December 8, 1981
Circular Letter No. 19 (1981)
TO: ALL LICENSED INSURERS WRITING AUTOMOBILE AND PERSONAL LINES COVERAGE
RE: TERMINATION DATE OF FINANCED INSURANCE POLICIES AND SECTION 576 OF THE BANKING LAW
It has come to the attention of the Insurance Department that some insurers, when receiving termination notices from premium finance agencies, are complying with the requests of the agencies and terminating financed policies retroactively; that is, prior to the date the request is received by the insurer.
A premium finance agency holding a valid power of attorney may cancel an insurance contract of its debtor (the insured) so long as it complies with the requirements as specified in Section 576 of the Banking Law.
Under New York law, a request for cancellation of a policy is not effective, irrespective of the intention of the insured, until actual receipt by the insurer or its agent. See Russ Togs, Inc. v. Fidelity-Phenix Ins. Co. 36 A.D. 2d 706, 319 N.Y.S. 2d 1 (1971), affd., 32 N.Y. 2d 628, 342 N.Y.S. 2d 658, 295 N.E. 2d 386 (1973); Louisiana Public Utilities Co. v. Atlas Assur. Co., 238 A.D. 474, 264 N.Y.S. 603, affd., 263 N.Y. 595, 189 N.E. 714 (1933). The Banking Law does not make an exception for premium finance agencies. Savino v. Merchants Mutual Ins. Co. 44 N.Y. 2d 623, 378 N.E. 2d 1038, 407 N.Y.S. 2d 468 (1978).
Whatever flexibility an insurer may have when dealing personally with the insured cannot be allowed when the finance agency requests the cancellation pursuant to its power of attorney.
This letter should be acknowledged by a responsible officer of the insurer who shall confirm that such insurer will not cancel any policy retroactively at the request of a finance agency.
Responses to this letter should be directed to Paul A. Zuckerman, New York State Insurance Department, Office of General Counsel, Two World Trade Center, New York, New York 10047.
Very truly yours,
ALBERT B. LEWIS
Superintendent of Insurance