In 1993 I worked for Earl Clemants, the owner of American Agency in St. Louis Park. One day, while looking through his bookcase, I stumbled across a three-ring binder that he had purchased from the Minnesota Bookstore that contained all Minnesota insurance statutes. With his permission, I borrowed the book and never returned it. I am grateful that Minnesota insurance statutes are now available online and that I always have the latest copy, yet for sentimental reasons I have not been able to part with the book.
Licensed agents and their staff must know the statutes and administrative rules pertaining to homeowner cancellations and nonrenewals. Underwriters have territory assignments that often span multiple states. Some are unfamiliar with Minnesota statute and inadvertently send notice of nonrenewal on policies for which they are not within their legal right. Typically, a phone call or email accompanied by reference to the statute will overturn the nonrenewal. If the matter cannot be resolved, the insured always has the right to file a complaint with the Minnesota Dept. of Commerce, and the contact information should be contained in the notice.
In this article we will review statutes and administrative rules that address under what conditions a homeowner policy may be non-renewed. Knowing this information will allow you to better advocate on behalf of your existing clients and win over new ones.
What is Homeowner’s Insurance?
Most agents would answer this question by including home, tenant homeowner and condominium policies. The statute broadens “Homeowner’s Insurance” to include mobile/manufactured home policies and dwelling owner policies. This is an important first step in understanding what types of policies the nonrenewal laws apply to.
65A.27 DEFINITIONS.
“Homeowner’s insurance” means insurance coverage, as provided in section 60A.06, subdivision 1, clause (1) (c), normally written by the insurer as a standard homeowner’s package policy or as a standard residential renter’s package policy. This definition includes, but is not limited to, policies that are generally described as homeowner’s policies, mobile/manufactured homeowner’s policies, dwelling owner policies, condominium owner policies, and tenant policies.
What is a Policy Nonrenewal?
We all recognize the dreaded legal notice advising policyholders that their insurance is being cancelled as of the expiration date and outlining the reasons. Minnesota Administrative Rule 2880.01 defines “nonrenewal” and it includes not only the ceasing of coverage at expiration, but also deductible increases and coverage reductions, unless all policyholders are subject to the same coverage alterations. Carriers are not permitted to adjust coverage, deductibles or internally change writing companies to a more expensive tier for a single policyholder unless there are grounds for the lawful nonrenewal of coverage.
“Nonrenewal” means an action taken by an insurer on an existing policy, at the end of the policy period to:
A. terminate the policy;
B. reduce the policy’s coverage, unless all the existing policies and those policies to be accepted as new business by the insurer in this state will have the same coverages;
C. increase the policy’s deductible, unless all existing policies and those policies to be accepted as new business in this state, by the insurer, will provide the same or higher deductible or
D. transfer a named insured from one rating plan to another within the same company, or from one company to another within a group of insurance companies, if the transfer results in a higher premium. A surcharge applied to a premium for a condition which increases the potential for loss, or the deletion of a claims free discount do not constitute a transfer of rating plans.
E. A policy of homeowners insurance written for a term longer than one year is not subject to nonrenewal until the end of the policy term even if the insurer can rerate the policy annually.
Grounds for “Nonrenewal” – Administrative Rule 2880.02
Both Administrative Rule 2880.02 and Statute 65A.29 specifically prohibit weather related claims from being the reason a policy is non-renewed.
Statute 72A.20 Methods Acts and Practices Defined as Unfair
Policies cannot be nonrenewed or rejected solely because of:
• Geographic location
• Age of Primary Structure
• Inquiry of a Hypothetical Claim
• And
More What are the Grounds for Nonrenewal?
Administrative Rule 2880.02 is extensive and should be read in its entirety. It includes many reasons that a reasonable person might expect. If an insured is using their premises for an illegal activity, are delinquent on property taxes or refuse to remove known hazards, a nonrenewal of coverage will be permitted. The question most agents ask is what losses can be included.
If the insured has two or more losses during the 3-year experience period, but not to include
1. Losses caused by natural causes including but not limited to lightning, wind, hail
2. Losses resulting in no payment
3. Losses for which the insurer recovers 80 percent or more of the payment through subrogation
Legal “Nonrenewal” Notice Requirements
If the policy fits the description of “homeowner’s insurance” and the company is cancelling the policy for a permitted reason, as required in Administrative Rule 2880.02 and Statute 65A.29 the nonrenewal notice must be sent to the policyholder. It must notify the policyholder that they have the right to file a complaint with the Minnesota Department of Commerce and that coverage may be available to them through the Minnesota Fair Plan.
No insurer shall refuse to renew, or reduce limits of coverage, or eliminate any coverage in a homeowner’s insurance policy unless it mails or delivers to the insured, at the address shown in the policy, at least 60 days’ advance notice of its intention. The notice must contain the specific underwriting or other reason or reasons for the indicated action and must state the name of the insurer and the date the notice is issued.
Proof of mailing this notice to the insured at the address shown in the policy is sufficient proof that the notice required by this section has been given.
Policy Nonrenewal – Carriers No Longer Writing Business in Minnesota
Carriers making a choice to no longer write coverage in Minnesota or homeowner’s coverage in general are sending nonrenewal notices. Agents are challenged to find replacement coverage not only because of the difficult market we are faced with, but for those policyholders that find themselves with unrepaired damage stemming from open claims. Changing carriers when a home has pre-existing damage is difficult if not impossible to do. For this reason, the use of excess and surplus lines carriers and the Minnesota Fair Plan is expanding in Minnesota.
Finally
For your convenience links to the statutes and rules referenced are provided. Knowing Minnesota statutes that regulate policy cancellation and nonrenewal of all lines of business is important. This knowledge needs to be shared and incorporated into your agency training program. If your agency is small and does not have a specific training department, consider courses offered by insurance education providers that include this type of basic training. The Minnesota Department of Commerce is a great resource. If you or a policyholder has an inquiry about a policy or consumer protection, consider giving them a call. (651) 539-1600
Reference Documents
Definition of Homeowner’s Policy MN Statute Homeowner’s Definition of Policy Types
Administrative Rule 2880 MN Admin. Rules – Homeowner Grounds for Nonrenewal
MN Statute 65A.29 Homeowner’s Cancellation, Nonrenewal, Refusal to Write
MN Statute 72A.20 (Sub 13) Homeowner Rate & Coverage Discrimination
