N.Y. ISC Law § 3426 — New York Code / Act ISC / Article 34 / Section 3426
Commercial lines insurance; cancellation and renewal provisions
Status: in_force

§ 3426. Commercial lines insurance; cancellation and renewal\nprovisions.  (a) Definitions. As used in this section:\n  (1) "Covered policy" means, for purposes of this section, a policy of\ncommercial risk insurance, professional liability insurance or public\nentity insurance, and shall include any contract, certificate or other\nevidence of such insurance.\n  (2) "Required policy period" means a period of one year from the date\nas of which a covered policy is renewed or first issued.\n  (3) "Nonpayment of premium" means the failure of the named insured to\ndischarge any obligation in connection with the payment of premiums on a\npolicy of insurance or any installment of such premium, whether the\npremium is payable directly to the insurer or its agent, or indirectly\nunder any premium finance plan or extension of credit. Payment to the\ninsurer, or to an agent or broker authorized to receive such payment,\nshall be timely for the purpose of this section if made within fifteen\ndays after the mailing to the insured of a notice of cancellation for\nnonpayment of premium.\n  (4) "Renewal" or "to renew" means the issuance or offer to issue by an\ninsurer of a policy superseding a policy previously issued and delivered\nby the same insurer, or another insurer under common control, or the\nissuance or delivery of a certificate or notice extending the term of a\npolicy beyond its policy period or term; provided, however, that any\npolicy with a policy period or term of less than one year shall, for the\npurpose of this section, be considered as if written for a policy period\nor term of one year, and any policy with no fixed expiration date shall,\nfor the purpose of this section, be considered as if written for\nsuccessive policy periods or terms of one year.\n  (5) "Administrative suspension" means a temporary suspension of a\ndriver's license pending a hearing, prosecution or investigation, or an\nindefinite suspension of a driver's license because of the failure of\nthe person suspended to perform an act, which suspension will be\nterminated by the performance of the act by the person suspended.\n  (6) "Excess liability policy" means a policy of commercial risk,\npublic entity or professional liability insurance, including a\ncommercial umbrella policy, when written over one or more underlying\nliability policies that provide with respect to the same risk coverage\nof at least five hundred thousand dollars in the aggregate.\n  (7) "Hyper limits excess liability policy" means an excess liability\npolicy of commercial risk, public entity or professional liability\ninsurance, including a commercial umbrella policy, when written over one\nor more underlying liability policies issued by authorized insurers that\nprovide with respect to the same risk coverage of at least ten million\ndollars in the aggregate.\n  (8) "Jumbo risk" means a business entity that generates gross revenues\nexceeding one hundred million dollars annually and that develops an\nannual liability premium for the policy of at least five hundred\nthousand dollars, but shall not include any public entity or\nnot-for-profit corporation.\n  (9) "Renewal date" means the date specified in a conditional renewal\nnotice, renewal certificate or in the renewal policy itself, for\ncoverage under a renewal policy to take effect.\n  (10) "Blanket" or "mass" nonrenewal means a situation where the\ninsurer within a six month period is nonrenewing policies representing\nmore than one percent of a market.\n  (11) "Market" shall have the meaning ascribed by paragraph one of\nsubsection (a) of section two thousand three hundred forty-four of this\nchapter.\n  (b) During the first sixty days a covered policy is initially in\neffect, except for the bases for cancellation set forth in paragraph\none, two or three of subsection (c) of this section, no cancellation\nshall become effective until twenty days after written notice is mailed\nor delivered to the first-named insured at the mailing address shown in\nthe policy and to such insured's authorized agent or broker.\n  (c) After a covered policy has been in effect for sixty days unless\ncancelled pursuant to subsection (b) of this section, or on or after the\neffective date if such policy is a renewal, no notice of cancellation\nshall become effective until fifteen days after written notice is mailed\nor delivered to the first-named insured and to such insured's authorized\nagent or broker, and such cancellation is based on one or more of the\nfollowing:\n  (1) With respect to covered policies:\n  (A) nonpayment of premium provided, however, that a notice of\ncancellation on this ground shall inform the insured of the amount due;\n  (B) conviction of a crime arising out of acts increasing the hazard\ninsured against;\n  (C) discovery of fraud or material misrepresentation in the obtaining\nof the policy or in the presentation of a claim thereunder;\n  (D) after issuance of the policy or after the last renewal date,\ndiscovery of an act or omission, or a violation of any policy condition,\nthat substantially and materially increases the hazard insured against,\nand which occurred subsequent to inception of the current policy period;\n  (E) material physical change in