Department of Financial Services Issues Circular Letter Concerning Cancel for Any Reason Travel Benefits
On March 6, 2020, the New York Department of Financial Services issued Insurance Circular Letter No. 4 to all authorized property/casualty insurers noting that under New York law, cancel for any reason (CFAR) benefits in the travel context do not technically qualify as insurance because the cancellation of a trip “for any reason” does not depend on the occurrence of fortuitous event. However, an insurer may sell CFAR benefits if it can demonstrate that the benefits are necessarily or properly incidental to the kinds of business that the insurer is authorized to write. If CFAR benefits are sold to a consumer who is also purchasing a standard travel insurance policy, CFAR benefits must be reflected in a standalone contract that is separate from the insurance policy.
DFS also reminds insurers that COVID-19 may be a covered peril under a travel insurance policy. Pursuant to Insurance Law § 3452, trip cancellation/interruption insurance is authorized as a property-type of insurance, regardless of the underlying reason for the cancellation/interruption so long as it is fortuitous. A travel insurer can also provide coverage specific to COVID-19. In either case, the trigger for coverage must be stated clearly in the policy.
NY Insurance Circular Letter No. 4 (2020)