2023 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;
(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; or
(E) where an insured requests a liability insurance policy with a term
of  less  than  one  year  from  an  insurer  that offers such policies;
provided that  the  insurer  also  offers  the  insured  the  option  of
purchasing a policy with a term of one year, and:
(i) the insurer writes the policy on an occurrence basis;
(ii)  the  insurer  writes the policy on a defense cost outside limits
basis;
(iii) the insurer may extend the policy, provided that:
(a) the coverage remains in effect at the same terms and conditions;
(b)  the  rate accords with the rates filed with the superintendent at
the policy's inception; and
(c) the extension does not  result  in  the  policy  period  exceeding
eleven months in total;
(iv)  the  policy has no annual aggregate liability limit but may have
aggregate limits for the term of the policy, and such  aggregate  limits
shall continue with any policy extension provided pursuant to item (iii)
of this subparagraph;
(v)   the  policy  does  not  provide  medical  malpractice  coverage;
liability insurance required by articles six, eight, or forty-four-B  of
the  vehicle and traffic law or under any other financial responsibility
law of this state; or public entity insurance;
(vi) the policy provides for a term of at least one month;
(vii) the policy does not contain a clause limiting the timely  filing
of a claim;
(viii) the policy provides for a return of premium on a pro-rata basis
if  the  insured  cancels  or otherwise terminates the policy before the
policy's expiration; and
(ix) the insurer provides a written disclosure  to  the  insured  that
explains  that a policy issued pursuant to this subparagraph may be more
expensive than a policy with a term of one year.
(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),  (B),  or  (E)  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.