July 12, 1985
Circular Letter No. 12 (1985)
TO: ALL INSURERS LICENSED TO WRITE AUTOMOBILE INSURANCE NEW YORK STATE
RE: CANCELLATION AND NONRENEWAL PROVISIONS PERTAINING TO PERSONAL PRIVATE PASSENGER AUTOMOBILE POLICIES
By the close of its recent session, the Legislature did not extend the August 1, 1985 effective date for the applicability of subsection (m) of Section 3425 of the Insurance Law.
Every new insurance policy covering any personal private passenger automobile voluntarily written to have an effective date on and after August 1, 1985 in New York State will, therefore, be governed by 3425(m) provisions.
Under these circumstances, the practical consequence is that -- in comparison to automobile insurance policies written voluntarily prior to August 1, 1985 -- newly and voluntarily written automobile insurance policies, with a post-July 31, 1985 effective date, become subject to different cancellation and nonrenewal standards.
In the opinion of this Department, 3425(m) provisions are inapplicable to automobile policies written prior to August 1, 1985. Such policies will, instead, continue to be governed in terms of cancellation and nonrenewal by those Section 3425 provisions other than subsection (m).
Thus, as long as a policy has been written prior to August 1, 1985 and is voluntarily renewed -- even when such renewals take place on or after August 1, 1985 -- 3425(m) provisions will not apply to that policy, which remains subject to, for example, the two percent limit on nonrenewals.
Because these different cancellation and nonrenewal standards will be in force, in regard to new personal private passenger automobile insurance business written to have an effective date on or after August 1, 1985:
(1) pursuant to subsection (1) of Section 3425, it is requested that insurers maintain appropriate separate records, differentiating old (including voluntary renewals) from new business, which will be subject to Department examination and audit;
(2) a three-year required policy period applies;
(3) no nonrenewal, conditional renewal, or cancellation may issue, unless based upon a ground specified in:
(a) subsections (b) and (c)(i) of Section 3425; or
(b) subsection (m)(3) of Section 3425; and
(4) the provisions of Section 3425(j)(1)(A), concerning the rights of an insured to continue coverage through a terminated agent or broker, apply.
The interpretation set forth in this letter represents the opinion of the Insurance Department regarding cancellation and nonrenewal of personal private passenger automobile insurance policies in New York State, until further notice from the Department or until further legislative action, if any, on this subject.
Please acknowledge receipt of this letter, and address any questions or problems concerning this subject, to Martin Ballot (212-602-0359), Supervising Insurance Examiner, Property/Casualty Insurance Bureau, at the above address.
JAMES P. CORCORAN
SUPERINTENDENT OF INSURANCE