The Office of General Counsel issued the following informal opinion on January 11, 2001, representing the position of the New York State Insurance Department.

Re: Nonrenewal of Livery Business and Section 3426

The Department has reviewed the notices of nonrenewal that have been issued by ABC Insurance Company ("ABC") to the members of the XYZ Purchasing Group ("XYZ") and is of the opinion that they are in violation of New York Insurance Law Section 3426.

ABC issued a policy to the purchasing group and its members. The policy provided that the policy period runs from March 1, 2000 to March 1, 2003. N.Y. Ins. Law § 3426(e) (McKinney 2000) provides that a policy of commercial risk insurance shall remain in effect at the same terms, conditions and rates, unless written notice of nonrenewal or conditional renewal is provided at least sixty, but not more than 120, days "in advance of the expiration date of the policy…" Since ABC’s nonrenewal notices were issued well in advance of 120 days of the March 1, 2003 expiration date of the policy, the notices were issued in violation of Section 3426.

ABC indicated to the Department that it relied on a section of its policy that states that if the policy period is other than one year, ABC has the right not to renew or continue the policy only at an anniversary of its original effective date. ABC’s construction of this provision is in direct conflict with the statute. While ABC was not obligated to issue a policy for more than one year, once it did so, it became bound to the longer policy period, notwithstanding any term of the policy to the contrary.

Failure of ABC to rescind the notices of nonrenewal is considered by the Department to be a willful violation of N.Y. Ins. Law § 3426 (McKinney 2000) and will subject ABC to potential disciplinary action and monetary penalties under N.Y. Ins. Law § 109 (McKinney 2000). As provided for in N.Y. Comp. Codes R. & Regs., tit. 11, § 153 (1995) (Regulation 135), which governs group property/casualty insurance policies, Section 3426 applies to each certificate under a group policy. Accordingly, each notice is a separate violation.

For further information you may contact Supervising Attorney Paul A. Zuckerman at the New York City Office.