OGC Opinion No. 07-09-08
The Office of General Counsel issued the following opinion on September 11, 2007 representing the position of the New York State Insurance Department.
Vehicle Inspections Under Regulation 79
1. May an insurer accept a window sticker or dealer invoice in conjunction with a supposedly incomplete bill of sale in order to waive inspection of a new automobile?
2. Is the Insurance Department required to send information to automobile dealers concerning required documentation needed for insurers to waive inspection?
1. No. § 67.3(b)(2) of NYCRR, Title 11, Pt. 67 (Regulation 79) permits an insurer to waive inspection of a new automobile if the insurer receives a bill of sale setting forth a full description of the vehicle, or if the insurer receives a copy of DMV-50 (a Department of Motor Vehicles form that establishes a transfer of ownership from the dealer to the customer) with a window sticker or dealer’s invoice.
2. No. The Insurance Department does not regulate automobile dealers, and the large number of automobile dealers and differing requirements among insurers precludes the Department from instituting a formal program to send information to automobile dealers concerning required documentation needed by insurers to waive inspection.
The questions are of a general nature, without reference to particular facts.
Similar issues to those raised by the current inquiry were discussed in an opinion by the Insurance Department’s Office of General Counsel (“O.G.C.”) issued April 5, 2007. This letter clarifies, and expands upon, that opinion.
Insurance Law § 3411(d) (McKinney 2007) sets forth an inspection requirement for new motor vehicle insurance policies as follows:
(d) A newly issued policy shall not provide coverage for automobile physical damage perils prior to an inspection of the automobile by the insurer.
Thus, a purchaser or lessor of a new automobile must have the automobile inspected by the insurer if the insurer is to provide physical damage insurance on a vehicle.
11 NYCRR Pt. 67 implements the provisions of Insurance Law § 3411 and sets forth the standards and procedures for the requisite inspections. 11 NYCRR § 67.1 defines physical damage insurance for the purposes of the inspection requirement. It states in pertinent part:
(c) Automobile physical damage insurance means a policy providing one or more of the following insurance coverages:
(3) fire or theft.
11 NYCRR § 67.2 sets forth automobile inspection requirements. It states in pertinent part:
(a) No new policy or endorsement insuring a private passenger automobile shall be issued in this State to provide coverage for automobile physical damage unless the insurer has inspected the automobile.
However, Insurance Law § 3411(m)(2) provides for exceptions to the inspection requirement as follows:
The inspections provided for in this section may be dispensed with or deferred under circumstances specified in the regulations of the superintendent. Such circumstances may include but are not limited to, the insuring of a new automobile, the insuring of an automobile whose inspection would constitute a serious hardship to the insurer, the insured or an applicant for insurance, and the insuring of an automobile for a limited specified period of time.
11 NYCRR § 67.3 details the exceptions relevant to the questions presented here as follows:
(b) An insurer may waive or dispense with a mandatory inspection under any of the following circumstances:
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(2) Where a new, unused automobile is purchased or leased from a franchised automobile dealership and the insurer is provided with either a copy of the bill of sale which contains a full description of such automobile, including all options and accessories, or a copy of the lease or MV-50 form, provided by the Department of Motor Vehicles, which establishes transfer of ownership from the dealer to the customer and a copy of the window sticker or advanced dealer shipping notice (invoice) showing the itemized options and equipment in addition to the total retail price of the vehicle on which will be added any dealer installed options installed on the vehicle at the time of sale or lease. The physical damage coverage on such new, unused automobile shall not be suspended during the term of the policy due to the insured’s failure to provide the required document(s). Payment of a claim shall be conditioned upon the receipt by the insurer of such document(s) and no physical damage loss occurring after the effective date of coverage shall be payable until the document(s) are provided to the insurer. If the above document(s) are not submitted by the insured 60 days prior to the annual renewal date, the insurer, upon renewal of the automobile physical damage insurance must require a physical inspection, pursuant to the provisions of section 67.7 of this Part (emphasis added).
Thus, there is no requirement that an insurer waive inspection on any new automobile simply because the Insurance Law and regulations promulgated thereunder provide that an insurer may waive inspection.
However, if an insurer wants to waive an inspection, it must adhere to Regulation 79. A bill of sale that sets forth a full description of the automobile, including all options and accessories, is one document that may suffice. But, a bill of sale that fails to include the required detailed description of the automobile is unacceptable, even if the information is obtained in conjunction with a window sticker, dealer invoice, or manufacturer’s statement of origin. See O.G.C. Opinion (April 5, 2007).
An insurer also may waive the inspection if it receives an MV-50 form and a copy of the window sticker or dealer invoice, either of which must show the itemized options and equipment, in addition to the total retail price of the vehicle, including any dealer-installed options. Thus, a copy of the window sticker or dealer invoice is only required under 11 NYCRR § 67.3(b)(2) if an MV-50 form is used instead of a bill of sale.
Further, an inspection may be waived on a new automobile that is leased if a copy of the lease agreement is provided together with a copy of the window sticker or dealer invoice. See id.
Nothing in 11 NYCRR § 67.3(b)(2) provides that a manufacturer’s statement of origin is an acceptable document for the purpose of inspection waivers.
Nevertheless, an insurer may request additional documentation beyond that which is required by Regulation 79, because 11 NYCRR § 67.3(b)(2) only sets forth minimum requirements for an insurer to waive inspection. This additional documentation may include a copy of the window sticker, dealer invoice or manufacturer’s statement of origin. However, an insurer must file its inspection procedures with the Superintendent pursuant to 11 NYCRR 67.0(b). These procedures must include a description of the documentation that the insurer requires in order to waive inspection. Therefore, it is possible for insurers to have differing requirements.
In response to the second question, the Insurance Department does not regulate automobile dealers. Furthermore, the large number of automobile dealers in New York and differing requirements among insurers precludes the Department from instituting a formal program to send information to automobile dealers concerning required documentation needed by insurers to waive inspection.
Individual automobile dealers are free to contact the Department should a question arise about required documentation; copies of the relevant regulations may be obtained from the Department’s Public Affairs Research Bureau at 212-480-2283.
For further information you may contact Associate Counsel Alexander Tisch at the New York City Office.