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 April 9, 2003, representing the position of the New York State Insurance Department.

RE: Restricted Driver Endorsement on Automobile Insurance Policy

Question Presented:

May an insurer endorse an automobile insurance policy, which is subject to N.Y. Ins. Law § 3425 (McKinney Supp. 2003), to exclude collision coverage for a particular driver?

Conclusion:

The Department has on rare occasion approved certain such endorsements. The Department has conditioned approval, in part, on the insurer obtaining the insured’s signature acknowledging that collision coverage is not provided when a specific individual drives the motor vehicle.

Facts:

An authorized insurer issued a policy of an automobile insurance that is subject to N.Y. Ins. Law § 3425 (McKinney Supp. 2003), with a policy period dated March 28, 2001 – March 28, 2002. It sent a notice of nonrenewal to its insured 48 days before the insured’s policy was set to expire. The insurer conditioned withdrawal of its nonrenewal notice on the insured agreeing to the attachment of an endorsement to the policy that would exclude collision coverage for the insured’s 19-year old son. Prior to the writing of the insured’s policy, the insured’s son had been ticketed for several moving violations, and had been involved in two motor vehicle accidents. The insured signed a form approving the issuance of the restricted driver endorsement, and the policy was renewed for the policy term March 28, 2002 – March 28, 2003. The endorsement that was issued states: "Effective 3/28/2002: Add Collision Waiver on the [covered motor vehicle] for [insured’s son] as of 3/20/2002."

In November 2002, the insured’s son, while driving the covered motor vehicle with the insured’s permission, was involved in an accident in which the vehicle was extensively damaged. The insurer denied coverage for the physical damage of the vehicle based on the restricted driver endorsement.

Analysis:

An insurer of an automobile insurance policy that is subject to N.Y. Ins. Law § 3425 (McKinney Supp. 2003) may not impose a restriction on who may drive a covered vehicle for liability coverage purposes pursuant to N.Y. Comp. Codes R. & Regs. tit. 11, § 60-1.1 (2002) (Reg. 35-A).

However, upon the Department’s approval pursuant to N.Y. Ins. Law § 2307 (McKinney Supp. 2003), an insurer may attach an endorsement to such policy that excludes coverage for physical damage to the covered vehicle if the damage occurrs when the vehicle is driven by a particular individual. The Department has on rare occasion approved such type of endorsements. The Department has conditioned approval, in part, on the insurer obtaining the insured’s signature acknowledging that collision coverage is not provided when a specific individual drives the motor vehicle.

The restricted driver form used by the insurer was filed with, and approved by, this Department. The insured signed a form approving the issuance of the restricted driver endorsement. While there appears to be some conflicting information on the endorsement regarding the date that it became effective, the dates do not appear to be a controlling issue here since the accident involving the insured’s son occurred long after either of the effective dates shown.

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