(a) Chapter 187 of the Laws of 1999 added a new section 3446 to the Insurance Law, entitled “product or system group insurance policies.” This Part implements section 3446, which permits a group policy to be issued to a manufacturer, distributor, or installer of a product or system, or a trustee on behalf of more than one manufacturer, distributor or installer. The policy insures persons who have purchased or own the product or system where the manufacturer, distributor, or installer has represented that the product or system is designed to prevent loss or damage to property from a specific cause. The policy covers the loss or damage to the property from such cause. The policy may not cover loss or damage resulting from a defect in materials or workmanship, or wear and tear and may not be duplicative of coverage under any other applicable insurance policy. The policy may provide coverage for unreimbursed incidental expenses that may be incurred as a result of the loss or damage to the property.

(b) Chapter 187 is the legislative response to agreements made by manufacturers, distributors, or installers of a product or system, or other persons, that provide a pecuniary benefit to the purchaser or user of that product or system, if damage results from the failure of the product or system to perform as represented. For example, sometimes in connection with a lock or other security device, or where a vehicle is etched with a unique identification code, an agreement is provided by the manufacturer, seller, installer, or other person that provides for the payment of a specified sum in the event the vehicle is stolen. These agreements are not truly warranties or guarantees, but rather are insurance contracts within the meaning of Insurance Law, section 1101 because there are intervening fortuitous events—in these examples, theft.

(c) Chapter 187 permits manufacturers, distributors, or installers of a product or system to make coverage available to consumers by purchasing newly authorized group insurance in connection with their products or systems. For example, a vehicle that is purchased with an applied or installed security product or system is subsequently stolen and not recovered. The manufacturer of the security product or system has obtained a product or system group insurance policy from an authorized insurer covering the owner of the vehicle. Under the owner's primary vehicle physical damage insurance policy, the owner receives the actual cash value of the vehicle less any deductible. In such a case, the product or system group insurance policy may cover the owner's deductible as well as the difference between the replacement cost of the vehicle and its actual cash value (e.g., the policy may cover the difference between the replacement cost of a new model year vehicle and the actual cash value of the stolen vehicle). In addition, there may be costs incurred to rent a temporary replacement vehicle and registration costs for a replacement vehicle. If not reimbursed under another insurance policy, these costs may be covered under the product or system group policy.

(d) Chapter 187 authorizes the superintendent to promulgate regulations regarding group product and system insurance policies, including provisions regarding policy cancellation and renewal, payment of premium, and minimum number of group members.