OGC Op. No. 10-11-06
The Office of General Counsel issued the following opinion on November 19, 2010, representing the position of the New York State Insurance Department.
Re: Amendment to Policy Issued in Free Trade Zone: Applicable Notice Requirements
Must an insurer provide notice to an insured prior to amending a special risk insurance policy issued pursuant to Article 63 of the Insurance Law?
Yes, pursuant to N.Y. Ins. Law
The inquirer reports that his client is insured by an insurer licensed to write insurance in New York’s Free Trade Zone. The inquirer states that the policy, which covers a construction project, includes a New York amendatory endorsement with standard New York cancellation provisions. Among other things, the inquirer states that the insurer in question changed the terms of the policy by proposing to eliminate coverage if the insured did not meet certain conditions. The inquirer wishes to know if the insurer needed to provide a 60-day notice to the insured when it changed the terms of the policy.
Although we requested additional facts concerning whether the policy in question is an excess liability 1, or jumbo risk 2, we were never provided such facts. As a result, this opinion will address in a general manner the question presented, and assume that the risk in question is located in New York.
The inquirer asks whether Article 63 exempts an insurer that sells policies in the Free Trade Zone from the notice requirements set forth in Article 34 of the Insurance Law. Article 63 of the Insurance Law, entitled Special Risks; Filing Exemption, is relevant to the inquiry. Insurance Law
Therefore, an insurer that writes policies in the Free Trade Zone (“Article 63 insurer”) is only exempt from filing rates and forms with the Superintendent of Insurance. The insurer is not otherwise exempt from complying with required terms, conditions and rates promulgated thereunder in its policies, and is still bound by the same standards and regulations applied to insurers that are required to file rates and forms with the Superintendent. See, e.g., Office of General Counsel (“OGC”) Opinion No. 05-11-04 (November 3, 2004); OGC Opinion No. 04-03-29 (March 31, 2004).
Commercial property/casualty insurance is governed by the notice provisions contained in Insurance Law
Therefore, an Article 63 insurer that fails to provide the applicable notice to the insured must renew the policy in question under the original policy terms, conditions and rates. See OGC Opinion No. 04-03-01 (March 2, 2004).
For further information you may contact Supervising Attorney D. Monica Marsh at the New York City office.
1 “Excess liability policy” means a policy of commercial risk, public entity or professional liability insurance, including a commercial umbrella policy, when written over one or more underlying liability policies that provide with respect to the same risk coverage of at $500,000 in the aggregate. See Insurance Law § 3426(a)(6).
2 “Jumbo risk” means a business entity that generates gross revenues exceeding $100,000,000 annually and that develops an annual liability premium for the policy of at least $500,000, but does not include any public entity or not-for-profit corporation. See Insurance Law § 3426(a)(8).