On March 30, 2020 the New York State Department of Financial Services (“DFS”) adopted emergency regulations requiring New York regulated insurers of life and annuity contracts, property and casualty insurers and premium finance companies to provide relief to New York consumers and businesses experiencing financial hardship due to COVID-19. The emergency regulations address cancellation policies and grace periods for the payments of premiums for insureds that have been adversely affected by the virus.
Many questions have been raised by New York insurance agents and brokers regarding the various elements of the Department’s emergency regulations. In this issue of The E&O Report we will address some of the most common questions that we have received related to these emergency regulations.
One element of the emergency regulations requires the following:
“A licensed insurance producer who services an in-force life insurance policy, annuity contract, or fraternal benefit society certificate or who procured the property/casualty insurance policy for the property policyholder shall...deliver notice to the policyholder…within ten business days…”
Pursuant to the above referenced section of the emergency regulations, the DFS is requiring that New York insurance
producers must notify policyholders (defined as individuals and small businesses that are independently owned and operated and have 100 or less employees) of the elements of the emergency regulations. The emergency regulations also contain a similar notification requirement by the insurers. The ten-day deadline for producers to provide these required notices means that they
must be sent out by Monday April 13, 2020. Big I NY has prepared a short sample notification letter that agencies and brokerages may use to provide this notice to policyholders. (A
copy of this sample letter is available on the association website in the coronavirus resource section). Alternatively, the DFS has also prepared a sample letter that it advised producers can use to provide this required notification. (A copy of the
NYSDFS sample letter is also available on the Big I NY website.)
Following the issuance of the emergency regulations, Big I NY contacted the DFS regarding whether the notices could be emailed to customers by an agency or brokerage even when they did not have the insured’s prior authorization to receive insurance documents by email, which is a requirement in New York. In response to that inquiry, the DFS advised that insurance agencies and brokerages are permitted to send the required notice to customers by email, even if the customers have not provided consent to receive emailed insurance documents. Based upon this directive, the notices may be sent to all customers the agency or brokerage has an email address for.
Compliance
Given the government directives concerning social distance and working from home if possible, these are very difficult times for New York business, especially independent insurance agencies and brokerages, to fully function. Owners of agencies and brokerages want to assist their customers and also comply with the various mandates of the DFS, while at the same time they desire to protect their health and the health of their employees. That being so, given the circumstances that currently exist, our recommendation to agencies and brokerages is to do their best with the resources they have to comply with the notice requirements of the emergency regulations. If you are unable to comply with any portion, be sure to thoroughly document your steps taken and challenges faced.
Commercial Lines E&S Policyholders
While the emergency regulations apply to most types of insurance policies they do not apply to all types. Yesterday, the DFS issued further clarification to the insurance industry concerning the applicability of the emergency regulations to excess line policies. The DFS indicated in its clarification that while the emergency regulations apply to personal lines coverage under an excess lines insurance policy, the emergency regulations do not apply to commercial lines coverage under an excess lines insurance policy. This means that the required notice mentioned above would not need to be sent to customers with commercial lines excess lines insurance policies, since the emergency regulations do not apply to them.
If you’ve Already Sent a Notice to Commercial Lines E&S Policyholders
Unfortunately, inasmuch as the DFS only issued the above-mentioned clarification on April 7th that the emergency regulations do not apply to customers with commercial lines excess lines insurance policies, some agencies and brokerages may have already sent notices of the emergency regulations to such customers. If that is the case for your agency or brokerage, we recommend that you do the following.
- First, contact the wholesale broker or excess lines broker through which the subject policy was obtained to determine whether the particular excess line insurer involved is voluntarily applying the provisions of the emergency regulations; we have been advised that some insurers have agreed to do this even though they are not required.
- If, however, the excess lines insurers advise that they are not applying the elements of the emergency regulations, the agency or brokerage should then follow up with the commercial lines excess lines customers that have already been sent notices to advise that the provisions of the emergency regulations do not apply to their policies.
What’s Next
The information that New York agents and brokers need to be aware of related to COVID-19 issues is constantly changing.
Big I NY has comprehensive information on its web site that is updated as soon as things change, or events occur of which insurance agents and brokers need to be aware.
As always, you should remember to reach out to Big I NY, post in the
BigINY.org Community, or contact my law firm, with any questions or issues that you may have. We are here to assist you through these tough times. I hope that all of you reading this E&O Report, as well as all of your family and agency employees, stay healthy and safe.
Submitted by:
James C. Keidel, Esq.
Keidel, Weldon & Cunningham, LLP