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

George E. Pataki
Governor

Howard Mills
Superintendent

The Office of General Counsel issued the following opinion on March 17, 2006, representing the position of the New York State Insurance Department.

Conditional Renewal Notice - Adding Coverage and Changing The Premium

Question Presented:

Must an insurer issue a conditional renewal notice when an insurer adds additional coverage to all policy renewals and charges a percentage of the premium as the premium for the coverage, but the insured has sufficient notice in order to opt-out of the additional coverage?

Conclusion:

No, under Section 3426(e)(1)(B) of the Insurance Law, an insurer does not need to issue a conditional renewal notice when an insurer adds additional coverage to all policy renewals and charges a percentage of the premium as the premium for the coverage, when the insured has sufficient notice in order to opt-out of the additional coverage.

Facts:

The inquirer states that an insurer is in the process of adding equipment breakdown and other coverage to one of its policies. The insurer wants to add the coverage upon policy renewal, charge a percentage of the premium as the additional premium for the coverage, and give the client the choice of opting out of the coverage. The opt-out would require the insured to take action to prevent issuance of a policy with the additional coverage and premium included.

Analysis:

N.Y. Ins. Law § 3426(e) (McKinney Supp. 2006) states in relevant part:

(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:

(A) not to renew such policy; or

(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).

Adding coverage upon policy renewal is not a change to a policy that would require the insurer to issue a conditional renewal notice under Section 3426(e)(1)(B) where the insured is provided timely opportunity to opt-out of the coverage.

As far as a change to the premium, the inquirer states that a percentage of the premium will be charged as the premium for the additional coverage, but does not give any other facts about the change in the premium. Since the additional premium is for additional coverage even if the premium for the additional coverage was in excess of 10%, it would not trigger a conditional renewal. However, if the increase premium for the coverages currently included under the policy exceeded 10%, then the insurer would have to issue a conditional notice.

For further information you may contact Senior Attorney Elizabeth Barrett at the New York City Office.