senate Bill S2865

2013-2014 Legislative Session

Fixes the date of cancellation of financed insurance and provides for a mechanism for cancellation by electronic means

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Archive: Last Bill Status - In Committee


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor

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Actions

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Jan 08, 2014 referred to banks
Jan 24, 2013 referred to banks

S2865 - Bill Details

Current Committee:
Law Section:
Banking Law
Laws Affected:
Amd ยงยง571 & 576, Bank L
Versions Introduced in Previous Legislative Sessions:
2011-2012: S3653
2009-2010: S4907

S2865 - Bill Texts

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Fixes the date of cancellation of financed insurance and provides for a mechanism for cancellation by electronic means; provides that the date of cancellation shall be in the cancellation notice.

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BILL NUMBER:S2865

TITLE OF BILL: An act to amend the banking law, in relation to cancel-
lation of an insurance contract upon default

PURPOSE: To make fixed and certain the date of cancellation of financed
insurance and to provide for a mechanism for cancellation by electronic
means.

SUMMARY OF PROVISIONS:

Section 1 of the bill amends section 571 of the Banking Law to require
premium finance agencies to mail notice of a premium finance agreement
to the insurance carrier whose premiums are being financed. This
provision not only provides notice of the existence of a premium finance
agreement but also establishes a line of communication for notices of
cancellation if needed at a latex time.

Section 2 of the bill amends Section 576 of the tanking Law regarding
the process and timing for a premium finance agency to send a cancella-
tion notice to an insurance company. The bill would allow the premium
finance agency to cancel an agreement by mailing the final notice of
such cancellation to the insurer at the address used pursuant to Section
571 of the Banking Law (as established in Section 1 above), with a copy
to the insured party, The cancellation shall be effective the later of
12:01 A.M. of the fourth business day following the mailing of such
notice or the cancellation date stated in the cancellation notice. The
bill also allows the notice to be sent by electronic means where the
insurer agrees to accept service by such method.

JUSTIFICATION: This bill would establish certainty regarding notices of
cancellation for premium finance agreements. The premium finance indus-
try, as well as the insurance industry, has, until a recent decision by
the Court of Appeals, recognized the date set forth on the notice of
cancellation by the premium finance agency as the date fox cancellation.
This practice has been called into question by the March 27, 2003 deci-
sion of the Court of Appeals in the matter of Crump v. Unigard Insurance
Company. In that case, the Court held that the date fixed on the premium
finance company's notice was not to be the date of cancellation. Rather,
the date of cancellation was to be the date the notice was received by
the insurer.

This has overturned a long standing practice and understanding as to the
manner in which the industry operates and has left the date of cancella-
tion, and the existence and continuation of the insurance, to the hands
of the postal deliverer. Thus, there is no way to ascertain, with any
degree of certainty, the date of cancellation of financed insurance. The
insured has no way of knowing what date insurance coverage was canceled
and as of what date he or she must obtain replacement insurance cover-
age, Similarly, the finance company cannot compute the amount of
unearned premiums due since it is uncertain as to the date of cancella-

tion. Therefore, the statute should be amended to make the date of
cancellation fixed and certain. This will benefit all parties since
there will be no question as to exactly when insurance is canceled, when
an insurer ceases to underwrite a risk, when unearned premiums are due,
and when the insured must obtain replacement coverage.

LEGISLATIVE HISTORY: Revised version of S.1742/A.6490 of 2005-06, which
passed the Assembly in 2005 and 2006 S.4907 2009-10 S.3653 of 2012
Referred to Banks

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: January 1st next succeeding the date on which this act
shall have become a law.

