On March 29, 2020, New York’s governor signed Executive Order 202.13 which, in part, modified sections of the New York Insurance Law to provide relief to certain policyholders experiencing financial hardship as a result of the COVID-19 pandemic. In response to the Executive Order, the New York Department of Financial Services has issued emergency regulations as described below.
On March 29, 2020, New York’s governor signed Executive Order 202.13 (the “Executive Order") which, in part, modified sections of the New York Insurance Law to provide relief to certain policyholders experiencing financial hardship as a result of the COVID-19 pandemic. In response to the Executive Order, the New York Department of Financial Services (“DFS”) promulgated Regulation 216 (11 NYCRR 229), and amended Regulation 27-A (11 NYCRR 185), Regulation 27-C (11 NYCRR 187), and Part 405 of the New York Code of Rules and Regulations on an emergency basis (collectively, the “Emergency Regulation”). The Emergency Regulation, inter alia, imposes new requirements on insurers and premium finance companies to provide grace periods for the payment of premium and premium repayment by certain policyholders experiencing financial hardship as a result of COVID-19. The Emergency Regulation follows on the guidance provided by the DFS in Circular Letter 2020-7, which urged insurers doing business in New York to make reasonable accommodations for policyholders affected by COVID-19. Our prior coverage of the DFS’ response to COVID-19 can be found here and here.
The Emergency Regulation applies to life insurance and annuities issued on an individual or group basis, a broad range of personal lines and commercial property and casualty covers including, for example, home, auto, fire, and liability insurance, and workers’ compensation insurance. For those life insurance policyholders facing financial hardship due to the COVID-19 pandemic, the Executive Order provides an extension of the grace period for the payment of premiums to 90 days, as well as an extension to 90 days for the exercise of rights or benefits under a policy or certificate for life insurance and annuity contracts. The Executive Order also imposes a 60-day moratorium on the cancellation, non-renewal, or conditional renewal of certain property and casualty insurance and workers’ compensation insurance policies for affected policyholders. The policyholders who are eligible include individuals and small businesses which are residents of New York State, individually owned and operated, and employ 100 or fewer employees.
The Emergency Regulation requires insurers to allow eligible policyholders (as described above) who did not make a timely premium payment to pay such premium in equal monthly installments over a 12-month period following June 1, 2020. The Emergency Regulation further prohibits insurers from imposing late fees on policyholders who do not make timely premium payments due to financial hardship resulting from the COVID-19 pandemic and from reporting such policyholders to a credit reporting agency or debt collector during the 90-day and 60-day moratorium periods for life and property and casualty policies, respectively.
Under the Emergency Regulation, the foregoing requirements also apply to premium finance companies, subject to safety and financial soundness considerations of the premium finance companies. Additionally, where a property and casualty policyholder does not make the first installment payment to the premium finance company after the 60-day grace period and the premium finance company cancels the policy prior to the next payment, the insurer must return the gross unearned premiums due under the policy to the premium finance company for the benefit of the policyholder on a pro rata basis, calculated as if the property and casualty insurance policy had been canceled 60 days prior to the effective date of such cancellation.
Insurers and premium finance companies are only required to extend the foregoing accommodations to policyholders who face financial hardship resulting from COVID-19, which may be demonstrated through written attestation by the policyholder. The Executive Order and Emergency Regulation are effective through April 28, 2020 unless extended by a subsequent executive order.