New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Howard Mills
Acting Superintendent

The Office of General Counsel issued the following informal opinion on March 10, 2005 representing the position of the New York State Insurance Department.

RE: Termination of Property and Casualty Personal Lines Insurance Agents and Brokers

Questions Presented:

Does N.Y. Ins. Law § 3425(j) (McKinney Supp. 2005) place an affirmative obligation on the part of the insurer to send an additional letter to an insured whose producer has been terminated by the insurer, notifying the insured of the right to specifically request renewal through the terminated agent or broker beyond the initial time period provided by N.Y. Ins. Law § 3425(j) (McKinney Supp. 2005)?

Conclusion:

No, provided that an insurer has satisfied the notification requirements required by § 3425(j), described in Department Circular Letter No. 4 (1984) when the insured’s producer was terminated, it is not necessary for the insurer to send an additional notification letter to the insured of the right to specifically request renewal through the terminated agent or broker beyond the initial time period provided by N.Y. Ins. Law § 3425(j) (McKinney Supp. 2005).

Facts:

An inquiry was received by the Department that appeared to interpret Circular Letter No. 4 (1984) as requiring that an insurer send a letter to an insured at the time of renewal advising of the insured’s right to make a request to continue the policy through the producer.

Analysis:

With regard to an insurer’s obligations to an insured upon termination of the insured’s producer, N.Y. Ins. Law § 3425(j)(1) (McKinney Supp. 2005) provides that:

(j) (1) Where an insurer or an agent who is authorized by such insurer to accept lines of insurance from licensed agents or brokers notifies a licensed agent or broker that its contract or account shall be terminated:

(A) with respect to a personal lines insurance policy required to be continued by this section, the insurer shall offer to continue the policy for any remaining part of the required policy period and any statutory extension and the insurer shall offer to continue the policy through the terminated agent or broker for at least its next one year policy period which commences within one year following the date of mailing or delivery to the terminated agent or broker of written notice of termination of such contract or account, and thereafter, at the specific request of the insured, shall offer to continue the policy through such terminated agent or broker for any remaining part of the required policy period including statutory extension;

(B) with respect to an automobile insurance policy subject to this section, the insurer shall offer to continue the policy for any remaining part of the required policy period and, unless the policy is cancelled or non-renewed in accordance with the provisions of either subsection (b), (c) or (f) of this section, it shall, at the specific request of the insured, offer to continue the policy through the terminated agent or broker for three successive one year policy periods which commence within the year following the date of mailing or delivery to the terminated agent or broker of written notice of termination of such contract or account; (emphasis added)

Thus, the statute provides different obligations for the insurer with regard to continuing policies, one for personal lines other than automobile and the other for automobile, when the insured’s agent or broker has been terminated by the insurer.

At the time Circular Letter No. 4 (1984) was issued, the above-quoted provisions were contained in N.Y. Ins. Law §§ 167-a and 167-aa. Although former sections 167-a and 167-aa of the Insurance Law were recodified as Section 3425 in 1984, the opinion expressed in Department Circular Letter No. 4 (1984) is still valid and in effect. With respect to the manner of making the offers required by N.Y. Ins. Law §§ 3425(j)(1)(A) and (B) (McKinney Supp. 2005), Department Circular Letter No. 4 (1984) states that:

A proper offer by the insurer would take the form of a letter sent to every personal lines insured whose producer of record has been terminated explaining the provisions of the statutes. Offers of continued insurance coverage and advice concerning the insured’s rights under these statutes could also be satisfied by setting out the language of the statute itself or by summarizing it in the letter.

The letter from the insurer should be sent at the time of the termination of the insured’s producer. An insurer should thereby explain the insured’s rights to continue the policy under N.Y. Ins. Law § 3425(j)(1)(A) or (B), as applicable, or set out the specific statutory language in the letter. The insurer is not required under § 3425 to send an additional letter to the insured regarding the insured’s right to make a specific request to continue the policy through the terminated producer, nor does Department Circular Letter No. 4 (1984) impose such an obligation on the insurer.

It should be noted that automobile policies voluntarily written from August 2, 2001 to June 25, 2003 are treated as "personal lines policies" that are subject to the requirements of paragraph (A) of 3425(j)(1), not paragraph (B). See Circular Letter No. 12 (2003) for guidance.

For further information you may contact Assistant Counsel Brenda M. Gibbs at the Albany Office.