Emergency Regulations in New York Prohibit Canceling Certain Property and Casualty Insurance Policies and Extend Premium Payment Deadlines

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As part of the ongoing executive and legislative efforts to address the COVID-19 pandemic, New York has issued emergency regulations temporarily suspending the cancelation of property and casualty insurance policies for certain policyholders based upon non-payment of premiums.  As described further below, these regulations allow eligible policyholders to temporarily avoid cancelation of their policies for non-payment provided the policyholder can demonstrate “financial hardship” as a result of the pandemic.

On March 30, 2020, New York Governor Andrew Cuomo issued Executive Order 202.13, which temporarily modified various provisions of New York law to provide that insurers cannot cancel or refuse to renew certain types of property and casualty policies held by individuals and “small businesses” due to non-payment of premiums for a period of 60 days.[1]  The Executive Order defines “small business” as a business that “is resident in this State, is independently owned and operated, and employs one hundred or fewer individuals.”[2]

Following Governor Cuomo’s Executive Order, the New York Department of Financial Services (known as “DFS”) issued regulations that provide additional clarification.[3]  The DFS regulations prohibit insurers from collecting late fees on premium payments missed due to the pandemic, and also prevent insurers from reporting insureds who fail to make payments for pandemic-related reasons to credit reporting agencies.[4]  The regulations further require insurers to allow qualifying policyholders who failed to make a premium payment due to the pandemic, and who can presently demonstrate “financial hardship” resulting from the pandemic, to pay the missed premiums over a 12-month period.[5]  Insurers also are required to accept a “written attestation” regarding “financial hardship” from the policyholder as proof of such hardship.[6]  Neither the Executive Order nor the DFS regulations define “financial hardship,” however.

The DFS regulations also extend the foregoing provisions, including the 60-day prohibition of cancelation or non-renewal and the ability to pay a missed payment over 12 months, to missed installment payments pursuant to premium finance agreements.[7]

The types of policies covered by Executive Order and the DFS regulations include, among other policies, liability insurance, property insurance covering the replacement value of damage to the property, fire insurance, automobile damage insurance, insurance relating to worker’s compensation, fidelity and surety insurance, credit insurance, credit unemployment insurance, gap insurance, and involuntary unemployment insurance.[8]

Although the regulations do not cover every insured, and do not cover every type of insurance policy, the regulations may nonetheless provide relief for a broad segment of business owners in New York.  Policyholders should review the regulations and their insurance policies carefully to determine whether they might be eligible for relief under these emergency regulations. 

 

[1] https://www.governor.ny.gov/news/no-20213-continuing-temporary-suspension-and-modification-laws-relating-disaster-emergency.

[2] Id.

[3]https://www.dfs.ny.gov/system/files/documents/2020/03/re_consolidated_amend_pt_405_27a_27c_new_216_text.pdf.

[4] Id. at Section 229.4. 

[5] Id. at Section 229.5. 

[6] Id.

[7] Id. at Sections 229.6 and 405.6.  The Executive Order and the DFS regulations provide similar protections for life insurance policies, providing a 90-day grace period for protected insureds.

[8] See New York Insurance Law Articles 34, 53, 54, and 55, and §§ 1113(a) and 1116; New York Workers’ Compensation Law §§ 54 and 226.