6.14 Cancellation

• Jurisdiction: Arizona

The Arizona legislature has enacted detailed requirements and conditions governing an insurance company's rights to cancel or not renew automobile liability insurance policies. These requirements and conditions are delineated in A.R.S. Sec. 20-1631. Every automobile policy issued in Arizona must contain the limitations required by A.R.S. Sec. 20-1631. Subsection D of this statute provides:

D. An insurer shall not issue a motor vehicle insurance policy in this state unless the cancellation and renewal conditions of the policy or the endorsement on the policy includes the limitations required by this section. After a policy issued in this state has been in effect for sixty days, or if the policy is a renewal, effective immediately, the company shall not exercise its right to cancel or fail to renew the insurance afforded under the policy unless:

1. The named insured fails to discharge when due any of the obligations of the named insured in connection with the payment of premium for this policy or any installment of the premium.

2. The insurance was obtained through fraudulent misrepresentation.

3. The name insured, any person who resides in the same household as the named insured and customarily operates a motor vehicle insured under the policy or any other person who regularly and frequently operates a motor vehicle insured under the policy:

(a) Has had his or her driver's license suspended or revoked during the policy period.

(b) Becomes permanently disabled, either physically or mentally, and such individual does not produce a certificate from a physician testifying to such person's ability to operate a motor vehicle.

(c) Is or has been convicted during the thirty-six months immediately preceding the effective date of the policy or during the policy period of:

(i) Criminal negligence, resulting in death, homicide or assault, arising out of the operation of a motor vehicle.

(ii) Operating a motor vehicle while in an intoxicated condition or while under the influence of drugs.

(iii) Leaving the scene of an accident.

(iv) Making false statements in an application for a driver's license.

(v) Reckless driving.

4. The insurer is placed in rehabilitation or receivership by the insurance supervisory official in its state of domicile or by a court of competent jurisdiction or the director has suspended the insurer's certificate of authority based on its financially hazardous condition.

5. The named insured, any person who resides in the same household as the named insured and customarily operates a motor vehicle insured under the policy or any other person who regularly and frequently operates a motor vehicle insured under the policy uses a motor vehicle rated or insured under the policy as a private passenger motor vehicle regularly and frequently for commercial purposes.

6. The director determines that the continuation of the policy would place the insurer in violation of the laws of this state or would jeopardize the solvency of the insurer.

A.R.S. Sec. 20-1631(D)(3) sets forth two different standards for named insureds and others.^[198] The statute provides that the policy may be canceled for the prohibited actions of a named insured or a member of his household who customarily operates an insured vehicle. The test for any other person is whether he regularly and frequently operates an insured vehicle.

The term "customarily" has a different meaning within the statute than "regularly and frequently."^[199] "Customarily" has been judicially...