CL 0100–AAIS COMMERCIAL
LINES COMMON POLICY CONDITIONS
(September
2025)
Most policies issued by
the American Association of Insurance Services (AAIS) for commercial lines
require the attachment of CL 0100–Common Policy Conditions to be considered
complete. This form is specifically used with the following lines of business:
The CL 0100 document
outlines five key conditions creating a comprehensive framework for guiding the
policy's implications. These conditions clearly define how the policy will
effectively address critical areas, ensuring clarity and accuracy in its
implementation. The following conditions are discussed in this article.
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. The insurance company does
not permit the named insured to transfer the policy to another party without
its written consent, as the company requires sufficient time to verify if the
new named insured meets its eligibility requirements.
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Example
1: Afia plans to
sell her small business to Harland, including all its assets, inventory, and
employees. She will also transfer her accountant to him. To make the sale as
smooth as possible, Afia requests her policy be transferred to Harland.
However, her agent has informed her the company will not permit assignment of
her insurance policy, and she will need to cancel her current policy on the
transfer date. Harland will then have to purchase his own insurance. |
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Example
2: Nancy, Becky, and Lyla own
a business named NBL, LLP. Scenario 1: Their financial manager recommends
they incorporate and change the name to NBL, Inc. No other changes are taking
place, and NBL, LLP would like to assign its policies to NBL, Inc. The
underwriter reviews the request and agrees to the assignment without canceling
or rewriting the policy. Scenario 2: Nancy, Becky, and Lyla want to sell
the business, and Charlie has offered to buy it. To speed up the process, he
requests they assign the NBL, LLP policy to him. Due to this condition, any
assignment by NBL, LLP without the insurance company’s approval is invalid
and will void coverage. |
Related Court Case: Assignment of
Policy Is Not Valid Without Insurer Consent
This section explains
how cancellations are managed. Although many states mandate the use of a
specific state form instead of this cancellation condition, this serves as a
useful starting point.
The named insured can request the
insurance company cancel the policy by either returning the policy or by
writing a letter informing the company of the desired cancellation date.
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Example:
Afia's policy runs from January 1,
2025, to January 1, 2026, and Afia's contract with Harland requires the
business to be transferred to him on November 1, 2025. Scenario
1: Afia writes a note to her insurance company on September
1, 2025, to cancel the policy effective November 1, 2025. Cancellation will
be effective on 11/01/2025. Scenario 2: Afia forgets to notify
her insurance company about the transfer. On December 1, 2025, she received a
renewal policy dated January 1, 2026, to January 1, 2027. She immediately
sends the renewal policy back and then requests the current policy be
canceled, effective November 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 prior to the
cancellation date when the reason for cancellation is non-payment 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 cancellation date, as
it becomes the end date of the policy period.
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Example:
Expect the Best Insurance Company mails
a notice of cancellation to Less Than Perfect Insured on December 15, 2025, to
be effective on January 1, 2026. Scenario
1: The reason for cancellation is nonpayment of
premium. The cancellation is effective January 1, 2026. Scenario 2: The reason for cancellation is non-compliance with
an inspection requirement. The cancellation cannot go into effect because the
notice period is too short. The policy continues in force. |
The named insured receives a refund when the policy is canceled. This
refund is calculated in accordance with the insurance company's rules. The
cancellation is effective even if the insured does not receive the refund
premium.
Proof of mailing the cancellation notice is sufficient to effect
cancellation. There is no requirement to show the first named insured received
the notice.
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 issued by the insurance
company outlines the agreement between the insurance company and the named insured.
If the named insured requests a change to the policy, the insurance company has
the right to accept or reject the request. An endorsement amending, waiving, or
changing any part of the policy must be attached to the policy to be valid.
Verbal changes by either party are not binding.
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Example: Kelly called his agent, Josh, to discuss the
recent basketball game. They got into quite a discussion, but just before
ending the call, Kelly remembered to tell Josh about the new tractor he had
just purchased. Two months later, the tractor was destroyed in a fire, and
Kelly filed 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 perform inspections and/or surveys. It may also issue reports
and recommendations to the named insured.
This right is intended
to benefit the insurance company. The inspections and surveys are not safety
assessments for third parties or employees. They should not be considered a
warranty or guarantee of the named insured's compliance with safety or health regulations.
This condition applies to the insurance
company providing coverage and to any rating advisory organization.
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Example:
Moira, the
safety director at Patients Plus, is excited about the Harvest Insurance
Company inspecting the property because she hopes to implement some
operational changes. She is very disappointed when only two minor
recommendations are made. She insists on a more comprehensive inspection, but
is informed that the purpose of 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 review and audit the named insured's records. However,
there are restrictions: the examination must be related to the policy, and only
records from the policy period need to be provided. The insurer may request
these records at any time within three years after the policy ends.
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Example: Marion's policy period ends on
September 1, 2025. In anticipation of a return premium due to her policy
being overestimated, she is eager for the insurance company to conduct an
audit of her books to adjust the premium accordingly. However, the insurance
company has chosen not to examine or audit her records. While Marion is
entitled to voice her concerns regarding this decision, she does not have the
right to insist that an audit take place. |
Related Court Cases:
Church Financial Records Held Subject To
Review by Insurer
Claimant Must Submit To Examination Under
Oath And Produce Records Requested