H.B. 137 Enrolled

CANCELLATION OR RENEWAL OF INSURANCE
1999 GENERAL SESSION
STATE OF UTAH
Sponsor: Trisha S. Beck
AN ACT RELATING TO INSURANCE; ADDRESSING CANCELLATION; PROHIBITING
NONRENEWAL IN CERTAIN CIRCUMSTANCES; AND MAKING TECHNICAL CHANGES.
This act affects sections of Utah Code Annotated 1953 as follows:
AMENDS:
31A-21-303, as last amended by Chapter 5, Laws of Utah 1991
Be it enacted by the Legislature of the state of Utah:
Section 1. Section 31A-21-303 is amended to read:
31A-21-303. Termination of insurance policies by insurers.
(1) (a) Except as otherwise provided in this section, in other statutes, or by rule under
Subsection (1)(c), this section applies to all policies of insurance other than life and disability
insurance and annuities, if [they] the policies of insurance are issued on forms [which] that are
subject to filing and approval under Subsection 31A-21-201 (1).
(b) A policy may provide terms more favorable to insureds than this section requires.
(c) The commissioner may by rule totally or partially exempt from this section classes of
insurance policies in which the insureds do not need protection against arbitrary or unannounced
termination.
(d) The rights provided by this section are in addition to and do not prejudice any other
rights the insureds may have at common law or under other statutes.
(2) (a) [Except as provided in Subsection (2)(c), no insurance policy may be cancelled by
the insurer prior to the expiration of the agreed term or one year from the effective date of the
policy or renewal, whichever is less, except for failure to pay a premium when due or on grounds
stated in the policy.] As used in this Subsection (2), "grounds" means:
(i) material misrepresentation;
(ii) substantial change in the risk assumed, unless the insurer should reasonably have
foreseen the change or contemplated the risk when entering into the contract;

(iii) substantial breaches of contractual duties, conditions, or warranties;
(iv) attainment of the age specified as the terminal age for coverage, in which case the
insurer may cancel by notice under Subsection (2)[(b)](c), accompanied by a tender of proportional
return of premium; or
(v) in the case of automobile insurance, revocation or suspension of the driver's license of
the named insured or any other person who customarily drives the car.
(b) (i) Except as provided in Subsection (2)(e) or unless the conditions of Subsection
(2)(b)(ii) are met, an insurance policy may not be canceled by the insurer before the earlier of:
(A) the expiration of the agreed term; or
(B) one year from the effective date of the policy or renewal.
(ii) Notwithstanding Subsection (2)(b)(i), an insurance policy may be canceled by the insurer
for:
(A) nonpayment of a premium when due; or
(B) on grounds defined in Subsection (2)(a).
[(b)] (c) (i) [Not sooner than 30 days after the delivery or first class mailing of a written
notice to the policyholder, the] The cancellation provided by Subsection (2)[(a)](b), except
cancellation for nonpayment of premium, is effective no sooner than 30 days after the delivery or
first-class mailing of a written notice to the policyholder.
(ii) Cancellation for nonpayment of premium is effective no sooner than ten days after
delivery or first class mailing of a written notice to the policyholder.
(d) (i) Notice of cancellation for nonpayment of premium shall include a statement of the
reason for cancellation.
(ii) Subsection (6) applies to the notice required for [other] grounds of cancellation other
than nonpayment of premium.
[(c)] (e) (i) Subsections (2)(a) [and (b)] through (d) do not apply to any insurance contract
that has not been previously renewed if the contract has been in effect less than 60 days when the
written notice of cancellation is mailed or delivered. [No]
(ii) A cancellation under this Subsection [is] (2)(e) may not be effective until at least ten

