S4507-2011 - NY Senate Open Legislation - Permits an insurer to rescind or retroactively cancel a policy in certain circumstances

Permits an insurer to rescind or retroactively cancel a policy in certain circumstances.

Sponsor: GOLDEN / Co-sponsor(s): SEWARD
Law Section: Insurance Law / Law: Add S3455, Ins L

S4507-2011 Actions

Mar 22, 2012: referred to insurance
Mar 22, 2012: DELIVERED TO ASSEMBLY
Mar 22, 2012: PASSED SENATE
Mar 21, 2012: ADVANCED TO THIRD READING
Mar 20, 2012: 2ND REPORT CAL.
Mar 19, 2012: 1ST REPORT CAL.372
Jan 4, 2012: REFERRED TO INSURANCE
Jan 4, 2012: returned to senate
Jan 4, 2012: died in assembly
Jun 20, 2011: referred to insurance
Jun 20, 2011: DELIVERED TO ASSEMBLY
Jun 20, 2011: PASSED SENATE
Jun 14, 2011: AMENDED ON THIRD READING 4507B
Jun 13, 2011: AMENDED ON THIRD READING (T) 4507A
May 11, 2011: ADVANCED TO THIRD READING
May 10, 2011: 2ND REPORT CAL.
May 9, 2011: 1ST REPORT CAL.553
Apr 8, 2011: REFERRED TO INSURANCE

S4507-2011 Meetings

Insurance: May 9, 2011

S4507-2011 Calendars

Floor Calendar: May 10, 2011 , Floor Calendar: May 11, 2011 , Floor Calendar: May 16, 2011 , Floor Calendar: May 17, 2011 , Floor Calendar: May 18, 2011 , Floor Calendar: May 23, 2011 , Floor Calendar: May 24, 2011 , Floor Calendar: May 25, 2011 , Floor Calendar: Jun 1, 2011 , Floor Calendar: Jun 2, 2011 , Floor Calendar: Jun 6, 2011 , Floor Calendar: Jun 7, 2011 , Floor Calendar: Jun 13, 2011

S4507-2011 Votes

VOTE: COMMITTEE VOTE: - Insurance - May 9, 2011

Ayes (13): Seward, Flanagan, Golden, Grisanti, Lanza, Larkin, LaValle, Martins, Saland, Young, Espaillat, Kennedy, Smith
Ayes W/R (3): Breslin, Kruger, Peralta
Nays (2): Diaz, Parker

VOTE: FLOOR VOTE: - Jun 20, 2011

Ayes (59): Adams, Addabbo, Alesi, Avella, Ball, Bonacic, Breslin, Carlucci, DeFrancisco, Diaz, Dilan, Espaillat, Farley, Flanagan, Fuschillo, Gallivan, Gianaris, Golden, Griffo, Grisanti, Hannon, Huntley, Johnson, Kennedy, Klein, Krueger, Kruger, Lanza, Larkin, LaValle, Libous, Little, Marcellino, Martins, Maziarz, McDonald, Montgomery, Nozzolio, O'Mara, Oppenheimer, Parker, Peralta, Ranzenhofer, Ritchie, Rivera, Robach, Saland, Sampson, Savino, Serrano, Seward, Skelos, Smith, Squadron, Stavisky, Stewart-Cousin, Valesky, Young, Zeldin
Nays (3): Duane, Hassell-Thomps, Perkins

VOTE: COMMITTEE VOTE: - Insurance - Mar 19, 2012

Ayes (17): Seward, Flanagan, Golden, Grisanti, Lanza, Larkin, LaValle, Martins, Saland, Young, Breslin, Diaz, Espaillat, Kennedy, Peralta, Smith, Stavisky
Nays (1): Parker

VOTE: FLOOR VOTE: - Mar 22, 2012

Ayes (56): Adams, Addabbo, Alesi, Avella, Ball, Bonacic, Breslin, Carlucci, DeFrancisco, Dilan, Espaillat, Farley, Flanagan, Fuschillo, Gallivan, Gianaris, Golden, Griffo, Grisanti, Hannon, Huntley, Johnson, Kennedy, Klein, Krueger, Lanza, Larkin, LaValle, Libous, Little, Marcellino, Martins, Maziarz, McDonald, Montgomery, Nozzolio, O'Mara, Parker, Peralta, Ranzenhofer, Ritchie, Rivera, Robach, Saland, Sampson, Savino, Serrano, Seward, Skelos, Smith, Squadron, Stavisky, Stewart-Cousin, Valesky, Young, Zeldin
Nays (3): Duane, Hassell-Thomps, Perkins
Absent (1): Diaz
Excused (1): Oppenheimer

S4507-2011 Memo

BILL NUMBER:S4507

TITLE OF BILL:
An act to amend the insurance law, in relation to permitting an insurer
to rescind or retroactively cancel a policy in certain circumstances

PURPOSE:
Remove incentive for staged and caused automobile insurance accidents,
by allowing for retroactive cancellation of newly issued insurance
private passenger and automobile insurance policies.

