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 September 1, 2006 representing the position of the New York State Insurance Department.

Re: Fire Insurance Fee

Questions Presented:

1. What portion of the premium for homeowners and commercial multiple peril policies is attributable to the peril of fire, for the purposes of the fire insurance fee under Section 9108?

2. Under Section 9108, is the fire insurance fee levied on the portion of the premium applied to coverage for equipment breakdown?

Conclusions:

1. For those homeowners and commercial multiple peril policies for which the actual fire portion cannot be determined, the accepted fire portions of the premium are 35 and 50 per cent, respectively, that are then levied for the fire insurance fee under Section 9108.

2. No, the fire insurance fee is not levied on the portion of the premium applied to coverage for equipment breakdown since there is no coverage for the peril of fire in the coverage.

Facts:

No specific fact pattern was presented.

Analysis:

N.Y. Ins. Law § 9101(b) (McKinney 2000) states that:

"Premium" includes all amounts received as consideration for insurance contracts or reinsurance contracts, other than for annuity contracts, and includes premium deposits, assessments, policy fees, membership fees, and every other compensation for such contract.

N.Y. Ins. Law § 9108 (McKinney 2000) states in pertinent part:

(a) Every insurance company authorized to do business in this state shall collect, in addition to the applicable premium charge, a fire insurance fee, separately identified and charged to each policyholder, from each such holder of a policy issued in the state or for delivery in the state for coverage of peril of fire, excluding a policy for protection of household furnishings and/or policies issued to protect one or two-family residential structures, schools, churches and hospitals.

(b)(1) The fee is hereby imposed at the rate of one and one-quarter per centum on the gross direct premium written on property or risks located in this state, provided, however, no fee shall be imposed on a policy to insure against peril of inland marine, ocean marine, automobile, or aircraft physical damage. Such fees shall be paid quarterly by insurance companies to the superintendent, after deducting from such gross premiums, (i) premiums upon policies not taken and (ii) premiums returned on cancelled policies…

The fee is levied on gross direct premiums written for the coverage of the peril of fire, less return premiums thereon.

In the case of a "pure" fire insurance policy, calculation of the fee is a simple matter of applying the percentage contained in Section 9108(b)(1) to the premiums in question. When the fee applies to a multiperil policy where a portion of the coverage applies to the peril of fire, then the issue becomes ascertaining the proper amount of the premium in question upon which the fee should be imposed.

Circular Letter No. 19 (1982), concerning fire insurance fees, addresses the issue in the following manner:

Of the multi-peril policies which are covered by this … Section for which the actual fire portion cannot be determined, the accepted fire portion for homeowners and commercial multiple peril policies are 35 and 50 per cent, respectively.

In addition, the inquirer stated that his company provides coverage for equipment breakdown by endorsement to its multi-peril policy. The fire insurance fee is not levied on the portion of the premium applied to coverage for equipment breakdown since there is no coverage for the peril of fire in the coverage.

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