The Office of General Counsel issued the following opinion on December 1, 2006, representing the position of the New York State Insurance Department.
Re: Unapproved mold exclusion in purchasing group policy
May a New York authorized insurer enforce a mold exclusion endorsement in New York liability insurance policies issued on a purchasing group basis where the endorsement was not approved by the Insurance Department?
A New York authorized insurer may not enforce a mold exclusion endorsement in New York liability insurance policies issued on a purchasing group basis where the endorsement was not approved by the Insurance Department.
A New York authorized insurer issued a group liability insurance policy on a national basis to a purchasing group. Apparently, the purchasing group included members that have a liability exposure in New York. The policy initially included coverage for mold damage but was subsequently endorsed to exclude coverage for mold damage for all risks, including those located in the State of New York.
The inquirer assumed that the mold endorsement was not approved by the Insurance Department based upon statements made in our earlier letters that this Department has not approved a mold exclusion in a liability insurance policy. See, for example, opinion by the undersigned dated March 31, 2004, entitled "Mold exclusions in New York umbrella and excess liability Free Trade Zone policies". However, since we were provided with the name of the insurer, we cannot check to verify this. For the purposes of this response, we shall assume that the insurer has not received approval to use such an endorsement in New York. We also assume, for the purposes of this response, that the policy form itself had otherwise been approved for use in New York.
Authorized property/casualty insurers are subject to Article 23 of the Insurance Law, in regard to "all kinds of insurance written on risks or operations in this state," subject to certain exceptions contained in N.Y. Ins. Law § 2302(a) (McKinney 2000), which are not relevant to your inquiry. Article 23, therefore, applies regardless of where the authorized insurer issues or delivers the policy, but only in regard to a policy insuring a New York risk or operation.
As stated in § 153.6(a) of N.Y. Comp. Codes R. & Regs. tit. 11, Part 153 (1995) (Regulation 135), all policy forms of authorized insurers with respect to purchasing groups covering risks or operations in this State shall be approved by the Superintendent pursuant to N.Y. Ins. Law § 2307(b) (McKinney 2006). Accordingly, the endorsement in question, as well as the underlying policy, with respect to New York risks or operations, had to be approved by the Superintendent before the insurer was authorized to use it in New York even if the master purchasing group policy, if any, had been issued outside New York.
In all respects in which a provision of an insurance policy violates the requirements or prohibitions of the Insurance Law, the policy is enforceable as if it conformed to such requirements or prohibitions. N.Y. Ins. Law § 3103 (McKinney 2006); Bersani v. General Accident Fire & Life Assurance Corp., 36 N.Y.2d 457, N.Y.S.2d 108 (1975). In an April 1, 2003, letter this office opined that an authorized insurer that used an unapproved policy form for a New York risk or operation containing a mold exclusion (where prior approval was required) may not enforce the exclusion against the insured.
It should also be noted that, as stated in § 153.6(b), rates, rating plans and rating rules shall be submitted to the Superintendent pursuant to the applicable provisions of Article 23. The use of an endorsement excluding certain coverages would modify the rates for the policy, thereby resulting in the insurer using an unfiled rate.
For further information you may contact Principal Attorney Paul A. Zuckerman at the New York City Office.