The Office of General Counsel issued the following informal opinion on September 30, 2002, representing the position of the New York State Insurance Department.
Re: Reason for non-renewal N.Y. Ins. Law § 3425(d)(1) (McKinney Supp. 2000)
Does "mileage pattern" meet the specificity requirement for non-renewal of a covered policy under N.Y. Ins. Law § 3425(d)(1) (McKinney Supp. 2000)?
No. "Mileage pattern" is not sufficiently specific to satisfy N.Y. Ins. Law § 3425(d)(1) (McKinney Supp. 2000)
The company wishes to non-renew insureds who do not drive the acceptable minimum mileage. The Departments concern that this would be discriminatory toward elderly insureds was assuaged by the company advising the Department that, after comparing the percentage of insureds under the age of 65 to whom such denials were issued to those over the age of 65, the figures indicated a lack of any discrimination against the elderly. The company was advised on several occasions that the use of "mileage pattern" as the reason for non-renewal or cancellation was unacceptable. The companys attorney, in a letter to the Department dated December 16, 1999 confirmed that the company would stop using "mileage pattern". The company is again asking whether, under N.Y. Ins. Law § 3425(d)(1) (McKinney Supp. 2002), the phrase "mileage pattern" is sufficiently specific.
N.Y. Ins. Law § 3425(d)(1) (McKinney Supp. 2002) provides:
Unless the insurer, at least forty-five but not more than sixty days in advance of the end of the policy period, mails or delivers to the named insured, at the address shown in the policy, a written notice of its intention not to renew a covered policy, or to condition its renewal upon change of limits or elimination of any coverages, the named insured shall be entitled to renew the policy upon timely payment of the premium billed to the insured for the renewal. The specific reason or reasons for nonrenewal or conditioned renewal shall be stated in or shall accompany the notice. This paragraph shall not apply when the named insured, an agent or broker authorized by the named insured, or an insurer of the named insured, has mailed or delivered written notice to the insurer that the policy has been replaced or is no longer desired. (Emphasis added).
The requirement that the insurer provide the specific reason or reasons for nonrenewal, either by including it in the notice or by having it accompany the notice, was added to former N.Y. Ins. Law § 167-a(4)(a) (now N.Y. Ins. Law § 3425(d)(1)) in 1971. The reasons for the amendment were cited as: (1) the need to permit the individual to argue against a cancellation that may be based on erroneous facts, (2) enabling the individual to explain to other companies why his policy was cancelled by the first company, and (3) discouraging companies from canceling for frivolous reasons.
In 1986, when cancellation and non-renewal provisions for commercial lines insurance were added to the Insurance Law by N.Y. Ins. Law § 3426, the language in N.Y. Ins. Law § 3425(d)(1)) imposing the specificity requirement for non-renewal and conditional renewals was used in N.Y. Ins. Law § 3426(e)(2). Therefore, Circular Letter 86-14, which was issued shortly after the enactment of § 3426, is instructive with regard to the specificity requirement. It explained that:
A primary objective of the new law is to maximize understanding and information between insurers and insureds. All notices of cancellation, nonrenewal or conditional renewal must contain specific reasons explaining the insurers action and refer to the availability of loss information. Generic statements such as "underwriting reasons" are no longer sufficient. . . .
The Office of General Counsel has also advised that an insurer may not escape the statutory requirements by claiming that the insured must inquire as to the underlying facts supporting the reasons for cancellation (the specificity requirement also appears in N.Y. Ins. Law § 3425(b) which applies to cancellation). 1
In view of the above, it is the opinion of this Office that the phrase "mileage pattern" does not meet the requirement that "the specific reason or reasons for nonrenewal be stated in or accompany the notice." An insured who receives this notice would not know whether it means that there is too much mileage being put on the car or that there is too little mileage being put on the car or that the car is being driven in a particular pattern that is not acceptable to the insurer. Further clarification would be needed before the insured could dispute the non-renewal or explain it to another company, both of which this section was intended to address. Moreover, if additional information were sought, it would be incumbent upon the insured to contact the insurer. This is precisely the situation this section was enacted to remedy. 2 Clearly, this notice does not meet the objective of maximizing understanding and information between insureds and insurers. Accordingly, for all the reasons stated above, it does not satisfy the specificity requirement in N.Y. Ins. Law § 3425(d)(1).
I am enclosing copies of correspondence from the Department to both the inquirer and his attorney regarding this issue, all of which expressed the Departments opinion that the use of "mileage pattern" as a reason for non-renewal or cancellation is unacceptable. The Department is, by this letter, reiterating that "mileage pattern" is not a sufficiently specific reason for cancellation or non-renewal and, as such, does not satisfy the requirement of Section 3425(d)(1).
For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.
1 May 9, 1996 Opinion Letter from Senior Attorney Wachtel to G. Alexander Novak, Esq. re: Homeowners Insurance - Specific Basis for Cancellation.
2 Before the 1971 amendment, Section 168-a only required that, on demand of the insured, the insurer provide the insured with the specific reason for its intention not to renew the policy.