SUMMARY OF SPECIFIC PROVISIONS:
Adds a new section 3455 to the insurance law.

Subsection A provides insurance companies the ability to cancel a policy
to its inception due to non-sufficient funds, nonexistence of a bank
account, or the unauthorized use of the account.

Subsection B provides that a person injured during this period may have
recourse to his or her own policy or the motor vehicle accident indemni-
fication corporation, provided they were not participating in any frau-
dulent activity.

JUSTIFICATION:
Automobile no-fault states have higher average premiums than tort
states. One of the reasons for this is that fraud tends to be more
prevalent in no-fault systems, as the rules under which they are imple-
mented make it relatively easy for bad actors to submit fraudulent
claims. Additionally, an accident can create a multiplicity of lawsuits,
since providers and collection attorneys may initiate a lawsuit for each
and every bill. New York's generous no-fault benefits, with minimal
oversight, provide huge incentives for unbundling of services and
supplies.

Staged accidents are one type of fraudulent claim that is becoming more
and more prevalent in New York. Staged accidents begin with bad actors
procuring an automobile insurance policy with the intent of submitting a
fraudulent claim.  In many cases, they procure a policy by submitting a
bad payment (either using a nonexistent bank account or stolen credit
card information). Most states allow the retroactive cancellation of a
policy in the case of a reversed payment to prevent this type of activ-
ity. New York, however, does not permit retroactive cancellations; rath-
er cancellations are currently only prospective in nature. That turns
into a gold mine where no-fault is involved. The time between the policy
is "purchased" to the time it is cancelled provides ample opportunity
for no-fault fraud.

This bill allows for retroactive cancellation in New York of newly
issued automobile insurance policies to prevent this type of fraud.
This would bring New York in line with the other large no-fault states.
In fact, only seven other states (AZ, CO, KS, ME, MD, NC and SD) do not

allow for retroactive cancellation. Innocent victims of uninsured driv-
ers (i.e.  mandatory uninsured motorist coverage), would be covered
under their own policy or the Motor Vehicle Accident Indemnification
Corporation.

The proposal would allow retroactive cancellation of the automobile
policy, in the first sixty days, where the payment is made with insuffi-
cient funds or the identity used to procure the policy turns out to be
fraudulent. The automobile insurer would be allowed to cancel a policy
retroactively in these cases.

By permitting retroactive cancellations, New York would join the great
majority of other states, and would remove many of the incentives for
staged accidents.

PRIOR LEGISLATIVE HISTORY:
New Bill.

FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
Immediately.

S4507-2011 Text

 S T A T E   O F   N E W   Y O R K
 
                                          4507
 2011-2012 Regular Sessions
 I N  SENATE
 April 8, 2011
 
 Introduced  by  Sen.  GOLDEN -- 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 permitting an  insurer
 to rescind or retroactively cancel a policy in certain circumstances
 

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  3455
 to read as follows:

 

S  3455.  CANCELLATION OF POLICY. (A) NOTWITHSTANDING ANY RULE, LAW OR
 REGULATION TO THE CONTRARY, AN  INSURER  MAY  RESCIND  OR  RETROACTIVELY
 CANCEL  TO  THE  INCEPTION  OF THE POLICY, A NEWLY ISSUED COVERED POLICY
 SUBJECT TO SUBSECTION (A) OF SECTION THREE THOUSAND FOUR  HUNDRED  TWEN
 TY-FIVE  OF  THIS CHAPTER OR A NEWLY ISSUED COMMERCIAL AUTOMOBILE INSUR
 ANCE POLICY SUBJECT TO SECTION THREE THOUSAND FOUR HUNDRED TWENTY-SIX OF
 THIS CHAPTER, IF THE INITIAL PREMIUM PAYMENT IS NOT HONORED BY A  FINAN
 CIAL INSTITUTION DUE TO NON-SUFFICIENT FUNDS, THE NONEXISTENCE OF A BANK
 ACCOUNT OR THE UNAUTHORIZED USE OF THE ACCOUNT.
 (B)  A  PERSON  WHO IS INJURED DURING THIS PERIOD MAY HAVE RECOURSE TO
 HIS OR HER OWN POLICY, OR THE  MOTOR  VEHICLE  ACCIDENT  INDEMNIFICATION
 CORPORATION,  PROVIDED SUCH PERSON DID NOT PARTICIPATE IN ANY FRAUDULENT
 ACTIVITY, INCLUDING, BUT NOT LIMITED TO, A STAGED  OR  CAUSED  ACCIDENT.
 THE MOTOR VEHICLE ACCIDENT INDEMNIFICATION CORPORATION MAY NOT SUBROGATE
 ITS CLAIM AGAINST THE RESCINDING INSURER.
 

S 2. This act shall take effect immediately.
 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
 [ ] is old law to be omitted.
 LBD09930-04-1

S4507-2011: Permits an insurer to rescind or retroactively cancel a policy in certain circumstances