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 October 23, 2002, representing the position of the New York State Insurance Department.

Re: Cancellation and Renewal Provisions

Questions Presented:

1. In N.Y. Ins. Law § 3425(j)(1)(A) (McKinney 2002 Cumulative Pocket Part), to what does the phrase " . . . statutory extensions . . ." refer?

2. Pursuant to N.Y. Ins. Law § 3425, with respect to an automobile insurance policy initially written on or before August 1, 2001, what is an insurer’s obligation to the insurance agent or broker (hereinafter producer) if the producer agreement between them has been terminated?

3. Pursuant to N.Y. Ins. Law § 3425, with respect to an automobile insurance policy initially written on or after August 2, 2001, what is an insurer’s obligation to the producer if the producer agreement between them has been terminated?

4. Pursuant to N.Y. Ins. Law § 3425, with respect to a personal lines insurance policy, what is an insurer’s obligation to the producer if the producer agreement between them has been terminated?

5. N.Y. Ins. Law § 3425(j)(1)(B) (McKinney 2002 Cumulative Pocket Part) states: ". . . the insurer shall . . . at the specific request of the insured, offer to continue the policy through the terminated agent or broker for three successive one year policy periods . . . ." Does the insured need to make this request each year?

6. N.Y. Ins. Law § 3425(j)(1)(B) (McKinney 2002 Cumulative Pocket Part) states: ". . . . the insurer shall . . . at the specific request of the insured, offer to continue the policy through the terminated agent or broker for three successive one year policy periods . . . ." Is the insured required to make ". . . the specific request . . ." in a specific way?

Conclusions:

1. The phrase " . . . statutory extension . . . ," found in N.Y. Ins. Law § 3425(j)(1)(A) (McKinney 2002 Cumulative Pocket Part), is historical, and has no other significance or meaning today.

2. The statutorily required policy period for an automobile insurance policy subject to N.Y. Ins. Law § 3425 that was originally issued on or before August 1, 2001 is one year pursuant to N.Y. Ins. Law § 3425(a)(8) (McKinney 2001-2002 Interim Pocket Part). Where a producer agreement has been terminated, N.Y. Ins. Law § 3425(j)(1)(B) (McKinney 2001-2002 Interim Pocket Part) requires an insurer to offer to keep such policy in force for any remaining part of the one-year required policy period. Thereafter, at the specific request of the insured, the insurer shall continue to offer the policy through the terminated producer for three successive one-year policy periods, which commence within the year following the date of mailing or delivery to the terminated producer of written notice of termination of such contract or account. However, the producer’s rights are subject to the continuation of the policy. An insurer may cancel or non-renew a policy as permitted under the applicable provisions of N.Y. Ins. Law § 3425 (McKinney 2001-2002 Interim Pocket Part), and, in such circumstance, is not required to make the offers above-described.

3. The statutorily required policy period for an automobile insurance policy subject to N.Y. Ins. Law § 3425 that was originally issued on or after August 2, 2001 is three years pursuant to N.Y. Ins. Law §§ 3425(a)(7) and (m) (McKinney 2001-2002 Interim Pocket Part). Where a producer agreement has been terminated, N.Y. Ins. Law § 3425(j)(1)(A) (McKinney 2001-2002 Interim Pocket Part) states that an insurer must offer to keep such policy in force for the remainder of the three-year required policy period. In addition, the insurer must also offer to continue the policy through the terminated producer for at least its next one year policy period that commences within one year following the date of mailing or delivery to the terminated agent or broker of written notice of termination of such contract or account. Thereafter, at the specific request of the insured, the insurer must offer to continue the policy through the terminated producer for the remaining part of the three year required policy period. However, the producer’s rights are subject to the continuation of the policy. An insurer may cancel or non-renew a policy as permitted under the applicable provisions of N.Y. Ins. Law § 3425 (McKinney 2001-2002 Interim Pocket Part), and, in such circumstance, is not required to make the offers above-described.

