New York Department of Financial Services Issues Circular Letter No. 7 Urging Regulated Entities to do Their Part to Support Consumers, Including Actions to Avoid Cancellation or Non-Renewal of Policies

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On March 19th, the New York Department of Financial Services (“DFS”) issued Circular Letter No. 7 (2020) (the “Letter”) urging all regulated entities to do their part to alleviate the adverse impact caused by COVID-19 on consumers and small businesses.

For consumers and small businesses that can demonstrate financial hardship caused by the pandemic, ‎The Letter requests regulated entities take reasonable and prudent actions to support New Yorkers by:

  • Offering payment accommodations, such as allowing consumers to defer payments at no cost, extending payment due dates, or waiving late or reinstatement fees, where consumers are unable to make timely payments of premium or fees due to COVID-19-related disruptions;
  • Working with consumers to avoid cancellation of insurance policies for (a) failure to pay premiums on time, (b) discovery of acts or omissions that may have increased the hazard insured against, or (c) physical changes in the property insured subsequent to issuance or last renewal that result in the property no longer meeting the insurer’s underwriting standards;
  • Working with consumers to avoid non-renewal of insurance policies where a consumer fails to timely respond to a non-renewal notice;
  • Increasing resources as necessary to accommodate increased claim submissions and increased inquiries from consumers about policy coverage benefits, including reviewing staffing plans to ensure that sufficient personnel are available to field claim submissions or inquiries and are informed on the most up-to-date developments relating to COVID-19;
  • Preparing clear and concise descriptions of coverage benefits that may be triggered as the COVID-19 situation continues to evolve, which should be posted prominently on insurance company and producer websites and sent in response to policyholder inquiries;
  • Alerting consumers to the heightened risk of scams and price gouging during financial disruptions, and reminding consumers to contact their insurance providers before purchasing unsolicited insurance policies or changing the terms of current insurance policies;
  • Ensuring that consumers do not experience a disruption of service if regulated entities close their offices, including making available other avenues for consumers to continue to manage their products and to submit inquiries and claims;
  • Providing flexibility regarding proof of death, disability, or other condition that triggers benefits under life insurance policies or annuity contracts;
  • Providing consumers with information and timely access to all medically necessary covered health care services, including testing and treatment for COVID-19, in accordance with all applicable DFS guidance, including DFS Guidance on Preparedness for Coronavirus (COVID-19) and DFS Guidance on Coronavirus and Telehealth Services; and
  • Proactively reaching out to customers via app announcements, text, email, or otherwise to explain the above-listed assistance being offered to consumers.

The Letter also urges all regulated entities, in their capacity as creditors to businesses of all sizes, to work with and provide accommodations to their borrowers, including refraining from exercising rights and remedies based on potential technical defaults under material adverse change and other contractual provisions that might be triggered by the COVID-19 crisis.

Additionally, the Letter states that reasonable and prudent efforts by regulated entities during this outbreak to assist consumers and businesses under these unusual and extreme circumstances are consistent with safe and sound insurance practices as well as in the public interest, and will not be subject to examiner criticism.

Locke Lord will continue to monitor these developments.

The Letter can be viewed here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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