July 9, 1982

SUBJECT: INSURANCE

CIRCULAR Letter No. 19 (1982)

TO: ALL INSURANCE COMPANIES AUTHORIZED TO TRANSACT FIRE INSURANCE BUSINESS IN NEW YORK STATE

RE: FIRE INSURANCE FEE

CIRCULAR Letter No. 11 (1982), issued with respect to the newly enacted Section 557-a of the Insurance Law (Chapter 55. of the Laws of 1982), is hereby superseded by this Circular Letter, in view of an amendment of such Section by Chapter 158 of the Laws of 1982, which was signed into Law on June 1, 1982.

Section 557-a, as amended, requires every insurance company authorized to write fire insurance in this state to collect from each policyholder a fire insurance fee, separately identified and charged, in addition to the applicable fire premium on risks located in this state.

Excluded from the application of the fee are policies issued for the protection of household furnishings and/or policies issued to protect one or two-family residential structures, schools, churches and hospitals. In addition, the fee does not apply to inland marine, ocean marine, automobile or aircraft physical damage premiums. The fee is also not applicable to premiums for extended coverages, other allied lines, liability and other casualty coverages.

The imposition of the fee, of 1 1/4% on the gross direct premiums written for the coverage of the peril of fire (less return premiums thereon), shall be applicable to policies issued or renewed with an effective date on or after July 1, 1982. All fees collected on policies issued or renewed with an effective date prior to July 1, 1982, shall be refunded to the policyholder.

Of the multi-peril policies which are covered by this amended Section for which the actual fire portion cannot be determined, the accepted fire portion for homeowners and commercial multiple peril policies are 35 and 50 per cent, respectively.

Commercial Multiple Peril

The fee is applicable to the fire portion of the special multi-peril, business owners and other commercial package policies, subsequent to the application of package discounts and modifications, if any.

Homeowners

While homeowners or dwelling policies covering one or two-family residential structures are excluded from the application of the fee, such fee is applicable to the fire portion of a homeowners or a dwelling policy covering a residential structure containing three or more residential units. A mobile home policy would be in the same category as a homeowners policy.

Farmowners-Ranchowners

The fee is not applicable to one or two-family farm or ranch dwellings nor to the household furnishings therein. It is applicable to business personal property, barns and other commercial structures situated on the farm or ranch. If a multi-peril policy, covering such property, has an indivisible property premium the accepted fire portion would be 50 per cent of such premium. If such multi-peril policy has an indivisible property and liability premium, the accepted fire portion would be 35 per cent of such premium.

Other Applications

1. The fee is applicable in the following situations where fire coverage is for:

a. contents furnished by, and insured by the owner of a structure containing three or more residential units, but the fee will not be applicable to that portion of the premium which clearly applies to the owner's personal household furnishings which are not rented to others; and

b. buildings and contents of furnished rooming houses, resort timeshares, and a condominium having a timesharing arrangement, but the fee would not be applicable to a fire policy covering an owner of a condominium unit for contents.

2. The fee is not applicable to:

a. time element coverage;

b. coverage for public and private nursery schools, kindergartens, grammar schools, high schools, colleges and universities (graduate and undergraduate) including real property owned by such institutions and used for such purposes, such as a dormitory or cafeteria and their contents. The exemptions apply to both profit and non-profit schools;

c. coverage for public and private hospitals (as defined in Section 2801(1) of the Public Health Law and Section 1.03(10) of the Mental Hygiene Law) including real property owned by such institutions and used for hospital purposes, such as nurses" residence or administrative building, and their contents. The exemptions apply to both profit and non-profit hospitals; and

d. coverage for a church and its contents including a building used for public worship and real property owned by the church which is used for church purposes, such as a rectory, convent or parsonage, and their contents.

Policies in effect prior to July 1, 1982

a. A multi-year policy having an effective date prior to July 1, 1982 shall be subject to the fee on its next anniversary date on or after July 1, 1982 if the premium due on such date is subject to rerating.

b. Additional premiums (for newly acquired property or for an increase in coverage for property already insured) with an effective date on or after July 1, 1982 developed on policies in effect prior to July 1, 1982, shall be subject to the fee.

General

The fee shall not be absorbed by the insurance company, but must be charged to the policyholder, and may not be calculated in rate filings. However, where an insurer has issued or renewed a policy prior to July 1, 1982, without charging the required fee, the Insurance Department will permit the insurer to absorb such fee provided the fee does not exceed $ 5.00.

Statistics regarding the fee are not required to be furnished to our statistical agents.

The insurer's right of cancellation for non-payment of the premium shall also extend to non-payment of the fee.

The refund of a fee should be calculated on the same basis as any return of premium.

There shall be no commission earned on the fee.

The fee is not subject to premium tax.

The fee charged must be calculated to the nearest cent.

The fee should be shown on the declarations page of the policy. Insurance companies requiring changes in their declarations pages or programming changes in their automated systems to comply with such requirement may show such fee, separately identified on a premium bill, until December 31, 1982. Thereafter, the fee must be shown on the declarations page. The insurance company files should have a copy of such premium bill attached to the policy file.

The fee shall be paid quarterly by insurance companies to the Superintendent of Insurance as follows: October 15, January 15, April 15 and July 15, to reflect the gross direct premiums, less return premiums thereon, written during the quarters ending September 30, December 31, March 31 and June 30, respectively; provided, however, that the fees payable with respect to such premiums written for the months of January and February, 1983, shall be paid to the Superintendent by March 15, 1983. Forms for reporting the fee are being developed for this purpose and will be distributed when completed.

Please acknowledge receipt of this letter and refer any questions relating to the fire insurance fee to:

Mr. Frank M. D'Amico
Director of Taxes and Accounts
New York State Insurance Department
Governor Nelson A. Rockefeller Plaza
Agency Building One
Albany, NY 12257

Very truly yours,

[SIGNATURE]

Donald D. Gabay

First Deputy Superintendent