senate Bill S4507B

2011-2012 Legislative Session

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

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Sponsored By

Archive: Last Bill Status - Passed Senate


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

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Actions

view actions (18)
Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Mar 22, 2012 referred to insurance
delivered to assembly
passed senate
Mar 21, 2012 advanced to third reading
Mar 20, 2012 2nd report cal.
Mar 19, 2012 1st report cal.372
Jan 04, 2012 referred to insurance
returned to senate
died in assembly
Jun 20, 2011 referred to insurance
delivered to assembly
passed senate
Jun 14, 2011 amended on third reading 4507b
Jun 13, 2011 amended on third reading (t) 4507a
May 11, 2011 advanced to third reading
May 10, 2011 2nd report cal.
May 09, 2011 1st report cal.553
Apr 08, 2011 referred to insurance

Votes

view votes

Mar 19, 2012 - Insurance committee Vote

S4507B
17
1
committee
17
Aye
1
Nay
0
Aye with Reservations
0
Absent
0
Excused
0
Abstained
show Insurance committee vote details

May 9, 2011 - Insurance committee Vote

S4507
13
2
committee
13
Aye
2
Nay
3
Aye with Reservations
0
Absent
0
Excused
0
Abstained
show committee vote details

Bill Amendments

Original
A
B (Active)
Original
A
B (Active)

Co-Sponsors

S4507 - Bill Details

Current Committee:
Law Section:
Insurance Law
Laws Affected:
Add §3455, amd §§3420 & 5103, Ins L; amd §313, V & T L
Versions Introduced in 2011-2012 Legislative Session:
A6346B

S4507 - Bill Texts

view summary

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

view 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 full text
download pdf
                    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

Co-Sponsors

S4507A - Bill Details

Current Committee:
Law Section:
Insurance Law
Laws Affected:
Add §3455, amd §§3420 & 5103, Ins L; amd §313, V & T L
Versions Introduced in 2011-2012 Legislative Session:
A6346B

S4507A - Bill Texts

view summary

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

view sponsor memo
BILL NUMBER:S4507A

TITLE OF BILL:
An act to amend the insurance law and the vehicle and traffic 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, amend sections 3420 and
5103 of the insurance law, and amend section 313 of the vehicle and
traffic.

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.

Also 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 full text
download pdf
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 4507--A
    Cal. No. 553

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                              April 8, 2011
                               ___________

Introduced  by  Sens.  GOLDEN, SEWARD -- read twice and ordered printed,
  and when printed to be committed to  the  Committee  on  Insurance  --
  reported  favorably  from  said committee, ordered to first and second
  report, ordered to a third reading,  amended  and  ordered  reprinted,
  retaining its place in the order of third reading

AN  ACT  to  amend the insurance law and the vehicle and traffic 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) AN INSURER MAY, WITHIN  THE  FIRST
SIXTY  DAYS,  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 TWENTY-FIVE OF THIS ARTICLE OR A
NEWLY ISSUED COMMERCIAL AUTOMOBILE INSURANCE POLICY SUBJECT  TO  SECTION
THREE  THOUSAND  FOUR HUNDRED TWENTY-SIX OF THIS ARTICLE, IF THE INITIAL
PREMIUM PAYMENT IS  NOT  HONORED  BY  A  FINANCIAL  INSTITUTION  DUE  TO
NON-SUFFICIENT  FUNDS,  THE  NONEXISTENCE OF A BANK ACCOUNT OR THE UNAU-
THORIZED USE OF THE ACCOUNT.  IN THE EVENT THAT SUCH INITIAL PAYMENT  IS
NOT HONORED BY A FINANCIAL INSTITUTION DUE TO NON-SUFFICIENT FUNDS IN AN
EXISTING ACCOUNT THAT THE POLICYHOLDER IS AUTHORIZED TO USE, THE INSURER
SHALL  NOTIFY  THE  POLICYHOLDER  THAT  UNLESS THE POLICYHOLDER REMITS A
CHECK CERTIFIED PURSUANT TO SECTION  3-411  OF  THE  UNIFORM  COMMERCIAL
CODE,  ALONG  WITH  ANY  FEES  ACCESSED FOR NON-SUFFICIENT FUNDS, TO THE
INSURER WITHIN TEN DAYS,  THE  POLICY  MAY  BE  RESCINDED  OR  CANCELLED
RETROACTIVELY TO THE INCEPTION OF THE POLICY.
  (B)  A PERSON WHO IS INJURED DURING THIS PERIOD SHALL HAVE RECOURSE TO
HIS OR HER OWN POLICY, SUBJECT  TO  THE  TERMS  AND  CONDITIONS  OF  THE
CONTRACT,  OR  THE  MOTOR  VEHICLE ACCIDENT INDEMNIFICATION CORPORATION,

