The Office of General Counsel issued the following opinion on May 23, 2001 representing the position of the New York State Insurance Department.
Re: Nonpayment Cancellation Notice.
Question Presented:
Must a notice of cancellation specify the amount of the premium in order to effectuate cancellation?
Conclusion:
No.
Facts:
The inquirer described the following two scenarios:
In the first scenario, the insured failed to pay the installment premium on a personal automobile policy in a timely fashion. As a result, the insured received a notice indicating that if the amount due was not paid, the policy would be cancelled. The notice of cancellation stated that the amount due was the installment amount (as specified in the notice) plus "any other premium that may be due" (which amount was not specified).
In the second scenario, the insured paid the installment premium in a timely fashion, but owed an additional amount due to an endorsement. Since the amount was not the total that the insurer considered due, the insurer cancelled the insurance policy.
Analysis:
N.Y. Ins. Law §3425(c)(McKinney 2000) states in pertinent part:
(c) After a covered policy has been in effect for sixty days, or upon the effective date if the policy is a renewal, no notice of cancellation shall be issued . . . unless it is based on one or more of the following:
(1) With respect to automobile insurance policies:
(A) nonpayment of premium . . . .
N.Y. Ins. Law §3425(a)(10) (McKinney 2000) states in pertinent part:
(10) "Nonpayment of premium" means the failure of the named insured to discharge any obligation in connection with the payment of premiums on a policy of insurance or any installment of such premium, whether the premium is payable directly to the insurer or its agent, or indirectly
under any premium finance plan or extension of credit. Payment to the insurer, or to an agent or broker authorized to receive such payment, shall be timely, if made within fifteen days after the mailing to the insured of a notice of cancellation for nonpayment of premium. (emphasis added).
N.Y. Ins. Law §3425(b)(McKinney 2000) states in pertinent part:
(b) During the first sixty days a covered policy is in effect, no notice of cancellation shall be issued or be effective unless it states or is accompanied by a statement of the specific reason or reasons for such cancellation.
The N.Y. Insurance Law does not specifically address whether the amount of the premium owed by the insured is to be included in the notice of cancellation. However, in Gannon v. New York Mutual Underwriters, 78 A.D.2d 399 (3d Dept. 1981), affd 55 N.Y.2d 641 (1981) the third Department held, inter alia, that a notice of cancellation was valid even though it did not state the amount of the premium due. Therefore, the courts holding in Gannon governs the question that was posed.
For further information you may contact Attorney Pascale Joasil at the New York City office.