31A-21-305. Cancellation upon request of a premium finance company.
(1) As used in this section:
(a) "Insurance premium finance company" means a person engaged in the business of
entering into premium finance agreements.
(b) "Premium finance agreement" means an agreement by which an insured or
prospective insured promises to pay to an insurance premium finance company the amount
advanced or to be advanced under the agreement to an insurer or to an insurance producer in
payment of premiums on an insurance policy, together with a service charge, an interest charge,
or both.
(2) When a premium finance agreement contains a power of attorney or other authority
enabling the insurance premium finance company to cancel any insurance policy listed in the
agreement, the following applies:
(a) Not less than ten days' written notice of the intent of the insurance premium finance
company to order cancellation of the insurance policy, unless the policyholder's default is cured
prior to the date stated in the notice, shall be delivered or mailed first-class to the policyholder.
The insurance producer indicated on the premium finance agreement shall also be given the same
notice.
(b) Pursuant to the power of attorney or other authority, evidence of which is delivered to
the insurer, the insurance premium finance company may order cancellation on behalf of the
insured. This cancellation shall be effected by mailing to the insurer a written notice stating
when the cancellation is effective. The insurance policy shall be cancelled as if the notice of
cancellation had been given by the insured, but without requiring the return of the insurance
policy. The insurance premium finance company shall also send a copy of the same notice to the
insured at his last known address and to the insurance producer indicated on the premium finance
agreement.
(c) Where statutory, rule, or contractual restrictions provide that the insurance policy may
not be cancelled unless notice is given to a governmental agency, mortgagee, or other third party,
the insurer shall give the prescribed notice on behalf of itself or the insured to that governmental
agency, mortgagee, or other third party within a reasonable time after the day it receives the
notice of cancellation from the premium finance company. When any statutory, rule, or
contractual restrictions require the continuation of insurance beyond the effective date of
cancellation specified by the premium finance company, the insurance is limited to the coverage
required by those restrictions and to the persons those restrictions are designed to protect.
(d) Whenever a financed insurance policy is cancelled, the insurer shall return any
unearned premiums due under the insurance policy to the insurance premium finance company
for the account of the insured, and this action by the insurer satisfies the insurer's obligations
under the insurance policy which relate to the return of unearned premiums. If the crediting of
return premiums to the account of the insured results in a surplus over the amount due from the
insured, the premium finance company shall refund that excess to the insured if it exceeds $5.
(3) No filing of the premium finance agreement or recording of a premium finance
transaction is necessary to perfect the validity of the agreement as a secured transaction as against
creditors, subsequent purchasers, pledgees, encumbrancers, successors, or assigns.
Amended by Chapter 298, 2003 General Session
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Last revised: Thursday, May 28, 2009