8.7 Cancellation and Renewal

• Library: Insurance Law in Virginia (Virginia CLE) (2020 Ed.)

8.7 CANCELLATION AND RENEWAL

8.701 Introduction. Disputes over the cancellation or renewal of a motor vehicle insurance policy usually arise following an accident or loss

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purportedly covered by the policy. The insurer or insured often files an action seeking a declaratory judgment as to (i) whether a policy was in effect and (ii) whether there was coverage for the accident or loss in question. Sometimes the insured files an action seeking damages for breach of contract by the insurer, and the insurer defends on the grounds of cancellation or nonrenewal of the policy.

The rights and obligations of the parties with respect to cancellation or renewal of a motor vehicle insurance policy issued or delivered in Virginia are generally controlled by statute. Applicable insurance statutes are considered "as much a part of the policy as if incorporated therein." ²⁷⁷ The applicable statutes control in the event of any conflict between the provisions of the policy and statutes. ²⁷⁸ Any party seeking to cancel a policy must strictly comply with the statutes. ²⁷⁹

Whether a cancellation complies with the statute is a question of law for the court rather than the jury. ²⁸⁰ The party asserting cancellation as a defense has the burden of proving effective cancellation in compliance with the statute. ²⁸¹ If the insured has agreed to conduct business with the insurer by electronic means, section 38.2-325(A) permits a notice of the cancellation of a policy to be delivered in this manner. Section 38.2-325(E) states that the named insured is solely responsible to notify the insurer of any change in his or her electronic address.

8.702 Applicable Statutes.

A. In General. The statutes governing cancellation and renewal of motor vehicle insurance policies are designed to prevent an insurer from canceling or refusing to renew liability insurance coverage for improper reasons and to require advance notice to the insured of the reasons for the insurer's action and possible availability of other insurance.

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B. Section 38.2-231 of the Virginia Code. Section 38.2-231 applies to an insurer's cancellation and refusal to renew motor vehicle insurance policies insuring a "business entity," which is defined to include corporations, individuals, partnerships, unincorporated associations, the Commonwealth of Virginia and its political subdivisions, and other local governmental authorities. ²⁸²

By its terms, the statute does not apply (i) to policies issued through the Virginia Automobile Insurance Plan (assigned risks), policies providing only excess insurance, or other contracts which may only incidentally provide insurance on motor vehicles ²⁸³ or (ii) any policy in the event the named insured or its attorney-in-fact has notified the insurer or its agent that the insured wishes that the policy be canceled or not renewed, or fails to accept an offer to renew before the date of expiration. ²⁸⁴

C. Section 38.2-2212 of the Virginia Code. Section 38.2-2212 applies to an insurer's cancellation of and refusal to renew liability and uninsured motorist coverages under personal or family motor vehicle insurance policies. It provides that no cancellation or refusal to renew those policies will be effective unless the insurer delivers notice to the named insured. ²⁸⁵ This section specifically applies to policies issued or delivered in Virginia and insuring as the named insured "one individual or husband and wife who are residents of the same household," and under which the insured vehicle is either a private passenger, station wagon, or motorcycle type that is not used commercially, rented to others, used as a public or livery conveyance (excluding car pools), or any other four-wheeled motor vehicle not used in the occupation, profession, or business, other than farming, of the insured, or as a public or livery conveyance or rented to others. ²⁸⁶

By its terms, this section does not apply:

1. To any policy issued through the Virginia Automobile Insurance Plan (assigned risks), any policy covering the operation of a garage, sales agency, repair shop, service station, or public parking place, any policy providing only excess insurance, or any other

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	contract that may only incidentally provide insurance on motor vehicles; 287
2.	If the insurer or its agent has manifested its willingness to renew by issuing or offering to issue a renewal policy, certificate, or other evidence of renewal or has manifested its willingness to renew in writing to the insured; 288
3.	If the named insured or his attorney-in-fact has notified the insurer or its agent that the insured wishes that the policy be canceled or not renewed, or fails to accept an offer to renew prior to the date of expiration; 289
4.	To any motor vehicle insurance policy that has been in effect less than 60 days when the termination notice is mailed or delivered to the insured, unless it is a renewal policy; 290
5.	If an affiliated insurer has manifested willingness to provide coverage at a lower premium than would have been charged for the same exposure on the expiring policy; 291 or
6.	To any insurer that only issues policies to one class or group of persons engaged in any one particular profession, trade, occupation, or business. 292

