SB 29A & AB 8025: Relates to unfair claim settlement practices (Bad Faith)

• May 7, 2015: PRINT NUMBER 29A
• May 7, 2015: AMEND AND RECOMMIT TO INSURANCE
• Jan 7, 2015: REFERRED TO INSURANCE

 

MEMO

BILL NUMBER:S29A

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 unreasonable delay in paying a claim was not substantially justified.

SUMMARY OF PROVISIONS:  This bill provides that an insurer doing business 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 initiate a lawsuit to recover under the policy by offering substantially less than the amounts ultimately recovered in the suit by the policy holder or

6. Failed to promptly proceed with the appraisal process once such has been demanded in any claim where coverage for a portion of the claim has been accepted by such insurer and a disagreement exists between the insured and the insurer with respect to the value of covered property or the amount, or extent of the covered loss.

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 considered.

 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 (4th 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.  top 1 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 justified.

LEGISLATIVE HISTORY:  S.486-A of 1997-98; 5.545 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; 2013-2014 - S.2544/A.3305

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE:  January 1st next succeeding the date on which it shall have become a law.
 

(TEXT) STATE OF NEW YORK 29–A 2015-2016 Regular Sessions IN SENATE (PREFILED) January 7, 2015

Introduced  by  Sen.  DeFRANCISCO -- read twice and ordered printed, and
  when printed to be committed to the Committee on Insurance --  commit-
  tee  discharged, bill amended, ordered reprinted as amended and recom-
  mitted to said committee

AN ACT to amend the insurance law, in relation to unfair  claim  settle-
  ment practices

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. The insurance law is amended by adding a new section 2601-a
to read as follows:
  S 2601-A. UNFAIR CLAIM SETTLEMENT  PRACTICES;  CIVIL  REMEDY.  (A)  AN
INSURER  DOING BUSINESS IN THIS STATE SHALL BE LIABLE TO THE HOLDER OF A
POLICY ISSUED OR RENEWED PURSUANT TO ARTICLE THIRTY-FOUR OF THIS CHAPTER
FOR DAMAGES AS PROVIDED IN THIS SECTION UPON SUCH POLICY HOLDER  PROVING
BY A PREPONDERANCE OF THE EVIDENCE THAT SUCH INSURER'S REFUSAL TO PAY OR
UNREASONABLE DELAY IN PAYMENT TO THE POLICY HOLDER OF AMOUNTS CLAIMED TO
BE  DUE  UNDER  A POLICY WAS NOT SUBSTANTIALLY JUSTIFIED.  AN INSURER IS
NOT SUBSTANTIALLY JUSTIFIED IN REFUSING TO PAY OR IN UNREASONABLY DELAY-
ING PAYMENT WHEN THE INSURER:
  (1) INTENTIONALLY, RECKLESSLY OR BY GROSS NEGLIGENCE FAILED TO PROVIDE
THE POLICY HOLDER WITH ACCURATE INFORMATION CONCERNING POLICY PROVISIONS
RELATING TO THE COVERAGE AT ISSUE;
  (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;
  (3)  FAILED  TO  PROVIDE  A TIMELY 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;
  (4)  FAILED TO MAKE A FINAL DETERMINATION AND NOTIFY THE POLICY HOLDER
IN WRITING OF ITS POSITION ON BOTH  LIABILITY  FOR,  AND  THE  INSURER'S