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                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  2865

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                            January 24, 2013
                               ___________

Introduced  by  Sen.  SMITH  -- read twice and ordered printed, and when
  printed to be committed to the Committee on Banks

AN ACT to amend the banking law,  in  relation  to  cancellation  of  an
  insurance contract upon default

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Section 571 of the banking law, as amended by chapter  1142
of the laws of 1969, is amended to read as follows:
  S 571.  Delivery  of copy of premium finance agreement. Before the due
date of the first instalment payable under a premium finance  agreement,
the  insurance agent or broker or the premium finance agency holding the
agreement shall deliver to the insured, or mail to him at his address as
shown in the agreement, a copy thereof or, if  the  agreement  contained
any  blank  space when it was signed by the insured and such blank space
was subsequently filled  in  in  accordance  with  subdivision  four  of
section  five  hundred sixty-seven OF THIS ARTICLE, a copy of the agree-
ment, as so filled in.  THE PREMIUM FINANCE AGENCY SHALL MAIL NOTICE  OF
A PREMIUM FINANCE AGREEMENT TO THE INSURANCE CARRIERS WHOSE PREMIUMS ARE
BEING  FINANCED  UNDER SUCH PREMIUM FINANCE AGREEMENT WITHIN TEN DAYS OF
THE DATE THAT THE PREMIUM FINANCE AGREEMENT BECOMES A CONTRACT.
  S 2. Paragraph (d) of subdivision 1 of section 576 of the banking law,
as amended by chapter 565 of the laws of 1978, is  amended  to  read  as
follows:
  (d)  After the notice in paragraph (a) [above] OF THIS SUBDIVISION has
expired, the premium finance agency may thereafter, in the name  of  the
insured,  cancel  such  insurance  contract  by mailing to the insurer a
notice of cancellation [stating when  thereafter  the  policy  shall  be
cancelled,  and  the  insurance  contract  shall be cancelled as if such
notice of cancellation had been submitted by the  insured  himself,  but
without  requiring  the return of the insurance contract] TO THE ADDRESS
TO WHICH NOTICE OF THE PREMIUM FINANCE AGREEMENT WAS  PROVIDED  PURSUANT

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD07214-01-3

S. 2865                             2

TO  SECTION  FIVE  HUNDRED  SEVENTY-ONE OF THIS ARTICLE OR TO AN ADDRESS
PROVIDED BY AN INSURANCE  CARRIER  SUBSEQUENT  TO  THE  NOTICE  PROVIDED
PURSUANT  TO  SECTION FIVE HUNDRED SEVENTY-ONE OF THIS ARTICLE. NOTWITH-
STANDING  ANY  LAW  TO THE CONTRARY, CANCELLATION SHALL BE EFFECTIVE THE
LATER OF 12:01 A.M. ON THE FOURTH BUSINESS DAY  FOLLOWING  THE  DATE  OF
MAILING  OF  SUCH  NOTICE  OF CANCELLATION BY THE PREMIUM FINANCE AGENCY
WITHOUT REGARD TO THE DATE OF RECEIPT OF SUCH NOTICE BY THE  INSURER  OR
THE  CANCELLATION  DATE  STATED IN THE CANCELLATION NOTICE.  THE DATE OF
CANCELLATION SHALL BE STATED IN SUCH CANCELLATION NOTICE.  IN THE  EVENT
THAT ANY INSURER SHALL AGREE TO ACCEPT THE SERVICE OF NOTICES OF CANCEL-
LATION BY ELECTRONIC MEANS, THEN THE PREMIUM FINANCE AGENCY MAY TRANSMIT
SUCH  NOTICE BY ELECTRONIC MEANS AND CANCELLATION SHALL BE EFFECTIVE THE
LATER OF 12:01 A.M. ON THE FOURTH BUSINESS DAY FOLLOWING TRANSMISSION OF
SUCH NOTICE OR THE CANCELLATION DATE STATED IN THE CANCELLATION  NOTICE.
THE  DATE  OF  CANCELLATION SHALL BE STATED IN SUCH CANCELLATION NOTICE.
THERE SHALL BE NO REQUIREMENT, NOR  SHALL  IT  BE  A  CONDITION  OF  THE
CANCELLATION,  THAT  THE  INSURANCE CONTRACT BE RETURNED.  A copy of the
notice of cancellation shall also be mailed to the insured.    PROOF  OF
MAILING  FOR  ANY  REQUIRED NOTICE PURSUANT TO THIS SUBDIVISION SHALL BE
SUFFICIENT PROOF OF THE GIVING OF NOTICE.
  S 3. This act shall take effect on the first of January next  succeed-
ing  the date on which it shall have become a law and shall apply to all
contracts cancelled on or after such effective date.

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