As a business owner, you may be well aware of the risks involved in your industry. Not only may you face damage to your business, such as may occur in a California fire or other natural disaster, but you may also deal with liability issues if someone suffers injuries or damages as a result of your services, products or employees’ actions. For this reason, you may carry numerous insurance policies or a package of several kinds of coverage.
What can you do if your insurer cancels your policy? The unfortunate fact is that many insurance policyholders do not really know or understand the contents of their policies. Therefore, they may not know when the insurer oversteps its rights to cancel coverage. If you have received a letter warning you that your coverage is coming to an end through no choice of yours, your first step is to carefully examine the fine print in your policy.
Was my policy cancellation legal?
The most obvious reason why an insurer will cancel a policy is for nonpayment of premiums. Missing a payment is not as rare as you would think, and even a careful and meticulous business owner may unintentionally miss a due date.
If a missed payment is the reason for your policy cancellation, this may be an easy fix. The letter you received should explain how long you have before the policy lapses, and you may be able to negotiate with the insurer to keep your coverage going if you catch up on the missed installments. However, the insurer may have other reasons for cancelling your policy, such as:
- The insurer believes you or your business has committed insurance fraud, such as exaggerating claims or filing false claims.
- The insurer alleges that you have not instituted recommended measures of loss prevention that would reduce the risk that your business would have to make future claims.
- The insurer believes your company is in willful violation of safety standards, which increases the risk of liability claims.
- You or a partner has recently been convicted of a state or federal crime, which raises the risk of insuring your business.
Your policy may specifically name the reasons why your insurer can cancel your policy, and it is important that you seek legal advice if you are unfamiliar with the limits that California law places on insurance companies. You may have a valid reason for fighting the cancellation in civil court.