Canceling a contractor insurance policy - when and how is it possible?
Oct 24, 2018
Question:
A lawyer representing an insurance agent contacted us regarding an insurance company's refusal to cancel a contractors' work insurance policy. Is the insurance company entitled to refuse cancellation? What options does the insured have to cancel a contractors' policy?
Answer:
A contractors' work insurance policy is an insurance policy that the insurance company may only cancel in limited and specific circumstances. The policy clauses relating to policy cancellation in the general terms of the "Bit" 2013 policy (the most common in the market among most insurance companies) concern cancellation by the insurance company. These are limited clauses that grant the insurance company the option to cancel only for non-payment (subject to prior notice as customary) or fraud - only. However, regarding cancellation by the insured, the policy does not address this matter. Therefore, if the client wishes to cancel contractors' work insurance on their own initiative, there are two optional approaches they can take. It is important to be familiar with both approaches, as an uncontrolled cancellation request (when the agent is not well-versed in the material) may yield a negative response.
Cancellation of contractors' work insurance based on reduction in project value The basis for insurance in the contractors' policy is the project value. An insured who has performed only part of the work and has left the project can approach the insurance company with a request to reduce the insurance amount according to the value of the work actually performed, and request to cancel the policy from the date of cessation of work by them. In such a situation, I do not see grounds for the insurance company to refuse.
It is important to remember that since some portion of the work has been performed (even if its financial scope is small) - the insurance company has the right to receive an appropriate premium, including for its expenses, as well as the proportional part of the premium for the value of the work performed and/or in combination and taking into account the period of its exposure. In such a case, the insurance company may charge according to "short period."
question:
An attorney representing an insurance agent contacted us after encountering a refusal by an insurance company to cancel a contractor's insurance policy . Is the insurance company entitled to refuse to cancel? What are the options available to the insured to cancel a contractor's policy?
answer:
A contractor's work insurance policy is an insurance policy that the insurance company is not permitted to cancel except in limited and specific cases. The clauses of the text that refer to the cancellation of the policy, in the general terms of the "Bit" 2013 policy (the most accepted on the market by most insurance companies) concern cancellation by the insurance company. These are limited clauses that give the insurance company the option of cancellation only for non-payment (subject to prior notice as is customary) or fraud - only.
However, with regard to cancellation by the insured, the policy does not address the issue. Therefore, if the customer wishes to cancel contractor work insurance on his own initiative, there are two optional ways he can take. It is important to be familiar with these two ways, as an uncontrolled request for cancellation (when the agent is not knowledgeable about the matter) may yield a negative response.
Cancellation of construction work insurance based on a decrease in the value of the project
The basis of insurance in the contractor's policy is the value of the project. An insured who has only performed part of the work and has withdrawn from the project can contact the insurance company with a request to reduce the insurance amount according to the value of the work he actually performed, and request to cancel the policy from the date he stops working. In such a situation, I see no reason for the insurance company to refuse.
It is important to remember that since some part of the work was performed (even if its financial scope is small) - the insurance company has the right to receive an adequate premium, including for its expenses, as well as the proportional part of the premium for the value of the work performed and/or in combination and taking into account the period of its exposure. In such a case, the insurance company can charge according to a "short period".
"Cancellation begins"
If the insured has not entered the land and has not begun work at all, he can demand cancellation from the beginning. Even in such a case, I do not see any justified grounds for refusal. However, it is reasonable to assume that the insurance company will be entitled to deduct from the full premium refund amounts its expenses for actions that were approved in advance by the insured. For example - conducting a survey, if it was carried out after the insured's express approval of the price quote and the issuance of the policy.
However, it is important to remember that while the insurance commencement date in the contractor's policy for the property section is immediately after all property has been unloaded from the site, the insurance commencement date for third-party and employers' liability sections is the date specified in the list. That is, if the insured has approved the activation of the insurance - the insurance company's liability began from the specified commencement date, even if the insured "feels" that he has not taken advantage of the insurance at all because he has not yet started work. This is sometimes the explanation for the insurance companies' insistence on this matter.
A final note in conclusion - if a contractor's work insurance policy contains a lien clause and/or an advance notice clause, or a clause that prevents cancellation except upon approval by the lienholder or the person commissioning the work - then the cancellation will only take effect after approval by the lienholder or the person commissioning the work (as the case may be) and/or the expiration of the appropriate period for the advance notice.
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