N.Y.: PIA offers agents, brokers guidance for commercial-lines cancellations, nonrenewals

When the commercial insurance market tightens, agents and brokers often become the frontline to answer client questions about nonrenewals, midterm cancellations and rate hikes. Fortunately, New York Insurance Law Section 3426 offers a detailed playbook on how commercial policies must be handled—protecting policyholders and offering a consistent framework for insurers.

This law was passed during a past hard market cycle, and it remains essential reading for any producer handling commercial risks in the Empire State. Here’s what you need to know.

What types of policies are covered?

Section 3426 applies to a broad range of commercial lines including:

• commercial property
• general liability
• commercial auto (fleet policies)
• umbrella and excess liability (with specific rules for high-limit policies)
• public entity and professional liability policies

It does not apply to personal lines (those are covered by Section 3425 (link to other article), excess-line placements, or certain specialty products like surety, workers’ compensation or marine insurance.

Midterm cancellations: What’s allowed?

During the first 60 days. New policies are in a kind of probationary “free look” period. Insurers can cancel for almost any reason—as long as it’s not illegal or discriminatory—with at least 20 days’ notice to both the insured and their agent or broker.

After the first 60 days. Cancellations get stricter. Policies only can be canceled midterm for specific reasons, such as:

• nonpayment of premium
• fraud or misrepresentation
• material increase in hazard
• regulatory violations or solvency issues

These cancellations require 15 days’ notice, and notices must cite the exact legal reason (e.g., 3426(c)(1)(A) for nonpayment).

Nonrenewals and conditional renewals

The default: Policies automatically renew. Unless a proper notice is sent, commercial-lines policies renew automatically on the same terms. That’s why getting notice timing and language right is so critical.

Types of notices include the following:

Nonrenewal. The insurer isn’t offering a new policy term.

Conditional renewal. The policy will renew, but with changes like:

• Reduced coverage
• Higher deductibles
• Exclusions added
• Premium increases over 10% (unless due to rating variables like audit or exposure)

Alternative renewal notice. Used when the insurer hasn’t decided yet. A second notice follows to confirm nonrenewal or conditional renewal.

Notice requirements:

• 60–120 days before expiration (or 30 days for jumbo risks and excess policies).
• Must go to both the insured and their authorized agent or broker.
• Must state specific reasons and include premium change estimates (within 5% range).
• Loss runs must be made available upon request within 10 days.

Late notices have consequences

If an insurer misses the notice window:

• The policy renews automatically on the same terms.
• The insured may cancel, but only on a pro-rata basis.
• Coverage extends for a full year unless the client replaces it.

Special considerations for agents & brokers

Terminated agents. The insurer must allow business to stay with the agent through the policy period and pay standard commission (unless there’s cause for termination).

Book transfers. Require careful handling to ensure clients receive required notices.

Mass nonrenewals. Any insurer planning a large-scale exit (more than 1% of a market) must submit an orderly withdrawal plan to the state 45 days in advance.

Real-world scenarios

There are several real-world situations for which you should be on the lookout, these include the following:

• A bad check as initial premium doesn’t void the policy—an agent must still issue a proper notice.
• Premium increases must follow strict rules—you can’t bump up rates midterm just because of a recalculation.
• Failure to install safety features (e.g., emergency lighting) after renewal can’t be grounds for cancellation unless it represents a new risk.

Want to go deeper?

To view all the compliance rules, legal citations and insurer obligations under Section 3426—including model notices and agent protections—PIA Northeast members can access the complete guide here.