the property insured, occurring after\nissuance or last annual renewal anniversary date of the policy, which\nresults in the property becoming uninsurable in accordance with the\ninsurer's objective, uniformly applied underwriting standards in effect\nat the time the policy was issued or last renewed; or material change in\nthe nature or extent of the risk, occurring after issuance or last\nannual renewal anniversary date of the policy, which causes the risk of\nloss to be substantially and materially increased beyond that\ncontemplated at the time the policy was issued or last renewed;\n  (F) a determination by the superintendent that continuation of the\npresent premium volume of the insurer would jeopardize that insurer's\nsolvency or be hazardous to the interests of policyholders of the\ninsurer, its creditors or the public;\n  (G) a determination by the superintendent that the continuation of the\npolicy would violate, or would place the insurer in violation of, any\nprovision of this chapter; or\n  (H) where the insurer has reason to believe, in good faith and with\nsufficient cause, that there is a probable risk or danger that the\ninsured will destroy, or permit to be destroyed, the insured property\nfor the purpose of collecting the insurance proceeds, provided, however,\nthat:\n  (i) a notice of cancellation on this ground shall inform the insured\nin plain language that the insured must act within ten days if review by\nthe department of the ground for cancellation is desired pursuant to\nitem (iii) of this subparagraph (H);\n  (ii) notice of cancellation on this ground shall be provided\nsimultaneously by the insurer to the department; and\n  (iii) upon written request of the insured made to the department\nwithin ten days from the insured's receipt of notice of cancellation on\nthis ground, the department shall undertake a review of the ground for\ncancellation to determine whether or not the insurer has satisfied the\ncriteria for cancellation specified in this subparagraph; if after such\nreview the department finds no sufficient cause for cancellation on this\nground, the notice of cancellation on this ground shall be deemed null\nand void.\n  (2) With respect to that portion of a covered policy providing motor\nvehicle coverage, in addition to the basis for cancellation set forth in\nparagraph one of this subsection, suspension or revocation during the\nrequired policy period of the driver's license of any person who\ncontinues to operate a motor vehicle insured under the policy, other\nthan a suspension issued pursuant to subdivision one of section five\nhundred ten-b of the vehicle and traffic law or one or more\nadministrative suspensions arising from the same incident which has or\nhave been terminated prior to the effective date of cancellation.\n  (3) With respect to professional liability insurance policies, in\naddition to the bases for cancellation set forth in paragraph one of\nthis subsection, revocation or suspension of the insured's license to\npractice his profession or, if the insured is a hospital, it no longer\npossesses a valid operating certificate under section twenty-eight\nhundred one-a of the public health law.\n  (4) With respect to an excess liability policy, in addition to the\nbasis for cancellation set forth in paragraph one of this subsection,\ncancellation of one or more of the underlying policies providing primary\nor intermediate coverage, where: (A) such cancellation is based upon\nparagraph one, two or three of this subsection; and (B) such policies\nare not replaced without lapse.\n  (5) Written notice of cancellation in accordance with this subsection\nshall be mailed or delivered to the first-named insured, at the address\nshown on the policy, and to the insured's authorized agent or broker.\n  (d) (1) After a covered policy has been in effect for sixty days, or\non and after the effective date if such policy is a renewal, no premium\nincrease for the term of the policy shall be made to become effective\nunless due to and commensurate with insured value added, subsequent to\nissuance or the last renewal date, pursuant to the policy or at the\ninsured's request or, in lieu of cancellation, where such increase is\nbased upon one or more of the grounds for cancellation set forth in\nsubparagraph (D) or (E) of paragraph one of subsection (c) of this\nsection.\n  (2) No covered policy which provides for a policy term of less than\none year may be issued, or issued for delivery, in this state, except:\n  (A) a policy issued to an insured for a seasonal purpose;\n  (B) a policy issued to cover a specific event or particular project\nthat will be performed in less than one year;\n  (C) a new policy where the specific term is made to coincide with the\nterm of an insured's already existing policy with the same insurer, with\nany insurer at the insured's written request or, in the case of an\nexcess liability policy, with different insurers;\n  (D) a group property/casualty policy or certificates, policies issued\npursuant to a safety group or mass merchandising program, or a medical\nmalpractice or for-hire vehicle policy whose expiration date is common\nto all other policies issued by an insurer; in any of which events the\nfirst policy period may be for a period of less than one year with\nsubsequent renewals requiring at least a one year policy period, and any\nsuch