do material changes to a policy fall under the 60-day notice law ? K . S . A . 40-2,121 provides that whenever an insurance carrier denies renewal or “ substitution of similar coverage for the same exposures ” under any commercial or professional property or casualty policy the carrier must provide 60 days ’ written notice to the named insured . A KAIA member reported recently that on one of the agency ’ s commercial accounts the carrier had changed the deductible on the property coverage from $ 1,000 to 5 % of the replacement cost of the insured ’ s building . This increased the deductible considerably . The carrier provided a renewal quote which showed the change in the deductible only about three weeks before the expiration date of the policy . The carrier didn ’ t provide separate notice of the change in the deductible . Under these circumstances the question is whether the carrier can enforce the change in the deductible in the renewal quote or is the carrier stuck with the $ 1,000 deductible in the expiring policy , because it failed to provide 60 days ’ written notice of the change .
There is no Kansas case on point . Under classic contract law , the renewal quote constitutes an offer which must be accepted by the insured in order to form a contract . If the renewal quote is for substantially different coverage than the expiring policy , then a good argument can be made that the carrier is refusing to renew the expiring policy and must provide 60 days ’ written notice to the insured . The statutory language that the carrier must provide 60 days ’ notice where it denies “ substitution of similar coverage for the same exposures ” lends credence to this argument . In this case , then is raising the deductible from $ 1,000 to 5 % of the replacement cost of the property insured a refusal
NASON ASSOCIATES , INC . IS YOUR AVIATION INSURANCE HEADQUARTERS to substitute similar coverage for the same exposures ? It probably depends on the replacement cost value of the property insured . If the replacement cost value of the property is $ 125,000 then the change in the deductible is only $ 250 which might not be considered that material a change . If , however , the replacement cost value of the property is $ 1 million then the deductible would increase to $ 10,000 which would likely be considered a very material change in the coverage .
One caveat is important . This argument would probably only work up until the next renewal of the policy in which the deductible was raised . In other words , if neither the agent nor the insured catches the change in the deductible until after the policy with the higher deductible has been renewed the insured will probably be stuck with the higher deductible . This is because renewal policies are considered new policies , so if the policy with the higher deductible is renewed with the same higher deductible there has been no material change in coverage from the expiring policy .
We at Nason Associates have daily contact with the worldwide aviation marketplace to help with uncovered exposures that are in your client ’ s path . If you have clients who are involved in flying or the aviation industry , our experience and marketing skills can provide you with a complete insurance program .
ALL TYPES OF AVIATION COVERAGE :
Aircraft Hull & Liability , Aviation Products Liability , Airport Liability , including Products & Hangarkeepers , Aviation Non-Ownership Liability , Work Comp , Aviation Property Coverage
NASON ASSOCIATES , INC . 6811 Shawnee Mission Parkway , # 312 Shawnee Mission , KS 66202 ( 913 ) 677-1550 FAX # ( 913 ) 384-9350 www . nasonassoc . com
| January-February 2016 | KANSAS INSURANCE AGENT & BROKER
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