OGC Opinion No. 03-01-29: N.Y. Comp. Codes R. & Reg. tit. 11, Part 60 (1999) Auto Liability Insurance / Policy Coverage Exclusions

OGC Op. No. 03-01-29

The Office of General Counsel issued the following opinion on January 14, 2003, representing the position of the New York State Insurance Department.

RE: N.Y. Comp. Codes R. & Reg. tit. 11, Part 60 (1999) Auto Liability Insurance / Policy Coverage Exclusions

Question Presented:

May a commercial black car automobile liability insurance policy include a coverage exclusion for circumstances where the motor vehicle is used for private or personal use?

Conclusion:

The exclusion is not permissible under N.Y. Comp. Codes R. & Reg. tit. 11, Part 60-1 (1999) (Regulation 35-A), which establishes the minimum provisions for all motor vehicle policies in New York that provide coverage in satisfaction of the financial security requirements of the Vehicle & Traffic Law.

Facts:

No particular facts are provided.

Analysis:

N.Y. Veh. & Traf. Law Art. 6 (McKinney 1996) was enacted to help ensure that innocent victims of motor vehicle accidents would be recompensed for the injury and financial loss inflicted upon them. N.Y. Veh. & Traf. Law § 310 (McKinney 1996). N.Y. Veh. & Traf. Law § 312 (McKinney 1996) requires that every driver maintain proof of financial security. One method of maintaining financial security is through an "owners policy of liability insurance." N.Y. Veh. & Traf. Law § 311(McKinney 1996), and its predecessor section 93-a, requires the Superintendent of Insurance to prescribe by regulation the minimum provisions for an owners policy of liability insurance. Section 311(4)(a) further provides that the "superintendent before promulgating such regulations or any amendment thereof, shall consult with all insurers licensed to write automobile liability insurance in this state and shall not prescribe minimum provisions which fail to reflect the provisions of automobile liability insurance policiesissued within this state at the date of such regulation or amendment thereof."

N. Y. Ins. Law § 3420(e) (McKinney 2000) provides as follows:

(e) No policy or contract of personal injury liability insurance or of property damage liability insurance, covering liability arising from the ownership, maintenance or operation

of any motor vehicle or of any vehicle as defined in section three hundred eighty-eight of the vehicle and traffic law, or an aircraft, or any vessel as defined in section forty- eight of the navigation law, shall be issued or delivered in this state to the owner thereof, or shall be issued or delivered by any authorized insurer upon any such vehicle or aircraft or vessel then principally garaged or principally used in this state, unless it contains a provision insuring the named insured against liability for death or injury sustained, or loss or damage occasioned within the coverage of the policy or contract, as a result of negligence in the operation or use of such vehicle, aircraft or vessel, as the case may be, by any person operating or using the same with the permission, express or implied, of the named insured.

In accordance with Insurance Law § 3420 and the provisions of the Vehicle & Traffic Law, the Superintendent promulgated Regulation 35 on July 17, 1956. Regulation 35 was repealed and replaced on November 24, 1958, by the present Regulation 35-A, which was subsequently codified as Part 60 of N.Y. Comp. Codes R. & Reg. tit. 11, and later renumbered as subpart 60-1, and amended several times. Unless permitted by statute or judicial decision, no owners policy of liability insurance used to satisfy the financial security requirements of the Vehicle & Traffic Law may contain an exclusion other than one expressly permitted under Regulation 35-A. The regulation does not apply to policies that are not used to satisfy the financial security requirements.

Among the permissible exclusions contained in the regulation is § 60-1.2(a), which applies when "...the motor vehicle is used as a public or livery conveyance." However, there is no provision of the regulation permitting a coverage exclusion when a commercial vehicle is being put to private or personal use.

N.Y. Veh. & Traf. Law Art. 8 (McKinney 1996 and Supp 2002) requires that "Every person, firm association or corporation engaged in the business of carrying or transporting passengers for hire in any motor vehicle...." file with the commissioner of motor vehicles proof of financial responsibility to respond to claims of personal injury and property damage liability. One method for satisfying the financial security requirement is to secure "...a policy of insurance, approved as to form by the superintendent of insurance...." N.Y. Veh. & Traf. Law § 370(1) (McKinney 1996 and Supp. 2002). N.Y. Veh. & Traf. Law § 321 (McKinney 1996) states that Article 6 of that law "...shall not apply to any motor vehicle for the operation of which security is required to be furnished under section three hundred seventy of this chapter...."

Black car liability policies are written pursuant to Article 8 of the VTL. Although Regulation 35-A by its terms specifically applies to policies that satisfy the financial security requirements of Article 6 of the VTL, every black car liability insurance policy must be in a form approved by the superintendent. The Department, in accordance with the requirements of N. Y. Ins. Law § 2307 (McKinney 2000 and Supp. 2002) that insurance policy forms may not be misleading or against public policy, has consistently applied the requirements of Regulation 35-A to liability insurance coverage issued to fulfill the financial security requirements of N.Y. Veh. & Traf. Law § 370 (McKinney 1996 and Supp. 2002), including black car liability insurance policies. This fulfills the public policy of the State, as expressed in the Vehicle and Traffic Law and Ins. Law § 3420, that no vehicle registered in the State of New York should be operated without continuous liability coverage. This is intended to protect both the operator of the vehicle and any party that may be injured as a result of the operator's negligence.

Other requirements of N.Y. Veh. & Traf. Law Art. 6 (McKinney 1996), such as notice of termination of insurance coverage requirements, N.Y. Veh. & Traf. Law § 313 (McKinney 1996 and Supp. 2002), may not be applicable to liability policies purchased to satisfy the requirements of § 370, Ruffin v. Statewide Insurance Company, 288 N.Y.S.2d 553 (Sup. Ct. Kings County 1968). But the basic purpose of requiring black car owners to file proof of financial security with the Commissioner of Motor Vehicles, the protection of the rights of innocent third parties, must be maintained. Sandolovich V. United States Fidelity and Guaranty Company, 254 N.Y.S. 563 (Sup. Ct. Monroe County 1931).

By applying the requirements of Regulation 35-A to black car liability insurance policies, the public policy objectives of both the Insurance Law and the Vehicle and Traffic Law are achieved. Accordingly, an exclusion from coverage in a commercial black car liability insurance policy for private or personal use is not permitted.