806 KAR 20:010. Declination, cancellation, and nonrenewal of property and casualty insurance.

 

      RELATES TO: KRS 304.12-020, 304.14-120, 304.14-210, 304.20-160, 304.20-300-304.20-350, 304.30-110

      STATUTORY AUTHORITY: KRS Chapter 13A, 304.2-110, 304.30-070

      NECESSITY, FUNCTION, AND CONFORMITY: KRS 304.2-110 provides that the Executive Director of Insurance may make reasonable administrative regulations necessary for or as an aid to the effectuation of any provision of the Kentucky Insurance Code. KRS 304.30-070 provides that the Executive Director of Insurance may make reasonable administrative regulations necessary for the effectuation of any provision of KRS Chapter 304.30. This administrative regulation provides certain guidelines for the declination, cancellation, and nonrenewal of property and casualty insurance pursuant to KRS 304.20-300 to 304.20-350.

 

      Section 1. Application of KRS 304.20-300 to 304.20-350 to Property and Casualty Insurance Policies. KRS 304.20-300 to 304.20-350 apply to declinations, cancellations, nonrenewals, and twenty-five (25) percent premium increases of property and casualty insurance policies described in KRS 304.20-300 delivered, issued for delivery, or renewed after July 15, 1986.

 

      Section 2. Notice of Reason for Declination, Cancellation, or Nonrenewal. (1) In every instance where KRS 304.20-300 to 304.20-350 require a reason for declination, cancellation, or nonrenewal to be given to an applicant or an insured, the reason given shall be a statement reasonably calculated to inform the applicant or insured of the reason for the declination, cancellation, or nonrenewal. The insurer shall provide specific grounds for nonrenewal, and shall not rely on underwriting reasons in general.

      (2) Subsection (1) of this section shall not apply where a risk is declined or a policy terminated where there is specific information available for review by the Executive Director of Insurance that the insured has contributed to a loss by arson or fraud. A more general reason may be given to the insured in this situation.

      (3) The fact that the reason or reasons for declination, cancellation, or nonrenewal have been obtained through an investigative consumer report subject to the Fair Credit Reporting Act, 15 USC 1681 et seq., shall not relieve the insurer from the requirement of notifying the insured of the declination, cancellation, or nonrenewal pursuant to KRS 304.20-300 to 304.20-350. However, any insured wishing to learn the substance of an investigative consumer report shall be directed to contact the consumer reporting agency and follow the procedures contained in the Fair Credit Reporting Act.

      (4) A reason for cancellation or nonrenewal which does not appear in the notice of cancellation or nonrenewal shall not be a basis for cancellation or nonrenewal.

 

      Section 3. Cancellation for Nonpayment of Premium Under Insurance Premium Finance Company Contracts Controlled by KRS Chapter 304.30. (1) If an insurance premium finance company exercises its power of attorney to cancel a policy pursuant to KRS 304.30-110, that cancellation is considered to be a cancellation at the request of the insured and shall not be subject to KRS 304.20-300 to 304.20-350.

      (2) The phrases "premium finance plan" and "extension of credit" in KRS 304.20-310(2) refer to extensions of credit to pay for insurance which are made by insurers or other entities not subject to KRS Chapter 304.30. (13 Ky.R. 462; Am. 644; eff. 10-2-86; 15 Ky.R. 262; eff. 9-2-88; 27 Ky.R. 1344; 1810; eff. 1-15-2001; TAm eff. 8-9-2007.)