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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;
  (5)  FAILED  TO  ACT  IN GOOD FAITH BY COMPELLING THE POLICY HOLDER TO
INSTITUTE SUIT TO RECOVER AMOUNTS  DUE  UNDER  ITS  POLICY  BY  OFFERING
SUBSTANTIALLY LESS THAN THE AMOUNTS ULTIMATELY RECOVERED IN SUIT BROUGHT
BY SUCH POLICY HOLDER; OR
  (6)  FAILED  TO  PROMPTLY PROCEED WITH THE APPRAISAL PROCESS ONCE SUCH
HAS BEEN DEMANDED IN ANY CLAIM WHERE COVERAGE FOR A PORTION OF THE CLAIM
HAS BEEN ACCEPTED BY SUCH INSURER AND A DISAGREEMENT EXISTS BETWEEN  THE
INSURED AND THE INSURER WITH RESPECT TO THE VALUE OF COVERED PROPERTY OR
THE AMOUNT, OR EXTENT OF THE COVERED LOSS.
  (B) ANY POLICY HOLDER WHO ESTABLISHES LIABILITY PURSUANT TO SUBSECTION
(A) OF THIS SECTION SHALL BE ENTITLED TO RECOVER, IN ADDITION TO AMOUNTS
DUE  UNDER  THE POLICY, INTEREST, COSTS, AND DISBURSEMENTS, COMPENSATORY
DAMAGES, CONSEQUENTIAL DAMAGES AND REASONABLE ATTORNEYS'  FEES  INCURRED
BY THE POLICY HOLDER FROM THE DATE OF THE LOSS, IN RECOVERING MONIES DUE
PURSUANT  TO  THE TERMS OF THE POLICY AS WELL AS PUNITIVE DAMAGES CAPPED
AT TWO TIMES THE VALUE OF THE COVERED LOSS ESTABLISHED AT TRIAL.
  (C) ANY POLICY HOLDER MAY RECOVER DAMAGES FROM AN INSURER DOING  BUSI-
NESS  IN THIS STATE PURSUANT TO THIS SECTION EITHER AS PART OF AN ACTION
TO RECOVER UNDER THE TERMS OF AN  INSURANCE  POLICY  OR  IN  A  SEPARATE
ACTION.
  (1)  AS A CONDITION TO ANY RECOVERY PURSUANT TO SUBSECTION (A) OF THIS
SECTION, A CIVIL REMEDY NOTICE OF THE ALLEGED VIOLATION  MUST  BE  FILED
WITH  BOTH  THE  INSURER AND THE DEPARTMENT AT LEAST SIXTY DAYS PRIOR TO
COMMENCEMENT OF AN ACTION SEEKING RELIEF PURSUANT TO SUBSECTION  (A)  OF
THIS SECTION.
  (2)  THE CIVIL REMEDY NOTICE MUST BE ON A FORM APPROVED BY THE DEPART-
MENT AND INCLUDE THE  FOLLOWING  INFORMATION,  IF  SUCH  INFORMATION  IS
REASONABLY KNOWN TO THE INSURED:
  (A)  THE  STATUTORY  PROVISION, INCLUDING THE SPECIFIC LANGUAGE OF THE
STATUTE WHICH THE INSURER IS ALLEGED TO HAVE VIOLATED.
  (B) THE FACTS AND CIRCUMSTANCES GIVING RISE TO THE VIOLATION.
  (C) THE NAME OF ANY INDIVIDUAL INVOLVED IN THE VIOLATION.
  (D) REFERENCE TO SPECIFIC POLICY LANGUAGE  THAT  IS  RELEVANT  TO  THE
VIOLATION, IF ANY.
  (E) A STATEMENT THAT THE NOTICE IS GIVEN IN ORDER TO PROTECT THE RIGHT
TO PURSUE THE CIVIL REMEDY.
  (3)  THE  INSURER  WHO IS THE SUBJECT OF THE CIVIL REMEDY NOTICE SHALL
HAVE SIXTY DAYS FROM THE FILING OF  THE  REQUIRED  NOTICE  TO  CURE  THE
VIOLATION.    NO CIVIL ACTION UNDER THIS SECTION WILL BE SUSTAINABLE IF,
WITHIN SIXTY DAYS AFTER THE REQUIRED NOTICE FILING, THE  DAMAGES  SOUGHT
ARE PAID.
  (4) THE RIGHTS ENUMERATED HEREIN ARE NOT THE EXCLUSIVE REMEDIES AVAIL-
ABLE  TO  THE INSURED AND DO NOT PRECLUDE ANY COMMON LAW CLAIMS OR OTHER
STATUTORY CLAIMS THAT MAY EXIST.
  (D) IN ANY TRIAL OF A CAUSE OF  ACTION  ASSERTED  AGAINST  AN  INSURER
PURSUANT TO THIS SECTION, EVIDENCE OF SETTLEMENT DISCUSSIONS WRITTEN AND
VERBAL  OFFERS  TO  COMPROMISE,  LOSS RESERVE AMOUNTS AND OTHER EVIDENCE
RELATING TO THE CLAIMS PROCESS SHALL BE ADMISSIBLE. IF CAUSES OF  ACTION
RELATING  TO  LIABILITY  OF  THE INSURER UNDER THE POLICY AND UNDER THIS
SECTION ARE ALLEGED IN THE SAME ACTION,  THE  COURT  MAY  BIFURCATE  THE
TRIAL  OF ISSUES SO AS TO AVOID PREJUDICE TO THE INSURER ON THE ISSUE OF
LIABILITY UNDER THE POLICY AND FACILITATE ADMISSIBILITY OF  EVIDENCE  ON
THE CAUSES OF ACTION ASSERTED PURSUANT TO THIS SECTION.

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  (E)  ALL  AMOUNTS  RECOVERED FROM AN INSURER AS ACTUAL DAMAGES, CONSE-
QUENTIAL DAMAGES, REASONABLE ATTORNEYS' FEES AND PUNITIVE DAMAGES IN ANY
ACTION AUTHORIZED IN THIS SECTION SHALL BE EXCLUDED BY  THE  INSURER  IN
ITS  DETERMINATIONS OF THE PREMIUMS IT WILL CHARGE ALL POLICY HOLDERS ON
ALL POLICIES ISSUED BY IT.
  S  2. This act shall take effect on the first of January next succeed-
ing the date on which it shall have become a law, and shall apply to all
acts and omissions by insurers occurring  on  or  after  such  effective
date.