4. The same requirements that apply to automobile insurance policies originally issued on or after August 2, 2001 discussed above in Response Number 3, apply to personal lines insurance policies. The only difference is that these rules apply to all personal lines insurance policies no matter when such personal lines insurance policies were originally issued.

5. The insured need only make this request once, at the appropriate time.

6. There is no statutorily mandated format or method of service for making this request.

Facts:

The inquirer provided no set of facts from which the above questions arose.

Analysis:

The term ". . . statutory extension . . . , " which is found in N.Y. Ins. Law § 3425(j)(1)(A) (McKinney 2002 Cumulative Pocket Part), is merely historical. The phrase was simply not removed from previous amendments to the law, but it has no current applicability. The following is a brief history of the amendments to N.Y. Ins. Law § 3425 (McKinney 2002 Cumulative Pocket Part) and its predecessor sections in which the phrase ". . . statutory extension . . ." first appeared. This history explains the evolution of N.Y. Ins. Law § 3425 (McKinney 2002 Cumulative Pocket Part) and the origins of the different policy periods that exist today.

Chapter 1072 of the Laws of 1974 added a new § 167-a to the Insurance Law, and repealed the former § 167-a and § 167-b. The new § 167-a combined and modified the provisions of the former sections that had dealt with automobile and non-automobile insurance separately. The new § 167-a provided for a three year required policy period for both non-automobile and automobile insurance policies. Subsequent amendments extended temporarily the three year period. These temporary extensions are what is meant by the phrase " . . . statutory extension . . . ."

Subsequently, Chapter 690 of the Laws of 1979 added a new § 167-aa, which dealt exclusively with automobile insurance. While many of the provisions in the new § 167-aa were the same as in § 167-a, the nonrenewal provisions were substantially different. Section 167-aa substituted a one year required policy period for the three year required policy period that was in § 167-a. But the one year required policy periods were subject to the "two-percent rule" while the three year required policy periods were not. The "two-percent rule" limited the number of policies that may be annually nonrenewed or conditionally renewed.

In the 1979 amendments, the provisions of § 167-a regarding automobile insurance were not repealed and remained part of that section, but were no longer in effect. Section 167-aa was subject to a sunset provision that provided that, upon the expiration of § 167-aa, the former provisions of § 167-a would be reinstated. In 1984, when the Insurance Law was recodified, the provisions of § 167-a and § 167-aa were combined into

§ 3425, eliminating the redundant provisions, reuniting the automobile and non-automobile provisions under one section, but automobile policies continued to remain subject to different nonrenewal rules than non-automobile policies. Since 1979, except between August 1, 1985 and January 1, 1986, the provisions of

§ 167-aa, as recodified as part of § 3425, have been extended continuously and remained in effect until last August 2, 2001 when the provisions relating to the automobile insurance provisions of § 167-a were reinstated.

The expired provisions of §167-aa that were recodified as part of § 3425 remain applicable for automobile policies initially issued on or before August 1, 2001. Pursuant to N.Y. Ins. Law § 3425(m) (McKinney 2002 Cumulative Pocket Part), under these provisions of §167-aa that currently apply to automobile policies originally issued on or before August 1, 2001, the required policy period for automobile insurance is one year, but, as before, the insurer is limited in the number of policies that may be annually nonrenewed or conditionally renewed by the "two-percent rule" specified in N.Y. Ins. Law § 3425(f) (McKinney 2002 Cumulative Pocket Part).

For automobile policies that were originally issued on or after August 2, 2001, the provisions of N.Y. Ins. Law § 3425(m) (McKinney 2002 Cumulative Pocket Part) apply. One of the principal differences is that pursuant to § 3425(m), a three year required policy period applies to automobile insurance for policies that are originally issued on or after August 2, 2001, with no limit on the number of policies that may be nonrenewed or conditionally renewed at the end of the required policy period.

