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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 February 14, 2002, representing the position of the New York State Insurance Department.

RE: Alternative Renewal Notice Under N.Y. Ins. Law Section 3426

Questions Presented:

1) Must the first notice under the alternative renewal notice procedure set forth in N.Y. Ins. Law Section 3426(e)(1)(C) (McKinney 2000) be provided at least sixty, but not more than one hundred twenty days, in advance of the policy expiration date?

2) Must the second notice required under the alternative renewal notice procedure set forth in N. Y. Ins. Law Section 3426(e)(1)(C) (McKinney 2000) be mailed or delivered prior to the policy expiration date?

Conclusions:

1) The first notice under the alternative renewal notice procedure must be provided at least sixty, but not more than one hundred twenty, days in advance of the policy expiration date as provided in N. Y. Ins. Law Section 3426(e)(3)(McKinney 2000).

2) The second notice under the alternative renewal notice procedure may be mailed or delivered after the policy expiration date provided that the mailing occurs "as soon as possible" after the first notice is issued.

Facts:

No particular facts were provided.

Analysis:

1. The Timeliness of the Alternative Renewal Notice

N. Y. Ins. Law Section 3426(e)(1) (McKinney 2000) sets forth three notice options to effect changes in a "covered policy".1 Under subparagraph (A), an insurer may provide notice of its intention not to renew a policy. Under subparagraph (B), an insurer may provide notice of its intention to renew the policy conditioned upon changes in the policy terms or upon an increase in premiums in excess of ten percent. Under subparagraph (C), an insurer may provide alternative notice as follows:

That the policy will not be renewed or will not be renewed under the same terms, conditions or rates; such alternative renewal notice must be mailed or delivered on a timely basis and advise the insured that a second notice shall be mailed or delivered at a later date indicating the insurer’s intention as specified in subparagraph (A) or (B) of this paragraph and that coverage shall continue on the same terms, conditions and rates as the expiring policy, until the later of the expiration date or sixty days after the second notice is mailed or delivered….

N. Y. Ins. Law Section 3426(e)(1)(C).

In order for a notice of alternative renewal to be considered "timely", it must be delivered at least sixty, but not more than one hundred twenty, days in advance of the policy expiration date. The above Section 3426(e)(1)(C) expressly provides that the "..alternative renewal notice must be mailed or delivered on a timely basis…" and Section 3426(e)(3) requires that "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 . . . . " Unlike late conditional notice and late notice of nonrenewal, there are no provisions for late alternative renewal notice in the statute. Section 3426(e)(5)(B) expressly permits late conditional notice and late nonrenewal notice as follows:

In the event that a late conditional notice or a late nonrenewal notice is provided by the insurer prior to the expiration date of the policy, coverage shall remain in full force and 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…

Id.

By its terms, this subparagraph applies only to late conditional renewal notices and late nonrenewal notices. The omission of a reference to a "late" alternative renewal notice is significant because it creates a presumption that the legislature did not intend to permit a late notice in this circumstance. "[W]here as here the statute describes the particular situations in which it is to apply, ‘an irrefutable inference must be drawn that what is omitted or not included was intended to be omitted or excluded’ (McKinney’s Cons. Laws of N.Y., Book 1, Statutes, Section 240)" Patrolmen’s Benevolent Association v. City of New York, 41 N. Y. 2d 205, 208, 391 N.Y.S. 2d 544, 546 (1976). Thus, as there is no provision for late alternative renewal notice, the alternative renewal notice must be provided at least sixty, but not more than one hundred twenty, days in advance of the policy expiration date as provided by Section 3426(e)(3) in order to be "timely".

2. The Second Notice Under the Alternative Renewal Procedure

N. Y. Ins. Law Section 3426(e)(5)(A) mandates coverage at the same terms, conditions and rates until the later of the expiration date or sixty days after the mailing and delivery of the second notice but it does not specify when the second notice must be provided:

If the insurer employs an alternative renewal notice as authorized by subparagraph (C) of paragraph one of this subsection, the insurer shall provide coverage on the same terms, conditions, and rates as the expiring policy, until the later of the expiration date or sixty days after the mailing or delivery of the second notice described in such subparagraph,

Id.

