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

Eliot Spitzer
Governor

Eric Dinallo
Superintendent

The Office of General Counsel issued the following opinion on June 4, 2007, representing the position of the New York State Insurance Department.

RE: Verbal Communication About Non-renewal of Homeowner’s Policy

Question Presented:

May an insurance agent verbally communicate to an insured, more than 60 days before the expiration date of a homeowner’s policy,1 that the insurer intends to non-renew the policy?

Conclusion:

An insurance agent is not prohibited from verbally communicating to an insured, more than 60 days before a homeowner’s policy’s expiration date, that the insurer will not renew the policy. Such communication, however, does not effectuate non-renewal. Moreover, a homeowner’s policy may be non-renewed only at the end of its three-year required policy period, unless the non-renewal is based upon a ground for which the insurer could have canceled the policy.

Facts:

The question was of a general nature, without reference to particular facts.

Analysis:

New York Insurance Law § 3425 (McKinney 2007) sets out the non-renewal requirements for a homeowner’s policy, which comes within the statute’s definition of a “covered policy” and “personal lines insurance.” Insurance Law § 3425(a)(2) reads as follows:

(a) This section shall apply to covered policies of insurance as defined in paragraphs one, two and three hereof.

* * *

(2) “Covered policy” also means a contract of insurance, referred to in this section as “personal lines insurance,” other than a contract of insurance defined in paragraph one hereof, issued or issued for delivery in this state, on a risk located or resident in this state, 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.

Insurance Law § 3425(d) sets forth the requirements for non-renewing a covered policy. It states in relevant part:

(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. The specific reason or reasons for nonrenewal or conditioned renewal shall be stated in or shall accompany the notice. This paragraph shall not apply when the named insured, an agent or broker authorized by the named insured, or an insurer of the named insured, has mailed or delivered written notice to the insurer that the policy has been replaced or is no longer desired. (Emphasis added.)

Nothing in Insurance Law § 3425 precludes an agent from verbally communicating to an insured, more than 60 days before the policy’s expiration date, that the insurer intends to non-renew the insured’s homeowner’s policy. However, such verbal communication would not effectuate non-renewal; it is not a substitute for the statutory requirement of written notice within 45 to 60 days prior to policy expiration.

Moreover, a homeowner’s policy is subject to a three-year required policy period. Indeed, Insurance Law § 3425(a)(7) provides:

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.

A homeowner’s policy generally may not be non-renewed before the end of its three-year required policy period. Insurance Law § 3425(e) states in relevant part:

With respect to personal lines insurance policies, 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.

Thus, while an agent may verbally communicate to an insured, more than 60 days before the policy’s expiration date, that his homeowner’s policy will be non-renewed, such verbal communication does not effectuate cancellation. And the agent should be mindful that a homeowner’s policy may only be non-renewed at the end of its three-year required policy period, unless the non-renewal is based upon a ground for which the insurer could have canceled the policy.

For further information you may contact Associate Attorney Sally Geisel at the New York City office.

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1 New York Insurance Law § 2351(a) (McKinney Supp. 2007) defines homeowner’s insurance as “a contract of insurance insuring against the contingencies described in subparagraphs (A), (B), (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 coverages 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.”