The Office of General Counsel issued the following opinion on February 11, 2005, representing the position of the New York State Insurance Department.
RE: Issuance of Binding Arbitration Endorsement
Question Presented:
Must an insurer issue a notice of conditional renewal in the manner prescribed by N.Y. Ins. Law § 3426(e) (McKinney Supp. 2005) to an insured prior to attaching an endorsement to the renewal of a commercial general liability insurance policy that will effect binding arbitration on the insurer and the insured?
Conclusion:
Yes, the insurer must issue a notice of conditional renewal in the manner prescribed by N.Y. Ins. Law § 3426(e) (McKinney Supp. 2005) prior to attaching such endorsement to the renewal commercial general liability insurance policy.
Facts:
It was reported that an insurer has begun adding two endorsements to the renewals of commercial general liability insurance policies: an endorsement that makes an arbitrators decision binding upon the insurer and the insured (ISO Form CG 24 02 11 85), which is a Department approved form, and another endorsement that extends the terms of the binding arbitration endorsement to the policys additional insureds (a non-ISO, proprietary form).
Analysis:
Before an insurer attaches an endorsement that will effect binding arbitration on the insurer and the insured to a renewal commercial general liability insurance policy, the insurer must provide the conditional renewal notice prescribed by N.Y. Ins. Law § 3426(e) (McKinney Supp. 2005), which states in pertinent part:
(1) A covered policy shall remain in full force and effect pursuant to the same terms, conditions and rates unless written notice is mailed or delivered by the insurer to the first-named insured, at the address shown on the policy, and to such insureds authorized agent or broker, indicating the insurers intention:
* * * *
(B) to condition its renewal upon change of limits, change in type of coverage, reduction of coverage, increased deductible or addition of exclusion, or upon increased premiums in excess of ten percent (exclusive of any premium increase generated as a result of increased exposure units, pursuant to subsection (d) of this section, or as a result of experience rating, loss rating, retrospective rating or audit), except that with respect to an excess liability policy, the insurer may also, consistent with regulations promulgated by the superintendent, condition its renewal upon requirements relating to the underlying coverage, in which event the conditional renewal notice shall be treated as an effective notice of nonrenewal if such requirements are not satisfied as of the later of the expiration date of the policy or sixty days after mailing or delivery of such notice[.]
(emphasis added).
There was not enough information provided about the non-ISO form, which purports to effect binding arbitration on the additional insureds to the policy, to determine whether such form has been approved by the Department. Generally speaking, additional insureds are bound by the same terms and conditions as the named insured; thus such endorsement would likely be a superfluous one where the ISO Form CG 24 02 11 85 has been made part of the policy. However, because we do not have adequate information, we do not opine with respect to such form.
For further information you may contact Associate Attorney Sally Geisel at the New York City Office.