CHAPTER 59. REASONS FOR CANCELLATIONS AND REFUSAL
TO RENEW; NOTICE AND APPEAL PROCEDURES

 This chapter implements section 5(9) of The Unfair Insurance Practices Act (40 P. S. § §  1171.5(9)).

   Remedies

 The following terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise.

   Policies covering owner-occupied dwellings—Policies covering a residential structure consisting of four or less household units, one of which is occupied by the owner of such structure.

   Policies covering personal property owned by individuals—Policies covering a natural person against loss, theft, damage or destruction of personal property, including liability arising out of the ownership or use thereof except policies of automobile insurance covered under the act of June 5, 1968 (P. L. 140, No. 78) (40 P. S. § §  1008.1—1008.11).

   The provisions of this §  59.3 issued under The Insurance Company Law of 1921 (40 P. S. § §  1—321); The Insurance Department Act of 1921 (40 P. S. § §  344—991); The Administrative Code of 1929 (71 P. S. § §  66, 186, 411 and 412); act of June 5, 1968 (P. L. 140, No. 78) (40 P. S. § §  1008.1—1008.11); and section 5(a)(9) of the Unfair Insurance Practices Act (40 P. S. §  1171.5(a)(9)).

 In addition to the statutorily permitted bases for cancellation of a policy of insurance found at section 5(a)(9) of the Unfair Insurance Practices Act (40 P. S. §  1171.5(a)(9)), an insurer may cancel any policy other than a policy insuring farm risks when the property insured would not meet the eligibility requirements for insurance of the Insurance Placement Facility of Pennsylvania (Fair Plan) then in effect.

   The provisions of this §  59.4a issued under The Insurance Company Law of 1921 (40 P. S. § §  1—321); The Insurance Department Act of 1921 (40 P. S. § §  344—991); The Administrative Code of 1929 (71 P. S. § §  66, 186, 411, and 412); act of June 5, 1968 (P. L. 140, No. 78) (40 P. S. § §  1008.1—1008.11); and section 5(a)(9) of the Unfair Insurance Practices Act (40 P. S. §  1171.5(a)(9)).

 Notices of cancellation or refusal to renew shall meet the following requirements:

   (1)  The form shall be clearly labeled: ‘‘Notice of Cancellation or Refusal to Renew.’’

   (2)  The form shall be given to the insured in duplicate.

   (3)  The date, not less than 30 days after the date of delivery or mailing, on which such cancellation or refusal to renew is to become effective shall be clearly indicated.

   (4)  Space must be provided for the insurer to provide the specific reason or reasons for the cancellation or refusal to renew.

   (5)  The reasons given for cancellation or refusal to renew shall be clear and complete. If the reason is a material misrepresentation, fraudulent statement, omission or concealment of fact material to the acceptance of the risk, or to the hazard assumed by the company, made by the insured, the insurer shall specify what statements, omissions or concealments it relied on for its action.

   (6)  If the reason is a substantial change or increase in the hazard, the insurer shall specify the changes or increased hazards it relied on for its actions. If the reason is the failure to pay a premium, the insurer shall specify the amount due, and the date when it was due.

   (7)  The form shall include that advice that the insured has a right to request review of the insurer’s action as provided in §  59.7 (relating to appeal procedure), within ten days of receipt of the notice. In so doing the notice shall include:

     (i)   Advice that review may be requested by signing a copy of the form in a space provided and sending it to one of the regional offices of the Insurance Department.

     (ii)   The addresses of the four regional offices of the Insurance Department.

   (8)  The form shall include advice to the insured that he or she may be eligible for insurance under the Pennsylvania Fair Plan Act or the Pennsylvania Auto Insurance Plan.

   (9)  Each provision of the notice shall be set forth in clear and understandable terms. To assure adequate notice, the form label shall be set at the top of the form in roman type no smaller than 14 point modern type, all capitals. The remainder of the notice shall be set in roman type no smaller than ten point modern type, two points leaded.

   (10)  A recommended form of notice which would meet the requirements of the foregoing provisions is given in Appendix A.

 (a)  An insured may request review by the Insurance Commissioner of the action of the insurer in cancelling or refusing to renew his or her policy by making written request therefor. This may be done by signing a copy of the ‘‘Notice of Cancellation or Refusal to Renew,’’ and sending it to one of the regional offices of the Insurance Department at one of the addresses given on the notice.

 (b)  Upon receipt of such request, both the insured and the insurer will be notified that an investigation has been undertaken and they may be contacted to secure additional information as required.

 (c)  Upon completion of the investigation, a copy of the investigative report will be supplied to both the insured and the insurer. Within ten days of receipt of the report either party may submit written comments for consideration by the Insurance Commissioner.

