New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on March 31, 2003, representing the position of the New York State Insurance Department.

Re: Criminal Conviction of an insured

Question Presented

Does New York Insurance Law prohibit an insurer from nonrenewing or canceling a commercial liability insurance policy issued to a person who was subsequently convicted of a crime?

Conclusion

New York Insurance Law permits an insurer to cancel within sixty days of issuing the commercial liability insurance policy for any reason that is non-discriminatory and does not violate the law. After such policy has been in effect for sixty days, an insurer may cancel such policy only for a reason enumerated in New York Insurance Law § 3426(c) (McKinney 2002). Specifically, New York Insurance Law § 3426(c)(1)(B)(McKinney 2002) states that after 60 days, a policy can be cancelled based on "conviction of a crime arising out of acts increasing the hazard insured against; . . ." Upon the anniversary of the policy, New York Insurance Law permits an insurer to nonrenew such policy for any reason that is non-discriminatory and does not violate the law.

Facts

The inquirer represents a client who is charged with committing a crime. The inquirer client is considering accepting a plea agreement. You wanted to know what impact the resulting conviction would have upon the inquirer’s client’s ability to maintain an existing liability insurance policy on his business. The inquirer asked if it made a difference whether the conviction was for a misdemeanor or a felony.

Analysis

This letter only addresses restrictions placed on insurers by the New York Insurance Law. New York Insurance Law § 3426 (McKinney 2002) establishes minimum requirements of cancellation and nonrenewal for commercial liability policies. With respect to cancellation, during the first 60 days of a new policy, New York Insurance Law

§ 3426(b) (McKinney 2002) permits an insurer to cancel a policy for any reason not prohibited by law. After the initial 60 days that a new policy has been in effect, an insurer may only cancel for one of the reasons enumerated in New York Insurance Law § 3426(c) (McKinney 2002). New York Insurance Law § 3426(c)(1)(B)(McKinney 2002) states that after 60 days, a policy can be cancelled based on "conviction of a crime arising out of acts increasing the hazard insured against; . . ." Because you did not provide specific facts regarding your client’s conviction, the Department cannot determine whether this, or any of the other enumerated reasons apply. Therefore, you should review the list to determine whether any of the enumerated reasons might apply to your client.

With respect to nonrenewal, New York Insurance Law does not prohibit an insurer from nonrenewing a commercial liability insurance policy issued to a person who was subsequently convicted of a crime, whether a misdemeanor or a felony.

In summary, New York Insurance Law permits an insurer to cancel within sixty days of issuing the commercial liability insurance policy for any reason that is non-discriminatory and does not violate the law. After such policy has been in effect for sixty days, an insurer may cancel such policy only for a reason enumerated in New York Insurance Law § 3426(c) (McKinney 2002). Upon the anniversary of the policy, New York Insurance Law permits an insurer to non-renew such policy for any reason that is non-discriminatory and does not violate the law. Pursuant to New York Insurance Law § 3426(e)(1)(C)(2)(McKinney 2002), the insurer must specifically state the reason for non-renewing in its notice of nonrenewal.

For further information one may contact Senior Attorney Susan Dess at the New York City Office.