Senate Bill S5327

                                 
BILL NUMBER: S5327

SPONSOR: BAILEY
 
TITLE OF BILL:

An act to amend the workers' compensation law, in relation to the
requirement for policyholders to provide 30-days notice to withdraw from
the state insurance fund

 
PURPOSE OR GENERAL IDEA OF BILL:

The purpose of this bill is to remove the requirement for New York State
Insurance Fund (NYSIF) policyholders to provide a 30-day notice to with-
draw from the Fund if they have secured insurance with another insurance
carrier.

 
SUMMARY OF PROVISIONS:

Section 1 of the bill amends section 94(a) of the Workers' Compensation
Law to establish that when an employer has given written notice to NYSIF
of his intention to withdraw from the Fund, which includes the effective
date of cancellation and proof that the employer has secured insurance
              

with another insurance carrier, such employer shall not be required to
provide such notice 30 days before the effective date of such cancella-
tion. The effective date of cancellation of such employer's contract
with NYSIF shall be the date that the new insurance contract with the
stock corporation, mutual corporation or reciprocal insurer takes
effect.

 
DIFFERENCE BETWEEN ORIGINAL AND AMENDED VERSION (IF APPLICABLE):

The amended version makes technical changes to ensure that if an employ-
er meets the requirements of the new undesignated paragraph, the rest of
the subdivision shall not apply.

 
JUSTIFICATION:

The State Insurance Fund (SIF) is a non-profit agency established in
1914 to provide a guaranteed source of workers' compensation insurance
coverage for employers in New York State. SIF is the largest single
carrier of workers' compensation insurance in the state, with 40 percent
of the market. Although a quasi-public agency, SIF was intended by the
Legislature to be treated the same as a private insurance company. (See
Commissioners of State Insurance Fund v. Low, 285 App. Div. 525, 138
N.Y.S 2d 437 (3rd Dept 1955).) It is more closely equated to an insur-
ance company than to a typical state agency (Martin Minkiowtiz, Practice
Commentaries, N.Y. Work Comp.  Section 76 (McKinney 1994).) Though SIP
was intended to be treated as a private insurance company, it is not
licensed by the New York State DES, nor is it subject to the depart-
ment's oversight and regulation.  As a result, SIF policyholders are put
at a disadvantage compared to policyholders of private workers' compen-
sation insurers. As a result, SIF policyholders have reported various
unfair practices which have gone unchecked. One common complaint is that
it takes retaliatory actions against policyholders who seek to move
their business from SIF to another coverage provider. Policyholders have
reported aggressive and unfair tactics, such as SIF suddenly revising
audits and questioning classifications in an effort to charge a depart-
ing customer a higher premium.

To rectify one of these inequities, the bill would place SIF on an even
footing with other insurers that provide workers' compensation insurance
by removing the 30-day notice requirement placed upon policyholders who
have secured a new insurance policy with another carrier. Currently, SIF
policyholders who want to cancel their policy with SIF because they have
found other coverage must provide SIF with 30 days advance written
notice. During this notice period, policyholders report that SIF employs
aggressive and retaliatory tactics in an effort to retain the business.

Under the legislation, the 30-day notice requirement would only be
required when you are not replacing a policy. If you are replacing a
policy, the 30-day notice is not required, and the effective date of
cancellation is the effective date of the new policy. Therefore, you can
move the policy at any point, even less than 30 days, if you can demon-
strate that you have a replacement policy and provide them with notice.

Moreover, if SIF policyholders cannot provide 30 days' notice, they find
themselves subject to excessive short-rate penalty provisions that
unfairly burden New York's businesses. It is simply unfair to require
policyholders of SIF to provide more notice than is required of policy-
holders of private carriers. This statutory provision has outlived its
usefulness and has become an article of anti-competitive protectionism
for the Fund.

 
PRIOR LEGISLATIVE HISTORY:

S2834 of 2023-24: Referred to Labor

S4694 of 2021-22: Referred to Labor

S3516A of 2020: Amend and Recommit to Labor

S428 of 2018: Reported and Committed to Finance

S5250 of 2016: Committed to Rules

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

None.

 
EFFECTIVE DATE:
This act shall take effect on the ninetieth day after it shall have
become law.