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 July 24, 2006 representing the position of the New York State Insurance Department.

Re: General Construction Law § 20 and time periods established by § 3425 of the Insurance Law

Questions Presented:

1. Does Section 20 of the General Construction Law apply to Section 3425(b) for a notice of cancellation?

2. May a notice of cancellation be mailed on the 60th day of the statutory period?

3. Does Section 20 of the General Construction Law apply to the time periods established by Section 3425(d) for conditional renewals, nonrenewals, and substitutions of policy forms?

4. Does Section 3425(e) restrict only nonrenewal or conditional renewals of personal lines insurance policies to the three year required policy period or does it also restrict cancellation of the policies?

5. May an insurer, upon the completion of a three year required policy period, issue a notice of nonrenewal or conditional renewal for reasons not listed in Section 3425(c)(2)?

Conclusions:

1. No, Section 20 of the General Construction Law does not apply to Section 3425(b) for a notice of cancellation.

2. Yes, a notice of cancellation may be mailed on the 60th day of the statutory period, but the insurer must be acting in accordance with its uniformly applied underwriting rules for cancellations.

3. Yes, Section 20 of the General Construction Law applies to the time periods established by Section 3425(d) of the Insurance Law for conditional renewals, nonrenewals, and substitutions of policy forms.

4. Section 3425(e) restricts nonrenewal or conditional renewals and not cancellation of personal lines insurance policies to the three year required policy period.

5. Yes, upon the completion of a three year required policy period (unless the policy provides for a greater period), the insurer may issue a notice of nonrenewal or conditional renewal for any reason; provided however, the reasons must not otherwise be prohibited by law (such as race, religion, etc.) or the policy terms and must be in accordance with the insurer’s uniformly applied underwriting rules.

Facts:

The inquirer’s company provides insurance compliance information and a software program that generates cancellation and conditional renewal notices.

The inquirer was told that a notice of cancellation may not be mailed on the 60th day of the statutory period because, in applying General Construction Law § 20, the first day (policy inception date) and the last day (day of mailing) are not considered part of the 60 days, and therefore the time period is technically only 58 days.

Analysis:

General Construction Law § 20 and time periods established by Section 3425

N.Y. Ins. Law § 3425 (McKinney Supp. 2006) states in relevant part:

(b) During the first sixty days a covered policy is in effect, no notice of cancellation shall be issued or be effective unless it states or is accompanied by a statement of the specific reason or reasons for such cancellation….

….

(d)(1) Unless the insurer, at least forty-five but not more than sixty days in advance of the end of the policy period, mails or delivers to the named insured, at the address shown in the policy, a written notice of its intention not to renew a covered policy, or to condition its renewal upon change of limits or elimination of any coverages, the named insured shall be entitled to renew the policy upon timely payment of the premium billed to the insured for the renewal.…

(2) If an insurer has the right to cancel a policy it may, in lieu of cancellation, condition continuation of such policy upon change of limits or elimination of any coverage not required by law, if written notice of such intention is mailed or delivered to the insured at the address shown in the policy at least twenty days prior to the effective date of such action.

(3) At its discretion, the insurer may, in lieu of renewing the policy in the form as last issued, substitute at the annual renewal date another approved policy form which contains at least substantially equivalent value in the aggregate of benefits, as determined by the superintendent. Notice of intention to substitute a different policy form on a renewal shall be made in the same manner as is prescribed in paragraph one of this subsection for a conditioned renewal but with respect to automobile insurance policies shall not be subject to the percentage limitations contained in subsection (f) of this section applicable to a conditioned renewal….

N.Y. Gen. Constr. Law § 20 (McKinney 2003) specifically states:

A number of days specified as a period from a certain day within which or after or before which an act is authorized or required to be done means such number of calendar days exclusive of the calendar day from which the reckoning is made. If such period is a period of two days, Saturday, Sunday or a public holiday must be excluded from the reckoning if it is an intervening day between the day from which the reckoning is made and the last day of the period. In computing any specified period of time from a specified event, the day upon which the event happens is deemed the day from which the reckoning is made. The day from which any specified period of time is reckoned shall be excluded in making the reckoning.

In Metropolitan Life Ins. Co. v Schmidt, 299 NY 428 (1949), the New York Court of Appeals held that the general rule of construction provides that, in computing any specified period of time from a specified event, the day upon which the event happens is deemed the day from which reckoning is made, and the day from which any specified period of time is reckoned shall be excluded in making the reckoning.

