Insurance Cancellation Notices Part 2: Endorsement Enforcement
In "Insurance Cancellation Notices Part 1: Is Notice Guaranteed?" we agreed that we should collect Notice of Cancellation (NOC) endorsements on our vendor and/or contractors important insurance policies. How do we go about making that happen?
First, make sure that your insurance requirements include specific language requiring the vendor or contractor’s insurer provide you with notice of cancelation, non-renewal or non-payment of premium.
Second, you will want to include language that the vendor or contractor is required to provide you with a copy of the NOC endorsement providing the required notice.
Finally, you will want to obtain a copy of the NOC endorsement to verify that the language on the endorsement provides the desired notice.
Do I want to go through the work to obtain a NOC endorsement from my vendors and contractors insurers?
It depends on many factors including the size of the job, the nature of the work, where the work is being performed, are subcontractors being used and so on. This becomes a discussion you will need to have with your procurement, legal and insurance professionals.
Can I get NOC endorsements along with my vendor's Certifcates of Insurance?
Again, this depends on many of the factors outlined above, but in general, yes NOC endorsements are available on almost all lines of insurance and from almost all insurers.
A couple of key issues include:
- How motivated are you to insert the necessary NOC language into your contracts and agreements;
- How much leverage do you have to keep the language in without diluting it;
- Will you collect copies of the NOC endorsements to make sure they are issued correctly and the desired notice will be provided. Some of this work can be coordinated with your insurance professionals.
Why might obtaining a 30 day Notice of Cancellation be difficult?
In some cases, an insurance policy may be written by a Surplus Lines insurer, some such insurers may not have the administrative ability or desire to issue and track NOCs or (for their efforts) they may charge relatively high fees (in some cases more than $100) for each NOC endorsement making implementation less palatable.
In other cases, it may be an insurer’s policy to avoid NOC endorsements, although this is rarer in a soft market cycle. Finally, some insurance policies may require payment in full making an NOC unnecessary, for instance, event insurance.
Historically, NOC endorsements were issued manually because insurer technology was behind relative to the business community and insurers had a concern about meeting the commitment of an NOC. This does seem to be changing as the insurance industry embraces technology and insurers are looking for ways to differentiate themselves in the marketplace.
Once the Notice of Cancellation Endorsement is in place then it is important to make sure every other aspect of your vendor's insurance is compliant with an efficient certificate of insurance tracking strategy. Download "The 9 Fundamentals of Vendor Insurance Review" to make sure you are correctly and effectively tracking certificates of insurance.
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