§ 3427 — Gap insurance; cancellation, renewal and other provisions

§ 3427. Gap insurance; cancellation, renewal and other provisions. (a)\nDefinitions. As used in this section:\n (1) "Covered policy" means, for purposes of this section, a policy or\ncontract of gap insurance, issued or issued for delivery in this state,\non a risk located or resident in this state.\n (2) "Nonpayment of premium" means the failure of the named insured to\ndischarge any obligations in connection with the payment of premiums on\na policy of insurance or any installment of such premium, whether the\npremium is payable directly to the insurer or its agent, or indirectly\nunder any premium finance plan or extension of credit. Payment to the\ninsurer, or to an agent or broker authorized to receive such payment,\nshall be timely, if made within fifteen days after the mailing to the\ninsured of a notice of cancellation for nonpayment of premium.\n (b) Lessor gap insurance:\n (1) A covered policy of lessor gap insurance shall be subject to all\nthe provisions of section three thousand four hundred twenty-six of this\narticle, except as otherwise provided in this section.\n (2) Subject to the notice requirements of subsection (c) of section\nthree thousand four hundred twenty-six of this article, a covered policy\nof lessor gap insurance may be cancelled only for:\n (A) one or more of the bases for cancellation set forth in\nsubparagraphs (A) through (D), and (F) through (H) of paragraph one of\nsubsection (c) of section three thousand four hundred twenty-six of this\narticle;\n (B) material change in the nature or extent of the risk, occurring\nafter issuance or last annual renewal anniversary date of the policy,\nwhich causes the risk of loss to be substantially and materially\nincreased beyond that contemplated at the time the policy was issued or\nlast renewed; or\n (C) if the policy automatically provides coverage for the gap amount\nwaived under new leases entered into by the lessor, or acquired by the\nlessor's assignee, the lessor's or assignee's (whichever is the insured)\nfailure to provide, within sixty days or as otherwise specified in the\npolicy, the insurer with the name and address of each lessee and other\ninformation reasonably required by the insurer.\n (c) Lessee gap insurance: (1) Except as provided in this section, the\nprovisions of sections three thousand four hundred twenty-five and three\nthousand four hundred twenty-six of this article shall not apply to a\ncovered policy of lessee gap insurance.\n (2) During the first sixty days a covered policy of lessee gap\ninsurance is initially in effect, no cancellation shall become effective\nuntil twenty days after written notice is mailed to the first named\ninsured at the mailing address shown in the policy, except for the bases\nfor cancellation set forth in subparagraphs (A) through (H) of paragraph\none of subsection (c) of section three thousand four hundred twenty-six\nof this article for which fifteen days notice shall be given.\n (3) After a covered policy of lessee gap insurance has been in effect\nfor sixty days, or on or after the effective date if the policy is a\nrenewal, no cancellation or nonrenewal shall become effective until\nfifteen days after written notice is mailed or delivered to the first\nnamed insured at the mailing address shown in the policy and\ncancellation or nonrenewal is conditioned upon the termination of the\nlease for reasons other than a total loss of the personal property\ncaused by its theft or physical damage, or is based on one or more of\nthe reasons set forth in subparagraphs (A) through (H) of paragraph one\nof subsection (c) of section three thousand four hundred twenty-six of\nthis article; except that where the lease is for ten years or longer,\nthe policy may be cancelled or nonrenewed forty-five days after written\nnotice is mailed or delivered to the first named insured at the mailing\naddress shown in the policy if the cancellation or nonrenewal is to be\neffective upon the tenth anniversary date of the policy or any\nsubsequent annual anniversary date.\n (4) If the policy is not issued for a term coextensive with the length\nof the lease, the insurer shall renew it for successive terms for the\nduration of the lease, unless cancelled or nonrenewed in accordance with\nthe provisions of this subsection.\n (d) Creditor gap insurance:\n (1) A covered policy of creditor gap insurance shall be subject to all\nthe provisions of section three thousand four hundred twenty-six of this\narticle, except as otherwise provided in this section.