N. Y. Ins. Law Section 3426(e)(1)(C) is similarly non-specific with respect to the timing of the second notice stating only that "...a second notice shall be mailed or delivered at a later date…". Unlike Sections 3426(e)(1)(C) and 3426(e)(5)(A), Section 3426(e)(5)(B) permits late conditional notice and late nonrenewal notice but expressly requires that the late notice must be "…provided by the insurer prior to the policy expiration date." Id. The lack of specificity in Sections 3426(e)(1)(C) and 3426(e)(5)(A) as to the timing of the second notice when contrasted with the express restriction on the timing of late nonrenewal and late conditional imposed by Section 3426(e)(5)(B), argues for permitting the second notice to be issued after the expiration date of the policy. The legislature could have expressly provided, as it did with late conditional and late nonrenewal notice under Section 3426(e)(5)(B), that the second notice must be provided prior to policy expiration if it wished to impose this requirement and this requirement should not be read into the statute. See, Book 1, Statutes, Section 74 (McKinney 1971 & Supp. 2001-2002).

Moreover, if the requirement that the second notice be sent prior to the policy expiration date were read into Section 3426(e)(5)(A), there would be little distinction between the second notice and late conditional and late nonrenewal notices under Section 3426(e)(5)(B): both the second notice and late notice under Section 3426(5)(B) would be required to be sent prior to policy expiration, both notices would extend the policy for a maximum of sixty (60) days and both notices would advise the insured of the insurer’s intention to nonrenew or conditionally renew. Thus, reading the statute to require the second notice to be issued prior to the policy expiration date would make it duplicative of the late nonrenewal and late conditional renewal requirements. An interpretation of a statute that creates such a redundancy is inconsistent with settled principles of statutory construction. "All parts of a statute must be harmonized with each other as well as with the general intent of the whole statute, and effect and meaning must, if possible, be given to the entire statute and every part and word thereof." Book 1, Statutes, Section 98 (McKinney 1971 & Supp. 2001-2002). (Emphasis added) See also, In the Matter of Yolanda D., 88 N. Y. 2d 790, 651 N.Y.S.2d 1 (1996). In order to harmonize this statute by giving effect and meaning to the second notice provision, the redundancy should be avoided and the statute read to allow the second notice to be issued, distinct from late nonrenewal and late conditional renewal notice, after policy expiration.

The interpretation that the second notice can be issued after policy expiration also comports with the legislative history of Section 3426. Section 3426 was added in 1986 in response to recommendations made by the Governor’s Advisory Commission on Liability Insurance. Memorandum of State Executive Department, McKinney’s 1986 Session Laws, at 2862. One of the three objectives of the bill, as identified by the Governor’s Advisory Commission and as quoted in the Executive Department Memorandum, was to "permit insurers the flexibility to operate responsibly." Id. This flexibility is facilitated by allowing the second notice to be forwarded after the policy expiration. Moreover, the Governor’s Advisory Commission appeared to contemplate such post-expiration notice in its report to the Governor:

IT IS RECOMMENDED THAT:

The Legislature enact legislation providing that:

(c) Non-compliance with the notice requirement will result in coverage remaining in effect at the same terms and conditions (including rates) of the expiring policy until 60 days after the expiration date, or after proper notice, whichever comes later…

Insuring Our Future, Report of the Governor’s Advisory Commission on Liability Insurance, 1986, at 100.

The second notice should not be delayed indefinitely, however. After the enactment of the new Section 3426 in 1986, the Insurance Department received inquiries from insurers, producers and consumers regarding the operation of its cancellation and nonrenewal provisions. Circular Letter No. 14 (1986) was issued in response to these inquiries in an effort to clarify the operation of the Section 3426 notice provisions. Id. The Circular Letter stated as follows with respect to alternative renewal notice:

Alternative Notice Followed by Second Notice

Because commercial risk, professional liability and public entity insurance present complicated issues, an insurer may issue an alternative notice in the event that it is not in a position to determine whether it will nonrenew or conditionally renew a particular policy. The alternative notice to that effect must also state that as soon as possible there will follow a second notice indicating that, furthermore, that coverage remains in effect under the same terms, conditions and rates as the expiring policy until sixty (60) days after the second notice is issued.

Id.

Thus, the insurer cannot wait indefinitely to provide the second notice. Rather, the second notice must be provided "as soon as possible" after the alternative notice is issued.

For further information you may contact Associate Counsel Joseph A. DeMauro at the New York City Office.


1 The term "Covered policy" is defined in N. Y. Ins. Law Section 3426(a)(1) as follows: "’Covered policy’ means, for purposes of this section, a policy of commercial risk insurance, professional liability insurance or public entity insurance, and shall include any contract, certificate or other evidence of such insurance."