OGC Opinion No. 07-12-08
The Office of General Counsel issued the following opinion on December 18, 2007 representing the position of the New York State Insurance Department.
RE: Required policy period for a package policy
1. If a personal lines package policy contains both personal automobile and homeowners coverage, is the policy subject to a one-year or a three-year required policy period?
2. If such policies have a required policy period of three years, may the insurer, during the required policy period at an annual anniversary date, non-renew the automobile portion of the package and continue to provide homeowners coverage under a homeowners policy?
3. Does the answer to either of the above questions turns on whether the greater part of the premium is attributable to the automobile coverage or the homeowners coverages?
1. Pursuant to N.Y. Ins. Law § 3425(a)(8) (McKinney 2007), the automobile insurance is subject to a minimum one-year required policy period, and pursuant to Insurance Law § 3425(a)(7), the homeowners policy is subject to a minimum three-year required policy period.
2. Yes. The automobile coverage may be non-renewed at the one-year anniversary date, assuming that all other statutory requirements for non-renewal are met, and the homeowners coverage shall continue for the full three-year required policy period.
3. No. The applicable policy term does not depend on whether the greater part of the premium is attributable to the auto coverage or to the homeowners coverages.
The inquirer’s inquiry is of a general nature, without reference to particular facts.
Insurance Law § 3425 is relevant to these queries. It sets forth the minimum non-renewal and cancellation requirements for most non-commercial property/casualty insurance policies. Insurance Law § 3425 reads as follows:
(a) This section shall apply to covered policies of insurance as defined in paragraphs one, two and three hereof.
(1) “Covered policy” means a contract of insurance, referred to in this section as “automobile insurance”, issued or issued for delivery in this state, on a risk located or resident in this state, insuring against losses or liabilities arising out of the ownership, operation, or use of a motor vehicle, predominantly used for non-business purposes, when a natural person is the named insured under the policy of automobile insurance.
(2) “Covered policy” also means a contract of insurance, referred to in this section as “personal lines insurance”, other than a contract of insurance defined in paragraph one hereof, issued or issued for delivery in this state, on a risk located or resident in this state, insuring any of the following contingencies:
(A) loss of or damage to real property used predominantly for residential purposes and which consists of not more than four dwelling units, other than hotels and motels;
(B) loss of or damage to personal property in which natural persons have an insurable interest, except personal property used in the conduct of a business; and
(C) other liabilities for loss of, damage to, or injury to persons or property, not arising from the conduct of a business, when a natural person is the named insured under the policy.
(3) A personal umbrella liability policy shall be considered a “covered policy” under paragraph two, and not paragraph one, of this subsection.
(4) A contract which insures any of the foregoing contingencies described in paragraph one or two hereof as well as other contingencies shall be a covered policy if that portion of the annual premium attributable to such foregoing contingencies exceeds that portion attributable to other contingencies.
(5) A covered policy shall not include a policy issued pursuant to any plan established under article fifty-three or fifty-four of this chapter or legal services insurance.
(6) “Renewal” or “to renew” means the issuance and delivery by an insurer, at the end of the policy period, of a policy superseding a policy previously issued and delivered by the same insurer, or the issuance and delivery of a certificate or notice extending the term of a policy beyond its policy period or term; provided, however, that any policy with a policy period or term of less than one year shall, for the purpose of this section, be considered as if written for a policy period or term of one year, or any policy with no fixed expiration date, shall, for the purpose of this section, be considered as if written for successive policy periods or terms of one year
(7) With respect to personal lines insurance, “required policy period” means a period of three years from the date as of which a covered policy is first issued or is voluntarily renewed
(8) With respect to automobile insurance, “required policy period” means a period of one year from the date as of which a covered policy becomes effective after first issuance or voluntary renewal.
Although this inquiry references a “package policy”, that phrase does not appear in the Insurance Law. Nevertheless, it is commonly understood to connote a homeowners and automobile policy administered together, often under a single policy number for the convenience of the premium payment. While an insurer may issue a single policy including both coverages, insurers more typically “package” two policies together. Be that as it may, the coverages are easily severable. Accordingly, each separate policy contained in a policy package is considered to be a single, discrete policy that is subject to its appropriate minimum statutory requirements.
Therefore, pursuant to Insurance Law § 3425(a)(8), the automobile insurance is subject to a minimum of a one-year policy required period, and pursuant to Insurance Law § 3425(a)(7), the homeowners policy (which is “personal lines insurance”) is subject to a minimum three-year required policy period.1
For example, subject to the terms of the policy (which may provide for a longer period) at the one-year anniversary date after the issuance of the policy package containing personal automobile and homeowners insurance, the insurer may choose to non-renew the automobile coverage, (assuming that all other statutory requirements for non-renewal are met), but continue the homeowners coverage for the remaining two years of the three-year policy period. The policy term for either the automobile policy or the homeowners policy does not depend on whether the greater part of the premium is attributable to the automobile coverage or the homeowners coverages.
For further information, one may contact Senior Attorney Susan A. Dess at the New York City office.
1 For purposes of this opinion, the Department assumes that any “packaging” would not run afoul of Insurance Law § 2324’s prohibition against “tying.”