OGC Opinion No. 04-02-28: Jeweler’s Block Insurance and Section 3426

OGC Op. No. 04-02-28

The Office of General Counsel issued the following opinion on February 27, 2004, representing the position of the New York State Insurance Department.

Re: Jeweler's Block Insurance and Section 3426

Question Presented:

Is an insurer, in regard to an international jeweler's block policy issued or delivered in New York, required to provide the insured with prior notice of cancellation or nonrenewal before the expiration of the policy?

Conclusion:

A jeweler's block insurance policy is not subject to the cancellation or nonrenewal provisions of N.Y. Ins. Law § 3426 (McKinney 2000 & Supp. 2004) and therefore no prior notice is required under New York law.

Facts:

No facts are specified. This is a general question regarding the jewelers block policies.

Analysis:

Under New York law, a jeweler's block insurance policy is considered to be a policy of marine insurance. "Marine and inland marine" insurance is defined in N.Y. Ins. Law § 1113(a)(20) (McKinney 2000 & Supp. 2004). Although the § 1113(a)(20) definition does not specifically refer to jewelers block insurance, the Insurance Department is guided by the 1976 Nation-Wide Marine Definition (the "Definition") adopted by the National Association of Insurance Commissioners (NAIC), subject to certain exceptions, which are specified in the Departments Circular Letter No. 22 (2000), which is available on the Department's website at http://www.ins.state.ny.us/cl00_22.htm. The Definition specifically includes "[p]olicies covering personal property which, when sold to the ultimate purchaser, may be covered specifically by the owner, under Inland Marine Policies Including(g) Jeweler's Block Policies". Section I F 19 (g) of the Definition.

With certain exceptions, cancellation and non-renewal of property/casualty insurance policies are governed by either N.Y. Ins. Law § 3425 (McKinney 2000 & Supp. 2004), which generally applies to non-commercial insurance policies, or N.Y. Ins. Law § 3426 (McKinney 2000 & Supp. 2004), which generally applies to commercial insurance policies. A jeweler's block policy is a policy of commercial risk insurance, as defined in N.Y. Ins. Law § 107(a)(47) (McKinney 2000), and would otherwise be subject to Section 3426, except that subsection (l)(2) provides:

This section shall not apply to policies issued pursuant to a plan established under article fifty-three, fifty-four or fifty-five of this chapter, surety policies, policies providing workers" compensation or employers" liability coverage, financial guaranty insurance, policies providing mortgage guaranty or credit insurance, policies principally marine insurance as defined by paragraph twenty of subsection (a) of section one thousand one hundred thirteen of this chapter, reinsurance contracts, policies written on an excess line basis, or policies subject to section three thousand four hundred twenty-five of this chapter. (Emphasis added).

As a marine insurance policy, a policy of jeweler's block insurance is exempt from the cancellation and nonrenewal requirements of § 3426. While § 3426 does not establish a clear test for what is meant by "principally marine insurance", it is reasonable that a policy where the portion of the annual premium attributable to covered contingencies exceeds that premium attributable to non-covered contingencies should be considered a covered policy, similar to the standard contained in § 3425(a)(3).

Accordingly, New York law does not require the insurer to provide the insured with notice prior to the expiration of a jeweler's block insurance policy. Notice requirements in the policy itself, if any, would govern.

Please note that, for non-commercial marine insurance policies, § 3425 does not contain a similar exclusion. Hence, such policies would be subject to the cancellation and nonrenewal requirements of that section.