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Ask Tim - Got an insurance technical question on your mind?

Blogs Home >> Ask Tim - Got an insurance technical question on your mind? >> 'Does a Premium Finance Company Have to Send Cancellation Notices By Certified Mail?'
Does a Premium Finance Company Have to Send Cancellation Notices By Certified Mail?

Question from an IIABNY member: What do you know about finance company cancellation notices? If the cancellation is on a Workers Compensation policy is the finance company required to send the notices to the insured Certified Mail/Return Receipt like the insurance companies do?

Answer: New York Banking Law Sect. 576 applies here. It states:


"1. When a premium finance agreement contains a power of attorney or other authority enabling the premium finance agency to cancel any insurance contract or contracts listed in the agreement, the insurance contract or contracts shall not be cancelled unless such cancellation is effectuated in accordance with the following provisions:

(a) Not less than ten days written notice shall be mailed to the insured at his last known address as shown on the records of the premium finance agency, of the intent of the premium finance agency to cancel the insurance contract unless the default is cured within such ten day period and that at least three days for mailing such notice is added to the ten day notice. A copy of the notice of intent to cancel shall also be mailed to the insurance agent or broker.

(b) Service of the notice of intent to cancel or notice of cancellation by mail shall be effective provided that the notices are mailed to the insured's last known address as shown on the records of the premium finance agency. The records of the premium finance agency shall be presumptive evidence as to the correctness of such address.

(c) If the insurance contract or contracts provide motor vehicle liability insurance, every such notice of cancellation shall include in type or print, of which the face shall not be smaller than twelve point, a statement that proof of financial security is required to be maintained continuously throughout the registration period and a notice prescribed by the commissioner of motor vehicles indicating the punitive effects of failure to maintain continuous proof of financial security and actions which may be taken by the insured to avoid punitive effects.

(d) After the notice in paragraph (a) above has expired, the premium finance agency may thereafter, in the name of the insured, cancel such insurance contract by mailing to the insurer a notice of cancellation stating when thereafter the policy shall be cancelled, and the insurance contract shall be cancelled as if such notice of cancellation had been submitted by the insured himself, but without requiring the return of the insurance contract. A copy of the notice of cancellation shall also be mailed to the insured..."

Nothing in this language requires the finance company to send the notice by certified mail, return receipt. In addition, New York Workers' Compensation Law Sect. 54, which requires notice by certified mail, return receipt, appears to refer only to insurers ("No contract of insurance issued by an insurance carrier against liability arising under this chapter shall be cancelled within the time limited in such contract for its expiration unless notice is given as required by this section...Such notice shall be served on the employer by delivering it to him, her or it or by sending it by mail, by certified or registered letter, return receipt requested, addressed to the employer at his, her or its last known place of business..."). I think if the legislature had intended for premium finance companies to follow the same rules as insurers, it would have included the same language in Banking Law Sect. 576. (As a side note, Sect. 576 does contain some provisions that apply specifically to auto policies; the legislature could have done likewise for Workers' Comp.)

To summarize, in my opinion premium finance companies do not have to send cancellation notices for Workers' Comp policies by certified mail.

Posted on Thursday, Nov 17, 2011 13:13:31 CST by tdodge

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