DFS moratorium set to expire on Jan. 16, 2013

January 14, 2013

Moratorium lifted in most counties

After four extensions, the Department of Financial Services’ Order Regarding Suspension of Certain Insurance and Banking Law Provisions within the designated counties (moratorium) will be lifted on Jan. 16, 2013, with the exception of certain ZIP codes that have yet to be determined by the DFS. 

Policies affected. The moratorium has been in effect since Oct. 26, 2012. During this time, insurers have been unable to terminate, cancel or nonrenew any "covered policy," as that term is defined by Insurance Law Sections 3425(a), 3426(a) and policies issued under Articles 53 and 54 of the Insurance Law or mail any notices of cancellation or nonrenewal on policies that were in effect as of Oct 26, 2012. The moratorium does not apply to any policy effective after the moratorium went into effect.

Moratorium operation. The moratorium has acted as a “time out” for covered policies. It has stopped the clock on all cancellations, terminations or nonrenewals. When the moratorium lifts, the clock will resume exactly where it was prior to the moratorium’s enactment. For policies where a notice of cancellation or nonrenewal was mailed prior to the enactment of the moratorium, the cancellation/nonrenewal can occur the same number of days after the moratorium is lifted as the number of days the cancellation was suspended by the moratorium.  For example, if a policy was set to cancel on Oct. 27, 2012, one day after the moratorium went into effect, the policy would cancel one day after the moratorium is lifted, in this case Jan. 17, 2013. If the policy was set to expire on Dec. 16, 2012, 50 days after the moratorium went into effect; the policy would cancel 50 days after the moratorium is lifted, which, in this case, would be March 7, 2013.

For those policies where notices of cancellation/nonrenewal were already sent, the NYSDFS has stated that insurers are encouraged, but not required, to send out new notices of cancellation/nonrenewal. If an insurer does send a new notice, this will not act to reset the clock on the cancellation, instead the notice can note that the clock picks up exactly where it left off.

Extension of policy terms. While carriers have been prohibited from nonrenewing/canceling policies during the moratorium, no company will be required to provide any additional time than they would have provided prior to the moratorium. The policy remains in place for the period of the moratorium. After the moratorium is lifted, an insurer may exercise such rights as it had on Oct. 25, 2012. In addition, carriers will be permitted to bill for the additional period of coverage required by the moratorium.