If you participate in a volunteer program and that allows the government to take over your hotel during the COVID-19 pandemic, can your insurance company cancel your policy? The answer is yes, they MAY, or they may not, and you are required to let them know of any material change in operations. Many carrier policy forms are ISO (Insurance Services Office)-based, and within that form are endorsements for cancellation and non-renewal. There are many parts to commercial insurance coverage: Property, General Liability, Crime, Equipment Breakdown and more.
A commercial policy can have multiple lines of coverage combined into one policy (often referred to as a package), or lines of coverage can each be on their own standalone policy (often referred to as monoline). Usually, if you have the same carrier on multiple lines of coverage, it’s in a package. In either situation, there will be part of the policy that is referred to as Common Policy Conditions. Please keep in mind that a package policy will have Common Policy Conditions that will refer to all lines of coverage in that package, while monoline policies will each have their own Common Policy Conditions. Then, because it’s not confusing enough yet, there are often endorsements to the Common Policy Conditions. These endorsements alter the policy to meet state and other requirements, as well as shape the policy to be more specific to what the carrier intends it to be. You will more than likely find the cancellation terms in the Common Policy Conditions, and changes to the cancellation terms in endorsements following the Common Policy Conditions. Somewhere in the cancellation policy you will find wording to the effect of: the policy can be canceled for a change in the activities or property which result in a materially added, increased or changed risk. Basically, if you change what the carrier agreed to insure, they have the right to cancel. Look at it from the carrier point of view. If you were a carrier and agreed to insure a hotel for hotel operations, how would you feel if it was all of a sudden a hospital? You agreed to the hotel policy because you are comfortable with, and have a good understanding of, hotel operations. Now you are insuring an operation you don’t know a lot about, and have very little information on. You have millions of dollars at risk on something you never intended to cover.
Now, cancellation is not for sure. Larger carriers may be able alter the policy to properly cover the new risk. Some carriers might cancel your policy and write a new one with more appropriate coverage. If your carrier cancels your policy, they will probably give you 10-30 days to find coverage elsewhere. Bottom line is, the carrier can cancel your policy, but you will have other options available, and won’t be stuck without coverage. Work with your broker as soon as you are aware of the possibility that your hotel could be turned over to a government agency. It’s best if these changes are not last-minute and rushed.
If you have any questions, feel free to reach out to us at G4 Risk Solutions.
G4 Risk Solutions