The Office of General Counsel has issued the following informal opinion on March 3, 2000 representing the position of the New York State Insurance Department.
Assigned Risk Plan ("AIP")
Whether a Broker that paid the premium from its own account may get the unearned premium back from AIP's assigned insurer, where the assigned insurer had used the unearned premium as an offset for earned premium owed by the Brokerage's AIP insured ("the insured") on a previous policy with the assigned insurer?
No. The broker may not get the unearned premium back from AIP's assigned insurer.
An insured made a check payable for $395 to a Brokerage as an indirect payment to New York Automobile Insurance Plan ("AIP"). The Brokerage then issued its own check to AIP. However, the insured's check to the Brokerage was returned because the account was closed. The Brokerage was not aware that the assigned insurer, XYZ Insurance Company ("XYZ"), had cancelled the insured on a previous policy. XYZ used a portion of $395 to offset an earned premium on that previous policy. XYZ cancelled the current policy for nonpayment of premium.
AIP Rule Sec. 11.A.1. APPLICATION FOR ASSIGNMENT states, in part, as applied to private passenger nonfleet: "All deposits must be made by a certified check, bank check, check of the producer of record, finance company check, or money order made payable or endorsed to the New York Automobile Insurance Plan." (Emphasis added). AIP Rule Sec. 11.A.1. allows an AIP insured to write one of the negotiable instruments referred to above, payable directly to AIP. The Brokerage assumed the risk when it accepted a personal check from the insured and issued its own check. As such, any recourse lies with the insured.
As to whether XYZ may use a portion of the Brokerage's check to offset earned premium owed by the insured on a previous policy, AIP Rule Sec. 14.E.2.i. states in part: "[T]he insurer may deduct from the deposit received with an application for insurance any unpaid balance of earned premium owed by the applicant to the insurer which became due during the 12 months immediately preceding the earlier of the date of application or effective date of the current policy and apply such amount deducted to the unpaid balance." As the amount of time between payment and the previous cancellation of the policy is not known in this case, this Office cannot determine whether XYZ is in compliance with the law.
For further information you may contact Senior Attorney Robert Freedman at the New York City Office.