NEW YORK STATE
REGULATION NO. 167
(11 NYCRR 310)
PRODUCT OR SYSTEM GROUP INSURANCE POLICIES
I, NEIL D. LEVIN, Superintendent of Insurance of the State of New York, pursuant to the authority granted by Sections 201, 301, and 3446 and Article 23 of the Insurance Law and Chapter 187 of the Laws of 1999, do hereby rename Chapter XII of Title 11 of the Official Compilation of Codes, Rules and Regulations of the State of New York to read "Group Property/Casualty Insurance" and promulgate a new Part 310 of Title 11 of the Official Compilation of Codes, Rules and Regulations of the State of New York (Regulation 167) to take effect upon publication in the State Register, to read as follows:
ALL MATERIAL IS NEW
Section 310.0 Preamble.
(a) Chapter 187 of the Laws of 1999 added a new Section 3446 to the Insurance Law, entitled "Product or system group insurance policies." This Part implements Section 3446, which permits a group policy to be issued to a manufacturer, distributor, or installer of a product or system, or a trustee on behalf of more than one manufacturer, distributor or installer. The policy insures persons who have purchased or own the product or system where the manufacturer, distributor, or installer has represented that the product or system is designed to prevent loss or damage to property from a specific cause. The policy covers the loss or damage to the property from such cause. The policy may not cover loss or damage resulting from a defect in materials or workmanship, or wear and tear and may not be duplicative of coverage under any other applicable insurance policy. The policy may provide coverage for unreimbursed incidental expenses that may be incurred as a result of the loss or damage to the property.
(b) Chapter 187 is the legislative response to agreements made by manufacturers, distributors, or installers of a product or system, or other persons, that provide a pecuniary benefit to the purchaser or user of that product or system, if damage results from the failure of the product or system to perform as represented. For example, sometimes in connection with a lock or other security device, or where a vehicle is etched with a unique identification code, an agreement is provided by the manufacturer, seller, installer, or other person that provides for the payment of a specified sum in the event the vehicle is stolen. These agreements are not truly warranties or guarantees, but rather are insurance contracts within the meaning of Insurance Law Section 1101 because there are intervening fortuitous events; in these examples, theft.
(c) Chapter 187 permits manufacturers, distributors, or installers of a product or system to make coverage available to consumers by purchasing newly authorized group insurance in connection with their products or systems. For example, a vehicle that is purchased with an applied or installed security product or system is subsequently stolen and not recovered. The manufacturer of the security product or system has obtained a product or system group insurance policy from an authorized insurer covering the owner of the vehicle. Under the owner's primary vehicle physical damage insurance policy, the owner receives the actual cash value of the vehicle less any deductible. In such a case, the product or system group insurance policy may cover the owner's deductible as well as the difference between the replacement cost of the vehicle and its actual cash value (e.g. the policy may cover the difference between the replacement cost of a new model year vehicle and the actual cash value of the stolen vehicle). In addition, there may be costs incurred to rent a temporary replacement vehicle and registration costs for a replacement vehicle. If not reimbursed under another insurance policy, these costs may be covered under the product or system group policy.
(d) Chapter 187 authorizes the superintendent to promulgate regulations regarding group product and system insurance policies, including provisions regarding policy cancellation and renewal, payment of premium, and minimum number of group members.
Section 310.1 Definitions.
For purposes of this Part, the following definitions shall apply:
(a) "Certificate" means any evidence of insurance coverage, or rider or endorsement thereto, issued to a group member under a product or system group policy.
(b) "Group member" means a person who purchases or owns a product or system and who is insured under a product or system group policy.
(c) "Group policyholder" means a manufacturer, distributor, or installer of a product or system, or a trustee of a trust established, or participated in, by one or more manufacturers, distributors, or installers, to which a product or system group policy is issued.
(d) "Issue" includes issue for delivery.
(e) "Manufacturer" shall have the meaning ascribed by Insurance Law Section 3446(j).
(f) "Policy" means any policy, contract, certificate, or other evidence of insurance, or rider or endorsement thereto.
