Effective date of discontinuance for nonpayment of premium or subscription

charges. 1. If a policy or contract or certificate subject to these rules provides for automatic discontinuance of the coverage after a premium or subscription charge has remained unpaid through the grace period allowed for such payment, the carrier is liable for valid claims for covered losses incurred prior to the end of the grace period. 2. If the actions of the carrier after the end of the grace period indicate that it considers the coverage as continuing in force beyond the end of the grace period (such as, by continuing to recognize claims subsequently incurred), the carrier is liable for valid claims for losses beginning prior to the effective date of written notice of discontinuance to the policyholder or other entity responsible for making payments or submitting subscription charges to the carrier. The effective date of discontinuance shall not be prior to midnight at the end of the third scheduled workday after the date upon which the notice is delivered.