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 July 1, 2004, representing the position of the New York State Insurance Department.

RE: Conditional Renewal Notice Based on Increased Premium On Commercial Risk Insurance Policy

Question Presented:

Must an insurer on a commercial risk insurance policy issue a conditional renewal notice if it increases the renewal premium by ten percent or less?

Conclusion:

An insurer on a commercial risk insurance policy does not have to issue a conditional renewal notice if it increases the renewal premium by ten percent or less. Additionally, a conditional renewal notice is not required to be issued if the renewal premium is increased by more than ten percent if the increase is generated as a result of increased exposure units, experience rating, loss rating, retrospective rating, or audit.

Facts:

The inquiry was general in nature, and no specific facts were provided other than those that are contained in the question presented.

Analysis:

N.Y. Ins. Law § 3426(a)(1) (McKinney Supp. 2004) states:

"Covered policy" means, for purposes of this section, a policy of commercial risk insurance, professional liability insurance or public entity insurance, and shall include any contract, certificate or other evidence of such insurance.

N.Y. Ins. Law § 3426(e)(1) (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 insured's authorized agent or broker, indicating the insurer's intention:

* * * *

(B) to condition its renewal upon change of limits, change in type of coverage, reduction of coverage, increased deductible or addition of exclusion, or upon increased premiums in excess of ten percent (exclusive of any premium increase generated as a result of increased exposure units, pursuant to subsection (d) of this section, or as a result of experience rating, loss rating, retrospective rating or audit), except that with respect to an excess liability policy, the insurer may also, consistent with regulations promulgated by the superintendent, condition its renewal upon requirements relating to the underlying coverage, in which event the conditional renewal notice shall be treated as an effective notice of nonrenewal if such requirements are not satisfied as of the later of the expiration date of the policy or sixty days after mailing or delivery of such notice[.] (emphasis added)

Hence, an insurer on a commercial risk insurance policy does not have to issue a conditional renewal notice if it increases the renewal premium by ten percent or less. Additionally, a conditional renewal notice is not required to be issued if the renewal premium is increased by more than ten percent if the increase is generated as a result of increased exposure units, experience rating, loss rating, retrospective rating, or audit.

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