The Office of General Counsel issued the following opinion on August 19, 2004, representing the position of the New York State Insurance Department.
Re: Non-Renewal Notice
Five days after the expiration date of a lawyers' professional liability policy, the authorized insurer advises the insured that it is extending the original expiration date of the policy by 64 days and simultaneously sends notice of non-renewal. Is this action violative of the New York Insurance Law?
Yes, such action is violative of N.Y. Ins. Law § 3426 (McKinney Supp. 2004).
An inquirer states the following:
We have a client whose original policy period for his lawyers professional liability insurance ran from June 12, 2003 - June 12, 2004. When the insurer received and reviewed the renewal application (the first week of June), they determined they did not wish to offer renewal terms. The insurer (an admitted carrier) notified us and the customer on June 17th that they would extend the original policy until August 21, 2004 and, at the same time, they were providing notice of non-renewal.
Lawyers professional liability insurance is a "covered policy" under N.Y. Ins. Law § 3426 (McKinney Supp. 2004), which states in subsection (a), paragraph (1) thereof:
"Covered policy" means, for purposes of this section, a policy of commercial risk insurance, professional liability insurance or public entity insurance, and shall include any contract, certificate or other evidence of such insurance.
An authorized insurer may effectuate non-renewal of a § 3426 covered policy by mailing or delivering a non-renewal notice, conditional renewal notice, or an alternative renewal notice that is followed thereafter by a second notice within a reasonable period of time, to the insured and its authorized agent or broker at least sixty, but not more than 120 days before the expiration date of the policy, assuming all other requirements of § 3426 have been met. N.Y. Ins. Law § 3426(e)(3) (McKinney Supp. 2004).
Where a late non-renewal notice or conditional renewal notice is provided by an authorized insurer on or after the expiration date of a § 3426 covered policy, coverage on the policy will remain in effect with the same terms and conditions of the expiring policy for another required policy period, and at the lower of the current rates or the prior period's rates, unless the insured cancels the policy or replaces coverage during the additional required policy period. N.Y. Ins. Law § 3426(e)(5)(C)(i) (McKinney Supp. 2004).
N.Y. Ins. Law § 3426(e)(5)(B) makes allowance for the mailing or delivery of a late non-renewal notice or conditional renewal notice under certain circumstances if the notice is mailed or delivered prior to the expiration date of the policy. There is no provision under either § 3426(e)(5)(B) or (C) for the mailing or delivery of a late alternative renewal notice. Hence, an alternative renewal notice must always be mailed or delivered within 60 to 120 days prior to the expiration date of the policy.
Based upon the facts provided, the insurer is in violation of N.Y. Ins. Law § 3426 (McKinney Supp. 2004). Should the insurer refuse to continue the policy for the additional required policy period, the inquirer may notify the Department's Consumer Services Bureau for assistance in the matter.
For further information you may contact Associate Attorney Sally Geisel at the New York City Office.