6 Top Tips for Notice of Cancellation (NOC)

An article by Noelle McCall, CIC, CRM, CISR

Notice of Cancellation is an endorsement commonly required in contracts that requires an insurance carrier to provide notice of cancellation and/or non-renewal to a third party requiring such notice. 

Usually, when this endorsement is included, it adds certain rules about how much advance notice the insurance company has to give before they can cancel the policy. It might also include instructions about who else should be informed if they decide to cancel. For instance, some parties (such as Additional Insureds) who are covered by the policy might ask for a special endorsement that guarantees they will be told if the policy is going to be canceled.

• Different insurance companies have different policies about how flexible they are with NOC rules.
• State law can also impact NOC.

Here are my 6 top tips for insurance agencies and brokers with regards to notice of cancellation (NOC) provisions in contracts and NOC endorsements.

If other party to contract is requiring notice of cancellation (NOC) for client's insurance:

1. Suggest strike requirement if possible.
   1. This avoids the issue.
2. If NOC is required, suggest add option for client's insurer or client to provide NOC. 
   1. This allows for flexibility in providing notice.
3. Recommend insurance agents and brokers do not agree to provide NOC on behalf of clients.
4. If NOC is required, suggest add shorter time period for cancellation due to non-payment, such as 10 or 15 days.
   1. Most policies include 10 to 15 days' notice for cancellation due to non-payment of policy premium.
5. Instead of providing NOC, strike NOC and add wording to allow other party to require client to provide Certificate of Insurance (COI) from time to time upon request by other party to contract.
   1. This is an easier way to ensure coverage is still in force as of the date the COI is issued.
6. If the client is required to accept the NOC wording "as is" without any changes, then this may not be a problem if the policies are never in danger of being cancelled or non-renewed.

Key Takeaways & Action Items

1. Compare contract requirements to client’s NOC endorsements. Request any changes to endorsements needed and add new endorsements if needed.
2. Recommend insurance agencies and brokers do not offer to provide NOC to 3^rd parties on behalf of clients.

How does your agency handle notice of cancellation requirements in client’s contracts?

Note - this article is written from an insurance and risk-related (not legal) perspective. I recommend clients consult with their legal counsel on all contract wording.