Can insurers operating on a surplus lines basis refuse to pay claims due to late premium payment?

Insurers operating on a surplus lines basis can include specific provisions in their policies regarding premium payments and the consequences of late payments. If a policy clearly states that claims can be denied due to late payment of premiums, then the insurer is within their rights to refuse to pay claims in that scenario. This is an important aspect of surplus lines, as these insurers often assume higher risks and design their policies with specific terms that may differ from standard insurance practices.

The clarity of the provision is crucial. For the insurer to deny a claim based on late premium payment, policyholders must be aware of this stipulation when they purchase the policy. This ensures that the terms are transparent and that the insured cannot claim ignorance regarding the implications of their payment timelines. In this way, the correct answer reflects the contractual nature of insurance agreements, emphasizing the importance of the policy terms agreed upon by both parties.