OGC Opinion No. 08-02-09
The Office of General Counsel issued the following opinion on February 22, 2008, representing the position of the New York State Insurance Department.
RE: Applicability of Insurance Law § 3425(d)(1) to expiration of Original Equipment Manufactured (“OEM”) coverage on a non-commercial automobile insurance policy
Question Presented:
Does Insurance Law § 3425(d)(1) require a conditional renewal notice under the hypothetical presented below when a covered vehicle reaches ten years of age?
Conclusion:
No. Insurance Law § 3425(d)(1) does not require a conditional renewal notice under the scenario presented here when a covered vehicle reaches ten years of age, because there is no change in the policy coverage or limits. Rather, the change occurs solely as a result of the operation of specific policy language.
Facts:
The inquirer presented a hypothetical under which a non-commercial automobile insurance policy states that OEM replacement parts, where available, shall be used for claims for covered losses occurring to an insured vehicle under ten years of age. The policy provision would not apply to any vehicle ten years of age or older. The inquirer’s example assumed that the policy provisions have been approved by the Department.
Analysis:
Insurance Law § 3425(d)(1) entitles a named insured of a non-commercial automobile insurance policy to renew the policy upon timely payment of premium unless the insurer provides timely notice of its intention to (1) renew the policy with conditions or (2) nonrenew. The statute reads, in relevant part, as follows:
(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. 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.
The statute applies when an insured's policy is about to expire, since the notice is to be produced "in advance of the end of the policy period." See Opinion of General Counsel No. 07-01-05 (January 12, 2007).
The inquirer’s hypothetical concerns a policy provision stating that the insurer shall use OEM parts, where available, for claims involving vehicles less than ten years of age. When the automobile reaches its tenth year, the policy provision requiring OEM parts will no longer apply. Where, as here, a change is effected through the specific operation of the policy terms and not a change to the policy terms themselves, there is no change in coverage within the meaning of Insurance Law § 3425(d). Accordingly, the insurer need not provide the insured with any conditional renewal notice.
Moreover, in Opinion of General Counsel No. 02-04-10 (April 8, 2002), the Department reached a similar conclusion with respect to a policy provision in a commercial lines policy. That policy provision increased the coverage limits and the resulting premium. In that opinion, the Office of General Counsel opined that the change in limits and premium was not a change in coverage that required a notice of conditional renewal under Insurance Law § 3426(e) because the change resulted solely from the operation of the policy provision itself.
The inquirer was further advised that an insurer that bases its estimate for an insured’s claim under motor vehicle collision or comprehensive coverage on any non-OEM crash parts must comply with the requirements set forth in Section 216.7(b)(5) of N.Y. Comp. Codes R. & Regs. tit. 11, Part 216 (2003) (Regulation 64). That regulation requires an insurer to quote only those OEM crash parts that equal or exceed comparable OEM crash parts in terms of fit, form, finish, quality and performance. The regulation also requires an insurer to specify the non-OEM or the non-OEM supplier.
For further information you may contact Senior Attorney Brenda Gibbs at the Albany Office.