For personal lines insurance, there have been no changes, and the required policy period remains three years. N.Y. Ins. Law §§ 3425(a)(7) and (j)(1)(A) (McKinney 2002 Cumulative Pocket Part).

Producers’ Rights

The following is a detailed discussion of producer’s rights found in N.Y. Ins. Law §3425 (McKinney 2002 Cumulative Pocket Part). N.Y. Ins. Law § 3425(j) (McKinney 2002 Cumulative Pocket Part) provides a producer with certain rights regarding business that it produced for an insurer after the insurer-producer relationship is terminated. These producer rights neither enhance nor diminish the rights otherwise provided to insureds under N.Y. Ins. Law § 3425 (McKinney 2002 Cumulative Pocket Part). The producer rights under N.Y. Ins. Law § 3425(j) (McKinney 2002 Cumulative Pocket Part) also do not override an insurer’s right to cancel or non-renew a policy otherwise provided under N.Y. Ins. Law § 3425 (McKinney 2002 Cumulative Pocket Part). The rights of producers that attach to an automobile policy depend upon when the policy was originally issued.

Pursuant to N.Y. Ins. Law § 3425(a)(8) (McKinney 2002 Cumulative Pocket Part), the required policy period for a covered policy of automobile insurance originally issued on or before August 1, 2001 is one year. Where a producer agreement has been terminated, N.Y. Ins. Law § 3425(j)(1)((B) (McKinney 2002 Cumulative Pocket Part) requires an insurer to offer to keep such policy in force through the terminated producer for any remaining part of the one-year required policy period. Thereafter, at the specific request of the insured, the insurer shall offer to continue the policy through the terminated producer for three successive one year policy periods which commence within the year following the date of mailing or delivery to the terminated producer of written notice of termination of such contract or account. However, the producer's rights are subject to the continuation of the policy. An insurer would not be required to continue such policies if such policies were to be cancelled or non-renewed as permitted under N.Y. Ins. Law § 3425 (McKinney 2002 Cumulative Pocket Part).

The required policy period for an automobile insurance policy originally issued on or after August 2, 2001 is three years pursuant to N.Y. Ins. Law §§ 3425 (a)(7) and (m) (McKinney 2002 Cumulative Pocket Part). Although a producer agreement has been terminated, N.Y. Ins. Law § 3425(j)(1)(A) (McKinney 2002 Cumulative Pocket Part) requires an insurer to offer to the insureds to keep such policy in force for the remainder of the three-year required policy period. In addition, the insurer must also offer to continue the policy through the terminated producer for at least its next one-year policy period which commences within one year following the date of mailing or delivery to the terminated producer of written notice of termination of such contract or account.

Thereafter, at the specific request of the insured, the insurer shall offer to continue the policy through the terminated producer for the remaining part of the three year required policy period. The producer’s rights are subject to the continuation of the policy. An insurer would not be required to continue a policy that was cancelled or non-renewed as otherwise permitted under N.Y. Ins. Law § 3425 (McKinney 2002 Cumulative Pocket Part).

In contrast to automobile insurance policies where the producer’s rights depend upon when the policy was originally issued, the issuance date does not control the producer’s rights regarding personal lines insurance policies. Pursuant to N.Y. Ins. Law § 3425(j)(1)(A) (McKinney 2002 Cumulative Pocket Part), the required policy period for all personal lines insurance policies is three years. The same producer’s rights that attach to an automobile insurance policy originally issued on or after August 2, 2001 pursuant to N.Y. Ins. Law §3425(m) (McKinney 2002 Cumulative Pocket Part), attach to all personal lines insurance policies, no matter when such policy was originally issued. These rights are discussed in the two paragraphs immediately preceding this one.

If, pursuant to N.Y. Ins. Law §3425 (McKinney 2002 Cumulative Pocket Part), the insured requests that the policy continue through the terminated producer, such insured need only make the required specific request once. There is no specific format for this notice or method of sending it.

For further information you may contact Senior Attorney Susan A. Dess at the New York City Office.