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Court Holds Renewal Requirement Does Not Apply to Surplus Lines Policy (NY)

May 1, 2013

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The IDW Group is a employment recruitment firm that obtained Errors and Omissions policies from Liberty Surplus Insurance Corporation through its insurance broker, Levine Insurance Risk Management.  Policies were issued for the periods of 2005/2006, 2006/2007, 2008/2009, and 2009/2010.
During 2007, there was some sort of mix-up involving the premium check, and no policy was issued for the 2007/2008 policy year.  During that time period, JP Morgan sued IDW, alleging that IDW violated a non-solicitation clause of a recruiting contract between the two companies.
When Liberty learned that there was no policy in place, it disclaimed coverage for the JP Morgan claim.  <a href=";docbase=CsLwAr3-2007-Curr" target="_blank" rel="noopener">IDW then sued</a> Levine for failing to obtain coverage and Liberty for, among other reasons, failing to provide IDW with the non-renewal notice required under the New York Insurance Law.
NY Insurance Law §3426 generally requires that a commercial insurer provide written notice to the insured of its intention not to renew a policy.  IDW alleged that because Liberty failed to provide such notice of non-renewal for the 2007/2008 policy year, that policy remained in effect and IDW was therefore entitled to coverage for the JP Morgan lawsuit.
But Liberty argued that its policy was exempt from the statute, because the statute states it does not apply to an “excess liability policy,” and here Liberty issued a surplus lines policy.  Although the statute seemingly applies to policies that provide excess coverage over primary policies, Liberty cited to an opinion from the New York Department of Insurance that said the term “surplus lines” is synonymous with “excess lines.”  Therefore, Liberty argued the statute did not apply to a surplus lines policy.
The Court found that the Department of Insurance opinion was persuasive (albeit not binding) and awarded Liberty summary judgment, dismissing IDW’s claims.  Frankly, while we think that credible arguments can be made that the certain requirements of the Insurance Law do not apply to excess/surplus lines carriers, here the Court may have conflated two similar terms and we are interested to see whether this decision holds up on appeal.
If you would like more information about this case, please write to <a href="">Mike Bono</a>.

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