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: Conditional Renewal of a Commercial Lines Policy
When an insurer renews a commercial lines insurance policy that was written on a business owners package policy form on a commercial package policy form, what procedures should the insurer use to be in compliance with N.Y. Ins. Law § 3426 (McKinney 2000)?
Based upon the limited facts provided, it appears that there would be a conditional renewal subject to N.Y. Ins. Law § 3426(e) (McKinney 2000) because there would be a change in the type of coverage provided.
No additional facts are provided other than those presented in the question. It is assumed that the change in type of policy would increase the premium in excess of ten percent. It also appears that there would be a change in some of the coverage; i.e., there may be additional exclusions in the new policies.
Based upon the assumption that there would be an increase of premium in excess of ten percent and/or a change in coverage resulting from the change in commercial lines policies, the written notice requirement of N.Y. Ins. Law § 3426(e)(1)(B) (McKinney 2000) concerning conditional renewal is required. That provision states:
(e)(1) A covered policy shall remain in full force and effect pursuant to the same terms, conditions and rates unless written notice is mailed or delivered by the insurer to the first-named insured, at the address shown on the policy, and to such insured's authorized agent or broker, indicating the insurer's intention:
. . . .
(B) to condition its renewal upon change of limits, change in type of coverage, reduction of coverage, increased deductible or addition of exclusion, or upon increased premiums in excess of ten percent (exclusive of any premium increase generated as a result of increased exposure units, pursuant to subsection (d) of this section, or as a result of experience rating, loss rating, retrospective rating or audit), except that with respect to an excess liability policy, the insurer may also, consistent with regulations promulgated by the superintendent, condition its renewal upon requirements relating to the underlying coverage, in which event the conditional renewal notice shall be treated as an effective notice of nonrenewal if such requirements are not satisfied as of the later of the expiration date of the policy or sixty days after mailing or delivery of such notice . . . .
As the language of the statute explicitly states, the requirement that written notice be sent to the policyholder is not limited to a context where the premium increase is in excess of ten percent. Instead, any change to coverage outlined in the statute is a basis for provision of the notice.
Given the general nature of this inquiry, an examination of N.Y. Ins. Law § 3426(e) (McKinney 2000) is advised for relevant language concerning conditional renewal applicable to the specific context that led to this inquiry.
The above opinion is informal and not binding on any court. For further information you may contact Senior Attorney Robert Freedman at the New York City Office.