31A-21-305 - Cancellation upon request of a premium finance company.
31A-21-305. Cancellation upon request of a premium finance company.
(1) As used in this section:
(a) "Insurance premium finance company" means a person engaged in the business ofentering into premium finance agreements.
(b) "Premium finance agreement" means an agreement by which an insured orprospective insured promises to pay to an insurance premium finance company the amountadvanced or to be advanced under the agreement to an insurer or to an insurance producer inpayment of premiums on an insurance policy, together with a service charge, an interest charge,or both.
(2) When a premium finance agreement contains a power of attorney or other authorityenabling the insurance premium finance company to cancel any insurance policy listed in theagreement, the following applies:
(a) Not less than 10 days' written notice of the intent of the insurance premium financecompany to order cancellation of the insurance policy, unless the policyholder's default is curedprior to the date stated in the notice, shall be delivered or mailed first-class to the policyholder. The insurance producer indicated on the premium finance agreement shall also be given the samenotice.
(b) Pursuant to the power of attorney or other authority, evidence of which is delivered tothe insurer, the insurance premium finance company may order cancellation on behalf of theinsured. This cancellation shall be effected by mailing to the insurer a written notice statingwhen the cancellation is effective. The insurance policy shall be cancelled as if the notice ofcancellation had been given by the insured, but without requiring the return of the insurancepolicy. The insurance premium finance company shall also send a copy of the same notice to theinsured at his last known address and to the insurance producer indicated on the premium financeagreement.
(c) Where statutory, rule, or contractual restrictions provide that the insurance policy maynot be cancelled unless notice is given to a governmental agency, mortgagee, or other third party,the insurer shall give the prescribed notice on behalf of itself or the insured to that governmentalagency, mortgagee, or other third party within a reasonable time after the day it receives thenotice of cancellation from the premium finance company. When any statutory, rule, orcontractual restrictions require the continuation of insurance beyond the effective date ofcancellation specified by the premium finance company, the insurance is limited to the coveragerequired by those restrictions and to the persons those restrictions are designed to protect.
(d) Whenever a financed insurance policy is cancelled, the insurer shall return anyunearned premiums due under the insurance policy to the insurance premium finance companyfor the account of the insured, and this action by the insurer satisfies the insurer's obligationsunder the insurance policy which relate to the return of unearned premiums. If the crediting ofreturn premiums to the account of the insured results in a surplus over the amount due from theinsured, the premium finance company shall refund that excess to the insured if it exceeds $5.
(3) No filing of the premium finance agreement or recording of a premium financetransaction is necessary to perfect the validity of the agreement as a secured transaction as againstcreditors, subsequent purchasers, pledgees, encumbrancers, successors, or assigns.
Amended by Chapter 298, 2003 General Session