senate Bill S1959A

2013-2014 Legislative Session

Permits an insurer to rescind or retroactively cancel a policy in circumstance involving an accident staged to defraud an insurer

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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

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Mar 24, 2014 referred to insurance
delivered to assembly
passed senate
Feb 26, 2014 advanced to third reading
Feb 11, 2014 2nd report cal.
Feb 10, 2014 1st report cal.147
Jan 08, 2014 referred to insurance
returned to senate
died in assembly
May 08, 2013 referred to insurance
delivered to assembly
passed senate
Feb 27, 2013 advanced to third reading
Feb 12, 2013 2nd report cal.
amended 1959a
Feb 11, 2013 1st report cal.52
Jan 09, 2013 referred to insurance

Votes

view votes

Feb 10, 2014 - Insurance committee Vote

S1959A
18
0
committee
18
Aye
0
Nay
1
Aye with Reservations
0
Absent
0
Excused
0
Abstained
show Insurance committee vote details

Feb 11, 2013 - Insurance committee Vote

S1959
19
0
committee
19
Aye
0
Nay
0
Aye with Reservations
0
Absent
0
Excused
0
Abstained
show committee vote details

Bill Amendments

Original
A (Active)
Original
A (Active)

S1959 - Bill Details

See Assembly Version of this Bill:
A3774A
Current Committee:
Law Section:
Insurance Law
Laws Affected:
Add §3455, amd §§3420, 5103 & 5201, Ins L; amd §313, V & T L
Versions Introduced in 2011-2012 Legislative Session:
S7746

S1959 - Bill Texts

view summary

Permits an insurer to rescind or retroactively cancel a policy in circumstance involving an accident staged to defraud an insurer.

view sponsor memo
BILL NUMBER:S1959 REVISED 1/16/13

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 retroac-
tively cancel a policy in certain circumstances

PURPOSE: The purpose of this bill is to remove the 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 PROVISIONS:

Section 1- Adds a new section 3455 to the insurance law that: provides
insurance companies the ability, within the first 30 days, to rescind a
policy to its inception due to 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 indemni-
fication corporation, provided they were not participating in any frau-
dulent 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 cover-
age.

Section 5-Section 5103 of the insurance law is amended to address indi-
viduals 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-sets forth in the Motor Vehicle Insurance Indemnification Law
coverage for innocent victims of staged accidents.

EXISTING LAW: Subsection (d) of section 3420 of the Insurance Law,
Subsection (2) of Section 5103 of the Insurance Law, and Paragraph (a)
of Subdivision 1 of Section 313 of the Vehicle and Traffic Law are
amended.

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 activ-
ity. New York, however, does not permit retroactive cancellations; rath-
er 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 driv-
ers (i.e. mandatory uninsured motorist coverage), would be covered under
their own policy or the Motor Vehicle Accident Indemnification Corpo-
ration.

The proposal would allow retroactive cancellation of the automobile
policy, in the first thirty days, where the payment is made with insuf-
ficient 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.

LEGISLATIVE HISTORY:

S.7746 of 2012 - Passed Senate 06/20/12

FISCAL IMPLICATIONS: None.

LOCAL FISCAL IMPLICATIONS:

EFFECTIVE DATE: This act shall take effect two hundred seventy days
after it shall have become a law.

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

                                  1959

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                               (PREFILED)

                             January 9, 2013
                               ___________

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 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
THIRTY DAYS, RESCIND OR RETROACTIVELY CANCEL TO THE  INCEPTION  A  NEWLY
ISSUED   AUTOMOBILE   INSURANCE  POLICY  SUBJECT  TO  PARAGRAPH  ONE  OF
SUBSECTION (A) OF SECTION THREE THOUSAND  FOUR  HUNDRED  TWENTY-FIVE  OF
THIS  ARTICLE,  A  NEWLY  ISSUED  COMMERCIAL AUTOMOBILE INSURANCE POLICY
SUBJECT TO SECTION THREE THOUSAND FOUR HUNDRED TWENTY-SIX OF THIS  ARTI-
CLE,  OR  A POLICY ISSUED PURSUANT TO ANY PLAN ESTABLISHED UNDER ARTICLE
FIFTY-THREE OF THIS CHAPTER, IF  THE  INITIAL  PREMIUM  PAYMENT  IS  NOT
HONORED  BY A FINANCIAL INSTITUTION DUE TO THE NONEXISTENCE OR THE UNAU-
THORIZED USE OF A BANK ACCOUNT OR THE INITIAL PREMIUM PAYMENT IS  DENIED
BY  A  CREDIT  CARD COMPANY DUE TO THE UNAUTHORIZED USE OF A CREDIT CARD
ACCOUNT. THIS SECTION SHALL NOT APPLY TO POLICIES REQUIRED UNDER ARTICLE
EIGHT OF THE VEHICLE AND TRAFFIC LAW.
  (B) A PERSON WHO IS INJURED DURING THIS PERIOD AND WHO WOULD  ORDINAR-
ILY  BE  COVERED  UNDER  THE  INSURED'S  POLICY HAD IT NOT BEEN CANCELED
PURSUANT TO SUBSECTION (A) OF THIS SECTION, SHALL BE ENTITLED TO RECOVER
UNDER HIS OR HER OWN POLICY SUBJECT TO THE TERMS AND CONDITIONS  OF  THE
CONTRACT,  OR IF THE INJURED PERSON IS UNINSURED, THEY SHALL BE ENTITLED
TO RECOVER UNDER THE MOTOR VEHICLE ACCIDENT INDEMNIFICATION CORPORATION,
PROVIDED SUCH PERSON DID NOT PARTICIPATE  IN  ANY  FRAUDULENT  ACTIVITY,
INCLUDING, BUT NOT LIMITED TO, AN ACCIDENT STAGED TO DEFRAUD AN INSURER.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD04362-01-3

