New York State Insurance Department Office of General Counsel Opinions for January 2009 -- Part I

Posted recently to the NYS Insurance Department's website are the Office of General Counsel Opinions from the first half of January 2009. Three of the 6 posted opinions merit mention here.  See each opinion letter for its analysis and discussion of the question(s) presented. 

Electronic Delivery of Executed Insurance Policies via the Internet (January 6, 2009)

Question Presented:

May an insurance policy that has been issued and executed on the Internet be considered a properly delivered and valid insurance contract if the insured prints the policy from the Internet on the insured’s personal computer?

Answer:

Yes.  Nothing in the Insurance Law or regulations promulgated thereunder prohibits an insurance company from issuing and delivering an insurance policy to an insured via the Internet if the insured has consented to receiving electronic documents. The electronic documents must conform to applicable substantive and formatting requirements of the Insurance Law and any other applicable laws.

Circular Letter No. 26 (2008) (January 13, 2009)

Questions Presented:

1.  Do the notice provision amendments of Chapter 388 of the Laws of 2008 apply to claims-made policies?

2.  Do the Chapter 388 notice provision amendments, which become effective on January 17, 2009, apply to policies already in effect on that date that contain a liberalization clause?

3.  Do the Chapter 388 notice provision amendments to N.Y. Ins. Law § 3420(c) set forth a specific date for receipt of notice of claim by an insurer that triggers the beginning of the two-year period that determines which party has the burden of establishing insurer prejudice due to failure to provide timely notice to the insurer?

Answers:

1.  Yes. The Chapter 388 notice provision amendments apply to claims-made policies, but allow for a claims-made policy to provide that the claim must be made during the policy period, any renewal thereof, or any extended reporting period, subject to Insurance Law § 3420(a)(4). 

2.  As a general matter, liberalization clauses typically apply to coverage and not policy conditions, but may be subject to the Chapter 388 notice provision amendments depending on the specific language in the policy endorsement.

3.  No. The date of receipt of notice of claim that triggers the beginning of the two-year period that determines which party has the burden of establishing insurer prejudice due to failure to provide timely notice to the insurer is set forth in the specific language of each policy endorsement.

[See my post of January 16, 2009 for a summary of Chapter 388's changes to the New York Insurance Law.]

Return of Unearned Premium from Producer-Canceled Assigned Risk Policy (January 15, 2009)

Question Presented:

1.  May an insurer cancel an assigned risk policy that is subject to a premium finance agreement at the behest of a producer because the insured’s check, which was deposited in the producer’s premium account, was dishonored by the bank upon which it was drawn?

2.  To whom must the insurer return the canceled policy’s unearned premium?

Answers:

1.  Yes.  An insurer may cancel an assigned risk policy that is subject to a premium finance agreement at the behest of a producer that requests cancellation in accordance with New York Auto Insurance Plan (“NYAIP”) § 18(4). 

2.  The insurer must return, from the canceled policy’s unearned premium, the amount paid by the premium finance agency, pursuant to NY Ins. Law § 3428(d). Further, the insurer must return the remainder, if any, to the producer that requested cancellation, as authorized by NYAIP § 18(4), because the insured’s check, which was deposited in the producer’s premium account, was dishonored by the bank upon which it was drawn.