senate Bill S4507

Amended

Permits an insurer to rescind or retroactively cancel a policy in certain circumstances

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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actions

  • 08 / Apr / 2011
    • REFERRED TO INSURANCE
  • 09 / May / 2011
    • 1ST REPORT CAL.553
  • 10 / May / 2011
    • 2ND REPORT CAL.
  • 11 / May / 2011
    • ADVANCED TO THIRD READING
  • 13 / Jun / 2011
    • AMENDED ON THIRD READING (T) 4507A
  • 14 / Jun / 2011
    • AMENDED ON THIRD READING 4507B
  • 20 / Jun / 2011
    • PASSED SENATE
  • 20 / Jun / 2011
    • DELIVERED TO ASSEMBLY
  • 20 / Jun / 2011
    • REFERRED TO INSURANCE
  • 04 / Jan / 2012
    • DIED IN ASSEMBLY
  • 04 / Jan / 2012
    • RETURNED TO SENATE
  • 04 / Jan / 2012
    • REFERRED TO INSURANCE
  • 19 / Mar / 2012
    • 1ST REPORT CAL.372
  • 20 / Mar / 2012
    • 2ND REPORT CAL.
  • 21 / Mar / 2012
    • ADVANCED TO THIRD READING
  • 22 / Mar / 2012
    • PASSED SENATE
  • 22 / Mar / 2012
    • DELIVERED TO ASSEMBLY
  • 22 / Mar / 2012
    • REFERRED TO INSURANCE

Summary

Permits an insurer to rescind or retroactively cancel a policy in certain circumstances involving a staged or fraudulent accident.

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Bill Details

Versions:
S4507
S4507A
S4507B
Legislative Cycle:
2011-2012
Current Committee:
Assembly Insurance
Law Section:
Insurance Law
Laws Affected:
Add ยง3455, Ins L
Versions Introduced in 2011-2012 Legislative Cycle:
A6346B

Votes

13
2
13
Aye
2
Nay
3
aye with reservations
0
absent
0
excused
0
abstained
show Insurance committee vote details

Sponsor Memo

BILL NUMBER:S4507

TITLE OF BILL:
An act
to amend the insurance law, in relation to permitting an insurer to
rescind or retroactively cancel a policy in certain circumstances

PURPOSE:
Remove incentive for staged and caused automobile insurance
accidents, by allowing for retroactive cancellation of newly issued
insurance private passenger and automobile insurance policies.

SUMMARY OF SPECIFIC PROVISIONS:
Adds a new section 3455 to the insurance law.

Subsection A provides insurance companies the ability to cancel a
policy to its inception due to non-sufficient funds, nonexistence of
a bank account, or the unauthorized use of the account.

Subsection B provides that a person injured during this period may
have recourse to his or her own policy or the motor vehicle accident
indemnification corporation, provided they were not participating in
any fraudulent activity.

JUSTIFICATION:
Automobile no-fault states have higher average
premiums than tort states. One of the reasons for this is that fraud
tends to be more prevalent in no-fault systems, as the rules under
which they are implemented make it relatively easy for bad actors to
submit fraudulent claims. Additionally, an accident can create a
multiplicity of lawsuits, since providers and collection attorneys
may initiate a lawsuit for each and every bill. New York's generous
no-fault benefits, with minimal oversight, provide huge incentives
for unbundling of services and supplies.

Staged accidents are one type of fraudulent claim that is becoming
more and more prevalent in New York. Staged accidents begin with bad
actors procuring an automobile insurance policy with the intent of
submitting a fraudulent claim.
In many cases, they procure a policy by submitting a bad payment
(either using a nonexistent bank account or stolen credit card
information). Most states allow the retroactive cancellation of a
policy in the case of a reversed payment to prevent this type of
activity. New York, however, does not permit retroactive
cancellations; rather cancellations are currently only prospective in
nature. That turns into a gold mine where no-fault is involved. The
time between the policy is "purchased" to the time it is cancelled
provides ample opportunity for no-fault fraud.

This bill allows for retroactive cancellation in New York of newly
issued automobile insurance policies to prevent this type of fraud.
This would bring New York in line with the other large no-fault
states. In fact, only seven other states (AZ, CO, KS, ME, MD, NC and
SD) do not allow for retroactive cancellation. Innocent victims of
uninsured drivers (i.e.


mandatory uninsured motorist coverage), would be covered under their
own policy or the Motor Vehicle Accident Indemnification Corporation.

The proposal would allow retroactive cancellation of the automobile
policy, in the first sixty days, where the payment is made with
insufficient funds or the identity used to procure the policy turns
out to be fraudulent. The automobile insurer would be allowed to
cancel a policy retroactively in these cases.

By permitting retroactive cancellations, New York would join the great
majority of other states, and would remove many of the incentives for
staged accidents.

PRIOR LEGISLATIVE HISTORY:
New Bill.

FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
Immediately.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  4507

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                              April 8, 2011
                               ___________

Introduced  by  Sen.  GOLDEN -- read twice and ordered printed, and when
  printed to be committed to the Committee on Insurance

AN ACT to amend the insurance law, in relation to permitting an  insurer
  to rescind or retroactively cancel a policy in certain circumstances

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. The insurance law is amended by adding a new  section  3455
to read as follows:
  S  3455.  CANCELLATION OF POLICY. (A) NOTWITHSTANDING ANY RULE, LAW OR
REGULATION TO THE CONTRARY, AN  INSURER  MAY  RESCIND  OR  RETROACTIVELY
CANCEL  TO  THE  INCEPTION  OF THE POLICY, A NEWLY ISSUED COVERED POLICY
SUBJECT TO SUBSECTION (A) OF SECTION THREE THOUSAND FOUR  HUNDRED  TWEN-
TY-FIVE  OF  THIS CHAPTER OR A NEWLY ISSUED COMMERCIAL AUTOMOBILE INSUR-
ANCE POLICY SUBJECT TO SECTION THREE THOUSAND FOUR HUNDRED TWENTY-SIX OF
THIS CHAPTER, IF THE INITIAL PREMIUM PAYMENT IS NOT HONORED BY A  FINAN-
CIAL INSTITUTION DUE TO NON-SUFFICIENT FUNDS, THE NONEXISTENCE OF A BANK
ACCOUNT OR THE UNAUTHORIZED USE OF THE ACCOUNT.
  (B)  A  PERSON  WHO IS INJURED DURING THIS PERIOD MAY HAVE RECOURSE TO
HIS OR HER OWN POLICY, OR THE  MOTOR  VEHICLE  ACCIDENT  INDEMNIFICATION
CORPORATION,  PROVIDED SUCH PERSON DID NOT PARTICIPATE IN ANY FRAUDULENT
ACTIVITY, INCLUDING, BUT NOT LIMITED TO, A STAGED  OR  CAUSED  ACCIDENT.
THE MOTOR VEHICLE ACCIDENT INDEMNIFICATION CORPORATION MAY NOT SUBROGATE
ITS CLAIM AGAINST THE RESCINDING INSURER.
  S 2. This act shall take effect immediately.



 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD09930-04-1

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