senate Bill S2544
(R, C, IP) 50th Senate District
- In Committee
- On Floor Calendar
- Passed Senate
- Passed Assembly
- Delivered to Governor
- Signed/Vetoed by Governor
Provides that an insurer doing business in this state shall be liable to a policy holder for such insurer's refusal to pay or unreasonable delay of payment to the policy holder if such refusal or delay was not substantially justified; enumerates instances whereby an insurer's refusal or delay of payment is not substantially justified including intentional negligence, failure to act in good faith, failure to provide written denial of claim and failure to make final determination of claim within six months.
TITLE OF BILL: An act to amend the insurance law, in relation to unfair
claim settlement practices
PURPOSE: To allow holders of property and casualty insurance policies
to recover damages when an insurance company's refusal to pay or unrea-
sonable delay in paying a claim was not substantially justified.
SUMMARY OF PROVISIONS: This bill provides that an insurer doing busi-
ness in this state shall be liable to a holder of property and casualty
insurance policy for damages upon such policy holder proving that such
insurer's refusal to pay or unreasonable delay in payment to the policy
holder of amounts claimed to be due there under was not substantially
An insurer would not be substantially justified in refusing to pay or in
unreasonably delaying payment when:
1. Intentionally, recklessly or by gross negligence failed to provide
the policy holder with accurate information concerning policy provision
relating to coverage at issue; or
2. Failed to effectuate, in good faith, a prompt, fair and equitable
settlement of a claim submitted by such policy holder in which liability
of such insurer to such policy holder was reasonably clear; or
3. Failed to provide a written denial of a policy holder's claim with a
full and complete explanation of such denial, including references to
specific policy provisions wherever possible; or
4. Failed to make a final determination and notify the policy holder in
writing of its position on both the liability for, and the insurer's
valuation of, a claim within six months of the date on which it received
actual or constructive notice of the loss upon which the claim is based;
5. Failed to act in good faith by compelling the policy holder to initi-
ate a lawsuit to recover under the policy by offering substantially less
than the amounts ultimately recovered in the suit by the policy holder.
Any policy holder who establishes liability shall be entitled to
recover, in addition to amounts due under the policy, interest, costs,
and disbursements, compensatory damages and reasonable attorneys fees.
Finally, there are procedural rules established to insure that the
insurer receives a fair trial on the issue of liability under the terms
of the policy before the issue of substantial justification is consid-
JUSTIFICATION: Existing law provides a code of conduct for insurers in
this state. Insurance Law Section 2601 now provides that no insurer in
this state shall engage in five enumerated unfair claims settlement
practices. Yet, only the Superintendent of Insurance can enforce these
provisions against the company. The holders of property and casualty
insurance policies who have incurred substantial costs in obtaining
reimbursement under the policy terms have no remedy. Any doubt about
this unfortunate state of the law was removed by the Court of Appeals in
its 1994 decision in ROCANOVA V. EQUITABLE LIFE, 83 NY2nd 603 (1984).
"The law of this State does not currently recognize a private cause of
action under Insurance Law § 2601... To the extent that a variety of
appellate division decisions hold otherwise, they are not to be
followed". ROCANOVA V. EQUITABLE LIFE, 83 NY2d at 614-515. (emphasis
added). Citizens of this state who pay insurance premiums should expect
insurers to live up to their policy obligations.
Under existing statutes and case law, an insurer can simply refuse to
pay a claim or offer an amount well below the value of the loss with
impunity. SEE E.G. LTS CONTRACTORS V. HARTFORD INS., 99 AD2d 644 (4111
Dept. 1984) no remedy for unreasonable delay in payment; UNILAND DEV. V.
HOME INS., 97 AD2d 973 (4th Dept. 1983) no remedy for intentional
refusal to pay. Even if the policy holder sues and wins the full amount
of the claim, he or she loses because of the costs and counsel fees
associated with bringing the successful action. This fact gives insurers
a terribly unfair advantage in negotiating a settlement of any claim
because of the ability of the insurers to financially bear the burden of
litigation which the ordinary citizen cannot afford to do.
The Superintendent of Insurance regulates the industry within the
constraints of available resources. Each citizen should be entitled to
prove his or her claim in court when an insurer takes a position in
settling a claim which is found not to have been substantially justi-
LEGISLATIVE HISTORY: S.486-A of 1997-98; S.545 of 1999-00; S.577 of
2001-02; S.1486-A of 2003-04; S.51 of 2005-06; S.1269/A.10307 of 2007-
08; S.4735/A.5589 of 2011-2012
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: January 1st next succeeding the date on which it shall
have become a law.
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