Senate Bill S2544

                                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.