The Office of General Counsel issued the following informal opinion on August 5, 2002, representing the position of the New York State Insurance Department.
Re: Service Requirements for Notice of Cancellation of Insurance Policies Subject to N.Y. Ins. Law § 3426
Do N.Y. Ins. Law §§ 3426(b) and (c) (McKinney 2000) require, as a condition for an effective cancellation of a policy subject to Section 3426, an authorized insurer to mail or deliver a written notice of cancellation to both the first-named insured and such insureds authorized agent or broker?
Yes. A written notice of cancellation must be mailed or delivered to both the first-named insured and such insureds authorized agent or broker as a condition for an effective cancellation of an insurance policy subject to N.Y. Ins. Law § 3426.
There are no facts presented.
N.Y. Ins. Law §§ 3426(b) and (c) provide in pertinent part that:
(b) During the first sixty days a covered policy is initially in effect, except for the bases for cancellation set forth in paragraph one, two or three of subsection (c) of this section, no cancellation shall become effective until twenty days after written notice is mailed or delivered to the first-named insured at the mailing address shown in the policy and to such insured's authorized agent or broker.
(c) After a covered policy has been in effect for sixty days unless cancelled pursuant to subsection (b) of this section, or on or after the effective date if such policy is a renewal, no notice of cancellation shall become effective until fifteen days after written notice is mailed or delivered to the first-named insured and to such insured's authorized agent or broker, and such cancellation is based on one or more of the following:
. . . .
(5) Written notice of cancellation in accordance with this subsection shall be mailed or delivered to the first-named insured, at the address shown on the policy, and to the insured's authorized agent or broker.
N.Y. Ins. Law §§ 3426(b) and (c) (McKinney 2000).
When the New York State Legislature enacted Section 3426, it "was reacting specifically to market problems involving [the] availability and affordability of insurance. Insureds were faced with huge rate increases and coverage cut-backs, often with little advance notice." Office of General Counsel Opinion No. 94-38 (1994). The purpose of Section 3426 was to restore stability to the insurance market by "imposing restrictions on insurers canceling and nonrenewing policies." Id. The service requirements of Section 3426 assure "effective notice to the insured and to the authorized agent1 who can assist the insured in obtaining replacement coverage." Office of General Counsel Opinion No. 90-57 (1990). Accordingly, the plain reading of §§ 3426(b) and (c), and the legislative intent behind their enactment substantiate the requirement that both the first-named insured and such insureds authorized agent, or broker, be served with the written notice of cancellation.
The above opinion is informal and not binding on any court. For further information you may contact Attorney Kristian Earl Lynch at the New York City Office.
1The New York State Insurance Department defines an authorized agent or broker as "the agent or broker that the insured designates to receive information on its behalf," i.e., "the licensee that the insured chose to do business with." Office of General Counsel Opinion No. 90-37 (1990). This authorized agent or broker is, presumably, the party most interested in maintaining a business relationship with the client, and would, therefore, advise the insured as quickly as possible of any notice of cancellation. Id.