The Office of General Counsel issued the following opinion on March 31, 2004, representing the position of the New York State Insurance Department.
Re: Non-Renewal Notice
Where a commercial umbrella policy that is subject to the provisions contained in N.Y. Ins. Law § 3426 (McKinney Supp. 2004) expires and the insurer does not mail or deliver a notice of non-renewal, does the policy automatically renew until such time as notice is properly mailed or delivered, or the insured cancels or requests non-renewal of the policy?
Where a commercial umbrella policy that is subject to the provisions contained in N.Y. Ins. Law § 3426 (McKinney Supp. 2004) expires and the insurer does not mail or deliver a notice of non-renewal, the policy automatically renews until such time as notice is properly mailed or delivered, or the insured cancels, or requests non-renewal of the policy.
An employee of an insurance brokerage firm states that one of the firms clients had an umbrella policy that was subject to "§ 3126." There is no § 3126 in the New York Insurance Law. It is assumed that the inquirer meant to refer to N.Y. Ins. Law § 3426 (McKinney Supp. 2004), which sets out the requirements regarding the cancellation and non-renewal of commercial property/casualty insurance policies. Since this section was referred to, it is further assumed that the umbrella policy was a commercial umbrella policy that was subject to the non-renewal provisions contained in N.Y. Ins. Law § 3426. The discussion herein is based on these assumptions.
The inquirer stated as follows:
Insured had in place an Umbrella policy that remained in full force and effect for the term 10/1/99 10/1/00. Premium was paid in full for this policy term. Prior to the expiration of the 10/1/99 10/1/00 policy no notice of non-renewal or conditional renewal had been forwarded to the broker or the insured. Broker proceeded with a request to renew the policy for the 10/1/00 10/1/01 period, and at the end of this policy term a request to renew the policy for the 10/1/01 10/1/02 term was made. No notice pursuant to § 3126 [sic] was sent out by the carrier at this time. Carrier contends that policies for the 10/1/00 10/1/01 and 10/1/01 10/1/02 terms were never issued; however, carrier admits to failing to send notice at the end of the 10/1/99 10/1/00 term as required by § 3126 [sic], and has subsequently offered to issue a policy for the 10/1/00 10/1/01 term. Carrier asserts that they are under no obligation under § 3126 [sic] to issue a policy for the 10/1/01 10/1/02 term.
Presumably, no physical copies of the 10/1/00 10/1/01 or 10/1/01 10/1/02 policies were ever sent to the insured or the broker, no request for premium payment was made by the insurer, and no premium payments were made by the insured.
N.Y. Ins. Law § 3426(e) (McKinney Supp. 2004) states in relevant part:
(e)(1) A covered policy shall remain in full force and effect pursuant to the same terms, conditions and rates unless written notice is mailed or delivered by the insurer to the first-named insured, at the address shown on the policy, and to such insureds authorized agent or broker, indicating the insurers intention:
(A) not to renew such policy;
Despite the fact that no physical copies of the policies for the terms 10/1/00 10/1/01 or 10/1/01 10/1/02 were ever issued, and that no premium was billed by the insurer or paid by the insured, the insurer is deemed to have renewed such policies with the same terms, conditions, and premium as the expired 10/1/99 10/1/00 policy. Renewal is automatic under N.Y. Ins. Law § 3426(e) in the absence of compliance with the non-renewal notice requirements contained in that section. The insurer is, however, entitled to the payment of the premiums for those policy years. See American Motorists Ins. Co. v. New York Seven-Up Bottling Co., Inc., 18 A.D.2d 36, 38, 238 N.Y.S.2d 80, 82 (1st Dept 1963), affd 13 N.Y.2d 1157 (1964) ("No inadvertence or mistake of the insurance company can prevent the collection of the proper premium.")
For further information you may contact Associate Attorney Sally Geisel at the New York City Office.