policies issued since the effective date of this section may be\namended to conform to a common expiration date; or\n  (E) where an insured requests a liability insurance policy with a term\nof less than one year from an insurer that offers such policies;\nprovided that the insurer also offers the insured the option of\npurchasing a policy with a term of one year, and:\n  (i) the insurer writes the policy on an occurrence basis;\n  (ii) the insurer writes the policy on a defense cost outside limits\nbasis;\n  (iii) the insurer may extend the policy, provided that:\n  (a) the coverage remains in effect at the same terms and conditions;\n  (b) the rate accords with the rates filed with the superintendent at\nthe policy's inception; and\n  (c) the extension does not result in the policy period exceeding\neleven months in total;\n  (iv) the policy has no annual aggregate liability limit but may have\naggregate limits for the term of the policy, and such aggregate limits\nshall continue with any policy extension provided pursuant to item (iii)\nof this subparagraph;\n  (v) the policy does not provide medical malpractice coverage;\nliability insurance required by articles six, eight, or forty-four-B of\nthe vehicle and traffic law or under any other financial responsibility\nlaw of this state; or public entity insurance;\n  (vi) the policy provides for a term of at least one month;\n  (vii) the policy does not contain a clause limiting the timely filing\nof a claim;\n  (viii) the policy provides for a return of premium on a pro-rata basis\nif the insured cancels or otherwise terminates the policy before the\npolicy's expiration; and\n  (ix) the insurer provides a written disclosure to the insured that\nexplains that a policy issued pursuant to this subparagraph may be more\nexpensive than a policy with a term of one year.\n  (e) (1) A covered policy shall remain in full force and effect\npursuant to the same terms, conditions and rates unless written notice\nis mailed or delivered by the insurer to the first-named insured, at the\naddress shown on the policy, and to such insured's authorized agent or\nbroker, indicating the insurer's intention:\n  (A) not to renew such policy; or\n  (B) to condition its renewal upon change of limits, change in type of\ncoverage, reduction of coverage, increased deductible or addition of\nexclusion, or upon increased premiums in excess of ten percent\n(exclusive of any premium increase generated as a result of increased\nexposure units, pursuant to subsection (d) of this section, or as a\nresult of experience rating, loss rating, retrospective rating or\naudit), except that with respect to an excess liability policy, the\ninsurer may also, consistent with regulations promulgated by the\nsuperintendent, condition its renewal upon requirements relating to the\nunderlying coverage, in which event the conditional renewal notice shall\nbe treated as an effective notice of nonrenewal if such requirements are\nnot satisfied as of the later of the expiration date of the policy or\nsixty days after mailing or delivery of such notice; or\n  (C) that the policy will not be renewed or will not be renewed upon\nthe same terms, conditions or rates; such alternative renewal notice\nmust be mailed or delivered on a timely basis and advise the insured\nthat a second notice shall be mailed or delivered at a later date\nindicating the insurer's intention as specified in subparagraph (A) or\n(B) of this paragraph and that coverage shall continue on the same\nterms, conditions and rates as the expiring policy, until the later of\nthe expiration date or sixty days after the second notice is mailed or\ndelivered; such alternative renewal notice also shall advise the insured\nof the availability of loss information pursuant to subsection (g) of\nthis section and, upon written request, the insurer shall furnish such\nloss information within ten days consistent with the provisions of such\nsubsection.\n  (2) A nonrenewal notice as specified in subparagraph (A), a\nconditional renewal notice as specified in subparagraph (B), and the\nsecond notice described in subparagraph (C) of paragraph one of this\nsubsection shall contain the specific reason or reasons for nonrenewal\nor conditional renewal, set forth the amount of any premium increase\n(or, where such amount cannot reasonably be determined as of the time\nthe notice is provided, a reasonable estimate of the premium increase\nbased upon the information available to the insurer at that time), and\ndescribe in plain and concise terms the nature of any other proposed\nchanges specified in paragraph one of this subsection. The\nsuperintendent shall by regulation specify the permissible range of such\nestimate (which shall not exceed five percent of the actual amount) and\nthe permissible methods by which an insurer may satisfy the notice\nrequirements of this section.\n  (3) The notice required by paragraph one of this subsection shall be\nmailed or delivered at least sixty, but not more than one hundred\ntwenty, days in advance of the expiration date of the policy, except\nthat for an excess liability policy or a policy issued to a jumbo risk,\nthe notice shall be mailed or delivered at least thirty, but not more\nthan one hundred twenty, days in advance of the expiration date of the\npolicy.