SENATORS

John J. Flanag

Second Senate District (entire Town of Smithtown and portions of the Town of Brookhaven and the Town of Huntington)

District Office:

260 Middle Country Road Suite 102 Smithtown, NY 11787

Phone: 631-361-2154 Fax: 631-361-5367

Albany Office:

Room 330, State Capitol Building Albany, NY 12247

Phone: 518-455-2071

Fax: 518-426-6904

Email: flanagan@nysenate.gov

Martin J. Golden

Brooklyn’s 22nd Senate District (Bay Ridge, Dyker Heights, Bensonhurst, Marine Park, Gerritsen Beach, Gravesend and parts of Sheepshead Bay, Borough Park and Midwood)

Satellite Office:

3604 Quentin Road Brooklyn, NY 11234

District Office:

7408 5th Avenue 1st Floor Brooklyn, NY 11209

Phone: (718) 238-6044

Fax: (718) 238-6170

Albany Office:

188 State Street Room 409, Legislative Office Building Albany, NY 12247

Phone: (518) 455-2730

Email: golden@nysenate.gov

Kemp Hannon

New York’s Sixth Senate District (central communities of Nassau County)

Albany Office:

The Capitol Room 420 Albany, NY 12247

Phone: 518-455-2200

District Office:

595 Stewart Ave. Suite, 540 Garden City, NY 11530

Phone: 516-739-1700

Email: hannon@nysenate.gov

Carl L. Marcellino

5th Senate District (Parts of Nassau and Suffolk Counties)

District Office:

250 Townsend Square Oyster Bay, NY 11771

Phone: (516) 922-1811

Fax: (516) 922-1154

Albany Office:

188 State Street Room 811, Legislative Office Building Albany, NY 12247

Phone: (518) 455-2390

Fax: (518) 426-6975

Email: marcelli@senate.state.ny.us

Jack M. Martin

Seventh District (Sands Point, Manorhaven, Port Washington, Manhasset, Lake Success, Mineola, Parts of Old Westbury and Westbury, New Hyde Park, Floral Park and Hicksville)

District Office:

252 Mineola Boulevard Mineola, NY 11501

Phone: 516-746-5924

Fax: 516-746-0439

Albany Office:

Legislative Office Building, Room 915 Albany, NY 12247

Phone: 518-455-3265

Fax: 518-426-6739

Email: martins@nysenate.gov

ASSEMBLY

Assemblymember Carl E. Heastie

Assembly District 83 (Northeast Bronx)

District Office:

1446 East Gun Hill Road Bronx, NY 10469

T: 718-654-6539
Fax: 718-654-5836

Albany Office:

LOB 932 Albany, NY 12248

T: 518-455-3791
Fax: 518-455-4812

Email: Speaker@assembly.state.ny.us
Assemblyman Phillip Goldfeder

Assembly District 23 (Southern Queens and Rockaway)

District Office:

95-16 Rockaway Beach Boulevard
Rockaway Beach, NY 11693

T: 718-945-9550
Fax: 718-945-9549

District Office:

162-38 Crossbay Blvd.
Howard Beach, NY 11414

T: 718-641-8755

Albany Office:

LOB 542
Albany, NY 12248

T: 518-455-4292

Email: GoldfederP@assembly.state.ny.us

Assemblyman Todd Kaminsky

Assembly District 20 (Long Beach, Atlantic Beach, East Atlantic Beach, Point Lookout, Lido Beach, Oceanside, Island Park, Lawrence, Cedarhurst, Hewlett, Woodmere, Inwood and portions of East Rockaway)

District Office:

20 W Park Ave Suite 301
Long Beach, NY 11561

T: 516-431-0500

Albany Office:

LOB 827
Albany, NY 12248

T: 518-455-3028

Email: kaminskyt@assembly.state.ny.us

Assemblymember Charles D. Lavine

Assembly District 13 (Glen Cove, Sea Cliff, Glenwood Landing, Bayville and Old Bethpage, as well as residents in parts of Glen Head, Locust Valley, Mill Neck, Oyster Bay, Centre Island, Cold Spring Harbor, Syosset, Woodbury, Plainview, Bethpage, Farmingdale, Hicksville, Westbury/New Cassel, Jericho, East Hills, Greenvale, Roslyn, Roslyn Heights and Roslyn Harbor)

District Office:

1 School Street
Suite 303-B
Glen Cove, NY 11542

T: 516-676-0050
Fax: 516-676-0071

Albany Office:

LOB 441
Albany, NY 12248

T: 518-455-5456
Fax: 518-455-5467

Email: Online form, http://assembly.state.ny.us/mem/Charles-D-Lavine/contact

Assemblyman Andrew Hevesi

Assembly District 28 (Forest Hills, Middle Village, Rego Park, Kew Gardens, Richmond Hill, and Glendale)

District Office:

70-50 Austin Street
Suite 110
Forest Hills, NY 11375

T: 718-263-5595

Albany Office:

LOB 844
Albany, NY 12248

T: 518-455-4926

Email: Online form, http://assembly.state.ny.us/mem/Andrew-Hevesi/contact