Q. We have a GL audit that we cannot collect. The insured no longer carries GL but we still write other lines of insurance for them. Can we cancel the other policies for non-payment of the audit to the agency?
A. No, each policy stands on its own. If an insured has an uncollected balance on audits, expired or canceled policies, and the agent writes other insurance for the same insured, monies collected or return premiums must be applied to the applicable policy.
Existing insurance may not be canceled for nonpayment of premium when the insured has renewed coverage with the promise to pay the old balance but has paid only for the renewed policies. If the insurance in force is paid, it cannot be canceled for nonpayment due to a past due balance on other policies.
However, the Workers’ Compensation Division of the Texas Department of Insurance does not object to an insurance company canceling a current workers’ compensation policy for failure to pay premium due on a prior policy written by the same company. They would require a 30-day notice of the cancellation.
Also relating to unpaid balances is the question of holding claim checks for claims where the policy premium has not been paid. An agent may not hold a claim check due to an unpaid balance and a company cannot refuse to pay a covered claim on a current, in-force policy because premium is owed.