senate Bill S2544

Relates to unfair claim settlement practices

download pdf

Sponsor

Co-Sponsors

view all co-sponsors

Bill Status


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

actions

  • 18 / Jan / 2013
    • REFERRED TO INSURANCE
  • 08 / Jan / 2014
    • REFERRED TO INSURANCE

Summary

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.

do you support this bill?

Bill Details

See Assembly Version of this Bill:
A3305
Versions:
S2544
Legislative Cycle:
2013-2014
Current Committee:
Senate Insurance
Law Section:
Insurance Law
Laws Affected:
Add §2601-a, Ins L
Versions Introduced in Previous Legislative Cycles:
2011-2012: S4735, A5589
2009-2010: A6709
2007-2008: A10307

Sponsor Memo

BILL NUMBER:S2544

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
justified.

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;
or

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-
ered.

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-
fied.

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.

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

                                  2544

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                            January 18, 2013
                               ___________

Introduced  by  Sen.  DeFRANCISCO -- 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 unfair  claim  settle-
  ment practices

  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 2601-a
to read as follows:
  S 2601-A. UNFAIR CLAIM SETTLEMENT  PRACTICES;  CIVIL  REMEDY.  (A)  AN
INSURER  DOING BUSINESS IN THIS STATE SHALL BE LIABLE TO THE HOLDER OF A
POLICY ISSUED OR RENEWED PURSUANT TO ARTICLE THIRTY-FOUR OF THIS CHAPTER
FOR DAMAGES AS PROVIDED IN THIS SECTION UPON SUCH POLICY HOLDER  PROVING
BY A PREPONDERANCE OF THE EVIDENCE THAT SUCH INSURER'S REFUSAL TO PAY OR
UNREASONABLE DELAY IN PAYMENT TO THE POLICY HOLDER OF AMOUNTS CLAIMED TO
BE  DUE  UNDER  A POLICY WAS NOT SUBSTANTIALLY JUSTIFIED.  AN INSURER IS
NOT SUBSTANTIALLY JUSTIFIED IN REFUSING TO PAY OR IN UNREASONABLY DELAY-
ING PAYMENT WHEN THE INSURER:
  (1) INTENTIONALLY, RECKLESSLY OR BY GROSS NEGLIGENCE FAILED TO PROVIDE
THE POLICY HOLDER WITH ACCURATE INFORMATION CONCERNING POLICY PROVISIONS
RELATING TO THE COVERAGE AT ISSUE;
  (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;
  (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;
  (4) FAILED TO MAKE A FINAL DETERMINATION AND NOTIFY THE POLICY  HOLDER
IN  WRITING  OF  ITS  POSITION  ON BOTH 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;
OR

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD07431-01-3

S. 2544                             2

  (5) FAILED TO ACT IN GOOD FAITH BY COMPELLING POLICY HOLDER TO  INSTI-
TUTE  SUIT  TO RECOVER AMOUNTS DUE UNDER ITS POLICY BY OFFERING SUBSTAN-
TIALLY LESS THAN THE AMOUNTS ULTIMATELY RECOVERED  IN  SUIT  BROUGHT  BY
SUCH POLICY HOLDER.
  (B) ANY POLICY HOLDER WHO ESTABLISHES LIABILITY PURSUANT TO SUBSECTION
(A) OF THIS SECTION SHALL BE ENTITLED TO RECOVER, IN ADDITION TO AMOUNTS
DUE  UNDER  THE POLICY, INTEREST, COSTS, AND DISBURSEMENTS, COMPENSATORY
DAMAGES AND REASONABLE ATTORNEYS' FEES INCURRED  BY  THE  POLICY  HOLDER
FROM  THE  DATE  OF  THE  LOSS, IN RECOVERING MONIES DUE PURSUANT TO THE
TERMS OF THE POLICY.
  (C) ANY POLICY HOLDER MAY RECOVER DAMAGES FROM AN INSURER DOING  BUSI-
NESS  IN THIS STATE PURSUANT TO THIS SECTION EITHER AS PART OF AN ACTION
TO RECOVER UNDER THE TERMS OF AN  INSURANCE  POLICY  OR  IN  A  SEPARATE
ACTION.
  (D)  IN  ANY  TRIAL  OF  A CAUSE OF ACTION ASSERTED AGAINST AN INSURER
PURSUANT TO THIS SECTION, EVIDENCE OF SETTLEMENT DISCUSSIONS WRITTEN AND
VERBAL OFFERS TO COMPROMISE AND OTHER EVIDENCE RELATING  TO  THE  CLAIMS
PROCESS  SHALL  BE ADMISSIBLE. IF CAUSES OF ACTION RELATING TO LIABILITY
OF THE INSURER UNDER THE POLICY AND UNDER THIS SECTION  ARE  ALLEGED  IN
THE  SAME  ACTION,  THE COURT MAY BIFURCATE THE TRIAL OF ISSUES SO AS TO
AVOID PREJUDICE TO THE INSURER ON THE ISSUE OF LIABILITY UNDER THE POLI-
CY AND FACILITATE ADMISSIBILITY OF EVIDENCE  ON  THE  CAUSES  OF  ACTION
ASSERTED PURSUANT TO THIS SECTION.
  (E)  ALL  AMOUNTS  RECOVERED  FROM  AN  INSURER  AS ACTUAL DAMAGES AND
REASONABLE ATTORNEYS' FEES IN ANY  ACTION  AUTHORIZED  IN  THIS  SECTION
SHALL  BE  EXCLUDED BY THE INSURER IN ITS DETERMINATIONS OF THE PREMIUMS
IT WILL CHARGE ALL POLICY HOLDERS ON ALL POLICIES ISSUED BY IT.
  S 2. This act shall take effect on the first of January next  succeed-
ing the date on which it shall have become a law, and shall apply to all
acts  and  omissions  by  insurers  occurring on or after such effective
date.

Comments

Open Legislation comments facilitate discussion of New York State legislation. All comments are subject to moderation. Comments deemed off-topic, commercial, campaign-related, self-promotional; or that contain profanity or hate speech; or that link to sites outside of the nysenate.gov domain are not permitted, and will not be published. Comment moderation is generally performed Monday through Friday.

By contributing or voting you agree to the Terms of Participation and verify you are over 13.