The Office of General Counsel issued the following informal opinion on July 23, 2003, representing the position of the New York State Insurance Department.
Re: Rate Changes and N.Y. Ins. Law § 3425
1. If an insurer issues a non-commercial motor vehicle insurance policy with a six-month term, may the insurer renew the policy with a premium change even though there is a required policy period of one year or three years, depending on when the policy was written?
2. If an insurer issues a homeowners insurance policy with a six-month term, may the insurer renew the policy with a premium change even though there is a required policy period of three years?
1. Yes. An insurer may renew a non-commercial motor vehicle policy with a premium change within the applicable required policy period.
2. Yes. An insurer may renew a homeowners policy with a premium change within the required policy period of three years.
An insurer that issues non-commercial motor vehicle and homeowners insurance policies with a 6 month term, wishes to confirm that it is not prohibited from changing the premium at the end of the 6 month policy term due to required policy periods imposed by N.Y. Ins. Law § 3425.
Pursuant to N.Y. Ins. Law § 3425(m) (McKinneys 2003), the required policy period for non-commercial motor vehicle policies originally written on or after August 2, 2001 and prior to June 26, 2003, is three years. N.Y. Ins. Law § 3425(m) does not apply to non-commercial motor vehicle insurance policies originally written prior to August 2, 2001 and after June 26, 2003. Such policies are governed by § 3425(a)(8), which mandates a one year required policy period.
With respect to homeowners insurance policies, such policies, as defined in N.Y. Ins. Law § 2351, are included within the definition of "personal lines insurance" contained in N.Y. Ins. Law § 3425(a)(2). N.Y. Ins. Law § 3425(a)(7) requires for such policies, a period of three years from the date that a covered policy is first issued or voluntarily renewed.
N.Y. Ins. Law § 3425(a)(6) provides 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 of one year and a policy with no fixed expiration date shall be considered as if written for successive policy periods or terms of one year. Therefore, under § 3425, a policy written for a period of six months, must be renewed for another six months and continue to be renewed for the entire duration of the applicable required policy period. Only after the required policy period has elapsed may an insurer elect to non-renew the insured.
The required policy periods for non-commercial motor vehicle policies and homeowners policies do not have any effect upon the ability of the insurer to renew policies with a premium change, provided that the premium change conforms to its rate filing with the New York State Insurance Department.
For further information you may contact Special Counsel Athan Shinas at the Albany Office.