\n  (4) Paragraphs one, two and three of this subsection shall not apply\nwhen the named insured, an agent or broker authorized by the named\ninsured, or another insurer of the named insured has mailed or delivered\nwritten notice that the policy has been replaced or is no longer\ndesired.\n  (5) (A) If the insurer employs an alternative renewal notice as\nauthorized by subparagraph (C) of paragraph one of this subsection, the\ninsurer shall provide coverage on the same terms, conditions, and rates\nas the expiring policy, until the later of the expiration date or sixty\ndays after the mailing or delivery of the second notice described in\nsuch subparagraph, except to the extent that, prior thereto, the insured\nhas replaced the coverage or elects to cancel, in which event such\ncancellation shall be on a pro rata premium basis.\n  (B) In the event that a late conditional renewal notice or a late\nnonrenewal notice is provided by the insurer prior to the expiration\ndate of the policy, coverage shall remain in effect, at the same terms\nand conditions of the expiring policy and at the lower of the current\nrates or the prior period's rates, until sixty days after such notice is\nmailed or delivered, except to the extent that, prior thereto, the\ninsured has replaced the coverage or elects to cancel, in which event\nsuch cancellation shall be on a pro rata premium basis; provided,\nhowever, that if the insured elects to renew on the basis of the\nconditional renewal notice, then such terms, conditions and rates shall\ngovern the policy upon expiration of such sixty day period unless such\nnotice was provided at least thirty days prior to the expiration date of\nthe policy, in which event the terms, conditions and rates set forth in\nthe conditional renewal notice shall apply as of the renewal date.\n  (C) (i) In the event that a late conditional renewal notice or a late\nnonrenewal notice is provided by the insurer on or after the expiration\ndate of the policy, coverage shall remain in effect on the same terms\nand conditions of the expiring policy for another required policy\nperiod, and at the lower of the current rates or the prior period's\nrates unless the insured during the additional required policy period\nhas replaced the coverage or elects to cancel, in which event such\ncancellation shall be on a pro rata premium basis.\n  (ii) Every notice mailed or delivered pursuant to this subsection\nshall advise the insured of the insured's rights to coverage and the\nduration thereof.\n  (6) Paragraph five of this subsection shall not create a new annual\naggregate liability limit (if any) for the covered policy, except that\nthe annual aggregate limit of the expiring policy shall be increased in\nproportion to the policy extension pursuant to such paragraph five;\nprovided, however, that if the insured elects to accept the terms,\nconditions and rates of the conditional renewal notice pursuant to\nsubparagraph (B) of paragraph four of this subsection, a new annual\naggregate limitation (if any) shall become effective as of the inception\ndate of the renewal, subject to regulations promulgated by the\nsuperintendent.\n  (7) Each insurer subject to this section shall adopt and implement\nreasonable standards and procedures to ensure compliance with the\nprovisions of subparagraphs (A), (B) and (C) of paragraph one and\nparagraphs two and three of this subsection. Each such insurer shall\nmaintain a written or electronic record of any notice not in compliance\nwith such provisions. Such record shall indicate the expiration date of\nthe policy, the date notice should have been sent, the date when notice\nwas sent, the policy number, and the name and address of the insured.\nSuch records shall be available for inspection upon request by the\nsuperintendent.\n  (8) No insurer may issue blanket or mass nonrenewal notices for any\nmarket, except upon submission to the superintendent, at least\nforty-five days in advance of mailing or delivery of such notices, of a\nplan for orderly withdrawal that describes the proposed nonrenewals,\nstates the basis for such nonrenewals, and identifies any measures such\ninsurer intends to take in order to minimize market disruption.\n  (9) This subsection shall not apply to a hyper limits excess liability\npolicy except in regard to nonrenewal or to a policy of the type\nspecified in subparagraph (A), (B), or (E) of paragraph two of\nsubsection (d) of this section.\n  (f) If an insurer provides the notice described in paragraphs one, two\nand three of subsection (e) of this section, and thereafter the insurer\nextends the policy for ninety days or less, an additional notice of\nnonrenewal is not required with respect to the extension.\n  (g) (1) Every notice mailed or delivered by an insurer pursuant to\nthis section shall advise the first-named insured and such insured's\nauthorized agent or broker of the availability of loss information\nconsistent with paragraph two of this subsection.\n  (2) Upon written request by the first-named insured or such insured's\nauthorized agent or broker, the insurer shall mail or deliver the\nfollowing loss information covering a period of years specified by the\nsuperintendent by regulation or the period of time coverage has been\nprovided by the insurer, whichever is less, within ten days of such\nrequest:\n  (A) Information on closed claims, including date and description of\noccurrence, and any payments;\n  (B) Information on open claims, including date and description of\noccurrence, and amounts of any payments; and\n  (C) Information on notice of any occurrences, including date and\ndescription of occurrence.