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD09930-09-1

S. 4507--A                          2

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.  Paragraph  2 of subsection (d) of section 3420 of the insurance
law, as amended by chapter 388 of the laws of 2008, is amended  to  read
as follows:
  (2)  If under a liability policy issued or delivered in this state, an
insurer shall disclaim liability [or], deny coverage, OR RESCIND  COVER-
AGE  PURSUANT  TO SECTION THREE THOUSAND FOUR HUNDRED FIFTY-FIVE OF THIS
ARTICLE, for death or bodily injury arising out of a motor vehicle acci-
dent, INCLUDING ANY CLAIM  FOR  PERSONAL  INJURIES  UNDER  AN  UNINSURED
MOTORIST  ENDORSEMENT  BY  ANY OCCUPANT OF A MOTOR VEHICLE INVOLVED IN A
STAGED OR ARRANGED ACCIDENT WHO IS WITHOUT KNOWLEDGE OF THE  STAGING  OR
ARRANGING OF THE ACCIDENT, or any other type of accident occurring with-
in  this  state,  it  shall give written notice as soon as is reasonably
possible of such disclaimer of liability or denial of  coverage  to  the
insured and the injured person or any other claimant.
  S  3.  Paragraph  1 of subsection (f) of section 3420 of the insurance
law, as amended by chapter 305 of the laws of 1995, is amended  to  read
as follows:
  (1)  No  policy insuring against loss resulting from liability imposed
by law for bodily injury or death suffered by any natural person arising
out of the ownership, maintenance and use of  a  motor  vehicle  by  the
insured  shall be issued or delivered by any authorized insurer upon any
motor vehicle then principally garaged or principally used in this state
unless it contains a provision whereby the insurer agrees that  it  will
pay  to  the insured, as defined in such provision, subject to the terms
and conditions set forth therein to be prescribed by the board of direc-
tors of the  Motor  Vehicle  Accident  Indemnification  Corporation  and
approved by the superintendent, all sums, not exceeding a maximum amount
or  limit  of  twenty-five  thousand  dollars  exclusive of interest and
costs, on account of injury to and all sums,  not  exceeding  a  maximum
amount  or  limit  of  fifty  thousand dollars exclusive of interest and
costs, on account of death of one person, in any one accident,  and  the
maximum  amount  or  limit,  subject to such limit for any one person so
injured of fifty thousand dollars or so killed of one  hundred  thousand
dollars,  exclusive  of  interest and costs, on account of injury to, or
death of, more than one person in any one accident, which the insured or
his legal representative shall be entitled to recover as damages from an
owner or operator of an  uninsured  motor  vehicle,  unidentified  motor
vehicle  which  leaves  the scene of an accident, a motor vehicle regis-
tered in this state as to which at the time of the  accident  there  was
not in effect a policy of liability insurance, A MOTOR VEHICLE FOR WHICH
THE  POLICY  OF  INSURANCE  HAS  BEEN RESCINDED OR CANCELLED PURSUANT TO
SECTION THREE THOUSAND FOUR HUNDRED FIFTY-FIVE OF THIS ARTICLE, a stolen
vehicle, A MOTOR VEHICLE INVOLVED IN AN  INTENTIONAL  FRAUDULENT  STAGED
ACCIDENT, EXCEPT SUCH VEHICLE OR THOSE VEHICLES OWNED AND/OR OPERATED BY
THE  PERPETRATOR  OR  PERPETRATORS  OF THE INTENTIONAL FRAUDULENT STAGED
ACCIDENT, a motor vehicle operated without permission of the  owner,  an
insured  motor  vehicle  where the insurer disclaims liability or denies
coverage or an unregistered vehicle because of bodily  injury,  sickness
or  disease,  including  death  resulting  therefrom,  sustained  by the
insured, caused by accident occurring in this state and arising  out  of
the  ownership, maintenance or use of such motor vehicle. No payment for
non-economic loss shall be made under such policy provision to a covered

