CL 0100–AAIS COMMERCIAL LINES COMMON POLICY
CONDITIONS
(December 2024)
Most American
Association of Insurance Services (AAIS) commercial lines policies require CL
0100–Common Policy Conditions to be attached to complete the policy.
Specifically, it is to be used with the following lines of business:
The CL 0100 contains five
conditions:
1. Assignment
2.
Cancellation
3.
Change, Modification or
Waiver of Policy Terms
4.
Inspections
5.
Examination of Books
and Records
The
policy is underwritten and issued based on the information provided by the
named insured on the policy. The insurance company will not permit that named
insured to assign the policy to another without its written permission because
the insurance company must have sufficient time to determine if the new named insured meets its eligibility criteria.
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Example 1: Afia
decides to sell her small business to Harland. She is turning over all
assets, inventory, and employees. Harland is even going to use her
accountant. Afia also agrees to turn her insurance policy over to him, but
her agent explains she does not have that option. Her insurance company will
not permit assignment, so she must cancel her policy on the transfer date,
and Harland will need to purchase his own policy. |
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Example 2: Nancy, Becky, and Lyla own a
business named NBL, LLP. Scenario 1: Their financial manager recommends
that they incorporate and change the name to NBL, Inc. No other change is
occurring, but NBL, LLP would like to assign its policy to NBL, Inc. The
underwriter reviews the request and agrees to the assignment without any
change in the policy. Scenario 2: Nancy, Becky, and Lyla want to walk away from the business, and Charlie
has offered to buy it. To make the deal happen quickly, he asks that they
assign the NBL, LLP policy to him. Because of this condition, any assignment
NBL, LLP makes is not valid and will void coverage. |
Related Court Case: Assignment of
Policy Is Not Valid Without Insurer Consent
This condition explains
how cancellations are handled. Many states require the use of a mandatory state
form in place of this cancellation condition, but this is a good starting point.
The named insured has the right to
request the insurance company to cancel the policy. This can be done in one of
two ways. The named insured can return the policy to the insurance company, or
it can simply write to the insurance company and tell it when, in the future,
the policy is to be canceled.
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Example:
Afia's policy runs from 01/01/2025 to
01/01/2026, and Afia's contract with Harland requires that the business be transferred
to him on 11/1/2025. Scenario
1: Afia writes a note to her insurance company on 9/1/2025
to cancel the policy on 11/1/2025. Cancellation will be effective on 11/01/2025.
Scenario 2: Afia forgets to notify
her insurance company about the transfer. On 12/1/2024, she received a renewal
policy dated 01/01/2025 to 01/01/2026. She immediately sends the renewal
policy back and then requests that the current policy be canceled back to
11/1/2025. The renewal is canceled flat. However, the cancellation date on the current policy will
not be any earlier than the date the insurance company receives the request. |
The insurance company can cancel by
mailing or delivering a written notice to the named insured at its last known
address. The notice must be mailed or delivered at least ten days before the
cancellation date when the reason for cancellation is nonpayment of premium.
The named insured must receive at least 30 days notice if the cancellation is
for any other reason. This notice must clearly state the date of cancellation
because it becomes the policy period's end date.
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Example: Expect the Best Insurance Company mails a notice of cancellation to Less Than Perfect
Insured on 12/15/2024 to be effective on 01/01/2025. Scenario 1: The reason for cancellation is
nonpayment of premium. The cancellation is effective 01/01/2025. Scenario 2: The reason for cancellation is an
uncooperative spirit. The cancellation cannot go into effect because the
notice period is too short. The policy continues in force. |
The named insured receives a return premium when the policy is canceled.
The return premium will be calculated in accordance with the insurance company's
rules. The cancellation is in effect even if the insured did not receive the
return premium.
Proof that cancellation notice was mailed is all that is needed to
effect cancellation. Proof that the first named insured actually received the
notice is not required.
Related Court Cases:
Cancellation Held Not Effective When Notice Addressed
Cancellation Validated by Proof Mailing of Notice
Cancellation Notice to Address of Record Held Valid
Was
Cancellation Notice Timely?
The policy that the insurance company
issues represent the agreement it makes with the named insured. If the named
insured requests a change, the insurance company has the right to accept or
reject the request. An endorsement that amends, waives, or changes any part of
the policy must be attached to the policy to be valid. Verbal changes on either
party's part is not binding.
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Example: Kelly called his agent, Josh, to discuss the latest basketball game.
They got into quite a discussion, but just before they signed off, Kelly
remembered to tell Josh about the new tractor he had just purchased. Two
months later the tractor is destroyed in a fire, and Kelly sends in a claim.
Josh does not remember the conversation, and Kelly cannot prove the
conversation took place. Because no endorsement was added to the policy,
there is no coverage for the tractor. |
Related Court Case:
Handwritten Changes to Declarations Create Coverage Dispute
The insurance company
has the right to make inspections and/or conduct surveys. It then may also
provide reports and recommendations to the named insured.
This right is intended
for the insurance company's benefit. The inspections and surveys are not safety
inspections for the benefit of third parties or employees. They are not to be
viewed as a warranty or a representation that the named insured complies with
any safety or health codes.
This condition applies to the insurance
company that provides coverage and to any rating advisory organization.
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Example: Moira, the safety director at Patients Plus, is excited when the
Harvest Insurance Company inspects the property because she wants to force
some changes in operations. She is very disappointed when only two minor
recommendations are submitted. She demands
a more thorough inspection and is told that the inspection is for the
insurance company's benefit, not the insured's. |
Related Court Cases:
Loss Prevention Representative Did Not Have Duty to Make Specific Inspection
Safety Inspections for Underwriting Purposes Held Not To
Create Liability For Insurer
The
insurance company has the right, but not the obligation, to examine and perform
an audit of the named insured's records. There are limitations on the
examination, though. It must be related to the policy, and only records that
apply to the policy period are required to be supplied. The insurance company
may request such records at any time for up to three years after the policy
period.
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Example: Marion's
policy period ends on 4/1/2025. She expects a return premium, so she is
anxious for the insurance company to audit her books and adjust the premium.
The insurance company decides not to examine or audit her books. Marion can
complain, but she has no right to demand an audit. |
Related Court Cases:
Church Financial Records Held Subject To
Review by Insurer
Claimant Must Submit To Examination
Under Oath And Produce Records Requested