The Office of General Counsel issued the following opinion on May 12, 2003, representing the position of the New York State Insurance Department.
Re: Applicability of N.Y. Ins. Law § 3425(d) & (e)(McKinney Supp. 2003) to Marine (Yacht) Insurance
Do the nonrenewal and cancellation requirements in N.Y. Ins. Law § 3425 (McKinney Supp. 2003) apply to personal lines marine insurance?
The nonrenewal and cancellation requirements in N.Y. Ins. Law § 3425 (McKinney Supp. 2003) apply to personal lines marine insurance.
The inquiry is general in nature. No specific facts were provided.
N.Y. Ins. Law § 3425 (McKinney Supp. 2003) establishes the requirements for cancellation of "personal lines insurance". Personal lines insurance is defined in N.Y. Ins. Law § 3425(a)(2) (McKinney Supp. 2003), which provides in pertinent part:
(a) This section shall apply to covered policies of insurance as defined in paragraphs one, two and three hereof.
(2) "Covered policy" also means a contract of insurance, referred to in this section as "personal lines insurance", other than a contract of insurance defined in paragraph one hereof, issued or issued for delivery in this state, on a risk located or resident in this state, insuring any of the following contingencies:
(B) loss of or damage to personal property in which natural persons have an insurable interest, except personal property used in the conduct of a business and
(C) other liabilities for loss of, damage to, or injury to persons or property not arising from the conduct of a business, when a natural person is the named insured under the policy.
As can be seen above, the provisions of Section 3425 cover insurance that is procured on a personal lines basis. The inquirer states that the insurance coverage in question involves marine insurance in the form of a personal lines yacht policy insuring for hull and protection and indemnity. The definition of marine insurance can be found in N.Y. Ins. Law § 1113(a)(20) (2000) which provides in pertinent part:
(20) "Marine and inland marine insurance," means insurance against any and all kinds of loss of or damage to:
(A) Vessels, hulls, craft, aircraft, cars, automobiles, trailers and vehicles of every kind in respect to, appertaining to or in connection with any and all risks or perils of navigation, transit, or transportation, including war risks, on or under any seas or other waters, on land or in the air, or while being assembled, packed, crated, baled, compressed or similarly prepared for shipment or while awaiting the same or during any delays, storage, transshipment, or reshipment incident thereto, including marine builders risks and all personal property floater risks;
(B) Person or property in connection with or appertaining to marine, inland marine, transit or transportation insurance, including liability for loss of or damage to either, arising out of or in connection with the construction, repair, operation, maintenance or use of the subject matter of such insurance .
Insurance coverage on a yacht falls within the definition of marine insurance.
Specifically, the inquirer asked whether the nonrenewal and cancellation requirements in Section 3425 apply to the yacht policy in question. The nonrenewal and cancellation provisions are contained in subsections (d) & (e) of Section 3425 which state in relevant part:
(d)(1) Unless the insurer, at least forty-five but not more than sixty days in advance of the end of the policy period, mails or delivers to the named insured, at the address shown in the policy, a written notice of its intention not to renew a covered policy, or to condition its renewal upon change of limits or elimination of any coverages, the named insured shall be entitled to renew the policy upon timely payment of the premium billed to the insured for the renewal. The specific reason or reasons for nonrenewal or conditioned renewal shall be stated in or shall accompany the notice. This paragraph shall not apply when the named insured, an agent or broker authorized by the named insured, or an insurer of the named insured, has mailed or delivered written notice to the insurer that the policy has been replaced or is no longer desired.
(2) If an insurer has the right to cancel a policy it may, in lieu of cancellation, condition continuation of such policy upon change of limits or elimination of any coverage not required by law, if written notice of such intention is mailed or delivered to the insured at the address shown in the policy at least twenty days prior to the effective date of such action.
(e) With respect to personal lines insurance policies, no notice of nonrenewal or conditional renewal of a covered policy shall be issued to become effective during the required policy period unless it is based upon a ground for which the policy could have been cancelled.
There is nothing in Section 3425 generally, or subsections (d) & (e) in particular, which indicate that the Section does not apply to marine insurance that is issued on a personal lines basis. In contrast, N.Y. Ins. Law § 3426 (2000) which applies to commercial risks, specifically provides, in Section 3426(l)(2), that the cancellation and nonrenewal provisions therein do not apply to policies that are principally marine insurance. By virtue of the fact that there is no such exclusion in Section 3425, the cancellation and nonrenewal provisions of Section 3425 apply to marine insurance, in this case a yacht policy, that is procured on a personal lines basis.
For further information you may contact Associate Attorney D. Monica Marsh at the New York City Office.