Question from an IIABNY member: Can you please indicate where it is stated that an insured can request a one more year renewal for an automobile insurance policy after the required three successive one year policy periods, and if it also applies to personal lines insurance policies?
Answer: That’s not exactly what the law says. New York Insurance Law Section 3425(j)(1) states:
Where an insurer or an agent who is authorized by such insurer to accept lines of insurance from licensed agents or brokers notifies a licensed agent or broker that its contract or account shall be terminated:…
(B) with respect to an automobile insurance policy subject to this section, the insurer shall offer to continue the policy for any remaining part of the required policy period and, unless the policy is cancelled or non-renewed in accordance with the provisions of either subsection (b), (c) or (f) of this section, it shall, at the specific request of the insured, offer to continue the policy through the terminated agent or broker for three successive one year policy periods which commence within the year following the date of mailing or delivery to the terminated agent or broker of written notice of termination of such contract or account;
As a side note:
- Subsection (b) permits the insurer to cancel a policy for any reason in the first 60 days.
- Subsection (c) permits the insurer to cancel after day 60 and on renewals for non-payment of premium; suspension or revocation during the required policy period of the driver's license of the named insured or any other person who customarily operates an auto insured under the policy; and discovery of fraud or material misrepresentation in obtaining the policy or in making a claim under it.
- Subsection (f) permits the insurer to non-renew up to two percent of its auto policies in a given rating territory per calendar year.
What the above provision of the law is saying is that the insurer must offer to finish the auto policy’s required policy period (which is one year – see subsection (a)(8),) and, if the insured requests, offer to renew the policy through the terminated agent for three consecutive one-year policy periods. Here’s an example to illustrate:
- Carrier notifies agent on Dec. 16, 2011 that the appointment is terminated
- Personal Auto Policy finishes the one-year required policy period on March 1, 2012
The carrier must offer to continue coverage under the policy until March 1, 2012. In addition, if the insured requests, it must offer to renew the policy through the terminated agent in 2012, 2013 and 2014. Effective March 1, 2015, it no longer has any obligation to offer a renewal.
With non-auto personal policies, it’s a bit different. The law states:
Where an insurer or an agent who is authorized by such insurer to accept lines of insurance from licensed agents or brokers notifies a licensed agent or broker that its contract or account shall be terminated:(A) with respect to a personal lines insurance policy required to be continued by this section, the insurer shall offer to continue the policy for any remaining part of the required policy period … and the insurer shall offer to continue the policy through the terminated agent or broker for at least its next one year policy period which commences within one year following the date of mailing or delivery to the terminated agent or broker of written notice of termination of such contract or account, and thereafter, at the specific request of the insured, shall offer to continue the policy through such terminated agent or broker for any remaining part of the required policy period …
Here are two illustrations (in more understandable English) to show what this means. First:
- Carrier notifies agent on Dec. 16, 2011 that the appointment is terminated
- Homeowners policy was written new on March 1, 2009, so the three-year required policy period (see subsection (a)(7)) ends on March 1, 2012.
The carrier must offer to continue coverage under the policy until March 1, 2012, it must offer to renew the policy through the terminated agent for the 2012-13 policy period, and, if the insured requests, must offer to renew the policy through the terminated agent for 2013 and 2014. Effective March 1, 2015, it has no obligation to offer a renewal.
Second scenario:
- Carrier notifies agent on Dec. 16, 2011 that the appointment is terminated
- Homeowners policy was written new on March 1, 2010, so the three-year required policy period (see subsection (a)(7)) ends on March 1, 2013.
The carrier must offer to continue coverage under the policy until March 1, 2013, but it has no obligation to offer to renew the policy through the terminated agent after that. This is because the three-year required policy period ends more than a year after the carrier notified the agent of termination.
The rules surrounding a carrier's obligations to insureds when it terminates an agent are complex, but they boil down to when the carrier notifies the agent and when a policy expires.
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