S. 1959                             2

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 AN ACCIDENT WHICH WAS STAGED TO DEFRAUD AN  INSURER  WHO  IS
WITHOUT  KNOWLEDGE  OF THE STAGING OR FRAUDULENT INTENT 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 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 ACCIDENT  WHICH  WAS  STAGED  TO
DEFRAUD AN INSURER, EXCEPT SUCH VEHICLE OWNED AND OPERATED BY THE PERPE-
TRATOR  OR PERPETRATORS OF SUCH 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
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

S. 1959                             3

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 ACCIDENT WHICH WAS STAGED TO DEFRAUD AN
INSURER, EXCEPT SUCH VEHICLE OWNED AND OPERATED BY  THE  PERPETRATOR  OR
PERPETRATORS  OF  SUCH  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
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

S. 1959                             4

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 ACCIDENT STAGED TO DEFRAUD
AN INSURER WHO IS WITHOUT KNOWLEDGE OF THE STAGING OR FRAUDULENT  INTENT
OF SUCH 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-
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

S. 1959                             5

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. Paragraphs 6 and 7 of subsection  (b)  of  section  5201  of  the
insurance  law  are  amended  and  a new paragraph 8 is added to read as
follows:
  (6) insured motor vehicles where the insurer  disclaims  liability  or
denies coverage, [and]
  (7) unregistered motor vehicles[.], AND
  (8) AN ACCIDENT STAGED TO DEFRAUD AN INSURER.
  S  9.  This  act  shall  take effect two hundred seventy days after it
shall have become a law.

S1959A (ACTIVE) - Bill Details

See Assembly Version of this Bill:
A3774A
Current Committee:
Law Section:
Insurance Law
Laws Affected:
Add §3455, amd §§3420, 5103 & 5201, Ins L; amd §313, V & T L
Versions Introduced in 2011-2012 Legislative Session:
S7746

S1959A (ACTIVE) - Bill Texts

view summary

Permits an insurer to rescind or retroactively cancel a policy in circumstance involving an accident staged to defraud an insurer.

view sponsor memo
BILL NUMBER:S1959A

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 retroac-
tively cancel a policy in certain circumstances

PURPOSE: The purpose of this bill is to remove the 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 PROVISIONS:

Section 1 adds new section 3455 to the Insurance Law. Subsection A
provides insurance companies the ability, within the first sixty days of
an automobile, commercial automobile or assigned risk plan policy being
issued, to retroactively rescind the policy if the initial premium
payment is dishonored due to (1) the nonexistence of a bank account, (2)
the unauthorized use of the account, or (3) the unauthorized use of a
credit card account.

Subsection B provides that a person injured during this sixty day period
and could have recovered under an insurance policy that was cancelled
pursuant to subsection (a) may recover under his or her own policy or,
if he or she is uninsured, the motor vehicle accident indemnification
corporation. Such recovery is available only if the injured party did
not participate in any fraudulent activity, such as staging the accident
to defraud the insurer. Additionally, the vehicle accident indemnifica-
tion corporation may not subrogate its claim against the rescinding
insurance company.

Section 2 amends Subsection (d) of section 3420 of the Insurance Law
requires insurers that deny a claim for death or bodily injury because
the policy was rescinded pursuant to new section 3455 to provide notice
of the disclaimer or denial to the claimant under the 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 cover-
age.

Section 5-Section 5103 of the insurance law is amended to address indi-
viduals who are involved in a staged accident 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-sets forth in the Motor Vehicle Insurance Indemnification Law
coverage for innocent victims of staged accidents

EXISTING LAW: Currently, automobile insurers are not permitted to
retroactively cancel policies for non-payment of premiums.

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 activ-
ity. New York, however, does not permit retroactive cancellations; rath-
er 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 driv-
ers (i.e. mandatory uninsured motorist coverage), would be covered under
their own policy or the Motor Vehicle Accident Indemnification Corpo-
ration.

The proposal would allow retroactive cancellation of the automobile
policy, in the first thirty days, where the payment is made with insuf-
ficient funds or the identity used to procure the policy turns out to be
fraudulent. The automobile insures 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.

LEGISLATIVE HISTORY: 2012: S.7746 - Passed Senate

FISCAL IMPLICATIONS: None to the State

EFFECTIVE DATE: This act shall take effect two hundred seventy days
after it shall have become a law.

