OGC Opinion No. 07-08-13
The Office of General Counsel issued the following opinion on August 30, 2007, representing the position of the New York State Insurance Department.
Re: Non-Renewal of Insurance due to Bankruptcy
Question Presented:
Is there any provision in the Insurance Law or the regulations promulgated thereunder that prohibits an insurer from nonrenewing a workers’ compensation or other casualty insurance policy due to the insured filing for Chapter 11 bankruptcy protection?
Conclusion:
No. There is nothing in the Insurance Law or regulations promulgated thereunder that prohibits an insurer from taking such an action.
Facts:
The inquiry is of a general nature, without reference to particular facts. Although it references “casualty” insurance, it does not define the term. For purposes of this opinion, we assume that the inquirer means a liability insurance policy.
Analysis:
The inquirer asks whether there is any provision in the Bankruptcy Code that prohibits non-renewal as a result of the insured filing for bankruptcy. The Insurance Department generally does not interpret the Bankruptcy Code, and therefore will not opine on it.
The inquirer further asks whether there is any provision in the Insurance Law that governs the nonrenewal of a casualty insurance policy due to the bankruptcy of the insured. N.Y. Ins. Law § 3426(e) (McKinney 2006), which addresses cancellation and renewal provisions of most commercial lines property/casualty insurance, states in pertinent part as follows:
(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 insured’s authorized agent or broker, indicating the insurer’s intention:
(A) not to renew such policy.
Thus, Insurance Law § 3426(e) requires insurers to provide timely notice to the insured of cancellation, nonrenewal, conditional renewal, or alternative renewal. Pursuant to that statute, if an insurer wishes to nonrenew a liability insurance policy, it must, at the end of the required policy period, send a non-renewal notice to the insured that specifies the reasons for the nonrenewal. So long as the reason is not otherwise prohibited by law, the Insurance Law does not otherwise limit the reasons for an insurer’s nonrenewal. Accordingly, there is no specific provision that prohibits an insurer from nonrenewing a liability insurance policy as a result of the insured declaring for Chapter 11 bankruptcy.
Moreover, Insurance Law § 3426(l)(2) specifically excludes policies of workers’ compensation insurance from its scope. Therefore, there is no specific provision within the Insurance Law that prevents an insurer from non-renewing a worker’s compensation policy for an employer/insured who filed for Chapter 11 bankruptcy protection. Additionally, the Worker’s Compensation Board has confirmed that there is no prohibition in the Worker’s Compensation Law against an insurer nonrenewing a policy as a result of an insured filing for Chapter 11 bankruptcy protection.
For further information you may contact Assistant Deputy Superintendent & Counsel Paul A. Zuckerman at the New York City Office.