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Q: Can insurance cancellation pose a threat to public safety?

Mon Nov 11th, 2013 on     Insurance Claims,    

An insurance company’s unusual move may have put it smack in the middle of a local political skirmish. This is not happening in Florida, but the situation brings up interesting questions about insurance coverage of public entities and policy cancellations in general.

This is all taking place in a small town — population no more than 1,500 — that is part of a major metropolitan area. On Oct. 21, the insurer notified the town council that it would be canceling the police department’s liability policy effective Nov. 19. The policy covered both the officers (including the chief) and their vehicles. Without the insurance, the town would be on the hook for lawsuits against the department and the individual officers, not to mention any accidents involving official police vehicles.

Without the insurance, then, the town cannot risk putting its police force to work. Town officials have said that they will suspend all police operations — from answering the phone to patrolling the neighborhood, the police will be barred from protecting and serving their community.

The chief, five officers and two clerks make up the entire police department. The premium runs about $30,000 per year. The insurer is not a private carrier; it is a self-funded insurance pool run by the state’s association of municipalities. However it’s organized, the insurer follows the same underwriting principles as every other liability insurance company.

If the notice period seems short — just four weeks — it may be because notices of cancellation in Florida must be sent out 45 days in advance. Notices must also include the reason for the cancellation.

It’s important to note, too, that property/casualty insurers can only cancel for a few reasons. We’ll get into the general rule as well as the explanation given the town in our next post.


The Advocate, “Sorrento struggles with loss of insurance for police,” Kate Stevens, Nov. 9, 2013

The Advocate, “Sorrento police chief fighting efforts to oust him,” David J. Mitchell, Oct. 31, 2013

The Advocate, “Sorrento may ask Ascension sheriff for law enforcement,” David Mitchell, Oct. 27, 2013

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