S. 4507--A                          3

person unless such person has incurred a serious injury, as  such  terms
are  defined  in  section five thousand one hundred two of this chapter.
Such policy shall not duplicate  any  element  of  basic  economic  loss
provided  for  under  article  fifty-one of this chapter. No payments of
first party benefits for basic economic loss made pursuant to such arti-
cle shall diminish the obligations of  the  insurer  under  this  policy
provision  for  the  payment  of  non-economic loss and economic loss in
excess  of  basic  economic  loss.  Notwithstanding   any   inconsistent
provisions  of  section  three thousand four hundred twenty-five of this
article, any such policy which does not contain the aforesaid provisions
shall be construed as if such provisions were embodied therein.
  S 4. Paragraph 1 of subsection (b) of section 5103  of  the  insurance
law is amended to read as follows:
  (1)  Intentionally  causes  his  own  injury, EXCEPT ANY OCCUPANT OF A
MOTOR VEHICLE INVOLVED IN A STAGED OR ARRANGED ACCIDENT WHO  IS  WITHOUT
KNOWLEDGE OF THE STAGING OR ARRANGING OF THE ACCIDENT.
  S  5.  Paragraph  2 of subsection (a) of section 5103 of the insurance
law is amended to read as follows:
  (2) The named insured and members of his household, other  than  occu-
pants  of  a motorcycle, for loss arising out of the use or operation of
(i) an uninsured motor vehicle or motorcycle, OR A VEHICLE WHOSE  COVER-
AGE  IS  RESCINDED  OR CANCELLED PURSUANT TO SECTION THREE THOUSAND FOUR
HUNDRED FIFTY-FIVE OF THIS CHAPTER, within the United States, its terri-
tories or possessions, or Canada; and (ii) an insured motor  vehicle  or
motorcycle  outside  of  this  state  and  within the United States, its
territories or possessions, or Canada.
  S 6. Paragraph (a) of subdivision 1 of section 313 of the vehicle  and
traffic  law,  as amended by chapter 569 of the laws of 1981, is amended
to read as follows:
  (a) [No] EXCEPT AS PROVIDED FOR IN SECTION THREE THOUSAND FOUR HUNDRED
FIFTY-FIVE OF THE INSURANCE LAW, NO contract of insurance  for  which  a
certificate  of  insurance has been filed with the commissioner shall be
terminated by cancellation by the insurer until  at  least  twenty  days
after  mailing to the named insured at the address shown on the policy a
notice of termination by regular mail, with a  certificate  of  mailing,
properly endorsed by the postal service to be obtained, except where the
cancellation  is  for  non-payment of premium in which case fifteen days
notice of cancellation by the insurer  shall  be  sufficient,  provided,
however,  if  another  insurance  contract has been procured, such other
insurance contract shall, as of its effective date and  hour,  terminate
the  insurance  previously  in effect with respect to any motor vehicles
designated in both contracts. No  contract  of  insurance  for  which  a
certificate of insurance has been filed with the commissioner in which a
natural  person  is  the  named  insured  and  the motor vehicle is used
predominantly for non-business  purposes  shall  be  non-renewed  by  an
insurer  unless  at  least  forty-five,  but not more than sixty days in
advance of the renewal date the insurer mails or delivers to  the  named
insured  at  the  address  shown  on  the policy a written notice of its
intention not to renew. No such contract of insurance in which the named
insured is not a natural person or the motor vehicle  is  used  predomi-
nantly  for  business purposes shall be non-renewed by an insurer unless
at least twenty days in advance of the renewal date the insurer mails or
delivers to the named insured at the address shown on the policy a writ-
ten notice of its intention not to renew.  All  notices  of  non-renewal
shall  be  sent  by regular mail with a certificate of mailing, properly
endorsed by the postal service to be obtained.  Time  of  the  effective

S. 4507--A                          4

date  and  hour of termination stated in the notice shall become the end
of the policy period. Every notice or acknowledgement of termination for
any cause whatsoever sent to the insured shall include in type of  which
the  face  shall not be smaller than twelve point a statement that proof
of financial security is required to be maintained continuously through-
out the registration period and a notice prescribed by the  commissioner
indicating  the punitive effects of failure to maintain continuous proof
of financial security and actions which may be taken by the  insured  to
avoid such punitive effects.
  S 7. This act shall take effect immediately.

