NY Bad Faith Bill Could Be a Game Changer for Policyholders and Injured Third-Parties

Samuel Lopez

November 20, 2022

Originally published in USA Herald on November 20, 2022.

New York courts have often been the venue of choice for insurance companies across the country to litigate their coverage disputes, because of the States laws that tend to favor the insurer.

Many of the attorneys that represent policyholders will tell you that the reason for that preference, is that unlike other states such as Florida, California, or Washington, New York does not provide policyholders with a private-independent right to file an action against insurers, apart from a breach of contract claim, or to file suit against their insurers for delaying the resolution of their claim or acting in bad faith.

In New York, the job of regulating an insurer’s conduct is left to the New York Department of Financial Services, a body the attorneys say insufficiently addresses the needs of the Policyholders and effectively places them at a disadvantage because of the insurers’ vast resources at their disposal, that effectively turns litigation into a David v. Goliath scenario.

However, there are people like New York State Sen. Jessica Ramos who have recently sponsored a bill that would provide policyholders and injured third parties, with an individual private right to file suit against insurers for conduct and behavior that amounts to bad faith.

Over the years, many of the Senator’s constituents have questioned why a violation of New York’s insurance law would not allow a New York citizen the right to bring a private cause of action against an insurer.

New York State Senate Bill S6813A and Assembly Bill A7285A, if passed, would drastically level the playing field. Senate Bill S6813A would give policyholders and injured third parties a private right to file a lawsuit against an insurer for an insurer’s unfair claim handling, including bad faith conduct.

However, insurance companies across the county are diligently opposing the bill arguing that an expansion of the state’s bad faith law would open the floodgates to litigation and increase premiums.

In a review of the bill, policyholders and injured third parties would be permitted to file claims against an insurer under the State’s existing insurance bad faith law, which at present can only be enforced by the Department of Financial Services.

The bill would also allow claimants who win in court the right to receive attorney’s fees and costs, damages, punitive damages, and any interest on any amounts due.

As this bill moves through the legislative process, the USA Herald will continue to bring you the latest coverage and developments.