\n  (3) The insurer may charge a reasonable fee as determined by the\nsuperintendent only for such information provided upon request, but not\nfor such information (even in the absence of a request therefor)\nrequired to be provided.\n  (4) For purposes of this subsection, the term first-named insured\nshall include an individual certificate holder under a property/casualty\ngroup policy with respect to such certificate holder's loss information.\n  (h) Every notice of cancellation issued pursuant to this section shall\nspecify the grounds for cancellation and shall contain where applicable\na reference to the pertinent paragraph or subparagraph of subsection (c)\nof this section. Every notice of nonrenewal issued pursuant to this\nsection shall set forth or be accompanied by the reason for nonrenewal,\nand any such stated reason shall be valid and effective unless such\nreason violates this chapter or any other state or federal law.\n  (i) No cancellation, conditional renewal or nonrenewal notice that\nfails to include a provision required by this section shall be an\neffective notice for purposes of this section.\n  (j) The provisions of subsection (e) of this section, regarding\nconditional renewal shall apply to the master contract under a\nproperty/casualty group policy, but shall not apply to individual\ncertificate holders under such group policy.\n  (k) (1) Subject to the rights of an insurer to cancel a policy\npursuant to subsection (b) or (c) of this section, in the event that an\ninsurer terminates the contract or account of a licensed agent or\nbroker, the insurer shall offer in regard to any policy written through\nsuch terminated agent or broker to continue each such policy with that\nagent or broker for any remaining part of the required policy period.\n  (2) The terminated agent or broker shall be entitled to receive\ncommissions on all business continued pursuant to paragraph one of this\nsubsection at the commission rate applicable to such agent or broker at\nthe time of termination.\n  (3) This subsection shall not apply to an agent or broker: (A) who\nexclusively represents one insurer or a group of insurers under common\nmanagement; (B) whose license has been revoked by the superintendent; or\n(C) whose contract or account has been terminated due to the agent's or\nbroker's insolvency or gross misconduct.\n  (l) (1) This section shall apply to any policy issued or issued for\ndelivery in this state covering risks with multi-state locations, where\nthe insured is principally headquartered in this state or where the\npolicy provides that this section, as a matter of choice of law, is to\ngovern the policy in regard to such locations.\n  (2) This section shall not apply to policies issued pursuant to a plan\nestablished under article fifty-three, fifty-four or fifty-five of this\nchapter, surety policies, policies providing workers' compensation or\nemployers' liability coverage, financial guaranty insurance, policies\nproviding mortgage guaranty or credit insurance, policies principally\nmarine insurance as defined by paragraph twenty of subsection (a) of\nsection one thousand one hundred thirteen of this chapter, legal\nservices insurance, reinsurance contracts, policies written on an excess\nline basis, or policies subject to section three thousand four hundred\ntwenty-five of this chapter.\n  (m) Nothing in this section shall be construed to prohibit an insurer\nfrom providing terms more favorable to an insured or other party in\ninterest with regard to cancellation, nonrenewal or conditional renewal;\nnor shall anything herein be construed to limit the grounds for which an\ninsurer may lawfully rescind or suspend a policy or decline to pay a\nclaim under a policy.\n  (n) (1) Except for subparagraphs (B) and (C) of paragraph five and\nparagraph seven of subsection (e), an insurer doing business in this\nstate which violates the provisions of subsection (e) with such\nfrequency as to indicate a general business practice shall be subject to\nthe penalties provided in paragraph two of this subsection.\n  (2) If it is found, after notice and an opportunity to be heard, that\nan insurer has violated subsection (e) of this section, each instance of\nnoncompliance with paragraph one of this subsection may be treated as a\nseparate violation of this section for purposes of ordering a penalty\npursuant to section one hundred nine of this chapter.\n  (o) The provisions of subsections (e) and (h) of this section shall\nnot apply to a policy the term of which expires during the period\ncommencing with the original effective date of this section and ending\non the sixtieth day after such effective date, provided, however, that\nin the interim the provisions of former sections three thousand four\nhundred twenty-six and three thousand four hundred twenty-seven of this\narticle as in effect on the day preceding the original effective date of\nthis section shall apply, as if such sections were not repealed by a\nchapter of the laws of nineteen hundred eighty-six, but in the event any\nsuch policy is at any time reexecuted, renewed, altered, modified or\namended, such provisions shall apply to such policy.\n