Academic journal article Journal of Risk and Insurance

State Statute Applied to Preclude Cancellation of Policy Absent Satisfaction of Required Grounds and Observance of Statutory Procedure

Academic journal article Journal of Risk and Insurance

State Statute Applied to Preclude Cancellation of Policy Absent Satisfaction of Required Grounds and Observance of Statutory Procedure

Article excerpt

American Continental Ins. Co. v. Steen, 91 P. 3d 864, 2004 Wash. LEXIS 362 (Washington Supreme Court--May 14, 2004)

Substantive state insurance law generally limits the grounds on which an insurer may cancel a personal lines insurance policy. Commonly accepted grounds are nonpayment of premium, fraud or material misrepresentation, increase of risk, or loss of reinsurance. State law may provide additional statutory protections against even cancellation by mutual agreement as this may defeat the public policy goal of assuring that victims of tort-feasors be compensated. For example, Washington has a statute that provides

   No insurance contract insuring against loss or damage through legal
   liability for the bodily injury or death by accident of any
   individual, or for damage to the property of any person, shall be
   retroactively annulled by any agreement between the insurer and
   insured after the occurrence of any such injury, death, or damage
   for which the insured may be liable, and any such annulment
   attempted shall be void.

See Rev. Code of Wash. 48.18.320.

The Washington Supreme Court recently held that this "nonannulment" statute applies to both occurrence basis and claims-made liability policies and restricts cancellation accordingly. See American Continental Ins. Co. v. Steen, 91 P. 3d 864, 2004 Wash. LEXIS 362 (Wash. 2004). Cancellation and annulment are often treated as synonyms. …

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