The Office of General Counsel issued the following informal opinion on March 14, 2002, representing the position of the New York State Insurance Department.
Re: Conditional Renewal Notices
Question Presented:
Under what circumstances must an insurer issue a conditional renewal notice to a policyholder?
Conclusions:
An insurer must issue a conditional renewal notice in the event that the coverage in question is going to be renewed with different limits, or there is a change in the type of coverage, an increased deductible, an addition of exclusion, or a premium increase in excess of ten percent (other than increases attributable to specific statutory exceptions).
Facts:
An agent of the inquirers company has stated that it is his belief that the company does not have to issue a conditional renewal notice in the event that a change in limits initiated by the insurer does not result in a premium increase in excess of ten percent.
Analysis:
In the context of commercial lines policies, N.Y. Ins. Law § 3426(e)(1) (McKinney 2000) specifically sets forth the circumstances in which a conditional renewal notice must be provided to an insured. That section provides as follows:
(e) (1) A covered policy shall remain in full force and effect pursuant to the same terms, conditions and rates unless written notice is mailed or delivered by the insurer to the first-named insured, at the address shown on the policy, and to such insured`s authorized agent or broker, indicating the insurers intention:
not to renew such policy; or
to condition its renewal upon change of limits, change in type of coverage, reduction of coverage, increased deductible or addition of exclusion, or upon increased premiums in excess of ten percent (exclusive of any premium increase generated as a result of increased exposure units, pursuant to subsection (d) of this section, or as a result of experience rating, loss rating, retrospective rating or audit), except that with respect to an excess liability policy, the insurer may also, consistent with regulations promulgated by the superintendent, condition its renewal upon requirements relating to the underlying coverage, in which event the conditional renewal notice shall be treated as an effective notice of nonrenewal if such requirements are not satisfied as of the later of the expiration date of the policy or sixty days after mailing or delivery of such notice; or
that the policy will not be renewed or will not be renewed upon the same terms, conditions or rates; such alternative renewal notice must be mailed or delivered on a timely basis and advise the insured that a second notice shall be mailed or delivered at a later date indicating the insurers intention as specified in subparagraph (A) or (B) of this paragraph and that coverage shall continue on the same terms, conditions and rates as the expiring policy, until the later of the expiration date or sixty days after the second notice is mailed or delivered; such alternative renewal notice also shall advise the insured of the availability of loss information pursuant to subsection (g) of this section and, upon written request, the insurer shall furnish such loss information within twenty days consistent with the provisions of such subsection.
As the language of the statute explicitly states, the requirement that written notice be sent to the policyholder is not limited to the situation where the premium increase is in excess of ten percent. Instead, any of the changes to coverage outlined in the statute necessitates the provision of the notice. In this connection, it is important to note the rationale behind the statute. In enacting § 3426 as part of Ch. 220 of the Laws of 1986, the Legislature sought to address market problems involving the availability and affordability of insurance. See Memorandum of the State Executive Department, 1986 N.Y. Laws 2856. Section 3426(e) specifically affords insureds protection by requiring the provision of notice where policy renewal is conditioned upon changes in policy coverage and the statutes applicability is not limited to the cases where a premium increase is the only change in the policy.
For further information you may contact Supervising Attorney Michael Campanelli at the New York City Office.