The Office of General Counsel issued the following informal opinion on July 19, 2002, representing the position of the New York State Insurance Department.
Re: Terrorism exclusions under property/casualty policy covering both New York and non-New York exposures
May a single property/casualty insurance policy issued by an authorized insurer covering property or risk located both in New York and outside New York be issued outside New York with an exclusion or sub-limit with respect to terrorism coverage, or must the policy be endorsed to provide such coverage with respect to property or risks in New York?
Any policy issued by an authorized insurer covering property or risks in New York must be filed and approved by the Superintendent. Provided that applicable regulatory approvals have been secured in the jurisdiction where the property is located, an authorized insurers policy form that has been approved in New York may be endorsed to exclude terrorism coverage for property or risk located outside New York where the endorsement is not otherwise acceptable in New York so long as such endorsement does not apply to the New York property or risk and does not modify the New York policy provisions or render them misleading or violative of public policy.
Certain insureds (the "Insureds") own properties located in New York and in other states. The Insureds wish to obtain property and liability coverage for these properties under a single policy from a New York authorized insurer (the "Insurer"). Although New York has not approved any terrorism exclusion to date, other states have and the Insurer may wish to utilize terrorism exclusions in those states.
An authorized property/casualty insurer is subject to the requirements of N.Y. Ins. Law Article 23 (McKinney 2000 & Supp. 2001-2002), with certain exceptions not relevant herein. Article 23 applies " to all kinds of insurance written on risks or operations in this state " N. Y. Ins. Law Section 2302(a) (McKinney 2000). N. Y. Ins. Law § 2307(b) (McKinney Supp. 2001-2002) provides that "Except as otherwise provided herein, no policy form shall be delivered or issued for delivery unless it has been filed with the superintendent and either he has approved it, or thirty days has elapsed and he has not disapproved it as misleading or violative of public policy."1
Thus, policy form approval is required for policies issued by authorized insurers covering risks or operations in this state, regardless of where the policy is issued or delivered. The scope of Article 23 precludes an authorized insurer from avoiding New York requirements by the simple expediency of issuing or delivering the policy outside the state. Where the insurer issues a policy endorsement intended to cover New York property or risks, the whole policy, not just the New York endorsement, is subject to filing and approval.
Generally, any policy endorsement that may be added to a policy covering a New York property or risks must be filed with the Department in accordance with Article 23 because it amends the approved policy form. However, the Department does not require the filing of property/casualty insurance endorsements that apply only to property or risks located outside of New York so long as the endorsement does not in any way modify the New York coverage or otherwise render the policy misleading or against public policy in this State and the endorsement has received applicable regulatory approvals in the jurisdiction where the property or risk is located.
The New York State Insurance Department has previously disapproved filings for terrorism exclusions pursuant to N.Y. Ins. Law Section 2307(b) because the exclusion was misleading and violative of public policy. This does not mean that the Superintendent may not ultimately find approvable a specific policy form containing such an exclusion. However, N.Y. Ins. Law § 3404 (McKinney 2000), which prescribes the minimum provisions applicable to policies insuring against the peril of fire, does not permit an exclusion for terrorism with respect to property located in this State.2
The above opinion is informal and not binding on any court. For further information you may contact Principal Attorney Paul A. Zuckerman at the New York City Office.
1There are certain exceptions to the filing and approval requirement, most notably in N.Y. Ins. Law Article 63 (McKinney 2000) for special risk insurance, commonly known as the "Free Trade Zone". However, such policies remain subject to the standards of Article 23 and regulations thereunder, including that the policy may not be misleading or violative of public policy.
2Please note that there are certain statutorily mandated coverages, such as certain types of motor vehicle insurance (including statutory automobile liability, no-fault insurance and uninsured motorist coverage and workers compensation insurance), where a terrorism exclusion would not be permitted. However, it does not appear that such coverages are applicable here