 (d)  If either insurer or insured desires a formal administrative hearing, such request shall be made at the time written comments are submitted. If so, a hearing will be scheduled as soon as possible. If not, the matter will be decided on the basis of the written comments and investigative report.

 (e)  Hearings will be held in accordance with the following procedures:

   (1)  Upon receipt of a request for a formal administrative hearing, notice of the time and place of such hearing will be sent by certified mail to the insurer and insured, not less than five days prior to the hearing.

   (2)  The hearing will be recorded on tape with a stenographer. The tape and stenographer’s notes must be prepared such that a full verbatim transcription may thereafter be made. Such tape will be retained for a period of 90 days following issuance of the Insurance Commissioner’s final order in the case.

   (3)  Parties will be afforded a reasonable time following the hearing to submit written briefs in support of their position.

   (4)  All relevant evidence of reasonable probative value will be admitted into the record of the proceeding and reasonable examination and cross-examination shall be permitted.

   (5)  The regulations in 1 Pa. Code Part II (relating to general rules of administrative practice and procedure) may be used where conducive to speedy and fair proceedings.

 (f)  Upon completion of a hearing, if held, or upon receipt of the written comments, the Insurance Commissioner will issue an Order in conformance with his findings.

   The provisions of this §  59.7 amended January 16, 1976, 6 Pa.B. 78. Immediately preceding text appears at serial page (19072).

 (a)  Some insurers affect a renewal of their outstanding policies of insurance merely by sending a renewal premium notice to the insured in advance of the expiration date of his policy. The insured need only make a timely payment of the premium due in order to keep his policy in force. In such a situation the mailing by the insurer of the renewal premium notice does constitute such a manifestation of willingness by the insurer to renew as to come within the purview of section 5(c)(1) of The Unfair Insurance Practices Act (40 P. S. §  1171.5(c)(1)) if mailed not less than 30 days in advance of the expiration date of the policy. If the insurer has manifested its willingness to renew by mailing a renewal notice or issuing a renewal policy and the insured fails to pay the renewal premium when due, the policy shall terminate in accordance with its terms. No further notice to the insured by the insurer of an intention not to renew for nonpayment of premium shall be necessary.

 (b)  The period of 60 days referred to in section 5(a)(9) and (c)(3) of The Unfair Insurance Practices Act (40 P. S. §  1171.5(a)(9) and (c)(3)) is intended to provide to insurers a reasonable period of time, if desired, to investigate thoroughly a particular risk while extending coverage during the period of investigation. An insurer may cancel the policy provided it gives at least 30 days notice of the termination and provided it gives notice no later than the 60th day. The insurer’s decision to cancel during this 60-day period must not violate section 5(a)(7)(iii) of The Unfair Insurance Practices Act (40 P. S. §  1171.5(a)(7)(iii)).

 (c)  Insurers are reminded, however, that a regulation of the U.S. Department of Housing and Urban Development as set forth in 24 CFR §  1905.9. (relating to notice of cancellation or nonrenewal) further limits the right of insurers to cancel or nonrenew policies of property insurance on properties eligible for coverage under the Pennsylvania FAIR Plan.

 (d)  The pertinent provisions of this regulation provide that:

   (a) Except in cases of owner or occupant incendiarism, material misrepresentation or nonpayment of premium, each plan shall require its participating insurers to give, and each such insurer shall give, property owners no less than 30 days prior written notice of any cancellation or nonrenewal of coverage initiated by the insurer with respect to any eligible risk, whether or not such risk is then insured under the Plan, in order to allow the affected property owner sufficient time to apply for an inspection and to obtain coverage under the Plan if necessary.

   (b) For the purposes of this §  1905.9, the term cancellation or nonrenewal shall include (1) reductions in amounts of insurance and adverse modifications in coverage initiated by the insurer with respect to any owner individually, and (2) refusals by the insurer or its agents to renew any expiring coverage in any line of essential property insurance previously provided to the property owner.

 This requirement, therefore, allows insurers to cancel or nonrenew such policies only if the insured is given 30 days notice of both the cancellation and of the possible availability of coverage under the Pennsylvania FAIR Plan: This applies to such policies both during and after the first 60 days of their issue.

   The provisions of this §  59.9 issued under the Unfair Insurance Practices Act § §  1—15 (40 P. S. § §  1171.1—1171.15).

   The provisions of this §  59.9 amended July 3, 1980, effective July 5, 1980, 10 Pa.B. 2876. Immediately preceding text appears at serial page (24944).

   Denial of Application

 Each insurer shall assure that the notice required by §  59.6 (relating to notice of cancellation or refusal to renew; requirements) shall be given to each policyholder affected. In the event the insurer, or its agent, knows or has reason to believe that any policyholder will be unable to read such notice, the insurer shall assure that the notice is communicated to the policyholder by an appropriate foreign language equivalent or oral communication in a language understood by the policyholder.