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 July 9, 2002, representing the position of the New York State Insurance Department.

RE: Termination of Producer Agreement

Questions Presented:

1) With respect to any new covered policy of automobile insurance subject to N.Y. Ins. Law § 3425 that is voluntarily written on or after August 2, 2001, what is an insurer’s obligation to the insurance agent or broker (hereinafter referred to as "producer") if the producer agreement between them has been terminated?

2) With respect to a covered policy of automobile insurance subject to N.Y. Ins. Law § 3425 that was voluntarily written originally prior to August 2, 2001, and renewals thereof, what is an insurer’s obligation to the producer if the producer agreement between them has been terminated?

3) With reference to N.Y. Ins. Law § 3425(f) (McKinney 2001-2002 Interim Pocket Part), how is the "two percent of the total number of covered policies of the insurer in force at last year-end in each such insurer’s rating territory in use in this state" calculated?

4) Is an insurer required to submit N.Y. Ins. Law § 3425(m)(2) (McKinney 2001-2002 Interim Pocket Part) data in its 2001 year end report?

5) What are the current data reporting requirements with respect to private passenger automobile liability writings?

Conclusions:

1) The statutory policy period for a new automobile insurance policy subject to N.Y. Ins. Law § 3425 that is voluntarily written on or after August 2, 2001 is three years pursuant to N.Y. Ins. Law § 3425(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 the next one-year policy period. Thereafter, at the specific request of the insured, the insurer must offer to continue the policy through the terminated producer for the remaining years 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.

2) The statutory policy period for a covered policy of automobile insurance subject to N.Y. Ins. Law § 3425 that was voluntarily written originally prior to August 2, 2001, and renewals thereof, is one year pursuant to N.Y. Ins. Law § 3425(a)(8) and (m)(1) (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 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 continue to offer the policy through the terminated producer for three successive one-year policy periods, which commences within one year from the date that the termination notice was mailed or delivered. 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) With reference to N.Y. Ins. Law § 3425(f) (McKinney 2001-2002 Interim Pocket Part), the calculation of the "two percent of the total number of covered policies of the insurer in force at last year-end in each such insurer’s rating territory in use in this state" for the year 2001 is based upon all of the covered policies in force at last year’s end, and not just those written prior to August 2, 2001.

4) Yes, an insurer is required to submit N.Y. Ins. Law § 3425(m)(2) (McKinney 2001-2002 Interim Pocket Part) data in its 2001 year end report.

5) The data reporting requirements for private passenger automobile liability writings have not been revised since 1995. For instructions for completing the report and affirmation, go to www.ins.state.ny.us/sec3425.htm and click on the attachments at the end of the January 19, 1995 letter that will appear on your screen.

Facts:

With reference to N.Y. Ins. Law § 3425(j)(1)(B) and (m)(1) (McKinney 2001-2002 Interim Pocket Part), an insurer inquired whether it is "only required to renew the closed agency business for 3 years and then . . . nonrenew that book." The insurer also inquired as to whether, once the closed agency business is renewed for the three years, the insurer may "nonrenew the entire book and it not be deemed discriminatory (i.e., advanced age business) because [the insurer is] nonrenewing for closed agent." With reference to N.Y. Ins. Law § 3425(j)(1)(A) and (m)(2) (McKinney 2001-2002 Interim Pocket Part) and "closed agency business", the insurer inquired as to whether it is "allowed to nonrenew the entire book in this case after 3 years of renewing the business at prevailing commissions without being deemed discriminatory[.]"

Analysis:

N.Y. Ins. Law § 3425 (McKinney 2001-2002 Interim Pocket Part) applies to non-commercial automobile insurance, other than that written through the New York Automobile Insurance Plan. N.Y. Ins. Law § 3425(j) (McKinney 2001-2002 Interim Pocket Part) provides a terminated producer with certain rights regarding business that it produced for the terminating insurer. These producer rights neither enhance nor diminish the rights otherwise provided to insureds under N.Y. Ins. Law § 3425 (McKinney 2001-2002 Interim Pocket Part). The producer rights under § 3425(j) also do not override an insurer’s right to cancel or non-renew a policy otherwise provided under § 3425. Depending upon when the policy was written, different provisions of § 3425(j) apply.

The required policy period for a new automobile insurance policy subject to N.Y. Ins. Law § 3425 that is voluntarily written on or after August 2, 2001 is three years pursuant to N.Y. Ins. Law § 3425(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) requires an insurer to 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 the next one-year policy period. Thereafter, at the specific request of the insured, the insurer must offer to continue the policy through the terminated producer for the remaining years of the three-year required policy period. (For example: if a required policy period ran from 8/5/01 – 8/5/04, and the termination notice is sent on 9/3/03, the insurer must offer to continue the policy through the terminated producer for one year until 8/5/05. Thereafter, if the insured specifically requests such, the insurer must continue the policy through the terminated producer through 8/5/07.) The producer’s rights are subject to the continuation of the policy. An insurer may cancel or non-renew a policy as permitted under N.Y. Ins. Law § 3425 (McKinney 2001-2002 Interim Pocket Part), and, in such circumstance, is not required to make the offers above-described.

The required policy period for a covered policy of automobile insurance voluntarily written originally prior to August 2, 2001, and renewals thereof, is one year pursuant to N.Y. Ins. Law § 3425(a)(8) and (m) (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 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 one year from the date that the termination notice was mailed or delivered. The producer’s rights are subject to the continuation of the policy. An insurer may cancel or non-renew a policy as permitted under N.Y. Ins. Law § 3425 (McKinney 2001-2002 Interim Pocket Part), and, in such circumstance, is not required to make the offers above-described.

With respect to the insurer’s inquiry regarding the calculation of the "two percent of the total number of covered policies of the insurer in force at last year-end in each such insurer’s rating territory in use in this state," N.Y. Ins. Law § 3425(f) (McKinney 2001-2002 Interim Pocket Part) provides that the calculation is based upon all of the covered policies in force at last year’s end, and not just those written prior to August 2, 2001.

As to the inquiry regarding the filing of data related to N.Y. Ins. Law § 3425(m)(2) (McKinney 2001-2002 Interim Pocket Part), an insurer is required to submit N.Y. Ins. Law § 3425(m)(2) (McKinney 2001-2002 Interim Pocket Part) data in its 2001 year end report. The data reporting requirements for private passenger automobile liability writings have not been revised since 1995. Instructions for completing the report and affirmation are available at www.ins.state.ny.us/sec3425.htm (click on the attachments at the end of the January 19, 1995 letter that will appear on the screen).

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