An admitted carrier in Texas tried to nonrenew a commercial umbrella policy that was due to renew in 30 days. However, the Texas insurance code says insureds must be notified of a nonrenewal 60 days before renewal. When the agent mentioned this, the carrier said it would extend coverage for another 30 days and then issue the nonrenewal. 

Extending a portion of the liability tower by 30 days puts the insured in a difficult position. In addition to creating staggered effective dates, it would force them into the excess & surplus market and lead to much higher premiums for lesser coverage. 

Q: Is the carrier acting in bad faith by extending the umbrella policy by 30 days to nonrenew?

Response 1: Bad faith is a legal argument. While it's certainly unfair to put the customer in this position, carriers are usually within their rights to extend a policy to nonrenew if they missed the original nonrenewal date.

The Texas insurance code permits this, saying that if notice is delivered later than the 60-day deadline, the coverage remains in effect until the 61st day after the notice delivery:

Sec. 551.054. WRITTEN NOTICE OF NONRENEWAL REQUIRED. (a) An insurer may refuse to renew a liability insurance or commercial property insurance policy if the insurer delivers or mails written notice of the nonrenewal to the first-named insured under the policy at the address shown on the policy.

(b) The notice must be delivered or mailed not later than the 60th day before the date on which the policy expires. If the notice is delivered or mailed later than the 60th day before the date on which the policy expires, the coverage remains in effect until the 61st day after the date on which the notice is delivered or mailed.

Is it possible to extend the other liability policies in the tower so that they all expire on the same date? If not, perhaps a discussion with someone higher up in the insurance company could get the insurer to reverse its position.

Another alternative is to try to replace the coverage before the expiration date. Or, you could work with the primary carrier to renew coverage a month later without a lapse.

Response 2: I've experienced the same thing in Missouri. You could try to trap the carrier and get it to renew since the 60-day window has expired—but it will cancel the policy after issuing it, which is allowed by law.

If you and your client don't want the staggered dates, your best option is to move everything to the umbrella's expiration date. 

Response 3: The carrier may be admitted, but the umbrella line of business is not a standard line. Therefore, the carrier is not legally bound to give any notice at all, unless its policy terms require it.

It's a better use of your time to find another carrier than argue this point with the carrier who is giving you what is technically an accommodation. Find a more welcoming carrier. You do not mention why the carrier is nonrenewing, but it may be that this risk is more properly covered by the E&S market anyway. 

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

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