Senate Bill S7038

                                 BILL NUMBER:  S7038

 TITLE OF BILL :

An act to amend the insurance law, in relation to the organization of
assessment corporations

 PURPOSE :

Clarify that assessment cooperative property and casualty insurance
companies are authorized to write liability coverage.

 SUMMARY OF PROVISIONS :

Sections 1 and 2 amend section 6605 of the Insurance Law to clarify
that assessment cooperative property and casualty insurance companies
can write liability coverage.

Section 3 is the effective date.

 JUSTIFICATION :

Assessment cooperatives are property and casualty insurance companies
that have been covering thousands of homeowners, renters, small
businesses and farms in New York for decades and, in many cases, for
over a century. These companies have been writing liability policies
              

that include fire coverage on personal property and/or contents, as
well as building structures, for over 50 years with these policies
having been approved by the Insurance Department for all of these
years. It has recently been stated by some Department of Financial
Services' officials that the current law could be interpreted as
prohibiting assessments cooperatives from providing essential
liability coverage to New Yorkers if the coverage is not tied to a
fire insurance policy covering a physical building structure.

This interpretation flies in the face of longstanding insurance
industry practice, a practice approved for decades by the state
government regulatory agency. This new interpretation is also contrary
to good public policy, as recognized by the New York Court of Appeals
in Polan v. State Insurance Department, 3 NY 3d 54, 63, where New
York's highest court noted that courts are extremely unwilling to
infer a legislative intent that would be contrary to longstanding
industry practice (in that case, referring to disability insurance
practices). In Polan the Court noted that adoption of one
interpretation of the statute "would require far-reaching changes in
the way the insurance industry does business" and they were therefore
"reluctant to infer such a mandate for radical change absent a clearer
legislative command." Polan at page 63.

This legislation is intended to restore the law to its long-recognized
purpose of allowing assessment cooperative property and casualty
insurance companies to write liability coverage. Otherwise, this new
interpretation would needlessly cause a tremendous disservice to the
policyholders who rely on smaller insurance companies to fill this
market need. Forcing assessment coops to stop writing these types of
policies would result in the market options shrinking considerably
with the policyholders very possibly facing price increases due to the
lack of options.

For example, thousands of tenant and homeowner policies would be
negatively impacted without any corresponding benefit. Similarly,
small businesses who rely on the assessment cooperatives to write
liability coverage in Manufacturers & Contractors policies would also
be harmed, again without any corresponding benefit. In fact,
assessment cooperatives and advance premium cooperatives in New York
cover over 71,000 New York small businesses.
As a result, this bill is needed to ensure a stable, competitive and
vibrant property and casualty insurance market in New York, a market
that will benefit New Yorkers.

 LEGISLATIVE HISTORY :

New bill.

 FISCAL IMPLICATIONS :

None.

 EFFECTIVE DATE :
Immediately.