D. Section 46.2-479 of the Virginia Code. Section 46.2-479 applies to policies that have been certified by an insurer as proof of financial responsibility required for the registration of motor vehicles and the licensing

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of certain drivers pursuant to the Motor Vehicle Safety Responsibility Act, including assigned risk policies. ²⁹³

E. Section 38.2-2208 of the Virginia Code. Section 38.2-2208 sets forth the requirements for effective written notices of cancellation or refusal to renew that are mailed or delivered electronically by an insurer to an insured pursuant to the provisions of a motor vehicle insurance policy. ²⁹⁴ Notices of cancellation or refusal to renew personal or family policies governed by section 38.2-2212 that are mailed or delivered electronically must also comply with this statute. ²⁹⁵ Notices of refusal to renew and notices of cancellation may be delivered electronically to the address provided by the named insured. ²⁹⁶

F. Section 38.2-2215 of the Virginia Code. Section 38.2-2215 specifically prohibits any insurer or agent from refusing to issue or failing to renew a motor vehicle insurance policy solely due to the age of the motor vehicle to be insured, provided the vehicle is licensed.

G. Section 38.2-508 of the Virginia Code. Section 38.2-508 prohibits unfair discrimination by any person with respect to the insurance of certain persons and risks. It prohibits an insurer from canceling or refusing to renew any type of insurance coverage solely because of blindness or mental or physical impairments of an individual unless based on sound actuarial principles ²⁹⁷ or solely because of the geographic location of the individual or risk unless such cancellation or refusal is for a business purpose that is not a mere pretext for unfair discrimination or is required by law or regulatory mandate. ²⁹⁸

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8.703 Cancellation and Refusal to Renew.

A. In General. An insurance policy is a contract and may be canceled like any other contract by mutual agreement, for valuable consideration, without regard to procedures for cancellation in the policy. ²⁹⁹ In the absence of mutual agreement, the insured or insurer has the right to terminate the contract without the consent of the other only by complying with the terms of the policy and applicable statutes. ³⁰⁰ Policies that have been "certified" as proof of financial responsibility pursuant to section 46.2-439 of the Virginia Code may not be canceled, as respects any loss or damage, by agreement of the parties after an insured has become responsible for the loss or damage. ³⁰¹

B. Definitions. The terms "cancellation" and "to cancel" are defined by statute to mean "termination of a policy during the policy period." ³⁰² The terms "renewal" or "to renew" are defined by statute to mean the issuance and delivery by an insurer of (i) a policy superseding at the end of the policy period a policy previously issued and delivered by the same insurer or (ii) "a certificate or notice extending the term of a policy" with types and limits of coverage at least equal to those contained in the superseded or extended policy. ³⁰³

C. Limitations on the Insurer's Rights to Cancel and Refuse to Renew. Subject to certain exceptions, an insurer may cancel or refuse to renew a motor vehicle insurance policy only pursuant to written notice in accordance with the policy and applicable statutes. ³⁰⁴ The statutory provisions limiting and governing the insurer's rights to cancel or refuse to renew motor vehicle insurance policies do not apply to certain policies or in certain circumstances.

Section 38.2-2212 does not apply if the insurer or its agent has manifested its willingness to renew the policy. ³⁰⁵ An insurer that sends a renewal notice has "manifested its willingness to renew the policy" and is not

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required to give notice of cancellation in compliance with section 38.2-2212 or 38.2-2208. ³⁰⁶ An insurer's offer to renew may be sent by regular mail and constitutes a "manifestation of willingness to renew" upon its mailing. The statute does not require that an insured actually receive the offer to renew. ³⁰⁷

Neither section 38.2-231 nor section 38.2-2212 applies if the named insured or his or her attorney-in-fact has notified the insurer or its agent orally, or in writing if required, of the insured's desire that the policy be canceled or not renewed; or the insured fails to accept an insurer's offer to renew before expiration of the policy; or if an affiliated insurer has offered to issue or has issued a policy with...