Senate Bill S2702

2015-2016 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 Senate Committee Banks Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Date of Action	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 06, 2016	referred to banks
Jan 28, 2015	referred to banks

2015-S2702 (ACTIVE) - Details

Current Committee:: Senate Banks
Law Section:: Banking Law
Laws Affected:: Amd §§571 & 576, Bank L
Versions Introduced in Other Legislative Sessions:: 2009-2010: S4907
2011-2012: S3653
2013-2014: S2865

2015-S2702 (ACTIVE) - Summary

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.

2015-S2702 (ACTIVE) - Sponsor Memo

                                BILL NUMBER:S2702

TITLE OF BILL:  An act to amend the banking law, in relation to
cancellation 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 Banking Law regarding
the process and timing for a premium finance agency to send a
cancellation 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 industry, 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 decision 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
cancellation, 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 cancellation. 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:

S.2865 of 2013-2014; referred to Banks
S.3653 of 2011-2012; referred to Banks

FISCAL IMPLICATIONS:

None.

EFFECTIVE DATE:

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

2015-S2702 (ACTIVE) - Bill Text download pdf

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

                                  2702

                       2015-2016 Regular Sessions

                            I N  S E N A T E

                            January 28, 2015
                               ___________

Introduced  by  Sen.  FUNKE  -- 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.
                                                           LBD06466-01-5

S. 2702                             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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Senate Bill S2702

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Archive: Last Bill Status - In Senate Committee Banks Committee

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2015-S2702 (ACTIVE) - Details

2015-S2702 (ACTIVE) - Summary

2015-S2702 (ACTIVE) - Sponsor Memo

2015-S2702 (ACTIVE) - Bill Text download pdf

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Sponsored By

Rich Funke

Archive: Last Bill Status - In Senate Committee Banks Committee

Actions

2015-S2702 (ACTIVE) - Details

2015-S2702 (ACTIVE) - Summary

2015-S2702 (ACTIVE) - Sponsor Memo

2015-S2702 (ACTIVE) - Bill Text download pdf

Comments