expected to compensate you for a loss, you're expected to tell them the truth on policy documents. When you sign up for new coverage, the company will ask about details like your age, where you live, and whether you’ve been in accidents before. These are all important questions that will help them assess your situation and determine the risks involved in protecting you.
That’s why providing the wrong information, even by mistake, can make your insurer cancel your policy, especially if the correct information would have discouraged them from approving your policy in the first place. Material misrepresentation on insurance policies is a common cause of cancellations.
Premiums are the payments you make to the insurance company in exchange for the protection they give you. It’s an important part of your agreement. Non-payment of premiums at the due date can lead your insurer to cancel your policy, sometimes without written notice.
If non-payment has led to a lapse in coverage, you need to contact your insurer as soon as possible. You may be within the grace period to keep your policy active. Typically, policyholders have a ten to twenty-day grace period to pay their outstanding balance. In Texas specifically, your policy may be canceled after ten days of non-payment.
Keep in mind that you may face two penalties to reinstate your policy within the grace period for late payments: you may be required to pay a reinstatement fee along with any unpaid premiums, and you may also have to file a no-loss statement verifying that no covered losses occurred while your policy was lapsed.
Your insurance policy can also help you compensate a third party if you unintentionally harm them during your policy period. For example, if you have an auto insurance policy and accidentally hit someone with your insured vehicle, your insurer may cover the compensation you owe the person.
However, if your insurance agent discovers that harm was intentional, this can cause them to cancel your policy before the expiration date and prevent you from extending your insurance coverage for longer.
A health insurance policy helps you take care of your medical payments when you’re sick, including consultation fees and the cost of medicine. However, if you get very ill, your insurer may cancel your policy, especially if the type of illness and medical payments required were not included in your policy. To learn whether your policy was wrongfully canceled, you should consult with a bad faith attorney.
In an auto insurance policy, you have to provide information about your car’s specifications and how you use it. If you start using your insured vehicle for work, like an Uber driver or a delivery driver, you’ll use your car a lot more than normal. If this happens, you have to inform your insurer about this development and let them weigh the risks involved in protecting you.
If you fail to inform your car insurance provider that you use your car for work and they find out anyway, they can decide not to bear the additional risk and terminate your car insurance policy, sometimes without a written notice. If you use your car for work and were involved in an accident, you should get legal help to learn about your options for seeking car insurance coverage. We can help you figure out if your car insurance cancellation was valid or in bad faith.
Repeated or especially costly insurance claims can lead to auto insurance cancellations for drivers. If you have a history of making car accident claims, your insurer may determine that the risk of insuring you exceeds what they are willing to cover. Your insurer may cancel your policy even in the middle of your policy term if you file too many motor vehicle accident claims.
One of the reasons for insurance cancellations is that you fail to take care of the thing you’ve insured. For example, your homeowner’s insurance policy may be canceled if the insurance company investigates the claim and discovers that you could have prevented the loss.
For example, let’s say you're aware there is a leak in your roof and you fail to fix it. Eventually, the leak may get worse and cause a lot of damage to your property. If your insurance company is not satisfied that you did your part to protect your house and prevent any damage, they can terminate your agreement before the cancellation date.
Your insurer is not allowed to simply cancel your policy for no reason or without explaining why. If your insurer is legitimately able to uncover faults and conditions that make you ineligible for coverage, then they must send you a written notice explaining their reasons for canceling. Typically, ten to thirty days' notice must be given for cancellations, depending on the reason.
This initial cancellation can be repealed and should be done so if you believe that their arguments are invalid.
Every state has unique regulations on cancellations and underwriting. The Texas Insurance Code sets the legal standard for how insurance companies must go about canceling a policy and sets the requirements for the written statement that must be provided to you. Insurers are typically required to provide notice of cancellations including the following:
Whether you’re dealing with a claim under new insurance or you’ve had your policy for years, bad faith cancellations may happen at any time. Many insurers cancel policies but fail to provide proof that the cancellation was justified. Bad faith cancellation can occur through several methods, including:
If your insurer has canceled your policy without a valid reason, then you may be the victim of bad faith insurance policy cancellation.
Unfortunately, post-claim underwriting is often seen following an insurance claim. This is a transparent attempt to avoid paying out what is rightfully owed to the insured and will often lead to the victim carrying the financial burden of the loss.
Without insurance coverage, you won’t just be left unprotected in case of a natural disaster, loss, or accident. You may also face penalties such as a revoked driver’s license or fees. When you sign up for coverage and meet all your requirements, you should be able to rely on your policy for protection from both losses and legal penalties. Sadly, some insurance companies act in bad faith to keep as much money as possible by cancelling valid policies.
If you have made an insurance claim after a disastrous event and your insurer is attempting to claim your policy was canceled, don’t just accept it; fight back with Millin & Millin Attorneys. Our bad faith insurance lawyers have advocated for Texas residents who have had to deal with bad faith insurance tactics. Our attorneys possess superior experience and the necessary knowledge to bring forth an exceptional case.
