The Office of General Counsel issued the following opinion on February 18, 2004, representing the position of the New York State Insurance Department.
RE: Commercial Liability Insurance Policy Endorsements
Must a property/casualty insurer provide a certain endorsement to commercial insurance coverages as requested by a City agency to require that it would be timely notified as an additional insured, or otherwise as a third party, in the event that there is a cancellation or material change in the policy between the insurer and a contractor hired by the agency to perform construction work?
An insurer may obligate itself to inform a third party (whether an additional insured or not) about cancellation or material changes. However, an insurer is not permitted to use an endorsement to an insurance policy unless the endorsement form has first been filed and approved by the Insurance Department pursuant to N.Y. Ins. Law § 2307(b) (McKinney Supp. 2004).
The ABC Health and Hospitals Corp. ("ABCHHC") is a self-insured city agency that requires contractors that perform construction work for it to carry various insurance coverages for general liability, automobile liability, workers compensation/employers liability, and builders risk, wherein ABCHHC and the City are named as additional insureds. The ABCHHC requires the use of the following endorsement to such policies, or one with similar language:
The policy shall not be canceled, terminated, modified or changed by the company unless thirty (30) calendar days prior written notice is sent to the insured and also sent to ABC Health and Hospitals Corporation Construction Administration by registered mail, nor shall the policy be canceled, terminated, modified or changed by the insured without the prior written consent of the ABC Health and Hospitals Corporation.
Without this proposed endorsement, the standard insurance policies only obligate the insurer to notify the contractor as first named insured in the event of cancellation or material changes.
Most insurers agree to use the endorsement required by the inquirers agency but some insurers decline to accept the endorsement.
An insurer may obligate itself to inform a third party (whether an additional insured or not) about cancellation or material changes. However, N.Y. Ins. Law § 2307(b) (McKinney Supp. 2004) provides in relevant part:
Except as otherwise provided herein, no policy form shall be delivered or issued for delivery unless it has been filed with the superintendent and either he has approved it, or thirty days have elapsed and he has not disapproved it as misleading or violative of public policy.
An endorsement is a policy form that contains material that becomes part of an insurance policy. Thus, an insurer may not use an endorsement to add, amend, expand, or otherwise alter the terms of an insurance policy unless the endorsement form has previously been filed and approved by the Insurance Department, subject, however, to exceptions that are inapplicable here.
Therefore, the insurer may not issue the endorsement for delivery in New York State until the endorsement form has been filed with the Superintendent and approved in accordance with N.Y. Ins. Law § 2307(b).
For further information you may contact Associate Attorney Jeffrey A. Stonehill at the New York City Office.