The Office of General Counsel issued the following informal opinion September 23, 2002, representing the position of the New York State Insurance Department.
Re: Cancellation of Workers' Compensation Insurance
May an insurer cancel a policy of workers' compensation insurance mid-term for non-payment or premium?
Cancellation and termination of workers' compensation insurance are governed by N.Y. Workers' Comp. Law § 54 (McKinney 1994 and Supp. 2002), not the Insurance Law. The Workers' Compensation Board would be the appropriate body to address this inquiry.
N.Y. Ins. Law § 3426 (McKinney 2000) establishes cancellation and renewal provisions for covered policies of the type described in Section 3426(a)(1). Paragraph (l)(2) of that section reads as follows:
(2) [Expires and repealed April 1, 2003] This section shall not apply to policies issued pursuant to a plan established under article fifty-three, fifty-four or fifty-five of this chapter, surety policies, policies providing workers' compensation or employers' liability coverage, financial guaranty insurance, policies providing mortgage guaranty or credit insurance, policies principally marine insurance as defined by paragraph twenty of subsection (a) of section one thousand one hundred thirteen of this chapter, legal services insurance, reinsurance contracts, policies written on an excess line basis, or policies subject to section three thousand four hundred twenty-five of this chapter.
N.Y. Ins. Law § 3426(l)(2) (McKinney 2000) (Emphasis added.)
Cancellation and termination of policies of workers' compensation insurance are governed by N.Y. Workers' Comp. Law § 54 (McKinney 1994 and Supp. 2002). Subsection (5) of said section reads as follows:
5. Cancellation and termination of insurance contracts. No contract of insurance issued by an insurance carrier against liability arising under this chapter shall be cancelled within the time limited in such contract for its expiration unless notice is given as required by this section. When cancellation is due to non-payment of premiums such cancellation shall not be effective until at least ten days after a notice of cancellation of such contract, on a date specified in such notice, shall be filed in the office of the [fig 1] chair and also served on the employer. When cancellation is due to any reason other than non-payment of premiums such cancellation shall not be effective until at least thirty days after a notice of cancellation of such contract, on a date specified in such notice, shall be filed in the office of the [fig 2] chair and also served on the employer; provided, however, in either case, that if the employer has secured insurance with another insurance carrier which becomes effective prior to the expiration of the time stated in such notice, the cancellation shall be effective as of the date of such other coverage. No insurer shall refuse to renew any policy insuring against liability arising under this chapter unless at least thirty days prior to its expiration notice of intention not to renew has been filed in the office of the [fig 3] chair and also served on the employer.
Such notice shall be served on the employer by delivering it to him, her or it or by sending it by mail, by certified or registered letter, return receipt requested, addressed to the employer at his, her or its last known place of business; provided that, if the employer be a partnership, then such notice may be so given to any of one of the partners, and if the employer be a corporation then the notice may be given to any agent or officer of the corporation upon whom legal process may be served; and further provided that an employer may designate any person or entity at any address to receive such notice including the designation of one person or entity to receive notice on behalf of multiple entities insured under one insurance policy and that service of notice at the address so designated upon the person or entity so designated by delivery or by mail, by certified or registered letter, return receipt requested, shall satisfy the notice requirement of this section. Provided, however, the right to cancellation of a policy of insurance in the state fund shall be exercised only for non-payment of premiums or as provided in section ninety-four of this chapter.
The provisions of this subdivision shall not apply with respect to policies containing coverage pursuant to subsection (j) of section three thousand four hundred twenty of the insurance law relating to every policy providing comprehensive personal liability insurance on a one, two, three or four family owner-occupied dwelling.
N.Y. Workers' Comp. Law § 54(5) (McKinney 1994).
N.Y. Ins. Law § 3420(j) reads as follows:
(j) (1) Notwithstanding any other provision of this chapter or any other law to the contrary, every policy providing comprehensive personal liability insurance on a one, two, three or four family owner-occupied dwelling, issued or renewed in this state on and after the effective date of this subsection shall provide for coverage against liability for the payment of any obligation, which the policyholder may incur pursuant to the provisions of the workers' compensation law, to an employee arising out of and in the course of employment of less than forty hours per week, in and about such residences of the policyholder in this state. Such coverage shall provide for the benefits in the standard workers' compensation policy issued in this state. No one who purchases a policy providing comprehensive personal liability insurance shall be deemed to have elected to cover under the workers' compensation law any employee who is not required, under the provisions of such law, to be covered.
(2) The term "policyholder" as used in this subsection shall be limited to an individual or individuals as defined by the terms of the policy, but shall not include corporate or other business entities or an individual who has or individuals who have in effect a workers' compensation policy which covers employees working in and about his or their residence.
(3) Every insurer who is licensed by the superintendent to issue homeowners or other policies providing comprehensive personal liability insurance in this state shall also be deemed to be licensed to transact workers' compensation insurance for the purpose of covering those persons specified in this subsection.
N.Y. Ins. Law § 3420(j)(McKinney 2000).
In summary, the cancellation provisions of N.Y. Ins. Law § 3426 (McKinney 2000) would not be applicable to "...policies providing workers' compensation...coverage". N.Y. Ins. Law § 3426(l)(2) (McKinney 2000). Cancellation of such policies would be governed by N.Y. Workers' Comp. Law § 54(5) (McKinney 1994), with the exception of "... policies containing coverage pursuant to subsection (j) of section three thousand four hundred twenty of the insurance law...." N.Y. Ins. Law § 3420(j)(McKinney 2000) refers to policies of personal homeowners' insurance. As a personal lines coverage, the cancellation requirements of N.Y. Ins. Law § 3425 (McKinney 2000 and Supp. 2002), governing personal lines insurance, would be applicable.
For interpretation issues regarding N.Y. Workers' Comp. Law § 54 (McKinney 1994) please contact the New York State Workers' Compensation Board.
For further information you may contact Associate Attorney Sam Wachtel at the New York City Office.