OGC Op. No. 07-03-14
The Office of General Counsel issued the following opinion on March 23, 2007 representing the position of the New York State Insurance Department.
Re: External appeal from nonrenewal of medical malpractice insurance
Does an insured have a right to an external appeal from an insurer’s determination not to renew his malpractice insurance policy?
No. Neither the Insurance Law nor any regulations promulgated thereunder provide an insured a right to an external appeal from an insurer’s determination not to renew his malpractice insurance policy.
The inquirer reports that he is a podiatrist who received a notice of nonrenewal effective August 17, 2006 from his malpractice insurer, Physicians Reciprocal Insurers (“PRI”). The notice listed the reason for the nonrenewal as “Claims Experience.” The inquirer reported that there were three claims made against him that existed since 2002, but that his malpractice insurer still renewed his policy in 2003, 2004, and 2005. The inquirer sent a letter to PRI requesting a reconsideration of its decision to nonrenew his policy. It is unclear whether the policy gave him a right to appeal the nonrenewal, but he reports that PRI sent him a letter saying that he could have an in-person or teleconference hearing to appeal the decision. He did not proceed with the appeal. Since PRI’s nonrenewal of the inquirer’s malpractice insurance, he has since obtained insurance with another company.
There are no provisions in the Insurance Law or regulations promulgated thereunder that confer on an insured the right to an external appeal of a malpractice insurer’s decision not to renew his malpractice insurance policy. However, an insurer may provide its insureds with such right in its policy. While it is unclear here whether PRI’s malpractice insurance policy gave the inquirer the right to appeal the nonrenewal, he reports that PRI sent him a letter saying that he could have an in-person or teleconference hearing to appeal the decision. The inquirer did not proceed with the appeal, but there does remain some questions as to whether PRI handled his nonrenewal appropriately or followed its own underwriting procedure.
N.Y. Ins. Law § 3426 (McKinney Supp. 2007) governs cancellation and renewal of commercial lines insurance, which includes medical malpractice insurance. Insurance Law § 3426(e) requires that a nonrenewal notice be mailed and delivered at least sixty, but not more than one hundred twenty days in advance of the expiration date of the policy. That provision reads 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 insured's authorized agent or broker, indicating the insurer's intention:
(A) not to renew such policy;
(2) A nonrenewal notice as specified in subparagraph (A)…of paragraph one of this subsection shall contain the specific reason or reasons for nonrenewal or conditional renewal, set forth the amount of any premium increase (or, where such amount cannot reasonably be determined as of the time the notice is provided, a reasonable estimate of the premium increase based upon the information available to the insurer at that time), and describe in plain and concise terms the nature of any other proposed changes specified in paragraph one of this subsection….
(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, except that for an excess liability policy or a policy issued to a jumbo risk, the notice shall be mailed or delivered at least thirty, but not more than one hundred twenty, days in advance of the expiration date of the policy.
Moreover, the notice must contain the specific reason or reasons for nonrenewal. Insurance Law § 3426(h) states:
Every notice of cancellation issued pursuant to this section shall specify the grounds for cancellation and shall contain where applicable a reference to the pertinent paragraph or subparagraph of subsection (c) of this section. Every notice of nonrenewal issued pursuant to this section shall set forth or be accompanied by the reason for nonrenewal, and any such stated reason shall be valid and effective unless such reason violates this chapter or any other state or federal law.
Finally, under Insurance Law § 3426(g)(1), a nonrenewal notice must advise the insured of his right to receive loss information as outlined in the statute. The statute provides:
Every notice mailed or delivered by an insurer pursuant to this section shall advise the first-named insured and such insured's authorized agent or broker of the availability of loss information consistent with paragraph two of this subsection.
Thus, if the insurer omits loss information from the nonrenewal notice, or if the insurer fails to comply with the other requirements of Insurance Law § 3426, the notice of nonrenewal is, as a matter of law, inadequate.
For further information you may contact Senior Attorney Elizabeth Barrett at the New York City Office.