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 April 26, 2006, representing the position of the New York State Insurance Department.

Re: Department Regulation 154 - Homeowners Policies

QUESTIONS PRESENTED:

1) For purposes of the reporting requirements for homeowners policies issued in New York, as mandated under 11 N.Y.C.R.R Part 19 (1997) (Regulation 154), should renter and mobile home policies be included as homeowners policies?

2) For purposes of the reporting requirements for homeowners policies, when an insurer includes multiple dwellings, owned by one insured and under one homeowners policy with one policy number, should the policy be counted as one or multiple homeowners policies in force?

CONCLUSIONS:

1) Pursuant to the provisions of Section 2351(a) of the Insurance Law, renter policies are not homeowners policies for purposes of reporting homeowners policies in force under Regulation 154. However, mobile home policies are homeowners policies for purposes of such reporting requirements.

2) For purposes of determining the number of homeowners policies in force, a single policy that insures multiple dwellings is counted as one policy.

FACTS:

None presented.

ANALYSIS:

11 N.Y.C.R.R. Part 19 (1997) (Regulation 154) contains requirements for "Homeowners Insurance; Applications for Withdrawal from Marketplace." Regulation 154 implements the requirements of N.Y. Ins. Law § 3425(o) (McKinney 2000 & Supp. 2006) of the Insurance Law, which governs the process when an insurer intends to materially reduce its volume of homeowners policies written. Section 19.1(b)(2) of the regulation, in accordance with Section 3425(o)(2)(C), provides that "a reduction of the net number of homeowners policies in force, by four percent or more…" shall constitute a material reduction of volume of policies for purposes of invoking the requirements of Section 3425(o). N.Y. Ins. Law § 3425(o)(2)(A) states that, with respect to a material reduction of homeowners insurance policies by an insurer, such homeowners policies are defined by Section 2351(a) of the Insurance Law.

N.Y. Ins. Law § 2351(a) (McKinney 2000 & Supp. 2006) states that:

(a) For the purposes of this section, "homeowners insurance" means a contract of insurance insuring against the contingencies described in subparagraphs (A), (B) and (C) or (B) and (C) of paragraph two of subsection (a) of section three thousand four hundred twenty-five of this chapter and which is a "covered policy" of personal lines insurance as defined in such paragraph; provided, however, that the coverage’s provided under such subparagraphs (B) and (C) shall not apply where the natural person does not have an insurable interest in the real property, or a portion thereof, or the residential unit in which such person resides.

N.Y. Ins. Law § 3425(a)(2)(A), (B) and (C) includes as covered personal lines insurance policies those policies "insuring any of the following contingencies:

(A) loss of or damage to real property used predominantly for residential purposes and which consists of not more than four dwelling units, other than hotels and motels;

(B) loss of or damage to personal property in which natural persons have an insurable interest, except personal property used in the conduct of a business; and

(C) other liabilities for loss of, damage to, or injury to persons or property, not arising from the conduct of a business, when a natural person is the named insured under the policy.

Therefore, for purposes of analysis, in determining whether policies insuring renters and mobile homes fall under the definition of homeowners policies, it is necessary to determine whether those policies meet the relevant provisions of Section 3425(a)(2)(A), (B) and (C) or Section 3425(a)(2)(B) and (C), and if they do meet the provisions of Section 3425(a)(2)(B) and (C), whether as required by Section 2351(a), the person purchasing the policy has "an insurable interest in the real property, or a portion thereof, or the residential unit in which such person resides…".

N.Y. Law § 3401 (McKinney 2000) states:

No contract or policy of insurance on property made or issued in this state, or made or issued upon any property in this state, shall be enforceable except for the benefit of some person having an insurable interest in the property insured. In this article, "insurable interest" shall include any lawful and substantial economic interest in the safety or preservation of property from loss, destruction or pecuniary damage.

A renters policy issued to a person insures the renter’s property but does not insure the real property itself. Therefore, a renters policy is not a homeowners policy under Section 3425(2)(A), (B) and (C), which covers "loss of or damage to real property used predominantly for residential purposes….".

Consequently, in order to be deemed a homeowners policy under Section 2351(a), the renters policy must meet the requirements of Section 3425(2)(B) and (C) and cover "loss of or damage to personal property in which natural persons have an insurable interest…" and "other liabilities for loss of, damage to, or injury to persons or property…", subject to the requirement of Section 2351(a) that states that a policy meeting the requirements of 3425(2)(B) & (C) shall not be deemed to be a homeowners policy "where the natural person does not have an insurable interest in the real property or a portion thereof, or the residential unit in which such person resides." (emphasis added). Although the statutes does not explicitly so state, it is reasonably clear that the real property, portion thereof or residential unit refers to property that is an "insured premises" under the policy, since the insured may have other residences, in which the insured may have an insurable interest but is not insured under the policy, such as a vacation home.

The inquirer has submitted ABC Insurance Company’s renters policy that typifies such coverage written in New York. It identifies an "insured premise" and covers the insured from loss of or damage to the renter’s personal property as well as liability coverage for loss of, or injury to persons or property. While the policy is not limited to covering of the insured’s property or liability within the insured premises, the policy has restrictions and limitations that aren’t applicable on the insured premises. The policy does not provide coverage for loss of or damage to the real property, a portion thereof, or the residential unit in which the insured resides. An insured renter usually does not have an insurable interest in either the real property or a portion thereof in which the residential premises is located or in the residential unit itself. Therefore, the renters policy is excluded from the definition of homeowners policies under Section 2351(a). As a result, for purposes of the reporting requirements of Regulation 154, renters policies should not be reported as homeowners policies.

In determining whether mobile homes policies are homeowners policies for purposes of Regulation 154, the same statutory analysis applied to renters policies must be followed. The key element in distinguishing a mobile homeowners policy is, unlike a rental unit, the insured person is typically the owner of, or otherwise has an insurable interest in, the mobile home. The inquirer has submitted to us ABC Insurance Company’s standard mobile home policy, which typifies issuance and usage in New York. The policy is similar to the renters policy in that it insures the insured’s personal property and liability but, additionally, the policy insures the mobile home itself at the residence premises, as well as attached structures, equipment and accessories that were built into and formed a permanent part of the mobile home, including improvements and replacements. Also included are steps, and oil and gas drums or tanks connected to the mobile home that furnish heating or cooking fuel.

If a mobile home is affixed to land, whether or not owned by the insured mobile home owner, it is real property. However, even where a mobile home is not affixed to land, the mobile home owner has an insurable interest in the residential unit in which the insured resides - that is the mobile home itself, since, as defined in Section 3401, an insurable interest shall include any lawful and substantial economic interest in the safety or preservation of property from loss, destruction pecuniary damage and thus, fulfills the requirements of Section 3425(a)(2)(B) and (C) and Section 2351(a). Therefore, for purposes of the reporting requirements of Regulation 154, mobile homes policies should be counted as homeowners policies.

For purposes of meeting the reporting requirements of Regulation 154 and Section 3425(o)(2)(C), calculations are based upon the number of "…homeowners policies in force…" Although a single policy may cover multiple dwellings, the plain language of the statute refers to the number of actual policies issued. Had the Legislature instead chosen to use the number of individual dwellings insured per policy issued as the basis for calculating a material reduction in policies, it could have done so. Therefore, the reporting requirements should be based upon what is simply stated, so that each policy issued is counted as a policy in force.

For further information please contact Supervising Attorney Lawrence M. Fuchsberg at the New York City Office.