The Office of General Counsel issued the following opinion on August 24, 2006, representing the position of the New York State Insurance Department.
Re: Conditional Renewal under Section 3425(d)(1)
Question Presented:
1) Does the renewal of a homeowner's policy that includes an increase in the windstorm deductible from 2% to 5% constitute a conditional renewal pursuant to N.Y. Ins. Law § 3425(d)(1) (McKinney Supp. 2006)?
2) If so, must the insurer specifically call the change in the deductible to the attention of the insured and provide the reasons for such change?
Conclusion:
1) The renewal of a homeowner's policy that includes an increase in the windstorm deductible from 2% to 5% constitutes a conditional renewal pursuant to N.Y. Ins. Law § 3425(d)(1) (McKinney Supp. 2006).
2) Pursuant to N.Y. Ins. Law § 3425(d)(1), the insurer is required to provide, within the deadline provided by the statute, written notice of its intention to renew with conditions and the reasons for the conditional renewal.
Facts:
According to the inquirer, an insurer recently issued a renewal of a homeowners policy, between 45 and 60 days prior to the end of the policy term. The renewal policy included an increase in the windstorm deductible from 2% to 5%. The 2% deductible in the original policy was fixed and was not subject to any provision that would provide for an automatic increase of any kind. The inquirer also stated that the renewal forms did not call the change to the insured's attention. Instead, the renewal forms provided an explanation, several pages into the renewal package, of the how the 5% deductible would be applied.
Analysis:
N.Y. Ins. Law § 3425 (McKinney Supp. 2006) applies to certain noncommercial property/casualty insurance including homeowners insurance and provides, in relevant part, as follows:
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(d)(1) Unless the insurer, at least forty-five but not more than sixty days in advance of the end of the policy period, mails or delivers to the named insured, at the address shown in the policy, a written notice of its intention not to renew a covered policy, or to condition its renewal upon change of limits or elimination of any coverages, the named insured shall be entitled to renew the policy upon timely payment of the premium billed to the insured for the renewal. The specific reason or reasons for nonrenewal or conditioned renewal shall be stated in or shall accompany the notice. This paragraph shall not apply when the named insured, an agent or broker authorized by the named insured, or an insurer of the named insured, has mailed or delivered written notice to the insurer that the policy has been replaced or is no longer desired.
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Thus, the renewal of a homeowner's policy that includes an increase in the windstorm deductible from 2% to 5% constitutes a conditional renewal pursuant to N.Y. Ins. Law § 3425(d)(1). To issue a conditional renewal, the insurer must provide the insured with written notice of the insurer's intention to condition its renewal upon the change in the windstorm deductible and the reasons for the change. Such notice must be provided at least forty-five but not more than sixty days in advance of the end of the policy period. Id.
For a conditional renewal to be issued to become effective during the three year required policy period for homeowner's policies, it may be based only upon a ground for which the policy could have been cancelled. See N.Y. Ins. Law §§ 3425(a)(7) and (e). At the end of the required policy period, a conditional renewal may be issued for any reason not prohibited by law and which is in accordance with the insurer's uniformly applied underwriting guidelines.
For further information you may contact Assistant Counsel Brenda Gibbs Albany Office.