New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

David A. Paterson
Governor

James J. Wrynn
Superintendent

OGC Op. No. 10-12-01

The Office of General Counsel issued the following opinion on December 2, 2010 representing the position of the New York State Insurance Department.

Re: Rate and Form Deviation

Questions Presented:

1. May a homeowners’ insurer deviate from its filed and approved policy forms without the Superintendent’s approval if the insured consents to the terms?

2. May a homeowners’ insurer deviate from its filed rates without the Superintendent’s approval if the insured consents to the terms?

Conclusions:

1. No. A homeowners’ insurer may not deviate from its filed and approved policy forms without the Superintendent’s approval even if the insured consents to the terms, because, pursuant to N.Y. Ins. Law § 2307 (McKinney 2006), the insurer must file and obtain the Superintendent’s approval to deliver it or issue it for delivery.

2. No. A homeowners’ insurer may not deviate from its filed rates without the Superintendent’s approval, even if the insured consents to the terms, because Insurance Law § 2314 prohibits an insurer from charging or demanding a rate or receiving a premium that departs from the rates in effect on behalf of the insurer unless the insured applies—and is approved by the Superintendent—for an increased premium rate pursuant to Insurance Law § 2309.

Facts:

The inquiry is of a general nature, without reference to specific facts.

Analysis:

Article 23 of the Insurance Law governs rates and policy forms for property/casualty insurance.

Forms

With respect to the inquirer’s first question, Insurance Law § 2307 states that insurers may not deliver or issue for delivery any policy forms, with exceptions not applicable here, without the Superintendent’s approval, or thirty days have elapsed and the Superintendent has not disapproved such forms as misleading or violative of public policy. Since a homeowners’ insurer must file and obtain the Superintendent’s approval to deliver or issue for delivery the insurer’s policy form, an insurer may not deliver or issue for delivery a form that has not been filed and approved by the Superintendent. There is no exception in Insurance Law § 2307 that permits the filing requirements to be waived even if an insured consents to take delivery of an unapproved form. In any event, only under extraordinary circumstances would the Department approve a form for one specific homeowners’ insured.

Rates

Pursuant to Insurance Law § 2305, prior approval of rates, rating plans, rating rules, and rate manuals are not required for homeowners’ insurance; rather, those filings are subject to Insurance Law § 2310, which requires “all changes in the rating rules and schedules of rates which are not subject to prior approval pursuant to [Insurance Law § 2305(b)]and the statistical, rating and other information in support of changes in such rating classifications and territories” to be filed with the Superintendent on or before the date of use (“file and use”).

With respect to the inquirer’s second question, Insurance Law § 2314 squarely addresses the matter, and states that:

No authorized insurer shall, and no licensed insurance agent, no employee or other representative of an authorized insurer, and no licensed insurance broker shall knowingly, charge or demand a rate or receive a premium which departs from the rates, rating plans, classifications, schedules, rules and standards in effect on behalf of the insurer, or shall issue or make any policy or contract involving a violation thereof.

Accordingly, an insurer may not charge or demand a rate or receive a premium that departs from the rates in effect on behalf of the insurer.

However, Insurance Law § 2309 permits an excess rate to be filed and approved by the Superintendent based on a “consent-to-risk” letter. That provision states:

Notwithstanding any other provisions of this article, upon the written application of the insured, stating the insured’s reasons therefor, filed with and approved by the superintendent, a rate in excess of the rate provided by a filing otherwise applicable may be used on any specific risk.

Accordingly, where the risk factors or criteria of the rating plan do not adequately reflect the risk for an individual insured, the individual may apply for an increased premium rate. Nevertheless, the Superintendent must approve the “consent-to-rate” letter. Therefore, an insured may not simply agree to an increased rate without the Superintendent’s prior approval.

For further information, you may contact Senior Attorney Sapna S. Maloor at the New York City office.