L Squared has notice a disturbing trend with late renewals and non-pay cancellations. The insurance coverage cancellation frequency for premium non-payments and lapsed coverage is on the rise. Partly due to insured staff turnover, partly due to lack of funds. Regardless of the reason not renewing or allowing coverage cancellations for not making payments results in coverage loss. Counting on an insurer backdating coverage or reinstating a cancelled policy may be wishful thinking. Insurers increasing refuse to put coverage back inforce.
Coverage gaps open firms up to uninsured claims. Whether it is Business Auto, Business Owners Coverage, Professional Liability Insurance or Workers Compensation letting your insurance coverage lapse can be costly.
With Business Auto, Business Owners and Workers Compensation occurrence policies letting the coverage lapse can leave permanent coverage gaps. Given Murphy’s Law this gap might exposure your assets to uninsured claims. Auto accidents, fires and worker injuries can happen at the worst possible time. Plus, your premiums might increase once you decide to get coverage inforce again. Insurers do not like insureds that let their coverage lapse.
Insurers normally report workers compensation coverage lapses directly to state workers compensation bureaus. The state work comp bureau may fine businesses for not having workers compensation in place.
Letting claims-made insurance lapse exposes the firm past acts. With lapsed claims-made coverage and no extended reporting period endorsement in place coverage ceases for past acts. Permanent loss of past acts coverage may occur. While it is sometimes possible to restore prior acts coverage it is expensive. There could be claims lurking that you know nothing about popping up 2 or 3 years later. Because of the nature of claims-made coverage there is no insurer to report the claim to or to provide a defense. These uninsured losses are devastating.
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Lee Norcross, MBA, CPCU
Managing Director, CEO
(616) 940-1101 Ext. 7080