NY Ins L § 3426 (2021)
2021 New York Laws ISC - Insurance Article 34 - Insurance Contracts-Property/casualty 3426 - Commercial Lines Insurance; Cancellation and Renewal Provisions.

§   3426.   Commercial   lines  insurance;  cancellation  and  renewal provisions.  (a) Definitions. As used in this section:  (1) "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.  (2) "Required  policy period" means a period of one year from the date as of which a covered policy is renewed or first issued.  (3) "Nonpayment of premium" means the failure of the named insured  to discharge any obligation in connection with the payment of premiums on a policy  of  insurance  or  any  installment of such premium, whether the premium is payable directly to the insurer or its agent,  or  indirectly under  any  premium  finance plan or extension of credit. Payment to the insurer, or to an agent or broker authorized to  receive  such  payment, shall  be  timely for the purpose of this section if made within fifteen days after the mailing to the insured of a notice  of  cancellation  for nonpayment of premium.  (4) "Renewal" or "to renew" means the issuance or offer to issue by an insurer of a policy superseding a policy previously issued and delivered by  the  same  insurer,  or another insurer under common control, or the issuance or delivery of a certificate or notice extending the term of  a policy  beyond  its  policy  period or term; provided, however, that any policy with a policy period or term of less than one year shall, for the purpose of this section, be considered as if written for a policy period or term of one year, and any policy with no fixed expiration date shall, for the purpose of  this  section,  be  considered  as  if  written  for successive policy periods or terms of one year.  (5) "Administrative  suspension"  means  a  temporary  suspension of a driver's license pending a hearing, prosecution or investigation, or  an indefinite  suspension  of  a driver's license because of the failure of the person suspended  to  perform  an  act,  which  suspension  will  be terminated by the performance of the act by the person suspended.  (6) "Excess  liability  policy"  means  a  policy  of commercial risk, public  entity  or  professional  liability   insurance,   including   a commercial  umbrella  policy,  when  written over one or more underlying liability policies that provide with respect to the same  risk  coverage of at least five hundred thousand dollars in the aggregate.  (7) "Hyper  limits  excess liability policy" means an excess liability policy of commercial  risk,  public  entity  or  professional  liability insurance, including a commercial umbrella policy, when written over one or more underlying liability policies issued by authorized insurers that provide  with  respect to the same risk coverage of at least ten million dollars in the aggregate.  (8) "Jumbo risk" means a business entity that generates gross revenues exceeding one hundred million dollars  annually  and  that  develops  an annual  liability  premium  for  the  policy  of  at  least five hundred thousand  dollars,  but  shall  not  include  any   public   entity   or not-for-profit corporation.  (9) "Renewal  date"  means the date specified in a conditional renewal notice, renewal  certificate  or  in  the  renewal  policy  itself,  for coverage under a renewal policy to take effect.  (10) "Blanket"  or  "mass"  nonrenewal  means  a  situation  where the insurer within a six month period is nonrenewing  policies  representing more than one percent of a market.  (11) "Market"  shall  have  the  meaning  ascribed by paragraph one of subsection (a) of section two thousand three hundred forty-four of  this chapter.  (b)  During  the  first  sixty  days  a covered policy is initially in effect, except for the bases for cancellation  set  forth  in  paragraph one,  two  or  three  of subsection (c) of this section, no cancellation shall become effective until twenty days after written notice is  mailed or  delivered to the first-named insured at the mailing address shown in the policy and to such insured's authorized agent or broker.  (c) After a covered policy has been in effect for  sixty  days  unless cancelled pursuant to subsection (b) of this section, or on or after the effective  date  if  such policy is a renewal, no notice of cancellation shall become effective until fifteen days after written notice is mailed or delivered to the first-named insured and to such insured's authorized agent or broker, and such cancellation is based on one or  more  of  the following:  (1) With respect to covered policies:  (A)  nonpayment  of  premium  provided,  however,  that  a  notice  of cancellation on this ground shall inform the insured of the amount due;  (B) conviction of a crime arising out of acts  increasing  the  hazard insured against;  (C)  discovery of fraud or material misrepresentation in the obtaining of the policy or in the presentation of a claim thereunder;  (D) after issuance of the policy  or  after  the  last  renewal  date, discovery of an act or