OGC Op. No. 10-01-04

The Office of General Counsel issued the following opinion on January 13, 2010, representing the position of the New York State Insurance Department

Re: Determining “Principally Headquartered” under N.Y. Ins. Law § 3426(l)(1) Where Insurer Issues Policy Covering Multiple-Affiliated Corporate Entities

Questions Presented:

1. Where an authorized insurer issues in New York or issues for delivery in New York a policy covering multiple-affiliated corporate entities located in various states, including New York, may the insurer use the location of the first-named insured in determining whether, for purposes of Insurance Law § 3426(l)(1), an insured is “principally headquartered” in New York?

2. If an authorized insurer issues, in New York, a policy that is delivered to an insured principally headquartered outside of New York, and the policy covers multiple-affiliated corporate entities with operations in various states including New York, is the policy form subject to the form filing requirements in the New York Insurance Law?

Conclusions:

1. Yes. An authorized insurer that issues in New York or issues for delivery in New York a non-group insurance policy to a first-named insured covering multiple-affiliated corporations may use the location of the first-named insured in determining whether, for purposes of Insurance Law § 3426(l)(1), an insured is “principally headquartered” in New York.

2. Yes. While the New York-issued policy will be delivered to an insured principally headquartered outside of New York, the policy will cover risks located or resident in New York. Accordingly, the policy form would be subject to the form filing requirements set forth in Article 23 of the Insurance Law, and may be subject to other applicable provisions of the Insurance Law and regulations promulgated thereunder.

Facts:

The inquirer asks whether an insurer may use the location of the first-named on a policy in determining if a corporate insured with multiple-affiliated corporations located in various states is principally headquartered in New York, and whether such a policy form is subject to the Insurance Law. The inquirer notes that the Insurance Law does not define the term “principally headquartered” in New York. For purposes of the inquiry, the inquirer asks that the Insurance Department assume the following: that the insurer in question is domiciled in New York; that the insurer issues commercial policies from its New York offices; and that the policy in question does not provide that Insurance Law § 3426 shall govern the policies.

Analysis:

The inquiry raises two questions. Each is addressed in turn.

I. Determining Whether An Insured is “Principally Headquartered” in New York Pursuant to Insurance Law § 3426(l)(1)

Insurance Law § 3426, which establishes the minimum cancellations and non-renewal requirements for most commercial property/casualty insurance, is relevant to the first question, which asks whether an authorized insurer that issues in New York or issues for delivery in New York a non-group insurance policy to a first-named insured covering multiple-affiliated corporations may use the location of the first-named insured in determining whether, for purposes of Insurance Law § 3426(l)(1), an insured is “principally headquartered” in New York. Insurance Law § 3426(l)(1) provides in pertinent part as follows:

This section shall apply to any policy issued or issued for delivery in this state covering risks with multi-state locations, where the insured is principally headquartered in this state or where the policy provides that this section, as a matter of choice of law, is to govern the policy in regard to such locations.

Insurance Law § 3426(l)(1) thus makes Insurance Law § 3426 applicable to any commercial policy issued in New York, or issued for delivery in New York, by an authorized insurer that covers risks with multi-state locations where the insured is principally headquartered in New York.

The commercial policy in question covers risks with multiple-affiliated corporations with locations in various states. Although Insurance Law § 3426 does not define the term “principally headquartered”, and while Insurance Law § 3426(l)(1) does not indicate which insured has to be principally headquartered in New York, other subsections of Insurance Law § 3426 specifically apply to the first named insured on a policy. See, e.g., Insurance Law § 3426(b), (c), (e), (g) (requiring certain cancellation, nonrenewal, and other notices be sent to the first-named insured on the policy). Hence, it is logical and consistent that an insurer may similarly use the location of the first-named insured on a policy in determining the “principally headquartered” location of the insured for purposes of Insurance Law § 3426(l)(1).

At any rate, N.Y. Comp. Codes R. & Regs. tit. 11, Pt. 153 (1995) (Regulation 135) specifically addresses the type of property/casualty commercial policy here - i.e., single policy issued to multiple-affiliated corporations. Regulation 135 applies to property/casualty insurance group policies, and 11 NYCRR § 153.1(g)(1)(i) defines a “group policy” as “a policy underwritten and issued on a collective basis of: (i) property casualty insurance insuring the interests of two or more persons or entities.” Insurance Law § 3426 applies to each certificate issued under a group policy. See 11 NYCRR § 153.4(d).

However, where, as here, there is a single policy with multiple-affiliated insureds, the commercial policy comes within one of the exceptions to a group policy set forth in 11 NYCRR § 153.1(g)(2). Specifically, 11 NYCRR § 153.1(g)(2)(i) provides:

(2) Where an insurer elects to issue a single policy with a first named insured and additional insureds, such policy shall not be considered a “group policy” in regard to the following:

(i) corporations or other entities under common control as defined in section 107(a)(16) ¹ of the Insurance Law, with regard to their related interests.

The policy in question falls within the exception for corporate affiliated entities, because the insured in question has “a single policy with a first named insured and additional insureds” - i.e., multiple-affiliated corporations with various operations under common control with regard to their related interests. Therefore, 11 NYCRR § 153.1(g)(2)(i) permits an insurer that issues a single policy covering multiple-affiliated corporations located in various states to use the location of the first-named insured on the policy in determining whether an insured is principally headquartered in New York pursuant to Insurance Law § 3426(l)(1).

II. Applicability of Form Filing Requirements to Policies Issued for Delivery Outside of New York

The inquirer also asks whether policy forms issued for delivery to an insured principally headquartered outside of New York, but which cover multiple-affiliated corporate entities with operations in various states, including New York, are subject to the form filing requirements set forth in the Insurance Law.

Except for certain delineated kinds of insurance not applicable here, Article 23 applies to “all kinds of insurance written on risks or operations in this state by an insurer authorized to do business in this state.” See Ins. Law § 2302(a). Insurance Law § 2307(b), which governs most property/casualty insurance policy forms, provides:

[N]o policy form shall be delivered or issued for delivery unless it has been filed with the Superintendent and either he has approved it, or thirty days have elapsed and he has not disapproved it as misleading or violative of public policy….

In addition, other provisions of the Insurance Law, too, may apply to a policy form issued for delivery to an insured principally headquartered outside New York, where such policy form covers multiple-affiliated corporate entities with operations in various states, including New York. For example, Insurance Law § 3404(b)(1), which governs fire insurance policies, prohibits an insurer from issuing or delivering a policy or contract of fire insurance on any property in this state unless such policy conforms as to all provisions, stipulations, agreements and conditions with such form of policy, may also apply. Similarly, Insurance Law § 3420 sets forth the standard provisions that must be contained in liability policies issued or delivered in this state.

In sum, a New York-issued policy that will cover risks located or resident in New York and delivered by an authorized insurer to an insured principally headquartered outside of New York, is subject to the form filing requirements of the Insurance Law and any regulations promulgated thereunder.

For Further information, you may contact Supervising Attorney D. Monica Marsh at the New York City office.

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¹ Insurance Law § 107(a)(16) states: “[e]xcept for the purposes of article fifteen of this chapter, ‘control’, including the terms ‘controlling’, ‘controlled by’ and ‘under common control with’, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an institution, whether through the ownership of voting securities, by contract or otherwise.”