Co-Sponsors

S4507B (ACTIVE) - Bill Details

Current Committee:
Law Section:
Insurance Law
Laws Affected:
Add §3455, amd §§3420 & 5103, Ins L; amd §313, V & T L
Versions Introduced in 2011-2012 Legislative Session:
A6346B

S4507B (ACTIVE) - Bill Texts

view summary

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

view sponsor memo
BILL NUMBER:S4507B

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

PURPOSE OR GENERAL IDEA OF BILL:
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:
Section 1- Adds a new section 3455 to
the insurance law that: provides insurance companies the ability,
within the first 60 days, to rescind a policy to its inception due to
non-sufficient funds, non-existence 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.

Section 2-Amends Subsection (d) of section 3420 of the insurance law
to provides insurers the ability to rescind coverage pursuant to
section 3455 for death or bodily injury arising from an uninsured
motorist endorsement by any occupant of a motor vehicle involved in a
staged accident who is without knowledge of the staging or arranging
of the staged or arranged accident.

Section 3-Paragraph 1 of subsection (f) of Section 3420 of the
insurance law, as amended by chapter 305 of the laws of 1995, is
amended to add rescinded policies to the list of scenarios that a
driver would be insured against in the event of bodily injury or death.

Section 4-Subparagraph A subsection (f) of section 3420 of the
insurance law is amended to deal with supplementary
uninsured/underinsured coverage. Section 5- Section 5103 of the
insurance law is amended to address individuals who are involved in a
staged accident who is without knowledge of the staging or arranging
of the staged or arranged accident.

Section 6-subsection (2) of section 5103 of the insurance law is
amended to account for vehicles whose coverage has been rescinded or
cancelled.

Section 7-Paragraph (a) of subdivision 1 of section 313 of the
vehicle and traffic law is amended to exempt section 3455 of the
insurance law from the 20 day mailing notice to cancel an insurance
policy.

Section 8-this act shall take effect immediately.


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 full text
download pdf
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 4507--B
    Cal. No. 553

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                              April 8, 2011
                               ___________

Introduced  by  Sens.  GOLDEN, SEWARD -- read twice and ordered printed,
  and when printed to be committed to  the  Committee  on  Insurance  --
  reported  favorably  from  said committee, ordered to first and second
  report, ordered to a third reading,  amended  and  ordered  reprinted,
  retaining its place in the order of third reading -- again amended and
  ordered reprinted, retaining its place in the order of third reading

AN  ACT  to  amend the insurance law and the vehicle and traffic 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) AN INSURER MAY, WITHIN  THE  FIRST
SIXTY  DAYS,  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 TWENTY-FIVE OF THIS ARTICLE OR A
NEWLY ISSUED COMMERCIAL AUTOMOBILE INSURANCE POLICY SUBJECT  TO  SECTION
THREE  THOUSAND  FOUR HUNDRED TWENTY-SIX OF THIS ARTICLE, IF THE INITIAL
PREMIUM PAYMENT IS  NOT  HONORED  BY  A  FINANCIAL  INSTITUTION  DUE  TO
NON-SUFFICIENT  FUNDS,  THE  NONEXISTENCE OF A BANK ACCOUNT OR THE UNAU-
THORIZED USE OF THE ACCOUNT.  IN THE EVENT THAT SUCH INITIAL PAYMENT  IS
NOT HONORED BY A FINANCIAL INSTITUTION DUE TO NON-SUFFICIENT FUNDS IN AN
EXISTING ACCOUNT THAT THE POLICYHOLDER IS AUTHORIZED TO USE, THE INSURER
SHALL  NOTIFY  THE  POLICYHOLDER  THAT  UNLESS THE POLICYHOLDER REMITS A
CHECK CERTIFIED PURSUANT TO SECTION  3-411  OF  THE  UNIFORM  COMMERCIAL
CODE,  ALONG  WITH  ANY  FEES  ACCESSED FOR NON-SUFFICIENT FUNDS, TO THE
INSURER WITHIN TEN DAYS,  THE  POLICY  MAY  BE  RESCINDED  OR  CANCELLED
RETROACTIVELY TO THE INCEPTION OF THE POLICY.
  (B)  A PERSON WHO IS INJURED DURING THIS PERIOD SHALL HAVE RECOURSE TO
HIS OR HER OWN POLICY, SUBJECT  TO  THE  TERMS  AND  CONDITIONS  OF  THE

