Can an Insurer Cancel Your Policy Without Warning?

An insurance policy is a contract. As such, the insurance company and the policyholder are bound by what the contract stipulates with regard to making premium payments, coverage conditions, benefits, and notifications. The policy will also detail the cancellation rules.

That means that, yes, an insurer can cancel your policy without warning, provided the policy allows for that.

If that insurer steps out of bounds of their contract, they could be liable for acting in bad faith. That is a scenario that could entitle you to seek compensation in addition to what you might be owed for a potential claim. The best way to determine whether there is a problem is to speak with an experienced Reno insurance bad-faith lawyer.

It also helps you to understand the limitations of your policy. The following post can bring those issues into focus.

Legal Requirements for Notice of Policy Cancellation

The Nevada Division of Insurance governs the insurance industry in the state and provides detailed rules and regulations (NRS 687B.310–687B.420) that the carriers must follow, and that includes the legal requirements for the notice of policy cancellation.

These are the notice of policy cancellation laws in Nevada:

Notice Period:

• 30 Days: Standard cancellation notice for most personal policies.
• 60 Days: Often required for commercial policies.
• 10 Days: Allowed for nonpayment of premium or fraud.

Method of Delivery:

Insurance companies must provide written notice, usually sent by mail or in person.

Contents of Notice:

The notice must include the specific reason for cancellation and the exact effective date.

Valid Reasons for Cancellation:

After a policy has been in effect for 70 days, insurers can generally only cancel for nonpayment of premiums, policy violations, or fraud.

Block Withdrawals:

If an insurer is withdrawing from a market, it must notify the Commissioner of Insurance at least 60 days before issuing cancellation notices.

Prohibited Cancellations:

Insurers cannot arbitrarily cancel policies.

If your policy was canceled in violation of these rules, it might constitute an actionable cause of bad faith insurance.

Valid Reasons for Immediate Insurance Termination

One of the most common reasons for an insurance policy termination is a failure to pay your premiums. Many insurance companies offer policyholders a grace period, but continuous non-payment can lead to cancellation.

Your policy can also be terminated if you provide false or incomplete information on an application. For instance, if you neglect to include a medical condition or citations on your driving history.

If your driver’s license is suspended or revoked, your insurance carrier is entitled to cancel your policy immediately. That can also happen if you’re convicted of a DUI or engage in illegal driving behavior.

Finally, an insurer can cancel your health plan if they stop selling plans in your state or exits the individual market entirely.

When Sudden Cancellation Becomes Insurance Bad Faith

Although there are legitimate reasons for an insurance company to cancel a policy.

However, there are certain situations in which the carrier may be acting in bad faith.

These are the situations where a sudden cancellation can become insurance bad faith:

• Post-Claim Underwriting (Rescission): There is always a fear with policyholders that they will be canceled if they file a major claim. When the insurer collects your premiums for years but suddenly cancels the policy after a major claim is filed, that can be an issue of bad faith.
• Lack of Proper Notice: As mentioned above, insurance companies need to provide proper notice before canceling a policy. They also have to provide adequate justification for the cancellation.
• Retaliatory Action: An insurer can’t cancel a policy because you filed a valid, high-value claim or you complained about how the insurer handled the claim.
• Mid-Term Cancellation without Cause: Terminating a policy before its expiration date without a valid contractual reason.

Consequences of an Illegal Policy Rescission

If it can be established that an insurance company acted in bad faith, the policyholder can be sued for an illegal rescission. A civil complaint can allege a breach of contract and breach of the covenant of good faith and fair dealing.

The result of a bad-faith lawsuit could lead to the courts ordering the insurer to pay damages. Those damages can include payments for the denied claim, along with non-economic damages for emotional distress. There might also be punitive damages awarded when the insurance company acted especially egregiously.

The insurance company might also be forced to reinstate the policy. Ultimately, it would be up to the policyholder if they want to continue with the policy.

How a Reno Bad Faith Attorney Can Restore Your Rights

When an insurer cancels your policy without following Nevada’s strict notice requirements, you don’t have to accept that outcome. A skilled Reno bad faith attorney can step in to evaluate whether the cancellation violates the policy terms or Nevada insurance statutes and if it rises to the level of bad faith.

The Law Office of Matthew L. Sharp can conduct a detailed review of your policy and the cancellation notice. If we agree that the insurance company acted in bad faith, we can discuss the options you might have to pursue a legal remedy.

There might be an opportunity to negotiate a settlement outside of a civil complaint.

We have years of dedicated experience focusing specifically on insurance bad faith claims and understand the tactics insurers use to avoid paying what they owe. If your policy was canceled without proper notice or justification, taking prompt legal action can make a critical difference in the outcome of your case.

Call to set up a free case review and to get the answers you need to decide your next move.