As one response to the COVID-19 pandemic, state insurance regulators including, inter alia, the insurance departments for California, Georgia, New York and Pennsylvania, have issued bulletins regarding the cancellation of insurance policies for non-payment of premium. Generally such guidance encourages insurance companies to refrain from cancelling insurance policies for reason of non-payment of premium and/or to extend the applicable grace period for the payment of overdue premium. However, the states have differed in their approaches on this issue in certain key respects.
Differing approaches
The majority of state insurance regulators have chosen only to request that insurers refrain from cancelling insurance policies for non-payment of premium or otherwise extend grace periods for the payment of overdue premium. However, certain states such as Arkansas, Georgia, Oregon and Washington have framed their respective bulletins as directives or emergency orders – i.e., that insurers which are in-scope are directed to undertake certain actions. For example, on March 25, 2020, the Washington Insurance Commissioner issued an order requiring all property and casualty insurers in the state to provide grace periods for payment of premium and to stop cancellations of insurance policies for non-payment of premiums until at least May 9, 2020
Guidance
Most states have directed their guidance to all authorized insurers and, with respect to California and Delaware, any non-admitted insurers doing business in-state. In contrast, Georgia, for example, has chosen to focus on property and casualty insurers issuing commercial insurance policies (including, specifically, business interruption insurance) and health insurers specifically. As a result, insurers are faced with a patchwork of requests. We note that the operational challenges of implementing such state-by-state guidance was discussed at the recent NAIC COVID-19 Special Session (see https://www.clydeco.com/insight/article/naics-special-session-regarding-covid-19).
Further, states have differed with respect to the nature of the accommodation to policyholders that insurers are being asked to make. For example, Delaware, Georgia (with respect to health insurance only) and New Mexico have advised that cancellations for non-payment of premium should be suspended either for the duration of the declared state of emergency or until further notice, whereas Arkansas has instead indicated that such an accommodation to policyholders should be extended only during a sixty (60) day moratorium which begins at the request of a policyholder who has been diagnosed with or tested positive for COVID-19.
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