Oregon Cancellation and Nonrenewal Laws
Oregon limits when an insurer may end a policy before it expires, and how much notice it must give before it refuses to renew one. The rules differ by line. Commercial liability policies and property policies (including homeowners) each have their own statute, with their own permitted reasons and notice periods. This chapter takes them in turn.
A few terms carry across both:
- Cancellation ends a policy before its expiration date
- Nonrenewal is the insurer’s refusal to renew a policy at its expiration date
- Nonpayment of premium includes failing to pay an installment, whether the premium is owed to the insurer, to its producer, or under a premium finance plan
Oregon laws, regulations and required provisions: cancellation and nonrenewal
Commercial liability (ORS 742.700 to 742.710)
Grounds for cancellation (ORS 742.702). Once a commercial liability policy is in force, an insurer may cancel it before expiration only for one or more of these reasons:
- Nonpayment of premium
- Fraud or material misrepresentation made by or with the knowledge of the named insured in obtaining the policy, continuing it, or presenting a claim under it
- A substantial increase in the risk of loss after the coverage was issued or renewed, including an increase in exposure due to rules, legislation or court decisions
- Failure to comply with reasonable loss control recommendations
- A substantial breach of contractual duties, conditions or warranties
- A determination by the Director that continuing the line or class of business will jeopardize the insurer’s solvency or put it in violation of the law
- Loss or decrease of reinsurance covering the risk
- Any other reason the Director approves by rule
Notice of cancellation. Cancellation is not effective until at least 10 working days after the insured receives a written notice. The notice states the effective date and the reason for cancellation, and tells the insured about the right to a hearing. Within 30 days after receiving the notice, the insured may ask for a hearing before the Director, where the insurer bears the burden of proving the reason it gave (ORS 742.704).
Renewal on different terms, and nonrenewal (ORS 742.706).
- When an insurer renews on less favorable terms or at higher rates, the new terms take effect at renewal only if the insurer gives the insured, and the producer, 45 days’ written notice. Without that notice, the insured may cancel the renewal policy within 45 days, paying earned premium pro rata at the lower of the old or new rate. (The notice is not required for a change filed with the Director that applies to the whole line or class, or for a premium increase based on a change in the risk.)
- Nonrenewal is not effective until at least 45 days after the insured receives written notice of it. If the insurer then extends the policy for 90 days or less, no second notice is needed
- A policy written for longer than one year with a guaranteed premium may not be nonrenewed, or have its premium raised, during that term
Proof of notice (ORS 742.708). A post office certificate of mailing to the named insured’s last known address is conclusive proof that the insured received the notice on the third calendar day after the date on the certificate.
What these rules do not cover (ORS 742.710). They do not apply to:
- A commercial liability policy that has been in effect less than 60 days and is not a renewal
- Policies subject to the personal auto rules (ORS 742.560 to 742.572)
- Workers’ compensation insurance
- Any assigned risk program
- Excess liability policies, including commercial umbrella and excess umbrella policies
Property (ORS 742.224, 746.686, 746.687)
The fire policy’s cancellation provisions (ORS 742.224). Every fire insurance policy must provide that:
- The insured may cancel at any time. The insurer then refunds the paid premium above the customary short rate for the time the policy was in force
- The insurer may cancel at any time by giving 10 days’ written notice for nonpayment of premium, or 30 days’ notice for any other reason. The refund is the premium above the pro rata premium for the time expired, and if it is not sent with the notice, it is refunded on demand
- When fire coverage is part of a package policy that includes commercial liability insurance, cancellation of the policy follows the commercial liability rules in ORS 742.702
Homeowner policies: cancellation (ORS 746.687). Once a homeowner policy has been in effect for 60 days (or immediately, if it is a renewal), an insurer may cancel it before expiration only for:
- Nonpayment of premium
- Fraud or material misrepresentation affecting the policy or the presentation of a claim
- Violation of the policy’s terms and conditions
- A substantial increase in the risk of loss after the coverage was issued or renewed
- A Director’s determination that continuing the line or class will jeopardize the insurer’s solvency or put it in violation of the law
The written notice states the effective date and the reasons, and is mailed or delivered to the policyholder:
| Reason | Notice |
|---|---|
| Nonpayment, or fraud or material misrepresentation | At least 10 days before cancellation |
| Any of the other permitted reasons | At least 30 days before cancellation |
Homeowner policies: nonrenewal. The insurer must mail or deliver a notice of renewal or nonrenewal at least 30 days before the policy expires. Proof of mailing to the address in the policy is sufficient proof of notice.
The first 60 days. The limits on cancellation do not apply to a new homeowner policy in effect fewer than 60 days. But even then, the insurer may not cancel, raise the rate, or change the terms during the current policy term because a claim was filed during those 60 days. At renewal, that claim may be treated like any other.
Claims and inquiries (ORS 746.686). When a consumer applies for, or renews, a homeowner policy, the insurer may not use these to decide whether to issue or renew it, or to set its rates or other terms:
- A claim with a date of loss more than five years earlier (except to give a discount)
- At application (not at renewal), a claim on the property from before the consumer bought it, if the consumer shows, to the insurer’s satisfaction, that the damage was fully restored and its underlying cause repaired, replaced or eliminated
The consumer’s first claim within the past five years may not be used to decide whether to issue or renew the policy, although it may still affect the rate.
A consumer’s inquiry about coverage, or about how the claim process works, may not be used against them if it is not a claim. An insurer or producer may ask whether the consumer is making a claim, and may rely on the consumer’s answer.
Lesson summary
- A commercial liability policy may be canceled only for the reasons listed in ORS 742.702, with at least 10 working days’ notice after the insured receives it. The insured may request a hearing within 30 days, where the insurer bears the burden of proof.
- Commercial liability nonrenewal, or renewal on worse terms, requires 45 days’ notice (ORS 742.706). A certificate of mailing proves receipt on the third day.
- The commercial liability rules do not apply to new policies under 60 days, personal auto, workers’ compensation, assigned risk or umbrella and excess policies.
- A fire policy lets the insured cancel at any time for a short rate refund. The insurer cancels with 10 days’ notice for nonpayment or 30 days’ otherwise, with a pro rata refund (ORS 742.224).
- A homeowner policy in force 60 days may be canceled only for nonpayment, fraud, violation of terms, a substantial increase in risk, or insurer solvency, with 10 or 30 days’ notice. Nonrenewal takes 30 days’ notice (ORS 746.687).
- A homeowner insurer may not use claims over five years old or a mere inquiry to underwrite or rate, and may not use the first claim in five years to decide whether to issue or renew (ORS 746.686).