(g) "Product or system group policy" means a policy issued on a group basis to a group policyholder that provides coverage to group members when the manufacturer, distributor, or installer of a product or system has represented that the product or system is designed to prevent loss or damage to property from a specific cause (other than loss or damage resulting from defect in materials or workmanship, or wear and tear), and the coverage provided to the group members is for loss or damage to such property from such cause. For purposes of this Part, loss or damage to the property (valued as actual cash value, stated value, replacement cost, or other method of valuation acceptable to the superintendent) may also include unreimbursed incidental expenses that may be incurred as a result of the loss or damage to the property, such as rental or registration costs for replacement property.
Section 310.2 General requirements.
(a) A product or system group policy issued to a group policyholder or a certificate issued to a group member thereunder may be issued or delivered in this state only in compliance with the provisions of Insurance Law Section 3446 and this Part.
(b) A product or system group policy may provide coverage only for a kind or kinds of insurance authorized by Insurance Law Section 1113(a)(4) through (12), (19), or (20).
(c) No product or system group policy or certificate may be issued or delivered in this state except by an authorized insurer. No such policy or certificate shall be eligible for placement by an excess line broker licensed pursuant to Insurance Law Article 21.
(d) The group shall consist of at least 25 members. This requirement shall be satisfied if the insurer reasonably relies on the group policyholder's good faith expectation at the time that the policy is issued that the group will maintain a membership of at least 25 during the policy period.
(e) The premium for a product or system group policy, including certificates thereunder, shall be paid by the group policyholder from funds contributed wholly by the group policyholder.
Section 310.3 Rates and forms.
(a) All product or system group policy and certificate forms shall be subject to the approval requirements of Insurance Law Section 2307(a), and shall comply with applicable Insurance Law Article 23 standards.
(b)(1) Except as provided in paragraph (3) of this subdivision, all product or system group policy rates, including rating plans, rating rules, and rating classifications and territories shall be submitted to the superintendent pursuant to the applicable provisions of Insurance Law Article 23.
(2) Except as provided in paragraph (3) of this subdivision, rates and rating plans and rules for a product or system group policy written as inland marine insurance shall not be exempt from filing requirements.
(3)(i) Notwithstanding any other provision of this section, in accordance with the provisions of Section 2311 of the Insurance Law, individual rate filings for 'a' rated risks shall not be required to be filed with the superintendent.
(ii) The insurer shall maintain all rating information used to support the rate in an individual underwriting file for each policy issued, in accordance with the records retention requirements of Part 243 of this Title (Regulation No. 52).
(iii) As used in this section, an "`a' rated risk" means any insurance coverage for which rates are individually determined based upon judgment because the insurer has not established a manual rate based upon experience, except that if the insurer acquires sufficient experience to establish, or the insurer itself has, a manual rate for such coverage, then such coverage shall no longer be considered an `a' rated risk for such insurer.
(c) A product or system group policy shall not qualify as a special risk pursuant to Insurance Law Article 63 and Part 16 of this Title (Regulation 86).
(d) The insurer must treat in like manner all eligible group members of the same class.
(e) Product or system group policy rates shall comply with applicable Insurance Law Article 23 standards, subject to the following factors:
(1) Premium reductions may be considered, based on actual or reasonably anticipated loss and expense experience of the group or where such expenses and experience can be fairly demonstrated;
(2) Rates shall not be deemed unfairly discriminatory in the event different premiums result for different groups with like loss exposure but different expense factors, or like expense factors but different loss exposures, where such differences can be fairly demonstrated; and
(3) Rates, rating plans or rating rules recognizing loss or expense experience differences on a group basis, in comparison to like risks not in the group, shall be deemed rating classifications subject to the superintendent's approval pursuant to Insurance Law Section 2307.
(f) An insurer shall maintain separate loss and expense statistics applicable to business underwritten and transacted under Insurance Law Section 3446.
Section 310.4 Certificate of insurance.
