The Office of General Counsel issued the following opinion on January 14, 2005, representing the position of the New York State Insurance Department.
Re: Contract Language Regarding Insurance Coverage
May the terms of a contract between ABC Cooperative ("ABC Co-op") and the Town of XYZ that address insurance coverage alter, expand or modify the terms of the existing insurance policy that ABC Co-op already has in place?
No. While the request by the Town of XYZ to amend the language of ABC Co-ops existing general liability insurance policy in the body of the consulting contract is not a violation of the Insurance Law, any document that amends, expands or otherwise alters the terms of the applicable insurance policy constitutes a policy form that must be filed with the Superintendent of Insurance in accordance with N.Y. Ins. Law § 2307(b) (McKinneys Supp. 2005).
The Town of XYZ has requested the following language in a consulting contract between it and ABC Co-op:
CONSULTANT and its subconsultants/subcontractors shall add the Town of XYZ as an additional insured by endorsement on all insurance policies, except professional liability, and a copy of that endorsement shall be provided to the TOWN. Evidence of such coverage shall be provided to the TOWN prior to the commencement of services with a copy of the insurance policy including the endorsement naming the TOWN as an additional insured. The insurance must be unrestricted and primary coverage for property damage, personal injury, breach of agreement/contract and lost profit. CONSULTANT and its subconsultants/subcontractors shall be responsible to pay all premiums and deductibles applied to this insurance. The TOWN's own insurance is a third-party beneficiary of this insurance clause. The failure by CONSULTANT to procure insurance in accordance with the requirements set forth above and the terms and conditions of an insurance procurement agreement acceptable to the Town Attorney shall constitute a breach of this agreement and any agreement with the TOWN, and CONSULTANT or its subconsultants/subcontractors shall be held liable for all costs, expenses and attorney fees incurred by the TOWN in the defense or prosecution of any claim or action due to or related to a breach of this clause and/or failure to obtain insurance in accordance with this section.
ABC Co-op has presented this language to its insurance broker. ABC Co-ops broker has advised that it cannot issue a certificate of insurance with the terms requested by the Town of XYZ because there is no general liability policy available that would provide the terms requested by the town.
ABC Co-op has advised that it already has a general liability policy in place that does not contain the terms requested by the Town of XYZ and would not be procuring a new and separate insurance policy containing such terms for the purposes of this contract.
N.Y. Ins. Law § 2307(b) states in pertinent part:
Except as otherwise provided herein, no policy form shall be delivered or issued for delivery unless it has been filed with the superintendent and either he has approved it, or thirty days have elapsed and he has not disapproved it as misleading or violative of public policy. After notice and hearing to the insurer or rate service organization which submitted a policy form for approval, the superintendent may withdraw approval of such form on finding that the use of such form is contrary to the legal requirements applicable at the time of withdrawal. The effective date of the withdrawal of approval shall be prescribed by the superintendent but shall be not less than ninety days after notice of withdrawal.
In view of this statutory language, no one may amend, expand, or alter the terms of ABC Co-ops general liability insurance policy unless authorized to do so by the insurer and the insurer has filed an appropriate endorsement with the Superintendent of Insurance and obtained prior approval for the use of such endorsement.
ABC Co-op has advised that it already has a general liability policy in place that does not contain the terms requested by the Town of XYZ and will not be procuring a new and separate insurance policy for the purposes of this contract. Therefore, ABC Co-ops insurance broker acted properly by refusing to issue a certificate of insurance that would have amended, expanded, or altered the terms of ABC Co-ops general liability policy.
While the request by the Town of XYZ to amend the language of ABC Co-ops existing general liability insurance policy in the body of the consulting contract is not a violation of the Insurance Law, any document that amends, expands or otherwise alters the terms of the applicable insurance policy constitutes a policy form that must be filed with the Superintendent of Insurance in accordance with N.Y. Ins. Law § 2307(b) (McKinneys Supp. 2005).
For further information you may contact Special Counsel Athan Shinas at the Albany Office.