Senate Bill S6482A

                                
 
BILL NUMBER: S6482

SPONSOR: BRESLIN
 
TITLE OF BILL:  An act to amend the insurance law, in relation to
notice of disclaimer of liability for certain revived causes of action

 
PURPOSE OR GENERAL IDEA OF BILL:

To clarify the timing within which insurers must notify purported policy
holders of an intent to deny or disclaim coverage for unique, and poten-
tially decades old, claims, that have been revived pursuant to the Civil
Practice Law and Rules.

 
SUMMARY OF PROVISIONS:

Section 1 amends Insurance Law 3420 to clarify when an insured must
provide notice of an intent to disclaim coverage of claims raised as a
result of actions revived pursuant to section 214-g of the civil prac-
tice law and rules.

Section 2 provides the effective date.
              

 
JUSTIFICATION:

New York Insurance Law requires that for an insurer to deny coverage for
a death or bodily injury claim, the insurer must give written notice of
the disclaimer to the insured and the injured person "as soon as reason-
ably possible." N.Y. Ins. Law § 3420(d)(2). Courts have similarly
concluded that "once the insurer has sufficient knowledge of facts enti-
tling it to disclaim, or knows that it will disclaim coverage, it must
notify the policyholder in writing as soon as is reasonably possible."
First Financial Ins. Co. v. Jetco Contracting Corp., 1 N.Y.3d 64, 66
(2003); Montpelier U.S. Ins. Co. v.  240 Mt. Hope Realty Co., 2015 U.S.
Dist. LEXIS 143820, *5 (S.D.N.Y.  Oct. 22, 2015). Case law further
requires that the timeliness of the disclaimer be measured from the
point in time when the insurer first learns of the grounds for disclaim-
er, and "an insurer's explanation is insufficient as a matter of law
where the basis for denying coverage was or should have been readily
apparent before the onset of the delay." First Financial, 1 N.Y. 3d at
68-69.

In 2019, the CPLR was amended to revive certain claims and causes of
action asserted against public and private entities and institutions
arising out of childhood sexual abuse, which may result in those enti-
ties and institutions seeking coverage under insurance programs stretch-
ing back decades. Many entities will be seeking coverage under purported
insurance policies for indemnification against claims arising out of the
new provisions of the CPLR. Existing Insurance Law is clear that it is
the insured's burden of proving the existence, terms and conditions of
the policy or policies. See, Pacific Employers Ins. Co. v.  Troy Belting
& Supply Co., No. 1:11-CV-912, 2016 U.S. Dist. LEXIS 134224, at *40-.41
(NDNY 2016); see, also, Bianchi v. Florists Mut. Ins. Co., 660 F. Supp.
2d 434, 436 (EDNY 2009). Due to the historic nature of these revived
claims and the age of alleged policies to cover such claims, insureds
may not have retained copies and supporting records, and may have little
or no evidence of existence, terms and conditions. Insurers, too, may be
unable to locate any evidence at all, or locate only incomplete copies,
without all policy terms and conditions, within the first month after
receiving notice.  This legislation clarifies that insurers must make
diligent efforts to locate alleged policies when notified of claims
thereunder. The bill also clarifies, however, that the time in which an
insurer must notify an insured of an intention to disclaim or deny
coverage for a claim brought pursuant to the CPLR reviver, will not
begin to run until the insurer has actual knowledge of the existence of
a policy - either because one has been presented by the insured, or one
has been located by the insurer - or, after reasonably diligent efforts
by both the insured and the insurer, neither is able to locate a copy or
sufficient evidence of existence, terms and conditions.

This clarification is consistent with public policy and fairness, that
insureds and insurers should be given as much time as they need, within
the bounds of reasonableness, to research and identify insurance poli-
cies that potentially apply to a revived claim or cause of action,
particularly ones that may be nearly seventy years old.

 
PRIOR LEGISLATIVE HISTORY:

None

 
EFFECTIVE DATE:
This act shall take effect immediately and be deemed to be in full force
and effect on the same date and in the same manner as section 3 of chap-
ter 11 of the laws of 2019, and shall apply to all policies entered into
on or before such date.