(a) The insurer shall be responsible for the mailing or delivery of a certificate of insurance to each group member insured under the product or system group policy. If the coverage is automatic and the group member is not required to register with the insurer to effect coverage, then the certificate shall be delivered with the product or system. If the coverage is not automatic and the group member is required to register with the insurer to effect coverage, and the certificate is not delivered with the product or system, the certificate shall be mailed or delivered to the group member not more than 20 days after receipt of the registration.
(b) The certificate shall contain in substance all material terms and conditions of coverage afforded to the group member, unless the product or system group policy is incorporated by reference and a copy of the product or system group policy accompanies the certificate.
(c) Each certificate shall contain a conspicuous notice advising the group member that, if the member has other applicable insurance coverage, the coverages under the product or system group policy shall not duplicate the other insurance coverage.
(d) Each certificate shall contain a conspicuous notice with the phone number to call or an address to write to, and the procedures to be followed, in the event of a claim under the policy.
(e) No group policy or certificate may contain an aggregate policy limit to be shared among group members or applicable to the group itself.
Section 310.5 Cancellation, nonrenewal, and conditional renewal.
(a) A product or system group policy or certificate shall not be subject to Insurance Law Sections 3425 or 3426. The following requirements shall apply in regard to cancellation, nonrenewal, or conditional renewal (as defined in subdivision (d) of this section) of coverage.
(b) Product or system group policy:
(1) Unless a product or system group policy provides for a longer policy period, the policy shall be issued or renewed for a one-year policy period.
(2) A product or system group policy may be canceled by an insurer only if cancellation is based on one or more of the reasons set forth in Insurance Law Section 3426(c)(1); provided, however, that an act or omission by a group member shall not constitute the basis for cancellation of the policy.
(3) An insurer's cancellation, nonrenewal, or conditional renewal of a product or system group policy shall not become effective until at least 30 days after the insurer mails or delivers written notice of such cancellation, nonrenewal, or conditional renewal to the group policyholder at the mailing address shown in the policy.
(4) Every notice of cancellation, nonrenewal, or conditional renewal shall contain the specific reason or reasons for cancellation, nonrenewal, or conditional renewal.
(1) An individual certificate may not be canceled, renewed, or conditionally renewed. Coverage under the certificate shall continue for the period specified in the certificate, even though the product or system group policy may have been canceled, nonrenewed or conditionally renewed.
(2) After the expiration of the period specified in the certificate, nothing in this Part shall preclude an insurer from offering to continue the coverage under the certificate as an individual policy, subject to any requirements that may apply to such a policy.
(d) "Conditional renewal" means a renewal which is conditioned upon change of limits, change in type of coverage, reduction or elimination of coverage, increased deductible or addition of exclusion, or increased premiums in excess of ten percent (exclusive of any premium increase generated as a result of increased exposure units or as a result of experience rating, loss rating, retrospective rating, or audit).
Section 310.6 Group insurance producers and adjusters; administration.
(a) If so authorized by the insurer, the group policyholder may perform ministerial services on behalf of the insurer, including supplying or delivering the certificate to the group member and administration of claims. However, no person shall act as an insurance agent, broker, or adjuster in connection with a product or system group policy unless that person is duly licensed under Insurance Law Article 21 or exempt from licensing therefrom.
(b) An insurer may reimburse a group policyholder for expenses incurred in administration of the product or system group policy if the payment is equivalent to the costs of rendering such services and such services would normally have been performed by the insurer, an agent or broker.
I, NEIL D. LEVIN, Superintendent of Insurance of the State of New York, do hereby certify that the foregoing is Regulation 167 (11 NYCRR 310), promulgated on September 26, 2000, pursuant to the authority granted by 201, 301, and 3446 and Article 23 of the Insurance Law and Chapter 187 of the Laws of 1999, to be effective upon publication in the State Register. Pursuant to the provisions of the State Administrative Procedure Act, prior notice of the proposed amendment was published in the State Register on August 9, 2000. No other publication or prior notice is required by statute.
Neil D. Levin
Superintendent of Insurance
September 26, 2000