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Posts Tagged ‘insurance premiums’

Cancelling a Financed Policy: Reliance on a Power of Attorney

Posted on: February 8th, 2019

By: Eric Benedict

When a prospective insured is applying for and obtaining coverage, no matter the type of risk, the cost of the premiums is likely to be a foremost concern. To cover the cost of the premium, an insured may choose to seek financing from third-party entities known as premium financing companies. In exchange for agreed upon terms, premium financing companies will pay all or part of the premium due, with expectation that the insured will pay back the loan over time. In an effort to reduce the risk that the premium finance company will suffer a loss as a result of the insured’s default, premium financing companies often require that the insured grant the company a power of attorney to cancel the policy on the insured’s behalf and collect any returned premium in the event of a default. Both the terms of a policy and relevant legal authorities may set forth different requirements for cancellation when the policy is cancelled by the insured than when it is cancelled by the insurer.

As a result of the relationship established between the premium finance company and the insured, an insurer is often placed in the position of receiving a notice of cancellation from the premium finance company on behalf of the insured. In many states, premium finance companies are subject to regulation and some states have set forth specific procedures that a premium finance company must follow when exercising a power of attorney to cancel a policy on the insured’s behalf. To provide certainty to the insurer regardless of whether the premium finance company has complied with statutory or regulatory requirements prior to cancellation, some statutory schemes also provide insurers the ability to rely on representations and cancellations from premium finance companies. Many of the states which have adopted such schemes provide specific conditions under which an insurer is entitled to rely on a notice of cancellation from a premium finance company, thereby shielding the insurer from liability after it cancels a financed policy at the direction of the premium finance company. While many of these schemes contain similar language, the circumstances and conditions under which an insurer may properly rely varies by jurisdiction.

Ultimately, although an insured’s ability to finance an insurance premium may have the effect of widening access to coverage to those who require financing, it is imperative that both the premium finance company and the insured understand their rights and obligations under the relevant statutory scheme. Similarly, it is critical that insurers understand the relevant legal authorities concerning its rights and responsibilities when dealing with an insurance premium finance company which exercises its right to cancel a party on behalf of the insured.

If you have any questions or would like more information, please contact Eric Benedict at [email protected].

Colorado Limits Risk Transfer for Snow and Ice Management Services

Posted on: June 13th, 2018

By: Josh Ferguson

Colorado becomes the second state to recently pass an anti-indemnity bill regarding snow and ice management service contracts.  The Snow Removal Service Liability Limitation Act has passed in Colorado and been signed into law by the Governor. The Act provides that it is against public policy and void for a snow and ice removal contract to require a snow and ice management service provider or receiver to: (1) indemnify the other for their own acts or omissions; (2) hold the other harmless for their own acts or omissions; or (3) impose a duty to defend the other for their own acts or omissions. Similar legislation is pending in many other states as indicated by Accredited Snow Contractors Association President Kevin Gilbride.

The Accredited Snow Contractors Association has noted several anticipated benefits to this legislation for the snow and ice management contractors. First, prohibiting transfer of contractual defense and indemnity for a property owner or manager’s own negligence, the property owner and/or manager has an increased reason to make sure the roadways and sidewalks are adequately treated.  Additionally, a potential side effect this statute could have is lowering ever increasing insurance premiums for snow and ice removal contractors by avoiding those tenders of contractual defense and indemnity.

For further information or for further inquiries involving hospitality or premises liability law, you may contact Josh Ferguson of Freeman Mathis & Gary, LLP, at [email protected].