I'm getting ready to flee the Geek Cave for a Thursday night's cultural activities, but before I do, here is a smattering of some of the recent questions that have come across my e-mail:
Question from an IIABNY member: On the issue of an origination fee, there was a statement on the Dec page that it was fully earned. The carrier cancelled after one month. Are there any provisions that would comment on the legality of a fully earned origination fee, specifically if the policy is canceled by the carrier?
Answer: The literature from the Insurance Department is a little thin. They mentioned it briefly in a Jan. 4, 2002 opinion:
The Department views late payment fees, reinstatement fees, and premium installment fees to be properly classified as fees that are outside of the rating structure, and which do not have to be filed with the Department or included as part of the manual rates. Such fees may be charged separately and apart from the policy premium because the expenses that such fees are meant to deflect arise independently from the issuance, underwriting, or general maintenance of insurance policies.3 These fees arise in relation to the way an insured opts to pay the premium, or are incurred because of an individual insured’s lateness in paying the premium, and not in relation to the expenses incurred on behalf of insureds generally. However, certain other fees, such as "policy placement fees" and "origination fees," are part of the policy rate because they are part of the insurer’s expenses in issuing the policy. Such fees generally relate to underwriting and arise in relation to every policy issued.
In other opinions, the department has said that it has approved minimum earned premium filings where the insurer has shown that the MEP equals the cost of policy issuance. It’s possible that they have taken the same view of policy origination fees; in that case, the insurer could charge it even if it was the party that cancelled the policy.
Question from an IIABNY member: If there is a package policy that is with an admitted carrier, and the carrier did not send notice of nonrenewal, and the insured orders the policy but does not pay the deposit, is the policy automatically renewed? Would it be necessary for the carrier to send notice of cancellation for nonpayment?
Answer: N.Y. Insurance Law Sect. 3426(e)(1) states:
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…
Therefore, renewal is automatic. Subsection (c) of the same law states:
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… (emphasis added)
On or after the renewal date, the insurer can cancel for non-payment only after giving the insured 15 days’ notice. As a side note, the department has said that an insurer can bill the insured for the deposit prior to the effective date and then issue a non-pay notice timed so that cancellation will be effective on the renewal date (see the Jan. 4, 2002 opinion I linked to above). However, the insurer must give 15 days’ notice at some point, so there’s no retroactive cancellation if the insurer didn’t send the notice before the renewal date.
Question from an IIABNY member: Could you please advise as to the rules of governing duplicate coverage as respects Workers' Compensation and the ability to recover premium when there is duplicate coverage?
Answer: There really are no rules pertaining to this. Nothing in the New York Insurance or Workers Compensation Law sets any formal rules that carriers must follow in this situation. If more than one carrier issued policies in good faith, they’re all entitled to at least some premium to cover the policy issuance expense. About the best you can do is try to negotiate with one of the carriers a settlement that the insured can live with.
That will have to do for today. I have a 9 p.m. appointment with Peter, Walter and Olivia.