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

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following informal opinion on November 13, 2002, representing the position of the New York State Insurance Department

ABC Bureau Membership Requirement and N.Y. Ins. Law § 3425(g) (McKinney 2002)

This is in response to your recent request for an opinion.

Questions Presented:

1. May ABC Casualty Insurance Company ("ABC Casualty") amend its by-laws to require ABC Bureau membership for new business but not for renewals?

2. May ABC Casualty amend its by-laws to cease requiring ABC Bureau membership in certain states?

3.May ABC Casualty amend its by-laws to require ABC Bureau membership for certain kinds of insurance but not for automobile or homeowners policies?

4. If ABC Casualty amends its by-laws, may it continue to rely on N.Y. Ins. Law 3425(g) (McKinney Supp. 2002) as a basis for non-renewal of an automobile liability policy?

Conclusion:

1. ABC Casualty may amend its by-laws to require ABC Bureau membership for its new business but not for renewals.

2. ABC Casualty may amend its by-laws to cease requiring ABC Bureau membership in certain states.

3. ABC Casualty may amend its by-laws to require ABC Bureau membership for certain kinds of insurance but not for automobile or homeowners policies.

4. If ABC Casualty amends its by-laws so that it is no longer an insurer that is organized for the sole and exclusive purpose of providing insurance policies to members of an organization, it will no longer be able to use N.Y. Ins. Law § 3425(g) (McKinney Supp. 2002) as the basis for non-renewal of an automobile liability policy.

Facts:

No facts were provided. The inquiry is general in nature.

Analysis:

ABC Casualty would be permitted to amend its by-laws to provide for any of the above three alternatives, provided that the amendment would not in any way discriminate against a protected class.

However, if it did so, its ability to rely on N.Y. Ins. Law § 3425(g) (McKinney Supp. 2002) as a ground for non-renewal of automobile liability policies would be affected. Section 3425(g) provides:

Notwithstanding any of the provisions and limitations of this section, any property/casualty insurance company organized for the sole and exclusive purpose of providing insurance policies to members of an organization and providing such insurance policies on risks in New York, may refuse to renew automobile liability policies of persons who fail to meet the requirements contained in the by-laws of such company prohibiting the sale of policies to non-members of the organization, provided that such company shall continue to participate in any assigned risk plans established pursuant to article fifty-three of this chapter.

Pursuant to Section 3425, an insurer that is organized for the sole and exclusive purpose of providing insurance policies to members of an organization may refuse to renew automobile liability policies, other than assigned risk policies, of persons who fail to meet the membership requirement. Under any of the scenarios that were presented, once an insurer amended its by-laws so that membership in the organization was no longer a requirement for the issuance or renewal of a policy, the insurer would no longer be organized for the sole and exclusive purpose of providing insurance policies to members of an organization and, accordingly, could not premise non-renewal of an automobile liability policy on this reason.

For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.