The Office of General Counsel issued the following opinion on July 26, 2004, representing the position of the New York State Insurance Department.
Re: Interpretation of Circular Letter 19 (2003) - Notice of Cancellation, Non-Renewal, etc
Pursuant to N.Y. Ins. Law § 3425(h)(3) (West 2004), must an insurer send a copy of a notice of cancellation, reduction of limits, substitution of policy form, elimination of coverages, conditioned renewal or intention not to renew to both the agent and the broker in a transaction where the insureds broker places the business through an agent?
In such a transaction the notice must be sent to the insured and the insured's broker. It need not be sent to the agent.
No specific facts were provided. The inquiry is general in nature.
N.Y. Ins. Law § 3425(h)(3) (West 2004) provides:
A copy of every notice of cancellation, reduction of limits, substitution of policy form, elimination of coverages, conditioned renewal or of intention not to renew, including the reasons therefor, or a summary of such notice, shall be mailed, delivered or transmitted to the insured's authorized agent or broker within seven days of the time such notice is mailed to the named insured. Electronic transmission or any other means of delivery or transmission of information commonly used by the insurer to communicate with agents or brokers shall be deemed sufficient for compliance with this paragraph. Failure to mail, deliver or transmit a copy of such notice to the insured's authorized agent or broker pursuant to this paragraph shall not render any such notice ineffective, provided that all of the other requirements of this section are met and shall not be considered failure to include a provision required by this section for purposes of paragraph two of this subsection.
The memorandum in support, 2003 Sess. Law News of N.Y. Leg. Memo Ch. 675 (McKinney's) describes the reason for the amendment as:
Having a copy of the notice alerts the agent or broker to the pending cancellation or non-renewal of a customer's coverage in a timely fashion and allows the agent or broker to assist the customer in averting termination of coverage (where the cancellation is for nonpayment or replacing coverage. Some agents and brokers believe that, especially for personal auto policies, companies have stopped sending nonpayment cancellation notices to the agent or broker because insurance agents and brokers are particularly effective in helping the client avoid cancellation by advising them to pay the premium due in time.
Thus, in a transaction where the insured's broker places the business through an agent, the purpose of N.Y. Ins. Law § 3425(h)(3) (West 2004), will be achieved by the insurer sending a copy of a notice of cancellation, reduction of limits, substitution of policy form, elimination of coverages, conditioned renewal or intention not to renew to the insured and the insured's broker. In this type of transaction, it is the broker who represents the insured and who is in a position to help clients avoid cancellation by advising them to pay the premium in due time. Although the broker places the business through the agent, the agent represents the insurer not the insured.
For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.