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 June 27, 2002, representing the position of the New York State Insurance Department.

Re: N.Y. Ins. Law § 3425(f) – Non-renewal of Automobile Insurance Policies before and after August 2, 2001

Questions Presented:

1. How does an insurer calculate the amount of permissible non-renewals ("2-percent rule") regarding automobile insurance policies issued before August 2, 2001 in a particular territory, pursuant to N.Y. Ins. Law § 3425(f)(1) (McKinney Supp. 2002)?

2. How does the "2-for-1 rule" under N.Y. Ins. Law § 3425(f)(2) (McKinney Supp. 2002) factor into the amount of permissible non-renewals?

Conclusions:

1. An insurer may non-renew or conditionally renew 2-percent of its business written on or before August 1, 2001, based upon the total number of the insurer’s covered policies in force at the last year’s-end of each year in each of the insurer’s rating territories in use in this state.

2. An insurer may non-renew or conditionally renew one additional policy written in a territory on or before August 1, 2001, in excess of the 2-percent limit, for every two new automobile policies written on or after August 2, 2001, in that particular territory.

Facts:

No additional facts were given.

Analysis:

As of August 2, 2001, certain provisions of N.Y. Ins. Law § 3425, relating to covered policies of "automobile insurance," as such term is defined in section 3425(a)(1), no longer apply to newly written policies. Essentially, these policies cover motor vehicles used primarily for non-business purposes, but do not include policies issued by the New York Assigned Risk Plan (the Plan) pursuant to N.Y. Ins. Law Article 53 (McKinney 2000). One of the provisions was section 3425(f), which:

1. Limited the number of notices of intent not to renew an automobile policy ("non-renewal notice") and notices to condition renewal upon reduction of limits or elimination of any coverages ("conditional renewal notice") that an insurer may issue in any one year to 2-percent of the total number of covered policies of the insurer in force at last year’s-end in each of the insurer’s rating territories in use in this state, which have completed their required policy period under section 3425; and

2. Permitted an insurer, for every two new automobile policies written in a territory, to non-renew or conditionally renew one additional automobile policy in that territory in excess of the 2-percent limit.

These provisions no longer apply to new policies issued on or after August 2, 2001. The Department, in Circular Letter 21 (2001), stated that section 3425(f) remains applicable for policies issued on or before August 1, 2001. However, policies newly issued on or after August 2, 2001, are subject to a three-year "required policy period" as defined in section 3425(a)(7). Additionally, section 3425(m)(3) lists the permissible grounds for non-renewal of such policies during the required policy period.

Therefore, for all policies issued on or before August 1, 2001, the 2-percent and 2-for-1 rules still apply. An insurer may non-renew or conditionally renew 2-percent of its business written on or before August 1, 2001, based upon the total number of the insurer’s covered policies in force at the last year’s-end of each year in each of the insurer’s rating territories in use in this state. Thus, the 2-percent rule is based upon all policies in force at the year’s-end. Although the newly issued policies are not subject to this rule, they are still counted in the base.

As an example, if an insurer has written 1,000 automobile insurance policies before August 2, 2001 in a given territory, and has written 100 new policies on or after August 2, 2001 through the end of the year, would the insurer be permitted to non-renew 2-percent of the 1,100 in force policies (22 policies), or would the insurer be limited to 2-percent of 1,000 policies (20 policies)? The answer would be 2-percent of the 1,100 in force policies, or 22 policies. The 22 policies must come from the policies written before August 2, 2001, and not from any of the subsequently written policies.

Regarding the 2-for-1 rule, an insurer may non-renew or conditionally renew one additional policy written in a territory on or before August 1, 2001, in excess of the 2-percent limit, for every two new automobile policies written on or after August 2, 2001, in that particular territory.

Policies issued on or after August 2, 2001, which are non-renewed either pursuant to section 3425(m)(3) or upon the expiration of the three-year required policy period, are not subject to the 2-percent or 2-for-1 rule.

For further information, you may contact Senior Attorney Meredith S. Kaufer at the New York City Office.