In terms of cancellation notices, under Section 3425(b) an insurer may not serve a notice of cancellation "[d]uring the first sixty days a covered policy is in effect" unless it states the specific reason or reasons for the cancellation. If Section 20 of the General Construction Law were applied to the sixty day period, in essence, an insurer would have sixty-one (61) days to issue a notice of cancellation. GCL 20 applies to a computation from a certain day within which or after or before an act is authorized or required to be done. However, Section 3425(b) is not such a provision, but rather an all-inclusive period with a clearly defined starting and ending point. An insurer would count the date the policy is effective as the first day and then add 59 days to that date to know the period of time a notice of cancellation may be issued or be effective. Accordingly, the insurer may cancel up to and including the 60th day, as long as the notice that is sent otherwise complies with applicable provision of N.Y. Ins. Law § 3425 and any other relevant law. In addition, the insurer must be acting in accordance with its uniformly applied underwriting rules for cancellations.

In a November 14, 1975 opinion the Department opined that in computing the number of days a policy has been in force for the purpose of determining the timeliness of a notice of cancellation the day upon which the policy became effective must be excluded pursuant to Section 20 of the General Construction Law. In that opinion, an insurer issued a policy to an insured effective May 23rd and thereafter served a notice of cancellation on July 22nd. The Department applied Section 20 to these facts and excluded the effective date of the policy and determined that the notice of cancellation was issued within the 60 day period of Section 3425(b) of the Insurance Law. However, the Department has reviewed that opinion and determined that General Construction Law does not apply to Section 3425(b) of the Insurance Law. In the example above the notice of cancellation was not served within the 60 days because the effective date of the policy is included in the sixty (60) day period.

General Construction Law § 20 does apply for nonrenewal or conditional renewals under § 3425 of the Insurance Law. To determine if a nonrenewal or conditional renewal under Section 3425 of the Insurance Law was made in a timely manner pursuant to General Construction Law § 20, the first day of the period is considered the reckoning day and is excluded from the time period for which an act is authorized or required to be done.

In terms of nonrenewals and conditional renewals, under Section 3425(d)(1) and 3425(d)(3) of the Insurance Law, an insurer may mail or deliver a notice of intention not to renew a policy, or condition renewal upon a change of limits, elimination of any coverages, or substitution of a policy form at least forty-five but not more than sixty days in advance of the end of the policy period. In determining the timeliness of a notice of intention pursuant to Section 20 of the General Construction Law, the inception date of the notice (that is, the mailing or delivery date) must be excluded. The termination date (that is, the effective date of the nonrenewal or conditional renewal) is included in the 45-60 day period.

Under Section 3425(d)(2) of the Insurance Law, if an insurer has a right to cancel a policy, but instead of cancellation, conditions continuation of a policy upon a change of limits or elimination of any coverages, an insurer must mail or deliver a notice of intention to do so to the insured at least twenty days prior to the effective date of such action. In determining the timeliness of a notice of intention pursuant to Section 20 of the General Construction Law, the inception date of the notice (that is, the mailing or delivery date) must be excluded. The termination date (that is, the effective date of the conditional renewal) is included in the twenty day period.

Requirements for nonrenewals or conditional renewals for personal lines insurance policies as defined in 3425(a)(2)

N.Y. Ins. Law § 3425(e) (McKinney Supp. 2006) states:

(e) With respect to personal lines insurance policies [as defined in N.Y. Ins. Law § 3425(a)(2) (McKinney Supp. 2006)], no notice of nonrenewal or conditional renewal of a covered policy shall be issued to become effective during the required policy period unless it is based upon a ground for which the policy could have been cancelled.

Further, N.Y. Ins. Law § 3425(a)(7) defines "required policy period" as the following:

With respect to personal lines insurance, "required policy period" means a period of three years from the date as of which a covered policy is first issued or is voluntarily renewed.

Section 3425(e) restricts a nonrenewal or conditional renewal during the three year required policy period to the reasons for which a policy may be cancelled pursuant to Section 3425(c)(2).

Upon the completion of a three year required policy period (unless the policy provides for a greater period), the insurer may issue a notice of nonrenewal or conditional renewal for any reason; provided however, the reasons must not otherwise be prohibited by law (such as race, religion, etc.) or the policy terms and must be in accordance with the insurer’s uniformly applied underwriting rules.

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