OGC Op. No. 04-10-04

The Office of General Counsel issued the following opinion on October 6, 2004, representing the position of the New York State Insurance Department.

Re: Applicability of Section 3425 of the Insurance Law

Question Presented:

Are policies insuring non-owner occupied one to four-family dwellings subject to N.Y. Ins. Law § 3425 or § 3426?


Policies insuring one to four-family dwellings are subject to N.Y. Ins. Law § 3425 whether or not they are owner-occupied.


No specific facts are provided. The inquirer states that his company writes a one to four-family rental property program. The inquirer wishes to cease writing the program because it is no longer profitable. Since none of the properties are owner-occupied, the inquirer asks whether the policies would be subject to the three year required policy period under § 3425.


N.Y. Ins. Law.§ 3425(a) (McKinney 2000 & Supp. 2004) provides in pertinent part:

(2) "Covered policy" also means a contract of insurance, referred to in this section as "personal lines insurance", other than a contract of insurance defined in paragraph one hereof, issued or issued for delivery in this state, on a risk located or resident in this state, insuring any of the following contingencies:

(A) loss of or damage to real property used predominantly for residential purposes and which consists of not more than four dwelling units, other than hotels and motels;

(B) loss of or damage to personal property in which natural persons have an insurable interest, except personal property used in the conduct of a business; and

(C) other liabilities for loss of, damage to, or injury to persons or property, not arising from the conduct of a business, when a natural person is the named insured under the policy.

* * *

(4) A contract which insures any of the foregoing contingencies described in paragraph one or two hereof as well as other contingencies shall be a covered policy if that portion of the annual premium attributable to such foregoing contingencies exceeds that portion attributable to other contingencies.

The definition of covered policy under subparagraph (A) is not limited to owner-occupied property. Hence, a policy of insurance covering non-owner-occupied property consisting of one to four dwelling units that are used predominantly for residential purposes would be subject to § 3425 as a personal lines insurance policy. As such, the three-year required policy period provisions of § 3425 would apply to any such policy.

Please note that if the number of policies involved in the program constitute a material number of the policies written by the inquirers' company that are subject to § 3425, then the inquirer would have to submit a plan for orderly reduction in accordance with § 3425(o). If such policies were homeowners insurance policies, as defined in N.Y. Ins. Law.§ 2351 (McKinney 2000 as amended by Chapter 121 of the Laws of 2004), then the inquirer would have to comply with the provisions of subsection (o) that are applicable to homeowners policies.1

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

1  Section 2351(a) provides that:

For the purposes of this section, "homeowners insurance" means a contract of insurance insuring against the contingencies described in subparagraphs (A), (B) and (C), or (B) and (C) of paragraph two of subsection (a) of section three thousand four hundred twenty-five of this chapter and which is a "covered policy" of personal lines insurance as defined in such paragraph; provided, however, that the coverages provided under such subparagraphs (B) and (C) shall not apply where the natural person does not have an insurable interest in the real property, or a portion thereof, or the residential unit in which such person resides.