OGC Op. No. 10-01-07
The Office of General Counsel issued the following opinion on January 20, 2010, representing the position of the New York State Insurance Department.
RE: Premium due date and late fees
1) Does the New York Insurance Law require an automobile insurer to provide a minimum amount of time within which an insured must remit his or her premium?
2) May an automobile insurer charge a late fee if the insured pays the premium after the due date?
1) No. The New York Insurance Law does not generally require an automobile insurer to provide a minimum amount of time in which an insured must remit the premium. However, if the policy is subject to the New York Automobile Insurance Plan (“NYAIP”), then the insurer must provide to the insured at least 15 days in which to submit the premium.
2) Yes. An automobile insurer may charge a late fee if the insured pays the premium after the due date.
The inquiry is of a general nature, without reference to particular facts.
I. Time period between the date the automobile insurer mails the premium bill to the insured and the due date for that premium
The inquirer’s first question asks whether an automobile insurer must provide a minimum amount of time within which an insured must remit premium. The inquirer has not indicated whether the insured about whom she inquires is insured under the NYAIP. The NYAIP, established pursuant to Article 53 of the Insurance Law, provides motor vehicle liability and physical damage coverages to those insureds who are unable to obtain such motor vehicle insurance in the voluntary market.
The Insurance Law and regulations promulgated thereunder do not expressly provide a minimum amount of time within which an insured must remit his or her premium, although that time should be a reasonable period. Nonetheless, NYAIP does specify a minimum amount of time for an insured to remit premium. Particularly, § 14(E) of the New York Automobile Insurance Plan Manual, which governs billing and collection of NYAIP premium payments, states:
2. In addition to the specific procedures for each option, billing and collection shall be governed by the following:
* * * *
b. The insurer shall bill the insured, sending a copy to the producer of record, for the amount of each remaining installment at least 15 days prior to the due date. All such billing shall include advices that the insured has the option of remitting his premium payment either through his producer or directly to the company.
Thus, if the policy is subject to the NYAIP, then the insurer must provide to the insured at least 15 days in which to submit the premium. Please note that if an insured fails to remit the premium in the time allocated, an automobile insurer’s notice of cancellation must comply with New York Vehicle and Traffic Law § 313 and either Insurance Law §§ 3425 or 3426, regardless of whether the policy is subject to NYAIP.
II. Late fee
The inquirer’s second question asks whether an insurer may charge a late fee if an insured pays the premium after it is due. In an Office of General Counsel (“OGC”) opinion dated January 4, 2002, the New York Insurance Department squarely addressed that question. That opinion notes that an insurer may charge a late payment fee - a fee associated with a premium payment that is made at a time later than the premium due date, but prior to both policy cancellation and the time in which an insurer may reject premium payment - provided that the insured is made aware of the fee prior to being charged that fee. The opinion also states that: 1) the late payment fee, and any consequences an insured would experience for failure to pay such fee, must be clearly stated to the insured (i.e., by including this information in the insurance policy form or in the billing statement), 2) in order to preclude discrimination, the amounts and conditions of the late payment fee must be applied equally to all insureds of the same class that are subject to the fee, and 3) the late payment fee charged must be reasonable.
Thus, an automobile insurer may charge an insured a late payment fee provided that the insurer meets the requirements set forth in the January 4, 2002 OGC opinion.
For further information, you may contact Senior Attorney Sapna Maloor at the New York City office.