Provides that an insurer doing business in this state shall be liable to a policy holder for such insurer's refusal to pay or unreasonable delay of payment to the policy holder if such refusal or delay was not substantially justified; enumerates instances whereby an insurer's refusal or delay of payment is not substantially justified including intentional negligence, failure to act in good faith, failure to provide written denial of claim and failure to make final determination of claim within six months.
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.
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 (4111 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.
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; S.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 200708; S.4735/A.5589 of 2011-2012
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: January 1st next succeeding the date on which it shall have become a law.
STATE OF NEW YORK ________________________________________________________________________ 2544 2013-2014 Regular Sessions IN SENATE January 18, 2013 ___________Introduced by Sen. DeFRANCISCO -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance 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 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 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; OREXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD07431-01-3 S. 2544 2
(5) FAILED TO ACT IN GOOD FAITH BY COMPELLING POLICY HOLDER TO INSTI- TUTE SUIT TO RECOVER AMOUNTS DUE UNDER ITS POLICY BY OFFERING SUBSTAN- TIALLY LESS THAN THE AMOUNTS ULTIMATELY RECOVERED IN SUIT BROUGHT BY SUCH POLICY HOLDER. (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 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. (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. (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 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 POLI- CY AND FACILITATE ADMISSIBILITY OF EVIDENCE ON THE CAUSES OF ACTION ASSERTED PURSUANT TO THIS SECTION. (E) ALL AMOUNTS RECOVERED FROM AN INSURER AS ACTUAL DAMAGES AND REASONABLE ATTORNEYS' FEES 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.