BILL NUMBER: S4326

SPONSOR: BRESLIN
 
TITLE OF BILL:

An act to amend the insurance law, in relation to providing for a policy
term of less than one year in certain situations

 
PURPOSE:

To permit insureds to obtain policies with terms of less than one year
upon request from an insurer that offers such policies.

 
SUMMARY OF PROVISIONS:

Section 1: Amends Insurance Law Section 3426 to permit insurers to offer
a commercial lines policy with a term of less than one year upon an
insured's request.

Section 2: Establishes the effective date.

              

 
EXISTING LAW:

Section 3426(d)(2) currently prohibits insurers from issuing a commer-
cial lines policy with a term of less than one year, with a few
exceptions.

 
JUSTIFICATION:

Insurance Law Section 3426 was enacted in the 1986 to address a crisis
in the commercial liability insurance market. All types of businesses
and public entities were having difficulty finding affordable liability
insurance.

To address the problem, the Legislature enacted comprehensive reforms
that provided stability, security, and certainty to policyholders,
including restrictions on policy cancellation and non-renewals and
premium increases.

While the commercial liability insurance market today is much healthier,
most of the reforms enacted in Section 3426 still provide legitimate
policyholder protections that remain relevant and important today--with
a notable exception.

Section 3426(d)(2) prohibits insurers from issuing a policy with a term
of less than one year. While this requirement was well intended 34 years
ago, today it is hurting small businesses by denying them the ability to
obtain coverage that meets their unique and changing needs.  Many small
businesses operate in a very different manner today and do not want or
need a one-year policy. The nature of work is changing and in today's
"gig" economy, all different types of businesses engage in part-time,
temporary, or freelance work, so they do not need continuous coverage
for a whole year. They need insurance for when they are engaged in a
job, which may be for few days, a few weeks, or even a few hours.

Unfortunately, businesses cannot get this type of "on-demand" insurance
for shorter terms in New York. New York is the only state that prohibits
short-term insurance policies. This means businesses will either forgo

obtaining insurance or will have to pay more for insurance they don't
need.

The COVID-19 pandemic has highlighted the importance for small busi-
nesses to be able to purchase polices for shorter terms based on their
needs. Many small businesses have struggled to remain in business during
the COVID shutdown. Those that have started to operate again often do so
on a part-time basis, and they still face an uncertain future. They must
have the ability to customize their insurance and control their costs or
they risk going out of business.  This bill would give small businesses
that ability.  Any policyholder that still wanted a one-year policy will
still be able to obtain it. This bill simply provides more choices for
an insured.

 
LEGISLATIVE HISTORY:

None.

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This act shall take effect on the thirtieth day after it shall have
become a law.