NY Prohibits Affordable Housing Status as Rating Factor in Commercial Property & ‎Casualty Policies While New Jersey Issues Bulletin and Survey

On June 24, 2024, the New York Department of Financial Services (“DFS”) issued Insurance Circular Letter No. 6 (2024),[1] informing property and casualty insurers writing and delivering commercial property and liability insurance policies in New York, including excess/surplus lines insurers, that the newly enacted N.Y. Insurance Law § 3462 prohibits insurers from inquiring about or making underwriting and rating decisions based on a property’s status as an affordable housing development or containing affordable housing units. If an insurer used this data in the past as part of their application, underwriting process, or rate-setting process, they must revise such applications, underwriting guidelines, and rates accordingly.[2]

Section 3462 provides that insurers may not “cancel, refuse to issue, refuse to renew or increase the premium of a policy, or exclude, limit, restrict, or reduce coverage under a policy” [3] based on the fact that the real property being insured is an affordable housing development. Insurers likewise are also prohibited from inquiring upon application whether a property is an affordable housing development or contains affordable housing units.[4] The statute outlines the following factors and bars insurers from asking about them on applications and from considering them during underwriting and rating.[5]

These factors include:

Any affordability requirement imposed on residents of specified income levels;
Participation in government-run rental assistance programs (e.g., Section 8 vouchers);
The level or source of income of tenants, owners, or shareholders; and
Publicly-supported ownership structure (e.g., ownership by a public housing entity or cooperative housing corporation).[6]

New York property and casualty insurers may not include these factors on an application nor use them in making an underwriting or rating decision, including “to determine if further underwriting is necessary.”[7] DFS instructs insurers—including excess/surplus lines and the New York Property Insurance Underwriting Association—to end the practice of collecting this information and cease its use in underwriting and rating. DFS further encourages insurers to review their rates, application forms, and underwriting guidelines, and revise them if necessary[8].

Section 3462(b) reiterates that insurers may cancel, refuse to issue, refuse to renew, increase premiums on a policy, or limit, restrict, or reduce coverage under such policy, due to “other factors that are permitted or not prohibited by any other section” of the Insurance Code,[9] i.e., nonpayment of premium or other factors not deemed discriminatory.

Background

In November 2022, DFS collaborated with New York State Homes and Community Renewal to issue a report[10] on “increases in insurance premiums and unavailability of insurance coverage for affordable housing developments.”[11] DFS investigated further via direct inquiries to insurers operating in New York State and discovered that some property and casualty insurers inquire about government-funded units or tenants’ use of government rental assistance as part of their underwriting process. DFS subsequently lobbied for Part BB of the education, labor, housing, and family assistance budget, which added section 3462 to the Insurance Law, was signed by Governor Hochul on April 20, 2024, and took effect immediately.[12]

A full copy of Circular Letter No. 6 (2024) is available here.

New Jersey

Earlier this week, the New Jersey Department of Banking and Insurance (“DOBI”) simultaneously issued Bulletin No. 24-10[13] and Order No. A24-06,[14] informing property and casualty insurers admitted in New Jersey that DOBI “has become aware of possible issues concerning the availability and cost of insurance coverage for affordable housing developments,” and thus requires admitted property and casualty insurers to submit survey results by August 22, 2024 to [email protected]. The Bulletin and Order both specify property and casualty sublines, such as boiler & machinery, fire, commercial multiple peril, homeowners multiple peril, inland marine, and workers’ compensation, among others. The survey primarily pertains to “government-regulated housing” and “government-subsidized housing,” including Low Income Housing Tax Credits (“LIHTC”). In contrast to New York, the DOBI Bulletin and Order only apply to admitted carriers.

Locke Lord will continue to monitor developments in this area. If you have any questions or concerns, please contact the author or your ‎Locke Lord partner.‎

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* With appreciation for the contributions of our summer associate Dani D’Annunzio of the Fordham Law School Class of 2025.

[1] N.Y. Dept. of Fin. Serv., Circular Letter No. 6 (2024), Re: Affordable Housing Underwriting and Rating (June 24, 2024) available here.

[2] If the insurer is admitted, they must also submit their revised rates to DFS. See N.Y. Dept. of Fin. Serv., Circular Letter No. 6 (2024).

[3] N.Y. Ins. Law § 3462(a) (McKinney 2024)

[4] See id. For example, in 2022, some insurers disclosed to DFS that their applications asked about government-subsidized housing units and whether tenants paid rent with housing assistance. DFS asserts that section 3462(a) now prohibits questions of this nature.

[5] Id. § 3462(a)(1)–(4).

[6] Id. § 3462(a)(1)–(4).

[7] N.Y. Dept. of Fin. Serv., Circular Letter No. 6 (2024), Re: Affordable Housing Underwriting and Rating (June 24, 2024).

[8] Admitted insurers must file revised rates with DFS.

[9] Id. § 3462(b).

[10] See Affordable Housing & Insurance, N.Y. Dept. of Fin. Serv (2022), available here.

[11] N.Y. Dept. of Fin. Serv., Circular Letter No. 6 (2024), Re: Affordable Housing Underwriting and Rating (June 24, 2024).

[12] See FY 2025 N.Y. State Executive Budget: Education, Labor, & Family Assistance, Art. VII. Legis., available here.

[13] N.J. Dept. of Banking & Ins., Bulletin No. 2024-10, Re: Affordable Housing and Insurance Survey (July 8, 2024), available here.

[14] N.J. Dept. of Banking & Ins., Order No. A24-06, Re: IN THE MATTER OF THE REQUEST FOR INFORMATION FROM INSURERS AUTHORIZED OR ADMITTED TO TRANSACT PROPERTY AND CASUALTY INSURANCE IN NEW JERSEY, (July 8, 2024), available here.