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    Subdivision 1. Reason for cancellation. No insurer may cancel a policy of commercial
liability and/or property insurance during the term of the policy, except for one or more of the
following reasons:
(1) nonpayment of premium;
(2) misrepresentation or fraud made by or with the knowledge of the insured in obtaining the
policy or in pursuing a claim under the policy;
(3) actions by the insured that have substantially increased or substantially changed the
risk insured;
(4) refusal of the insured to eliminate known conditions that increase the potential for loss
after notification by the insurer that the condition must be removed;
(5) substantial change in the risk assumed, except to the extent that the insurer should
reasonably have foreseen the change or contemplated the risk in writing the contract;
(6) loss of reinsurance by the insurer which provided coverage to the insurer for a significant
amount of the underlying risk insured. A notice of cancellation under this clause shall advise the
policyholder that the policyholder has ten days from the date of receipt of the notice to appeal the
cancellation to the commissioner of commerce and that the commissioner will render a decision
as to whether the cancellation is justified because of the loss of reinsurance within 30 business
days after receipt of the appeal;
(7) a determination by the commissioner that the continuation of the policy could place the
insurer in violation of the insurance laws of this state; or
(8) nonpayment of dues to an association or organization, other than an insurance association
or organization, where payment of dues is a prerequisite to obtaining or continuing the insurance.
This provision for cancellation for failure to pay dues does not apply to persons who are retired at
62 years of age or older or who are disabled according to Social Security standards.
    Subd. 2. Notice. Cancellation under subdivision 1, clauses (2) to (8), shall not be effective
before 60 days after notice to the policyholder. The notice of cancellation shall contain a specific
reason for cancellation as provided in subdivision 1.
A policy shall not be canceled for nonpayment of premium pursuant to subdivision 1, clause
(1), unless the insurer, at least ten days before the effective cancellation date, has given notice to
the policyholder of the amount of premium due and the due date. The notice shall state the effect
of nonpayment by the due date. No cancellation for nonpayment of premium shall be effective if
payment of the amount due is made before the effective date in the notice.
    Subd. 3. New policies. Subdivisions 1 and 2 do not apply to any insurance policy that has not
been previously renewed if the policy has been in effect less than 90 days at the time the notice of
cancellation is mailed or delivered. No cancellation under this subdivision is effective until at
least ten days after the written notice to the policyholder.
    Subd. 4. Longer term policies. A policy may be issued for a term longer than one year or
for an indefinite term with a clause providing for cancellation by the insurer for the reasons
stated in subdivision 1 by giving notice as required by subdivision 2 at least 60 days before
any anniversary date.
    Subd. 5. Rescission. (a) No insurer may rescind or void a contract of liability or property
insurance unless there was material misrepresentation, material omission, or fraud made by or
with the knowledge of the insured in obtaining the contract or in pursuing a claim under the policy.
(b) No misrepresentation or omission shall be material unless knowledge by the insurer of
the facts misrepresented or omitted would have led to a refusal by the insurer to make such a
contract. In determining the question of materiality, evidence of the practice of the insurer with
respect to the acceptance or rejection of similar risks shall be admissible.
(c) For purposes of this section, a representation is a statement as to past or present fact,
made to an insurer or the insurer's agent by the applicant as an inducement for issuing a contract
of commercial liability or property insurance. A misrepresentation is a false representation, and
the facts misrepresented are those facts which make the representation false.
(d) This subdivision does not limit the right to cancel the policy prospectively for the reasons
stated in subdivision 1, clause (2).
History: 1987 c 337 s 24; 1994 c 485 s 13; 1996 c 446 art 1 s 7