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 July 9, 2007, representing the position of the New York State Insurance Department.

Re: Timing of a non-renewal notice on a new homeowners policy

Question Presented:

For purposes of sending out a non-renewal notice, when does the required three-year policy period begin for a new homeowners policy?

Conclusion:

The three-year required policy period is measured from the effective date of the policy. Under the circumstances described below, the policy is considered to be a new policy pursuant to New York Insurance Law § 3425(a)(6) and (7) (McKinney 2006).

Facts:

A homeowners insurance policy was issued in June 2004. Subsequently, the insured, upon the agent’s advice, signed a cancellation request/policy release effective June 30, 2005 for the initial policy. The insured had not requested the cancellation of the initial policy. A new policy was issued to the insured on June 30, 2005 by an affiliate of the insurer of the initial policy under a different policy number at a more favorable rate to the insured. Both insurers are authorized insurers in New York. From which date the three-year policy period mandated by law begins to run.

Analysis:

Insurance Law § 3425, which governs cancellation and renewals of certain property/casualty policies, provides that the required policy period shall be three years for any covered policy of personal lines insurance, which includes a homeowners policy, issued by an authorized insurer. In relevant part, the statute reads as follows:

(a)(6) “Renewal” or “to renew” means the issuance and delivery by an insurer, at the end of the policy period, of a policy superseding a policy previously issued and delivered by the same insurer, or the issuance an delivery of a certificate or notice extending the term of a policy beyond its policy period or term; provided, however, that any policy with a policy period or term of less than one year shall, for the purpose of this section, be considered as if written for a policy period or term of one year, or any policy with no fixed expiration date, shall, for the purpose of this section, be considered as if written for successive policy periods or terms of one year.

(a)(7) 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.

Here, when the insured signed a cancellation/release of the original policy with the first insurer, the three-year policy limit began to run from the effective date of the new policy for purposes of any notice of non-renewal. See Office of General Counsel (“OGC”) Opinion No. 06-07-11 (July 24, 2006). Thus, based on the fact pattern presented, the three-year policy period requirement is measured from the June 30, 2005 inception of the new policy.

For further information you may contact Associate Counsel Alexander Tisch at the New York City Office.