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

                                 1959--A
    Cal. No. 52

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                               (PREFILED)

                             January 9, 2013
                               ___________

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

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 A NEWLY
ISSUED  AUTOMOBILE  INSURANCE  POLICY  SUBJECT  TO  PARAGRAPH   ONE   OF
SUBSECTION  (A)  OF  SECTION  THREE THOUSAND FOUR HUNDRED TWENTY-FIVE OF
THIS ARTICLE, A NEWLY  ISSUED  COMMERCIAL  AUTOMOBILE  INSURANCE  POLICY
SUBJECT  TO SECTION THREE THOUSAND FOUR HUNDRED TWENTY-SIX OF THIS ARTI-
CLE, OR A POLICY ISSUED PURSUANT TO ANY PLAN ESTABLISHED  UNDER  ARTICLE
FIFTY-THREE  OF  THIS  CHAPTER,  IF  THE  INITIAL PREMIUM PAYMENT IS NOT
HONORED BY A FINANCIAL INSTITUTION DUE TO THE NONEXISTENCE OR THE  UNAU-
THORIZED USE OF A BANK ACCOUNT, OR THE INITIAL PREMIUM PAYMENT IS DENIED
BY  A  CREDIT  CARD COMPANY DUE TO THE UNAUTHORIZED USE OF A CREDIT CARD
ACCOUNT. THIS SECTION SHALL NOT APPLY TO POLICIES REQUIRED UNDER ARTICLE
EIGHT OF THE VEHICLE AND TRAFFIC LAW.
  (B) A PERSON WHO IS INJURED DURING THIS PERIOD AND WHO WOULD  ORDINAR-
ILY  BE  COVERED  UNDER  THE  INSURED'S  POLICY HAD IT NOT BEEN CANCELED
PURSUANT TO SUBSECTION (A) OF THIS SECTION, SHALL BE ENTITLED TO RECOVER
UNDER HIS OR HER OWN POLICY SUBJECT TO THE TERMS AND CONDITIONS  OF  THE
CONTRACT,  OR IF THE INJURED PERSON IS UNINSURED, THEY SHALL BE ENTITLED

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD04362-02-3

S. 1959--A                          2

TO RECOVER UNDER THE MOTOR VEHICLE ACCIDENT INDEMNIFICATION CORPORATION,
PROVIDED SUCH PERSON DID NOT PARTICIPATE  IN  ANY  FRAUDULENT  ACTIVITY,
INCLUDING, BUT NOT LIMITED TO, AN ACCIDENT STAGED TO DEFRAUD AN INSURER.
THE MOTOR VEHICLE ACCIDENT INDEMNIFICATION CORPORATION MAY NOT SUBROGATE
ITS CLAIM AGAINST THE RESCINDING OR CANCELLING 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 INCLUDING A DISCLAIMER
OR DENIAL BECAUSE THE INSURER RESCINDED OR CANCELLED  COVERAGE  PURSUANT
TO  SECTION  THREE THOUSAND FOUR HUNDRED FIFTY-FIVE OF THIS ARTICLE, for
death or bodily injury arising out of a motor vehicle accident,  INCLUD-
ING ANY CLAIM FOR PERSONAL INJURIES UNDER AN UNINSURED MOTORIST ENDORSE-
MENT  BY  ANY OCCUPANT OF A MOTOR VEHICLE OR OTHER PERSON INVOLVED IN AN
ACCIDENT THAT WAS STAGED TO DEFRAUD AN INSURER WHO IS WITHOUT  KNOWLEDGE
OF  THE  STAGING OR FRAUDULENT INTENT 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 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 ACCIDENT WHICH WAS STAGED TO
DEFRAUD AN INSURER, EXCEPT SUCH VEHICLE OWNED AND OPERATED BY THE PERPE-
TRATOR OR PERPETRATORS OF SUCH 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. 1959--A                          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 ACCIDENT WHICH WAS STAGED TO DEFRAUD AN
INSURER, EXCEPT SUCH VEHICLE OWNED AND OPERATED BY  THE  PERPETRATOR  OR
PERPETRATORS  OF  SUCH  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
motor  vehicle  against  which  a claim has been made for damages to the

S. 1959--A                          4

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 ACCIDENT STAGED TO  DEFRAUD
AN  INSURER WHO IS WITHOUT KNOWLEDGE OF THE STAGING OR FRAUDULENT INTENT
OF SUCH 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-
ten  notice  of  its  intention not to renew. All notices of non-renewal

S. 1959--A                          5

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. Paragraphs 6 and 7 of subsection  (b)  of  section  5201  of  the
insurance  law  are  amended  and  a new paragraph 8 is added to read as
follows:
  (6) insured motor vehicles where the insurer  disclaims  liability  or
denies coverage, [and]
  (7) unregistered motor vehicles[.], AND
  (8) AN ACCIDENT STAGED TO DEFRAUD AN INSURER.
  S  9.  This  act  shall  take effect two hundred seventy days after it
shall have become a law.

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