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD09930-12-1

S. 4507--B                          2

CONTRACT,  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.  Paragraph  2 of subsection (d) of section 3420 of the insurance
law, as amended by chapter 388 of the laws of 2008, is amended  to  read
as follows:
  (2)  If under a liability policy issued or delivered in this state, an
insurer shall disclaim liability [or], deny coverage, OR RESCIND  COVER-
AGE  PURSUANT  TO SECTION THREE THOUSAND FOUR HUNDRED FIFTY-FIVE OF THIS
ARTICLE, for death or bodily injury arising out of a motor vehicle acci-
dent, INCLUDING ANY CLAIM  FOR  PERSONAL  INJURIES  UNDER  AN  UNINSURED
MOTORIST  ENDORSEMENT BY ANY OCCUPANT OF A MOTOR VEHICLE OR OTHER PERSON
INVOLVED IN A STAGED OR ARRANGED ACCIDENT WHO IS  WITHOUT  KNOWLEDGE  OF
THE  STAGING OR ARRANGING OF THE ACCIDENT, or any other type of accident
occurring within this state, it shall give written notice as soon as  is
reasonably  possible of such disclaimer of liability or denial of cover-
age to the insured and the injured person or any other claimant.
  S 3. Paragraph 1 of subsection (f) of section 3420  of  the  insurance
law,  as  amended by chapter 305 of the laws of 1995, is amended to read
as follows:
  (1) No policy insuring against loss resulting from  liability  imposed
by law for bodily injury or death suffered by any natural person arising
out  of  the  ownership,  maintenance  and use of a motor vehicle by the
insured shall be issued or delivered by any authorized insurer upon  any
motor vehicle then principally garaged or principally used in this state
unless  it  contains a provision whereby the insurer agrees that it will
pay to the insured, as defined in such provision, subject to  the  terms
and conditions set forth therein to be prescribed by the board of direc-
tors  of  the  Motor  Vehicle  Accident  Indemnification Corporation and
approved by the superintendent, all sums, not exceeding a maximum amount
or limit of twenty-five  thousand  dollars  exclusive  of  interest  and
costs,  on  account  of  injury to and all sums, not exceeding a maximum
amount or limit of fifty thousand  dollars  exclusive  of  interest  and
costs,  on  account of death of one person, in any one accident, and the
maximum amount or limit, subject to such limit for  any  one  person  so
injured  of  fifty thousand dollars or so killed of one hundred thousand
dollars, exclusive of interest and costs, on account of  injury  to,  or
death of, more than one person in any one accident, which the insured or
his legal representative shall be entitled to recover as damages from an
owner  or  operator  of  an  uninsured motor vehicle, unidentified motor
vehicle which leaves the scene of an accident, a  motor  vehicle  regis-
tered  in  this  state as to which at the time of the accident there was
not in effect a policy of liability insurance, A MOTOR VEHICLE FOR WHICH
THE POLICY OF INSURANCE HAS BEEN  RESCINDED  OR  CANCELLED  PURSUANT  TO
SECTION THREE THOUSAND FOUR HUNDRED FIFTY-FIVE OF THIS ARTICLE, a stolen
vehicle,  A  MOTOR  VEHICLE INVOLVED IN AN INTENTIONAL AND/OR FRAUDULENT
AND/OR STAGED ACCIDENT, EXCEPT SUCH  VEHICLE  OR  THOSE  VEHICLES  OWNED
AND/OR  OPERATED  BY  THE PERPETRATOR OR PERPETRATORS OF THE INTENTIONAL
AND/OR FRAUDULENT AND/OR STAGED ACCIDENT, a motor vehicle operated with-
out permission of the owner, an insured motor vehicle where the  insurer
disclaims  liability  or  denies  coverage  or  an  unregistered vehicle
because of bodily injury, sickness or disease, including death resulting
therefrom, sustained by the insured, caused  by  accident  occurring  in
this  state and arising out of the ownership, maintenance or use of such

