CHAPTER 264
FORMERLY
HOUSE BILL NO. 444
AS AMENDED BY HOUSE AMENDMENTS NOS. 1 AND 4
AN ACT TO AMEND CHAPTER 5, TITLE 18. DELAWARE CODE RELATING TO EMERGENCY POWERS OF THE INSURANCE COMMISSIONER TO REGULATE CANCELLATION AND NONRENEWALS OF COMMERCIAL. MUNICIPAL AND PROFESSIONAL LIABILITY INSURANCE POLICIES.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:
Section 1. Amend Section 531, Chapter 5, Title 18 by renumbering said Section as Section "532".
Section 2. Amend Title 18 of the Delaware Code, Section 531. Chapter 5, by adding a new Section 531, as follows:
§531. Emergency Powers to Regulate Liability Insurance Cancellations and Nonrenewals
(a)(1) Whenever the Insurance Commissioner in his discretion finds that an abnormal disruption has occurred or is occcurring in the liability insurance market, which has created or will create a situation where the availability of commercial, municipal or professional liability insurance is affected and such disruption will affect the normal transaction of business in this State, as to mid-term cancellations, or affect the health, safety and welfare of Delaware citizens as to nonrenewals, the Commissioner may promulgate regulations regarding cancellations and nonrenewals to safeguard the interests of policyholders and the public generally.
(2) When the Commissioner has reasonable cause to believe that a specific line of commercial, municipal or professional liability insurance is unavailable and that such unavailability is a threat to the public health, safety and welfare, he may declare such line to be 'critical' and immediately suspend and enjoin any proposed nonrenewal of coverage of policies of insurance relating to such line and extend policy renewal dates pending a hearing. Within 30 days thereafter, the Commissioner shall hold a public hearing in accordance with procedures mandated by the Administrative Procedures Act. The Commissioner shall serve upon known affected insurers and any other persons involved a copy of such notice, including an order to extend the date of policy terminations pending the public hearing.
(3) Within fifteen days after the public hearing the Commissioner shall find whether or not the specific line Ls in fact 'critical.' The Commissioner may find that the specific line is 'critical' if he finds both that:
(1) The type of coverage Is generally unavailable in Delaware at any price reasonably related to the risk assumed; and
(2) That the unavailability of this type of coverage constitutes a threat to the public health, safety and welfare.
(4) If the Commissioner finds that (I) and (U) above are present. he may declare the line of coverage Is 'critical'. Such declaration shall be effective for 90 days from the date when first declared critical under (2) above.
(b) Such regulation shall apply to commercial liability Insurance policies, other than automobile, but including commercial multi- peril insurance policies and municipal or professional liability coverages. It does not apply to reinsurance, excess and surplus lines insurance. residual market risks, workers' compensation insurance, multi state location risks, policies subject to retrospective rating plans, excess or umbrella policies and such other policies that are exempted by the Commissioner of Insurance.
(c) Such regulation shall provide that no cancellation or nonrcnewal of a policy under this Act shall be effective in this State unless such cancellation or nonrenewal is based upon any one of the following reasons:
(I) nonpayment of premium;
(2) material misrepresentation or nondisclosure to the company of a material fact at the time of acceptance of the risk;
(3) increased hazard or material change in the risk assumed which could not have been reasonably contemplated by the parties at the time of assumption of the risk; materially affect the nature and/or insurability of the risk;
(5) fraudulent acts against the company by the insured or its representatives that materially affect the nature of the risk insured;
(6) lack of cooperation from the insured on loss control matters affecting insurability of the risk;
(7) bona fide loss of or substantial changes In applicable reinsurance. The insurer shall give 60 days notice to the Insurance Commissioner and the insured under this Section and shall supply such information at that time as the Insurance Commissioner shall require;
(8) material increase In exposure arising out of changes in statutory or case law subsequent to the issuance of the insurance contract;
(9) bona fide loss of or reduction in available insurance capacity. The insurer shall give 60 days notice to the Insurance Commissioner and the insured under this Section and shall supply such information at that time as the Insurance Commissioner shall require;
(10) any other reasons approved by the Commissioner.
(d) This Section shall not apply to an insurer issuing a notice of cancellation with respect to any policy which has been In effect for less than 60 days at the time the notice is mailed or delivered.
(c) A notice of cancellation or nonrcnewal of insurance coverage by insurer shall be in writing, shall be mailed or delivered to the first named insured at the mailing address as shown on the policy. Notices of cancellation or nonrenewal shall be mailed or delivered at least 60 days but no more than 120 days prior to the effective date of the cancellation or nonrenewal. Notices of cancellation based upon non. payment of premium shall be mailed or delivered at least 10 days prior to the effective date of cancellation. The notice shall state the effective date of the cancellation.
(1) The insurer shall provide the first named insured with a written statement setting forth the reasons for cancellation or nonrenewal where the named insured agrees in writing to hold the insurer harmless from liability for any communication giving notice of or specifying a reason for a cancellation or nonrenewal, or for any statement made in connection with an attempt to discover or verify the existence of conditions which would be a reason for a canccUation or nonrenewal under this Section.
(g) For purposes of this Section, the transfer of a policyholder between companies within the same insurance group is not a refusal to renew. In addition, changing deductibles, chimes in premium, changes in the amount of insurance or reductions in policy limits or coverage arc not refusals to renew, if such changes arc reasonably related to the risk involved.
(h) Notice of nonrenewal is not required if:
(1) the insurer has offered to issue a renewal policy; or
(2) a named insured has obtained replacement coverage or has agreed in writing to obtain replacement coverage.
(i) Any cancellation or nonrenewal not in compliance with the notice provision of this Section is not effective until proper notice is given.
(j) No poUcy of commercial, municipal or professional liability Insurance, subject to this Section, shall be extended beyond its termination date for a period of more than ninety (90) days. The premium on such policies may reflect any change in rates approved by the Insurance Commissioner.
(k) Rate filings for any line or class affected by this Section shall be approved or disapproved within 30 days of their filing.
(I) In addition to these provisions. the Commissioner may implement a market assistance plan providing for a voluntary group of insurers In order to aid insureds in obtaining commercial insurance coverages specified therein."
Section 2. The Insurance Commissioner shall adopt regulations governing the application of this Act. Any regulations issued pursuant to this Act shall be applicable for a period of not more than 180 days from the effective date of such regulation.
Section 3. This Act shall become effective immediately upon its adoption.
Approved May 9, 1986.