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 February 18, 2004, representing the position of the New York State Insurance Department.

Re: The Completion of Service on Beneficiary & Regulation 133

Questions Presented:

1. Under N.Y. Comp. Codes R. & Regs. tit. 11, § 79.2(h) (2004) (Regulation 133), is the service by mail of a bank’s written notice of nonrenewal upon the beneficiary of such bank’s letter of credit complete upon mailing or upon receipt?

2. Under N.Y. Comp. Codes R. & Regs. tit. 11, § 79.2(h) and § 79.9(a) (2004) (Regulation 133), is registered mail the only method by which an issuing bank may serve the beneficiary of its letter of credit with written notice of the bank’s election not to renew such letter of credit?

Conclusions:

1. The service of the bank’s written notice of nonrenewal by mail is complete upon mailing of the notice.

2. No. The issuing bank may use other substantially similar methods of service that provide proof of mailing, such as: courier mail, certified mail or overnight mail.

Facts:

No facts are provided.

Analysis:

Under N.Y. Comp. Codes R. & Regs. tit. 11, § 79.2(h) (2004) (Regulation 133), "[f]or a letter of credit to be acceptable, it must . . . contain an evergreen clause which provides at least 30 days' written notice to the beneficiary prior to expiry date for nonrenewal."1  And under N.Y. Comp. Codes R. & Regs. tit. 11, § 79.2(l), all letters of credit must "conform in substance" to N.Y. Comp. Codes R. & Regs. tit. 11, § 79.9(a), which provides an exhibit of a letter of credit that contains an acceptable evergreen clause as follows:

It is a condition of this Letter of Credit that it is deemed to be automatically extended without amendment for one year from the expiry date hereof, or any future expiration date, unless 30 days prior to any expiration date we notify you by registered mail that we elect not to consider this Letter of Credit renewed for any such additional period.

Accordingly, the service of the bank’s written notice of nonrenewal by mail is complete upon mailing of the notice.

With respect to service of the written notice of nonrenewal by registered mail, § 79.2(h) does not specify the method(s) of service that an issuing bank may utilize for such notice. However, § 79.2(l) does require all letters of credit to "conform in substance" to § 79.9(a), whose evergreen clause states that notification shall be made by registered mail. Consequently, the issuing bank may use other substantially similar methods of service that provide proof of mailing, such as: courier mail, certified mail or overnight mail.

For further information you may contact Senior Attorney Kristian Earl Lynch at the New York City Office.


1  "An ‘evergreen clause’ is a provision that calls for continuous automatic renewals of a letter of credit, subject to its being nonrenewed on at least thirty days’ written notice." 4 New York Insurance Law 54-17 n.56 (Wolcott B. Dunham, Jr., gen. ed. 1990).