S. 4507--B                          3

motor vehicle. No payment for non-economic loss shall be made under such
policy provision to a covered person unless such person has  incurred  a
serious  injury,  as such terms are defined in section five thousand one
hundred two of this chapter. Such policy shall not duplicate any element
of  basic  economic  loss  provided  for under article fifty-one of this
chapter. No payments of first party benefits  for  basic  economic  loss
made  pursuant  to  such  article  shall diminish the obligations of the
insurer under this policy provision for the payment of non-economic loss
and economic loss in excess of basic economic loss. Notwithstanding  any
inconsistent  provisions  of section three thousand four hundred twenty-
five of this article, any such policy which does not contain the  afore-
said  provisions  shall be construed as if such provisions were embodied
therein.
  S 4. Subparagraph (A) of paragraph 2 of subsection (f) of section 3420
of the insurance law, as separately amended by chapters 547 and  568  of
the laws of 1997, is amended to read as follows:
  (A)  Any such policy shall, at the option of the insured, also provide
supplementary  uninsured/underinsured  motorists  insurance  for  bodily
injury,  in an amount up to the bodily injury liability insurance limits
of coverage provided under such policy, subject  to  a  maximum  of  two
hundred  fifty  thousand dollars because of bodily injury to or death of
one person in any one accident  and,  subject  to  such  limit  for  one
person,  up to five hundred thousand dollars because of bodily injury to
or death of two or more persons in  any  one  accident,  or  a  combined
single  limit  policy of five hundred thousand dollars because of bodily
injury to or death of one or more persons in any one accident.  Provided
however,  an  insurer  issuing  such  policy, in lieu of offering to the
insured  the  coverages  stated   above,   may   provide   supplementary
uninsured/underinsured  motorists  insurance  for  bodily  injury, in an
amount up to the bodily injury liability insurance  limits  of  coverage
provided under such policy, subject to a maximum of one hundred thousand
dollars  because  of  bodily injury to or death of one person in any one
accident and, subject to such limit for one person, up to three  hundred
thousand  dollars  because  of  bodily injury to or death of two or more
persons in any one accident, or a combined single limit policy of  three
hundred  thousand dollars because of bodily injury to or death of one or
more persons in any one accident, if such insurer also makes available a
personal umbrella policy with liability coverage limits up to  at  least
five  hundred  thousand dollars which also provides coverage for supple-
mentary   uninsured/underinsured   motorists    claims.    Supplementary
uninsured/underinsured  motorists  insurance  shall provide coverage, in
any state or Canadian province, if the limits  of  liability  under  all
bodily  injury  liability  bonds and insurance policies of another motor
vehicle liable for damages INCLUDING BUT NOT LIMITED TO  A  VEHICLE  FOR
WHICH  THE  POLICY OF INSURANCE HAS BEEN RESCINDED OR CANCELLED PURSUANT
TO SECTION THREE THOUSAND FOUR HUNDRED FIFTY-FIVE  OF  THIS  ARTICLE,  A
MOTOR VEHICLE INVOLVED IN AN INTENTIONAL AND/OR FRAUDULENT AND/OR STAGED
ACCIDENT, EXCEPT THAT VEHICLE OR THOSE VEHICLES OWNED AND/OR OPERATED BY
THE  PERPETRATOR  OR  PERPETRATORS  OF THE INTENTIONAL AND/OR FRAUDULENT
AND/OR STAGED ACCIDENT, are in a lesser amount than  the  bodily  injury
liability  insurance  limits  of  coverage provided by such policy. Upon
written   request   by   any    insured    covered    by    supplemental
uninsured/underinsured motorists insurance or his duly authorized repre-
sentative  and  upon  disclosure  by the insured of the insured's bodily
injury  and  supplemental  uninsured/underinsured  motorists   insurance
coverage  limits,  the insurer of any other owner or operator of another

