OGC Opinion No. 06-06-06: Modification of Commercial General Liability Insurance Policy

OGC Op. No. 06-06-06

The Office of General Counsel issued the following opinion on June 16, 2006, representing the position of the New York State Insurance Department.

Re: Modification of Commercial General Liability Insurance Policy

Question Presented:

If an insurer that issued a commercial general liability insurance policy amended its policy language but did not file the amendment with the Insurance Department, what would be the effect?

Conclusion:

If an insurer that issued a commercial general liability insurance policy amended its policy language but did not file the amendment with the Insurance Department, the insurer would be in violation of the filing provision contained in N.Y. Ins. Law § 2307 (McKinney 2000 & Supp. 2006) and would be subject to the penalty provisions contained in N.Y. Ins. Law §2320(c) (McKinney 2000 & Supp. 2006). As a remedial measure, the Department could require the violating insurer to honor the terms, conditions and exclusions of its filed and approved policy form where such form provided greater coverage and/or benefits than its non-filed and non-approved form.

Most property/casualty policy forms (and amendments thereto) of an authorized insurer must be filed and approved pursuant to N.Y. Ins. Law § 2307, unless the policy form is exempt from filing as a special risk ("free trade zone") coverage under N.Y. Ins. Law Art. 63 (McKinney 2000 & Supp. 2006) and N.Y. Comp. Codes R. & Regs. tit. 11, Part 16 (Regulation 86).

If the policy at issue is a renewal and the insurer has failed to provide the insured with conditional notice of the amended language, as required by N.Y. Ins. Law § 3426 (McKinney Supp. 2006), the insured would receive the benefit of the expiring policys terms and conditions, without application of the amended language.

Facts:

An attorney representing a commercial insured stated that an authorized insurer of a commercial general liability insurance policy amended its policy form by changing who is excluded from filing a bodily injury claim from "the insured" to "an insured." The attorney also stated that his insured client did not receive notice from the insurer that the policy language was being amended.

Analysis:

N.Y. Ins. Law § 2307 (McKinney Supp. 2006), which applies to most property/casualty insurance, and is applicable here, states in relevant part:

(b) 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. . . .

Failure to comply with this section would subject a violating insurer to the penalties imposed by N.Y. Ins. Law § 2320(c) (McKinney 2000 & Supp. 2006). However, property/casualty insurance policies issued in accordance with New York Insurance Law Article 63, regarding special risk insurance (also known in the industry as "free trade zone" insurance), are exempt from the filing requirements of N.Y. Ins. Law § 2307.

As a remedial measure, the Department could require the violating insurer to honor the terms, conditions and exclusions of its filed and approved policy form where such form provided greater coverage and/or benefits than its non-filed and non-approved form.

In addition, N.Y. Ins. Law § 3426(e), which applies to most commercial property/casualty insurance policies, and is applicable here, states in relevant part:

(e)(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:

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(B) to condition its renewal upon . . . reduction of coverage . . . or addition of exclusion . . .

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(3) The notice required by paragraph one of this subsection shall be mailed or delivered at least sixty, but not more than one hundred twenty, days in advance of the expiration date of the policy . . . .

Thus, if the policy at issue is a renewal and the insurer failed to provide the insured with conditional notice of the amended language, as required by N.Y. Ins. Law § 3426 (McKinney Supp. 2006), the insured would receive the benefit of the expiring policys terms and conditions, without application of the amended language. Special risk insurance policies are not exempt from the requirements of N.Y. Ins. Law § 3426.