New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following informal opinion on November 15, 2001, representing the position of the New York State Insurance Department.

RE: Conditional Renewal Notice and N.Y. Ins. Law § 3426

Question Presented:

With reference to the scenario described in an inquiry regarding an expiring commercial liability insurance policy, did the incumbent insurer properly comply with the nonrenewal notice provisions contained in N.Y. Ins. Law § 3426 (McKinney 2000)?

Conclusion:

Yes; the incumbent insurer properly complied with the nonrenewal notice provisions contained in N.Y. Ins. Law § 3426 (McKinney 2000).

Facts:

The commercial lines manager of an insurance agency inquired as to whether an incumbent insurer of a commercial liability policy (with an original expiration date of October 30, 2001, and an expiring premium of $446,000) had properly complied with the New York Insurance Law provisions regarding notice of nonrenewal. The scenario was described as follows:

1) on July 20, 2001, the agency sent to the insurer the renewal submission, which contained a five-year loss history and a letter from the insured requiring the renewal quote to be provided by September 30, 2001;

2) on August 10, 2001, the insurer issued a conditional nonrenewal notice stating that the premium may increase more than 10%;

3) on September 20, 2001, the agency received a renewal quote of $550,000 that the insurer stated was "open until 9/30/01 per letter from insured";

4) on or about September 28, 2001, the insurer verbally reduced its quote to $520,000;

5) on September 28, 2001, the agency submitted its proposal to the insured;

6) on October 11, 2001, the insured accepted the quote, and the agency apprised the insurer accordingly. The insurer declined to bind at the quoted price because the acceptance deadline had passed;

7) on October 16, 2001, the carrier withdrew its quote, issued a 60-day extension of coverage (extending the expiration date to December 18, 2001) to the insured, and indicated that the renewal quote might exceed $1,000,000;

8) on October 18, 2001, the agency received a letter from the insurer stating that due to "a recent change in the company’s underwriting philosophy and the adverse loss development on the insured program" the insurer’s quote was withdrawn.

Analysis:

N.Y. Ins. Law § 3426(e)(1)(A) (McKinney 2000) states:

(e)(1) A covered policy shall remain in full force and effect pursuant to the same terms, conditions and rates unless written notice is mailed or delivered by the insurer to the first-named insured, at the address shown on the policy, and to such insured’s authorized agent or broker, indicating the insurer’s intention: not to renew such policy; . . . .

N.Y. Ins. Law § 3426(e)(2) and (3) (McKinney 2000) states in relevant part:

(2) A nonrenewal notice as specified in subparagraph (A) . . . of this subsection shall contain the specific reason or reasons for nonrenewal . . . .

(3) The notice required by paragraph one of this subsection shall be mailed or delivered at least sixty, but not more than one hundred twenty, days in advance of the expiration date of the policy . . . .

N.Y. Ins. Law § 3426(e)(5)(B) (McKinney 2000) states in relevant part:

In the event that a . . . late nonrenewal notice is provided by the insurer prior to the expiration date of the policy, coverage shall remain in effect, at the same terms and conditions of the expiring policy and at the lower of the current rates or the prior period’s rates, until sixty days after such notice is mailed or delivered . . . .

Thus, the insurer properly complied with the nonrenewal notice provisions contained in N.Y. Ins. Law § 3426 (McKinney 2000) because the policy was extended for 60 days from the date of mailing or delivery of the nonrenewal notice.

For further information you may contact Senior Attorney Sally Geisel at the New York City Office.