S. 4507--B                          4

motor vehicle against which a claim has been made  for  damages  to  the
insured shall disclose, within forty-five days of the request, the bodi-
ly  injury liability insurance limits of its coverage provided under the
policy  or all bodily injury liability bonds. The time of the insured to
make any supplementary uninsured/underinsured motorist claim,  shall  be
tolled  during  the period the insurer of any other owner or operator of
another motor vehicle that may be liable for  damages  to  the  insured,
fails to so disclose its coverage. As a condition precedent to the obli-
gation    of    the    insurer    to   pay   under   the   supplementary
uninsured/underinsured  motorists  insurance  coverage,  the  limits  of
liability  of  all  bodily  injury liability bonds or insurance policies
applicable at the time of the accident shall be exhausted by payment  of
judgments or settlements.
  S  5.  Paragraph  1 of subsection (b) of section 5103 of the insurance
law is amended to read as follows:
  (1) Intentionally causes his own injury,  EXCEPT  ANY  OCCUPANT  OF  A
MOTOR  VEHICLE  OR OTHER PERSON INVOLVED IN AN INTENTIONAL AND/OR STAGED
AND/OR FRAUDULENT ACCIDENT WHO IS WITHOUT KNOWLEDGE OF  THE  STAGING  OR
ARRANGING OF THE ACCIDENT.
  S  6.  Paragraph  2 of subsection (a) of section 5103 of the insurance
law is amended to read as follows:
  (2) The named insured and members of his household, other  than  occu-
pants  of  a motorcycle, for loss arising out of the use or operation of
(i) an uninsured motor vehicle or motorcycle, OR A VEHICLE WHOSE  COVER-
AGE  IS  RESCINDED  OR CANCELLED PURSUANT TO SECTION THREE THOUSAND FOUR
HUNDRED FIFTY-FIVE OF THIS CHAPTER, within the United States, its terri-
tories or possessions, or Canada; and (ii) an insured motor  vehicle  or
motorcycle  outside  of  this  state  and  within the United States, its
territories or possessions, or Canada.
  S 7. Paragraph (a) of subdivision 1 of section 313 of the vehicle  and
traffic  law,  as amended by chapter 569 of the laws of 1981, is amended
to read as follows:
  (a) [No] EXCEPT AS PROVIDED FOR IN SECTION THREE THOUSAND FOUR HUNDRED
FIFTY-FIVE OF THE INSURANCE LAW, NO contract of insurance  for  which  a
certificate  of  insurance has been filed with the commissioner shall be
terminated by cancellation by the insurer until  at  least  twenty  days
after  mailing to the named insured at the address shown on the policy a
notice of termination by regular mail, with a  certificate  of  mailing,
properly endorsed by the postal service to be obtained, except where the
cancellation  is  for  non-payment of premium in which case fifteen days
notice of cancellation by the insurer  shall  be  sufficient,  provided,
however,  if  another  insurance  contract has been procured, such other
insurance contract shall, as of its effective date and  hour,  terminate
the  insurance  previously  in effect with respect to any motor vehicles
designated in both contracts. No  contract  of  insurance  for  which  a
certificate of insurance has been filed with the commissioner in which a
natural  person  is  the  named  insured  and  the motor vehicle is used
predominantly for non-business  purposes  shall  be  non-renewed  by  an
insurer  unless  at  least  forty-five,  but not more than sixty days in
advance of the renewal date the insurer mails or delivers to  the  named
insured  at  the  address  shown  on  the policy a written notice of its
intention not to renew. No such contract of insurance in which the named
insured is not a natural person or the motor vehicle  is  used  predomi-
nantly  for  business purposes shall be non-renewed by an insurer unless
at least twenty days in advance of the renewal date the insurer mails or
delivers to the named insured at the address shown on the policy a writ-

S. 4507--B                          5

ten notice of its intention not to renew.  All  notices  of  non-renewal
shall  be  sent  by regular mail with a certificate of mailing, properly
endorsed by the postal service to be obtained.  Time  of  the  effective
date  and  hour of termination stated in the notice shall become the end
of the policy period. Every notice or acknowledgement of termination for
any cause whatsoever sent to the insured shall include in type of  which
the  face  shall not be smaller than twelve point a statement that proof
of financial security is required to be maintained continuously through-
out the registration period and a notice prescribed by the  commissioner
indicating  the punitive effects of failure to maintain continuous proof
of financial security and actions which may be taken by the  insured  to
avoid such punitive effects.
  S 8. This act shall take effect immediately.

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