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 March 21, 2002, representing the position of the New York State Insurance Department.

RE: Commercial Property and Casualty Insurance Written Through the Excess Line Market and N.Y. Ins. Law § 3426

Question Presented:

Are commercial property/casualty insurance policies written by an unauthorized insurer through the excess lines market subject to the cancellation and renewal provisions contained in N.Y. Ins. Law § 3426 (McKinney 2000)?

Conclusion:

No, commercial property/casualty insurance policies written by an unauthorized insurer through the excess lines market are not subject to the cancellation and renewal provisions contained in N.Y. Ins. Law § 3426 (McKinney 2000).

Facts:

A licensed insurance broker in New York, who also has an excess line broker’s license that authorizes him to procure policies of insurance from insurers that are not authorized to transact business in this state in accordance with New York’s excess line laws, stated that 95% of his business are grocery stores in New York and New Jersey, and that the other 5% are small businesses, such as shoe stores, small restaurants, bakeries, etc. He stated that the unauthorized insurer that wrote the commercial property/casualty insurance for his customers has been cancelling and non-renewing the policies in a manner that he believed was in violation of the New York Insurance Law.

Analysis:

N.Y. Ins. Law § 3426 (McKinney 2000), which sets out the cancellation and renewal provisions regarding commercial lines insurance, does not apply to policies written on an excess line basis. N.Y. Ins. Law § 3426 (l)(2) (McKinney 2000) states:

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. (emphasis added).

Cancellation and non-renewal of a policy that is written by an unauthorized insurer through the excess line market is, therefore, governed exclusively by the terms of such policy.

For further information you may contact Senior Attorney Sally Geisel at the New York City Office.