Notice of Cancellation Gaps
Notice of Cancellation refers to an insurance company’s obligation to inform the certificate holder if the insured cancels an insurance policy.
Because vendors must submit evidence of insurance to perform work on a property and tenants must do the same to rent space in a building, it may be tempting for either one to purchase the requisite insurance, submit a COI proving it to the property manager, and then cancel the insurance policy afterwards to avoid paying further premiums.
This dishonest behavior creates a risk for the landlord that no insurance is actually in place when it is required to be. If an accident were to happen and the vendor or tenant is underinsured, an expensive lawsuit could befall the landlord.
For this reason, landlords often require a provision stipulating that 30 days’ advance written notice be given to the certificate holder in the event that a policy is cancelled. This is an assurance that if coverage is going to lapse for a vendor or tenant, the landlord will find out ahead of time and have a chance to respond accordingly.
Missing 30 Days’ Notice of Cancellation
A 30 Days’ Notice of Cancellation provision can either be evidenced in the form of a separate endorsement or else in the Description of Operation of a COI as in the example below.
If there is no space to write it into the Description of Operation, it can be mentioned on an Additional Remarks (ACORD 101) page.
Missing 30 Days’ Notice of Cancellation endorsement
Sometimes just noting on a COI that an insurance policy has a 30 Days’ Notice of Cancellation provision is not enough. Even if the broker writes in the Description of Operations that there is a 30 Days’ Notice of Cancellation provision, this amounts to nothing more than a promised courtesy that is not legally binding or enforceable. In practice, insurers often fail to notify the Certificate Holder when policies do lapse.
For this reason, landlords’ managers often require vendors and tenants to submit an actual endorsement for the 30 Days’ Notice of Cancellation. This is a separate page that effectively amends the insurance policy and creates a legally enforceable obligation for the insurance company to notify the Certificate Holder 30 days before coverage lapses. The insured may have to pay an additional fee for the insurer to produce such an endorsement.
These endorsements can look many different ways depending on the insurers, but you can see a few common examples below.