State Farm must offer to renew homeowners’ polices for 113 Long Island, N.Y., residents after the state’s insurance department found it used improper non-renewal notices, which failed to disclose the availability of other coverage options.

James J. Wrynn

The New York State Insurance Department said that its order is the result of one homeowner’s complaint. That complaint alleged that the insurer said it would not renew his policy as it was reducing its exposure to potential losses in coastal areas.

A department inquiry revealed that State Farm acted improperly as it never advised the homeowner of coverage opportunities through the New York Property Insurance Underwriting Association (NYPIUA) or provided contact information for the Coastal Market Assistance Program. The latter program is administered by the NYPIUA to help homeowners in coastal areas obtain insurance.

The investigation into a single complaint led to the discovery of 112 other improper renewal notices, according to the department.

“The insurance department continues to monitor the situation on Long Island to make sure that insurance remains available and that the rules are followed when insurers reduce their exposure,” New York State Insurance Superintendent James J. Wrynn said in a statement. “Homeowners have specific rights when policies are non-renewed. Insurers must honor those rights by following the proper procedures.”

The department noted that given Long Island’s susceptibility to coastal storms, some larger insurers are reducing their exposure to potential losses by non-renewing some homeowners. Under state law, insurers are permitted to non-renew up to 4% of their homeowners’ policies annually statewide.

However, when non-renewals occur, homeowners must receive between 45 days and 60 days of notice before the effective date to obtain a replacement policy, and notices must state the specific reason for non-renewal and advise homeowners of both NYPIUA and the Coastal Market Assistance Program, according to the department.