\n (2) Subject to the notice requirements of subsection (c) of section\nthree thousand four hundred twenty-six of this article, a covered policy\nof creditor gap insurance may be cancelled only for:\n (A) One or more of the bases for cancellation set forth in\nsubparagraphs (A) through (D), and (F) through (H) of paragraph one of\nsubsection (c) of section three thousand four hundred twenty-six of this\narticle;\n (B) Material change in the nature or extent of the risk, occurring\nafter issuance or last annual renewal anniversary date of the policy,\nwhich causes the risk of loss to be substantially and materially\nincreased beyond that contemplated at the time the policy was issued or\nlast renewed; or\n (C) If the policy automatically provides coverage for the gap amount\nwaived under new loans or other credit transactions entered into by the\ncreditor or acquired by the creditor's assignee, the creditor's or\nassignee's (whichever is the insured) failure to provide, within sixty\ndays or as otherwise specified in the policy, the insurer with the name\nand address of each debtor and other information reasonably required by\nthe insurer.\n (e) Debtor gap insurance:\n (1) Except as provided in this section, the provisions of sections\nthree thousand four hundred twenty-five and three thousand four hundred\ntwenty-six of this article shall not apply to a covered policy of debtor\ngap insurance.\n (2) During the first sixty days a covered policy of debtor gap\ninsurance is initially in effect, no cancellation shall become effective\nuntil twenty days after written notice is mailed to the first named\ninsured at the mailing address shown in the policy, except for the bases\nfor cancellation set forth in subparagraphs (A) through (H) of paragraph\none of subsection (c) of section three thousand four hundred twenty-six\nof this article for which fifteen days notice shall be given.\n (3) After a covered policy of debtor gap insurance has been in effect\nfor sixty days, or on or after the effective date if the policy is a\nrenewal, no cancellation or nonrenewal shall become effective until\nfifteen days after written notice is mailed or delivered to the first\nnamed insured at the mailing address shown in the policy and\ncancellation or nonrenewal is conditioned upon the termination of the\nloan for reasons other than a total loss of the personal property caused\nby its theft or physical damage, or is based on one or more of the\nreasons set forth in subparagraphs (A) through (H) of paragraph one of\nsubsection (c) of section three thousand four hundred twenty-six of this\narticle; except that where the loan or other credit transaction is for\nten years or longer, the policy may be cancelled or nonrenewed\nforty-five days after written notice is mailed or delivered to the first\nnamed insured at the mailing address shown in the policy if the\ncancellation or nonrenewal is to be effective upon the tenth anniversary\ndate of the policy or any subsequent annual anniversary date.\n (4) If the policy is not issued for a term coextensive with the length\nof the loan or other credit transaction, the insurer shall renew it for\nsuccessive terms for the duration of the loan or other credit\ntransaction, unless cancelled or nonrenewed in accordance with the\nprovisions of this subsection.\n (f) For purposes of this section, "property insured", as used in\nsubparagraphs (E) and (H) of paragraph one of subsection (c) of section\nthree thousand four hundred twenty-six of this article, means the\nproperty which is the subject of the lease or loan or other credit\ntransaction.\n (h) Every notice of cancellation issued pursuant to this section shall\nspecify the grounds for cancellation.\n (i) If a lessor, creditor or assignee charges the lessee or debtor for\nthe waiver of the gap amount, the lessor or creditor, or, in the absence\nof a waiver by the creditor or lessor, the assignee, as part of the\nwaiver offer, shall provide the lessee or debtor with a notice\nspecifying the name of the insurer that has issued the lessor or\ncreditor gap insurance policy, the cost of the lessor or creditor gap\ninsurance coverage, and the charge for the waiver. Any person having\nbeen found, after notice and hearing, to have wilfully violated this\nsubsection shall be liable to the people of this state for a civil\npenalty in a sum not exceeding five hundred dollars for each violation.\n (j) Notwithstanding any other provision of this chapter, the\ncancellation and nonrenewal provisions of this section shall apply only\nto the gap insurance provisions of a policy or contract that also\nprovides other coverages and the gap insurance coverage shall be\nseverable from the other coverages for the purposes of cancellation and\nnonrenewal; except that lessor or debtor gap insurance coverage included\nwithin a policy insuring a mobile home shall be subject to the\ncancellation and nonrenewal requirements applicable to the mobile home\npolicy.\n (k) Notwithstanding section three thousand four hundred thirty-five of\nthis article, a covered policy of lessor or creditor gap insurance that\ninsures a lessor or creditor and the lessor's or creditor's assignees\nshall not be considered a group insurance policy.\n (l) The superintendent may prescribe by regulation minimum policy\nprovisions for gap insurance which the superintendent deems to be\nnecessary or appropriate for lessor gap insurance, creditor gap\ninsurance, lessee gap insurance and debtor gap insurance contracts or\npolicies.\n