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days after the delivery to the insured of a written notice of cancellation.
(iii) If the notice required by this Subsection (2)(e) is sent by first-class mail, postage
prepaid, to the insured at [his] the insured's last-known address, delivery is considered accomplished
after the passing, since the mailing date, of the mailing time specified in the Utah Rules of Civil
Procedure. [Policy cancellations]
(iv) A policy cancellation subject to this Subsection [are] (2)(e) is not subject to the
procedures described in Subsection (6).
(3) A policy may be issued for a term longer than one year or for an indefinite term[, with]
if the policy includes a clause providing for cancellation by the insurer by giving notice as provided
in Subsection (4)(b)(i) 30 days prior to any anniversary date.
(4) (a) Subject to Subsections (2), (3), and (4)(b), a policyholder has a right to have the
policy renewed[,]:
(i) on the terms then being applied by the insurer to similar risks[,]; and
(ii) (A) for an additional period of time equivalent to the expiring term if the agreed term is
one year or less[,]; or
(B) for one year if the agreed term is longer than one year.
(b) [The] Except as provided in Subsection (4)(c), the right to renewal under Subsection
(4)(a) is extinguished if:
(i) at least 30 days prior to the policy expiration or anniversary date a notice of intention not
to renew the policy beyond the agreed expiration or anniversary date is delivered or sent by first-class
mail by the insurer to the policyholder at the policyholder's last-known address;
(ii) not more than 45 nor less than 14 days prior to the due date of the renewal premium, the
insurer delivers or sends by first-class mail a notice to the policyholder at the policyholder's
last-known address, clearly stating:
(A) the renewal premium[,];
(B) how it may be paid[,]; and
(C) that failure to pay the renewal premium by the due date extinguishes the policyholder's
right to renewal;

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(iii) the policyholder has:
(A) accepted replacement coverage[,]; or [has]
(B) requested or agreed to nonrenewal; or
(iv) the policy is expressly designated as nonrenewable.
(c) Unless the conditions of Subsection (4)(b)(iii) or (iv) apply, an insurer may not fail to
renew an insurance policy as a result of a telephone call or other inquiry that:
(i) references a policy coverage; and
(ii) does not result in a claim being filed or paid.
(5) (a) (i) Subject to Subsection (5)(b), if the insurer offers or purports to renew the policy,
but on less favorable terms or at higher rates, the new terms or rates take effect on the renewal date
if the insurer delivered or sent by first-class mail to the policyholder notice of the new terms or rates
at least 30 days prior to the expiration date of the prior policy.
(ii) If the insurer did not give [this] the prior notification described in Subsection (5)(a)(i)
to the policyholder[,] the new terms or rates do not take effect until 30 days after the notice is
delivered or sent by first-class mail, in which case the policyholder may elect to cancel the renewal
policy at any time during the 30-day period.
(iii) Return premiums or additional premium charges shall be calculated proportionately on
the basis that the old rates apply.
(b) Subsection (5)(a) does not apply if the only change in terms that is adverse to the
policyholder is:
(i) a rate increase generally applicable to the class of business to which the policy belongs[,];
(ii) a rate increase resulting from a classification change based on the altered nature or extent
of the risk insured against[,]; or
(iii) a policy form change made to make the form consistent with Utah law.
(6) (a) If a notice of cancellation or nonrenewal under Subsection (2)[(b)](c) does not state
with reasonable precision the facts on which the insurer's decision is based, the insurer shall send
by first-class mail or deliver that information within ten working days after receipt of a written
request by the policyholder. [This]

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(b) A notice under Subsection (2)(c) is not effective unless it contains information about the
policyholder's right to make the request.
(7) If a risk-sharing plan under Section 31A-2-214 exists for the kind of coverage provided
by the insurance being cancelled or nonrenewed, [no] a notice of cancellation or nonrenewal required
under Subsection (2)[(b)] (c) or (4)(b)(i) [is] may not be effective unless it contains instructions to
the policyholder for applying for insurance through the available risk-sharing plan.
(8) There is no liability on the part of, and no cause of action against, any insurer, its
authorized representatives, agents, employees, or any other person furnishing to the insurer
information relating to the reasons for cancellation or nonrenewal or for any statement made or
information given by them in complying or enabling the insurer to comply with this section unless
actual malice is proved by clear and convincing evidence.
(9) This section does not alter any common law right of contract rescission for material
misrepresentation.

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