OGC Opinion No. 06-07-08

The Office of General Counsel issued the following opinion on July 12, 2006 representing the position of the New York State Insurance Department.

Re: Premium payment following cancellation notice

Questions Presented:

1. After a cancellation notice for non-payment has been issued, is the premium considered paid as of the date it is postmarked or the date it is received by the insurer?

2. After a cancellation notice for non-payment has been issued, when is the premium considered paid if it is made electronically?

Conclusions:

1. The premium is generally considered paid as of the date of the postmark.

2. The premium is generally considered paid as of the date the insured transmits the payment electronically to the insurer or the agent or broker authorized to receive such payment.

Facts:

No facts were presented. The inquiry is general in nature.

Analysis:

The Insurance Law does not address specifically when a premium is deemed to have been submitted after a cancellation notice for non-payment has been issued. It is the position of the Insurance Department that the insured should be afforded the greatest degree of protection. The Department has opined previously that, after a cancellation notice for non-payment has been issued, the premium is generally considered paid as of the date of the postmark. Unless the cancellation notice specifies otherwise, payment of the premium is assumed complete at the time the insured mails the payment to the insurer or to an agent or broker authorized to receive such payment, not the date it is received by the insurer. See Opinion of General Counsel No. 05-02-11 (February 7, 2005); Opinion of General Counsel No. 05-02-19 (February 11, 2005).¹

This position is supported by the court's decision in Government Employees Insurance Company v. Solaman, 597 NYS2d 990 (N.Y. Sup.Ct. 1993). The court held that the mailing by the insured of the premium after receipt of a proper cancellation notice but prior to the cancellation date was sufficient to keep the policy in effect. In its decision, the court relied on the "Postal Acceptance Rule," that in the absence of any limitation or provision to the contrary in the offer [to provide insurance under a properly issued policy], the acceptance of the offer is complete and the contract [the insurance policy] becomes binding upon both parties when the offeree [insured] deposits the acceptance by the payment of premium in the post office. In other words, unless the insurer requires payment by a particular method or otherwise limits payment methods, payment of the premium is assumed complete at the time the insured mails the payment.

Similarly, the premium is generally considered paid the day the insured transmits the payment electronically to the insurer or to the agent or broker authorized to receive such payment.

For further information you may contact Senior Attorney Elizabeth Barrett at the New York City Office.

¹ Opinion of General Counsel No. 05-02-11 (February 7, 2005) is available on the Department's website at http://www.ins.state.ny.us/ogco2005/rg050211.htm. Opinion of General Counsel No. 05-02-19 (February 11, 2005) is available on the Department's website at http://www.ins.state.ny.us/ogco2005/rg50219.htm.