omission, or a violation of any policy condition, that  substantially and materially increases the hazard insured against, and which occurred subsequent to inception of the current policy period;  (E) material physical change in the property insured, occurring  after issuance  or  last  annual renewal anniversary date of the policy, which results in the property becoming  uninsurable  in  accordance  with  the insurer's  objective, uniformly applied underwriting standards in effect at the time the policy was issued or last renewed; or material change in the nature or extent of the  risk,  occurring  after  issuance  or  last annual  renewal anniversary date of the policy, which causes the risk of loss  to  be  substantially  and  materially   increased   beyond   that contemplated at the time the policy was issued or last renewed;  (F)  a  determination  by  the superintendent that continuation of the present premium volume of the insurer would  jeopardize  that  insurer's solvency  or  be  hazardous  to  the  interests  of policyholders of the insurer, its creditors or the public;  (G) a determination by the superintendent that the continuation of the policy would violate, or would place the insurer in  violation  of,  any provision of this chapter; or  (H)  where  the  insurer has reason to believe, in good faith and with sufficient cause, that there is a  probable  risk  or  danger  that  the insured  will  destroy,  or permit to be destroyed, the insured property for the purpose of collecting the insurance proceeds, provided, however, that:  (i) a notice of cancellation on this ground shall inform  the  insured in plain language that the insured must act within ten days if review by the  department  of  the  ground for cancellation is desired pursuant to item (iii) of this subparagraph (H);  (ii)  notice  of  cancellation  on  this  ground  shall  be   provided simultaneously by the insurer to the department; and  (iii)  upon  written  request  of  the  insured made to the department within ten days from the insured's receipt of notice of cancellation  on this  ground,  the department shall undertake a review of the ground for cancellation to determine whether or not the insurer has  satisfied  the criteria  for cancellation specified in this subparagraph; if after such review the department finds no sufficient cause for cancellation on this  ground, the notice of cancellation on this ground shall be  deemed  null and void.  (2)  With  respect to that portion of a covered policy providing motor vehicle coverage, in addition to the basis for cancellation set forth in paragraph one of this subsection, suspension or  revocation  during  the required  policy  period  of  the  driver's  license  of  any person who continues to operate a motor vehicle insured  under  the  policy,  other than  a  suspension  issued  pursuant to subdivision one of section five hundred  ten-b  of  the  vehicle  and  traffic  law  or  one   or   more administrative  suspensions  arising from the same incident which has or have been terminated prior to the effective date of cancellation.  (3) With respect to  professional  liability  insurance  policies,  in addition  to  the  bases  for cancellation set forth in paragraph one of this subsection, revocation or suspension of the  insured's  license  to practice  his  profession or, if the insured is a hospital, it no longer possesses a  valid  operating  certificate  under  section  twenty-eight hundred one-a of the public health law.  (4) With  respect  to  an  excess liability policy, in addition to the basis for cancellation set forth in paragraph one  of  this  subsection, cancellation of one or more of the underlying policies providing primary or  intermediate  coverage,  where:  (A) such cancellation is based upon paragraph one, two or three of this subsection; and  (B)  such  policies are not replaced without lapse.  (5)  Written notice of cancellation in accordance with this subsection shall be mailed or delivered to the first-named insured, at the  address shown on the policy, and to the insured's authorized agent or broker.  (d)  (1)  After a covered policy has been in effect for sixty days, or on and after the effective date if such policy is a renewal, no  premium increase  for  the  term of the policy shall be made to become effective unless due to and commensurate with insured value added,  subsequent  to issuance  or  the  last  renewal  date, pursuant to the policy or at the insured's request or, in lieu of cancellation, where  such  increase  is based  upon  one  or  more  of the grounds for cancellation set forth in subparagraph (D) or (E) of paragraph  one  of  subsection  (c)  of  this section.  (2)  No  covered  policy which provides for a policy term of less than one year may be issued, or issued for delivery, in this state, except:  (A) a policy issued to an insured for a seasonal purpose;  (B) a policy issued to cover a specific event  or  particular  project that will be performed in less than one year;  (C)  a new policy where the specific term is made to coincide with the term of an insured's already existing policy with the same insurer, with any insurer at the insured's written request  or,  in  the  case  of  an excess liability policy, with different insurers; or  (D)  a group property/casualty policy or certificates, policies issued pursuant to a safety group or mass merchandising program, or  a  medical malpractice  or  for-hire vehicle policy whose expiration date is common to all other policies issued by an insurer; in any of which  events  the first  policy  period  may  be  for  a period of less than one year with subsequent renewals requiring at least a one year policy period, and any such policies issued since the effective date of  this  section  may  be amended to conform to a common expiration date.  (e)  (1)  A  covered  policy  shall  remain  in  full force and effect pursuant to the same terms, conditions and rates unless  written  notice is mailed or delivered by the insurer to the first-named insured, at the address  shown  on the policy, and to such insured's authorized agent or broker, indicating the insurer's intention:  (A) not to renew such policy; or  (B) to condition its renewal upon change of limits, change in type  of coverage,  reduction  of  coverage,  increased deductible or addition of exclusion,  or  upon  increased  premiums  in  excess  of  ten   percent (exclusive  of  any  premium increase generated as a result of increased exposure  units,  pursuant  to  subsection  (d) of this section, or as a result of  experience  rating,  loss  rating,  retrospective  rating  or audit),  except  that  with  respect  to an excess liability policy, the insurer  may  also,  consistent  with  regulations  promulgated  by  the superintendent,  condition its renewal upon requirements relating to the underlying coverage, in which event the conditional renewal notice shall be treated as an effective notice of nonrenewal if such requirements are not satisfied as of the later of the expiration date of  the  policy  or sixty days after mailing or delivery of such notice; or  (C)  that  the  policy will not be renewed or will not be renewed upon the same terms, conditions or rates;  such  alternative  renewal  notice must  be  mailed  or  delivered on a timely basis and advise the insured that a second notice shall be  mailed  or  delivered  at  a  later  date indicating  the  insurer's intention as specified in subparagraph (A) or (B) of this paragraph and that  coverage  shall  continue  on  the  same terms,  conditions  and rates as the expiring policy, until the later of the expiration date or sixty days after the second notice is  mailed  or delivered; such alternative renewal notice also shall advise the insured of  the  availability  of loss information pursuant to subsection (g) of this section and, upon written request, the insurer shall  furnish  such loss  information within ten days consistent with the provisions of such subsection.  (2)  A  nonrenewal  notice  as  specified  in  subparagraph   (A),   a conditional  renewal  notice  as  specified in subparagraph (B), and the second notice described in subparagraph (C) of  paragraph  one  of  this subsection  shall  contain the specific reason or reasons for nonrenewal or conditional renewal, set forth the amount  of  any  premium  increase (or,  where  such  amount cannot reasonably be determined as of the time the notice is provided, a reasonable estimate of  the  premium  increase based  upon  the information available to the insurer at that time), and describe in plain and concise terms the nature  of  any  other  proposed changes   specified   in   paragraph   one   of   this  subsection.  The superintendent shall by regulation specify the permissible range of such estimate (which shall not exceed five percent of the actual amount)  and the  permissible  methods  by  which  an  insurer may satisfy the notice requirements of this section.  (3) The notice required by paragraph one of this subsection  shall  be mailed  or  delivered  at  least  sixty,  but  not more than one hundred twenty, days in advance of the expiration date  of  the  policy,  except that  for an excess liability policy or a policy issued to a jumbo risk, the notice shall be mailed or delivered at least thirty,  but  not  more than  one  hundred twenty, days in advance of the expiration date of the policy.  (4) Paragraphs one, two and three of this subsection shall  not  apply when  the  named  insured,  an  agent  or broker authorized by the named insured, or another insurer of the named insured has mailed or delivered written notice that the  policy  has  been  replaced  or  is  no  longer desired.  (5)  (A)  If  the  insurer  employs  an  alternative renewal notice as authorized by subparagraph (C) of paragraph one of this subsection,  the insurer  shall provide coverage on the same terms, conditions, and rates as the expiring policy, until the later of the expiration date or  sixty days  after  the  mailing  or delivery of the second notice described in such subparagraph, except to the extent that, prior thereto, the insured  has replaced the coverage or elects  to  cancel,  in  which  event  such cancellation shall be on a pro rata premium basis.  (B)  In  the  event  that  a late conditional renewal notice or a late nonrenewal notice is provided by the insurer  prior  to  the  expiration date  of  the policy, coverage shall remain in effect, at the same terms and conditions of the expiring policy and at the lower  of  the  current rates or the prior period's rates, until sixty days after such notice is mailed  or  delivered,  except  to  the  extent that, prior thereto, the insured has replaced the coverage or elects to cancel,  in  which  event such  cancellation  shall  be  on  a  pro  rata premium basis; provided, however, that if the insured  elects  to  renew  on  the  basis  of  the conditional  renewal notice, then such terms, conditions and rates shall govern the policy upon expiration of such sixty day period  unless  such notice was provided at least thirty days prior to the expiration date of the  policy, in which event the terms, conditions and rates set forth in the conditional renewal notice shall apply as of the renewal date.  (C) (i) In the event that a late conditional renewal notice or a  late nonrenewal  notice is provided by the insurer on or after the expiration date of the policy, coverage shall remain in effect on  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 during the additional required policy period has replaced the coverage or elects  to  cancel,  in  which  event  such cancellation shall be on a pro rata premium basis.  (ii)  Every  notice  mailed  or  delivered pursuant to this subsection shall advise the insured of the insured's rights  to  coverage  and  the duration thereof.  (6)  Paragraph  five  of this subsection shall not create a new annual aggregate liability limit (if any) for the covered policy,  except  that the  annual aggregate limit of the expiring policy shall be increased in proportion to the policy extension  pursuant  to  such  paragraph  five; provided,  however,  that  if  the  insured  elects to accept the terms, conditions and rates of  the  conditional  renewal  notice  pursuant  to subparagraph  (B)  of  paragraph  four  of this subsection, a new annual aggregate limitation (if any) shall become effective as of the inception date  of  the  renewal,  subject  to  regulations  promulgated  by   the superintendent.  (7)  Each  insurer  subject  to this section shall adopt and implement reasonable standards  and  procedures  to  ensure  compliance  with  the provisions  of  subparagraphs  (A),  (B)  and  (C)  of paragraph one and paragraphs two and three of this subsection.  Each  such  insurer  shall maintain  a written or electronic record of any notice not in compliance with such provisions. Such record shall indicate the expiration date  of the  policy, the date notice should have been sent, the date when notice was sent, the policy number, and the name and address  of  the  insured. Such  records  shall  be  available  for  inspection upon request by the superintendent.  (8) No insurer may issue blanket or mass nonrenewal  notices  for  any market,   except   upon  submission  to  the  superintendent,  at  least forty-five days in advance of mailing or delivery of such notices, of  a plan  for  orderly  withdrawal  that describes the proposed nonrenewals, states the basis for such nonrenewals, and identifies any measures  such insurer intends to take in order to minimize market disruption.  (9) This subsection shall not apply to a hyper limits excess liability policy  except  in  regard  to  nonrenewal  or  to  a policy of the type specified in subparagraph (A) or (B) of paragraph two of subsection  (d) of this section.  (f) If an insurer provides the notice described in paragraphs one, two and  three of subsection (e) of this section, and thereafter the insurer extends the policy for ninety days or  less,  an  additional  notice  of nonrenewal is not required with respect to the extension.  (g)  (1)  Every  notice  mailed or delivered by an insurer pursuant to this section shall advise the first-named  insured  and  such  insured's authorized  agent  or  broker  of  the  availability of loss information consistent with paragraph two of this subsection.  (2) Upon written request by the first-named insured or such  insured's authorized  agent  or  broker,  the  insurer  shall  mail or deliver the following loss information covering a period of years specified  by  the superintendent  by  regulation  or  the period of time coverage has been provided by the insurer, whichever is less,  within  ten  days  of  such request:  (A)  Information  on  closed claims, including date and description of occurrence, and any payments;  (B) Information on open claims,  including  date  and  description  of occurrence, and amounts of any payments; and  (C)  Information  on  notice  of  any  occurrences, including date and description of occurrence.  (3) The insurer may charge a  reasonable  fee  as  determined  by  the superintendent  only for such information provided upon request, but not for such information  (even  in  the  absence  of  a  request  therefor) required to be provided.  (4)  For  purposes  of  this  subsection, the term first-named insured shall include an individual certificate holder under a property/casualty group policy with respect to such certificate holder's loss information.  (h) Every notice of cancellation issued pursuant to this section shall specify the grounds for cancellation and shall contain where  applicable a reference to the pertinent paragraph or subparagraph of subsection (c) of  this  section.  Every  notice  of nonrenewal issued pursuant to this section shall set forth or be accompanied by the reason for  nonrenewal, and  any  such  stated  reason  shall be valid and effective unless such reason violates this chapter or any other state or federal law.  (i) No cancellation, conditional renewal  or  nonrenewal  notice  that fails  to  include  a  provision  required  by  this section shall be an effective notice for purposes of this section.  (j) The provisions  of  subsection  (e)  of  this  section,  regarding conditional   renewal  shall  apply  to  the  master  contract  under  a property/casualty group  policy,  but  shall  not  apply  to  individual certificate holders under such group policy.  (k)  (1)  Subject  to  the  rights  of  an  insurer to cancel a policy pursuant to subsection (b) or (c) of this section, in the event that  an insurer  terminates  the  contract  or  account  of  a licensed agent or broker, the insurer shall offer in regard to any policy written  through such  terminated  agent or broker to continue each such policy with that agent or broker for any remaining part of the required policy period.  (2) The terminated agent  or  broker  shall  be  entitled  to  receive commissions  on all business continued pursuant to paragraph one of this subsection at the commission rate applicable to such agent or broker  at the time of termination.  (3)  This  subsection  shall  not apply to an agent or broker: (A) who exclusively represents one insurer or a group of insurers  under  common management; (B) whose license has been revoked by the superintendent; or (C)  whose contract or account has been terminated due to the agent's or broker's insolvency or gross misconduct.  (l) (1) This section shall apply to any policy issued  or  issued  for delivery  in this state covering risks with multi-state locations, where  the insured is principally headquartered in  this  state  or  where  the policy  provides  that this section, as a matter of choice of law, is to govern the policy in regard to such locations.  (2) This section shall not apply to policies issued pursuant to a plan established  under article fifty-three, fifty-four or fifty-five of this chapter, surety policies, policies providing  workers'  compensation  or employers'  liability  coverage,  financial guaranty insurance, policies providing mortgage guaranty or credit  insurance,  policies  principally marine  insurance  as  defined  by paragraph twenty of subsection (a) of section one  thousand  one  hundred  thirteen  of  this  chapter,  legal services insurance, reinsurance contracts, policies written on an excess line  basis,  or policies subject to section three thousand four hundred twenty-five of this chapter.  (m) Nothing in this section shall be construed to prohibit an  insurer from  providing  terms  more  favorable  to an insured or other party in interest with regard to cancellation, nonrenewal or conditional renewal; nor shall anything herein be construed to limit the grounds for which an insurer may lawfully rescind or suspend a policy or  decline  to  pay  a claim under a policy.  (n)  (1)  Except  for  subparagraphs (B) and (C) of paragraph five and paragraph seven of subsection (e), an insurer  doing  business  in  this state  which  violates  the  provisions  of  subsection  (e)  with  such frequency as to indicate a general business practice shall be subject to the penalties provided in paragraph two of this subsection.  (2) If it is found, after notice and an opportunity to be heard,  that an insurer has violated subsection (e) of this section, each instance of noncompliance  with paragraph one of this subsection may be treated as a separate violation of this section for purposes of  ordering  a  penalty pursuant to section one hundred nine of this chapter.  (o)  The  provisions  of subsections (e) and (h) of this section shall not apply to a policy the  term  of  which  expires  during  the  period commencing  with  the original effective date of this section and ending on the sixtieth day after such effective date, provided,  however,  that in  the  interim  the  provisions of former sections three thousand four hundred twenty-six and three thousand four hundred twenty-seven of  this article as in effect on the day preceding the original effective date of this  section  shall  apply,  as if such sections were not repealed by a chapter of the laws of nineteen hundred eighty-six, but in the event any such policy is at any time reexecuted,  renewed,  altered,  modified  or amended, such provisions shall apply to such policy.