OGC Op. No. 06-01-12
The Office of General Counsel issued the following opinion on January 9, 2006, representing the position of the New York State Insurance Department.
Re: Validity of a Nonpayment Cancellation Notice.
Under N.Y. Ins. Law § 3425 (McKinney Supp. 2005), is a nonpayment cancellation notice valid if it does not state the amount due on the face of the notice, but refers the insured to a premium statement that accompanies the notice, which states the amount due?
No, the nonpayment cancellation notice is not valid since it does not state the amount due on the face of the notice.
The insurer sent a nonpayment cancellation notice to Mr. A dated January 18, 2005. The notice states that the policy will be cancelled, effective February 5, 2005, if the minimum payment shown on the accompanying premium statement is not received by the due date shown on the premium statement. The premium statement states that a minimum amount of $594.04 must be paid by February 5, 2005 to have the policy reinstated. The question is whether the nonpayment cancellation notice meets the requirements of Section 3425. The inquirer contends that Vehicle and Traffic Law § 313 states that required information be included in the notice itself, while Section 3425 does not. He states that the distinction in the language of Vehicle and Traffic Law § 313 and N.Y. Ins. Law § 3425 supports his reading that the requirements of Section 3425 are satisfied by the accompanying premium statement.
N.Y. Ins. Law § 3425(c) (McKinney Supp. 2005, as amended by Ch. 675 of the Laws of 2003) states, in relevant part, as follows:
(c) After a covered policy has been in effect for sixty days or upon the effective date if the policy is a renewal, no notice of cancellation shall be issued . . . unless it is based on one or more of the following:
(1) With respect to automobile insurance policies:
(A) nonpayment of premium, provided, however, that a notice of cancellation on this ground shall inform the insured of the amount due. . . . (emphasis added)1
The Memorandum in support of Ch. 675 of the Laws of the 2003 states, inter alia, that the purpose of the amendment to Section 3425(c)(1)(A) was to assure "that cancellation notices for nonpayment specify in the notice the amount due that must be paid in order to prevent cancellation of the policy." See Memorandum of the New York State Senate, Insurance--Cancellation--Notice, 226th Sess., at 2093 (N.Y. 2003).
Moreover, "the general rule involving cancellation is that notice provisions and statutes must be literally complied with. . ." (Palotta v. Physicians" Reciprocal, 137 Misc. 2d 223 (Sup. Ct. Nassau County 1987)) and cancellation notice requirements are strictly construed against the insurer. Zeman v. Zack Agency, Inc., 75 A.D.2d 261 (2d Dept.1980). Thus, while Vehicle and Traffic Law § 313 may have different language than Section 3425, a plain reading of Section 3425(c)(1)(A), as well as the legislative intent behind the amendment, substantiate the requirement that the amount due must be stated in the notice of cancellation itself, rather than on a premium statement that accompanies the notice.
For further information you may contact Associate Attorney Pascale Jean-Baptiste at the New York City Office.
1 N.Y. Vehicle and Traffic Law § 313(1)(a) (McKinney 2005) mandates that every notice or acknowledgement of termination for any cause whatsoever sent to the insured must include, in a type face not smaller than twelve point: (1) a statement that proof of financial security is required to be maintained continuously throughout the registration period, (2) a notice prescribed by the commissioner indicating the punitive effects of failure to maintain continuous proof of financial security and (3) actions which may be taken by the insured to avoid such punitive effects. However, it does not address whether the amount of the premium must be included in the notice of cancellation.