The Office of General Counsel issued the following opinion on February 11, 2005, representing the position of the New York State Insurance Department.
Re: Payment of Premium to Insurer Agent or Broker as of Postmarked Date
1. Is a premium payment made to an insurance agent or broker considered payment to the insurer?
2. Which date controls as to a premium payment submitted to an insurer, agent, or broker, the postmarked date or the actual date of receipt at the office?
1. Pursuant to N.Y. Ins. Law § 2121(a) (McKinney 2000), a premium payment made to an insurance broker is deemed to be payment made to the insurer. An insurance broker should accept an insureds premium payment where it is in the insureds best interests to do so. An insurance agent is the representative of the insurer and must, therefore, accept premium payment from an insured. However, an insurer may prohibit by contract its agent from accepting premium payments. A producer of an assigned risk automobile insurance policy must always take a premium payment proffered to it in an acceptable form from an insured pursuant to the Rules of the New York Automobile Insurance Plan.
2. The premium is generally considered paid as of the date of the postmark, with certain exceptions.
In the inquirer's insurance experience as an agent or broker, some insurers only consider payments timely if they are received in their payment centers by the due date, even where the insured delivered the payment to the inquirer's office by the due date.
The New York Insurance Law § 2101(a) (McKinney Supp. 2005) defines an "insurance agent," in pertinent part, as follows:
(a) In this article, "insurance agent" means any authorized or acknowledged agent of an insurer, and any sub-agent or other representative of such an agent, who acts as such in the solicitation of, negotiation for, or sale of, an insurance, health maintenance organization or annuity contract, other than as a licensed insurance broker . . . .
Generally, a policyholder may submit premium payments for an ordinary insurance policy to an insurers agent.1 However, an insurer may prohibit its agent from accepting premium payments from its policyholder by contractual agreement.2 While an insurer may prohibit its agent from receiving premium payments, if the agent, nonetheless, accepts such payment, the insurer may be deemed to have accepted it depending upon the insureds knowledge
of the contractual provisions that limit the agents authority.3 The insurer should make certain that the policyholder has notice of such limitations to avoid the possible consequences of causing the policyholder to believe that the agent has the authority to accept such premium payments.4
N.Y. Ins. Law § 2121(a) (McKinney 2000) states:
Any insurer which delivers in this state to any insurance broker or any insured represented by such broker a contract of insurance pursuant to the application or request of such broker, acting for an insured other than himself, shall be deemed to have authorized such broker to receive on its behalf payment of any premium which is due on such contract at the time of its issuance or delivery or payment of any installment of such premium or any additional premium which becomes due or payable thereafter on such contract, provided such payment is received by such broker within ninety days after the due date of such premium or installment thereof or after the date of delivery or a statement by the insurer of such additional premium.
This section provides that an insurance broker is authorized to accept payment of premium on behalf of the insurer. Thus, under § 2121, payment to an insurance broker is deemed to be payment to the insurer.5 While § 2121 does not require an insurance broker to accept an insureds premium payment, an insurance broker should do so where it is in the best interests of the insured.
Under Section 14(E)(2)(b) of the Rules of the New York Automobile Insurance Plan, an insured must be advised that it has the option of remitting premium payment either to his producer or to the insurer directly. Thus, an insurance agent or broker must always take a premium payment proffered to it in an acceptable form by an insured of the Assigned Risk Plan.
N.Y. Ins. Law § 3425 (McKinney Supp. 2005), which applies to personal lines insurance, and its companion N.Y. Ins. Law § 3426 (McKinney Supp. 2005), which applies to commercial insurance, provides for a 15 day grace period. If the insured remits the premium within those fifteen days, the insurer must accept the payment and continue the policy. Neither section, however, addresses the specific question of whether the premium is deemed to have been submitted as of the date of postmark or the date that it is received by the insurer. It is the position of the Insurance Department that both statutes should be interpreted so as to afford the greatest protection to the consumer. Thus, the premium is considered to be remitted as of the date it is postmarked.
This position is supported by the courts decision in Government Employees Insurance Company v. Solaman, 597 NYS2d 990 (N.Y. Sup.Ct. 1993). The court held that the mailing by the insured of the premium after receipt of a proper cancellation notice but prior to the cancellation date was sufficient to keep the policy in effect. In its decision, the court relied on the "Postal Acceptance Rule," that in the absence of any limitation or provision to the contrary in the offer [to provide insurance under a properly issued policy], the acceptance of the offer is complete and the contract [the insurance policy] becomes binding upon both parties when the offeree [insured] deposits the acceptance by the payment of premium in the post office. In other words, unless the insurer requires payment by a particular method or otherwise limits payment methods, payment of the premium is assumed complete at the time the insured mails the payment.
For further information you may contact Associate Attorney Jeffrey A. Stonehill at the New York City Office.
1 69 NY Jur 2d, Insurance § 994.
2 68 NY Jur 2d, Insurance § 428.
3 68 NY Jur 2d, Insurance §§ 436-439, 994.
4 68 NY Jur 2d, Insurance §§ 428-431.
5 69 NY Jur 2d, Insurance § 995.