Permits an insurer to rescind or retroactively cancel a policy in certain circumstances involving a staged or fraudulent accident.

---

S4507B-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

S4507B-2011 Meetings

Insurance: Mar 19, 2012

S4507B-2011 Calendars

Active List: Mar 22, 2012 , Active List: Jun 20, 2011 , Floor Calendar: Mar 20, 2012 , Floor Calendar: Mar 21, 2012 , Floor Calendar: Mar 22, 2012 , Floor Calendar: Jun 15, 2011 , Floor Calendar: Jun 16, 2011 , Floor Calendar: Jun 17, 2011

S4507B-2011 Votes

S4507B-2011 Memo

BILL NUMBER:S4507B

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

PURPOSE OR GENERAL IDEA OF BILL:
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:
Section 1- Adds a new section 3455 to
the insurance law that: provides insurance companies the ability,
within the first 60 days, to rescind a policy to its inception due to
non-sufficient funds, non-existence 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
indemnification corporation, provided they were not participating in
any fraudulent activity.

Section 2-Amends Subsection (d) of section 3420 of the insurance law
to provides insurers the ability to rescind coverage pursuant to
section 3455 for death or bodily injury arising from an uninsured
motorist endorsement by any occupant of a motor vehicle involved in a
staged accident who is without knowledge of the staging or arranging
of the staged or arranged accident.

Section 3-Paragraph 1 of subsection (f) of Section 3420 of the
insurance law, as amended by chapter 305 of the laws of 1995, is
amended to add rescinded policies to the list of scenarios that a
driver would be insured against in the event of bodily injury or death.

Section 4-Subparagraph A subsection (f) of section 3420 of the
insurance law is amended to deal with supplementary
uninsured/underinsured coverage. Section 5- Section 5103 of the
insurance law is amended to address individuals who are involved in a
staged accident who is without knowledge of the staging or arranging
of the staged or arranged accident.

Section 6-subsection (2) of section 5103 of the insurance law is
amended to account for vehicles whose coverage has been rescinded or
cancelled.

Section 7-Paragraph (a) of subdivision 1 of section 313 of the
vehicle and traffic law is amended to exempt section 3455 of the
insurance law from the 20 day mailing notice to cancel an insurance
policy.

Section 8-this act shall take effect immediately.


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 implemented 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 activity. New York, however, does not permit retroactive
cancellations; rather 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
drivers (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
insufficient 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.

S4507B-2011 Text

                      S T A T E   O F   N E W   Y O R K
  ________________________________________________________________________

                                   4507--B
      Cal. No. 553

                         2011-2012 Regular Sessions

                              I N  SENATE

                                April 8, 2011
                                 ___________

  Introduced  by  Sens.  GOLDEN, SEWARD -- read twice and ordered printed,
    and when printed to be committed to  the  Committee  on  Insurance  --
    reported  favorably  from  said committee, ordered to first and second
    report, ordered to a third reading,  amended  and  ordered  reprinted,
    retaining its place in the order of third reading -- again amended and
    ordered reprinted, retaining its place in the order of third reading

  AN  ACT  to  amend the insurance law and the vehicle and traffic 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) AN INSURER MAY, WITHIN  THE  FIRST
  SIXTY  DAYS,  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 TWENTY-FIVE OF THIS ARTICLE OR A
  NEWLY ISSUED COMMERCIAL AUTOMOBILE INSURANCE POLICY SUBJECT  TO  SECTION
  THREE  THOUSAND  FOUR HUNDRED TWENTY-SIX OF THIS ARTICLE, IF THE INITIAL
  PREMIUM PAYMENT IS  NOT  HONORED  BY  A  FINANCIAL  INSTITUTION  DUE  TO
  NON-SUFFICIENT  FUNDS,  THE  NONEXISTENCE OF A BANK ACCOUNT OR THE UNAU-
  THORIZED USE OF THE ACCOUNT.  IN THE EVENT THAT SUCH INITIAL PAYMENT  IS
  NOT HONORED BY A FINANCIAL INSTITUTION DUE TO NON-SUFFICIENT FUNDS IN AN
  EXISTING ACCOUNT THAT THE POLICYHOLDER IS AUTHORIZED TO USE, THE INSURER
  SHALL  NOTIFY  THE  POLICYHOLDER  THAT  UNLESS THE POLICYHOLDER REMITS A
  CHECK CERTIFIED PURSUANT TO SECTION  3-411  OF  THE  UNIFORM  COMMERCIAL
  CODE,  ALONG  WITH  ANY  FEES  ACCESSED FOR NON-SUFFICIENT FUNDS, TO THE
  INSURER WITHIN TEN DAYS,  THE  POLICY  MAY  BE  RESCINDED  OR  CANCELLED
  RETROACTIVELY TO THE INCEPTION OF THE POLICY.
    (B)  A PERSON WHO IS INJURED DURING THIS PERIOD SHALL HAVE RECOURSE TO
  HIS OR HER OWN POLICY, SUBJECT  TO  THE  TERMS  AND  CONDITIONS  OF  THE

   EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                        [ ] is old law to be omitted.
                                                             LBD09930-12-1

 S. 4507--B                          2

  CONTRACT,  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.  Paragraph  2 of subsection (d) of section 3420 of the insurance
  law, as amended by chapter 388 of the laws of 2008, is amended  to  read
  as follows:

    (2)  If under a liability policy issued or delivered in this state, an
  insurer shall disclaim liability [or], deny coverage, OR RESCIND  COVER-
  AGE  PURSUANT  TO SECTION THREE THOUSAND FOUR HUNDRED FIFTY-FIVE OF THIS
  ARTICLE, for death or bodily injury arising out of a motor vehicle acci-
  dent, INCLUDING ANY CLAIM  FOR  PERSONAL  INJURIES  UNDER  AN  UNINSURED
  MOTORIST  ENDORSEMENT BY ANY OCCUPANT OF A MOTOR VEHICLE OR OTHER PERSON
  INVOLVED IN A STAGED OR ARRANGED ACCIDENT WHO IS  WITHOUT  KNOWLEDGE  OF
  THE  STAGING OR ARRANGING OF THE ACCIDENT, or any other type of accident
  occurring within this state, it shall give written notice as soon as  is
  reasonably  possible of such disclaimer of liability or denial of cover-
  age to the insured and the injured person or any other claimant.
    S 3. Paragraph 1 of subsection (f) of section 3420  of  the  insurance
  law,  as  amended by chapter 305 of the laws of 1995, is amended to read
  as follows:

    (1) No policy insuring against loss resulting from  liability  imposed
  by law for bodily injury or death suffered by any natural person arising
  out  of  the  ownership,  maintenance  and use of a motor vehicle by the
  insured shall be issued or delivered by any authorized insurer upon  any
  motor vehicle then principally garaged or principally used in this state
  unless  it  contains a provision whereby the insurer agrees that it will
  pay to the insured, as defined in such provision, subject to  the  terms
  and conditions set forth therein to be prescribed by the board of direc-
  tors  of  the  Motor  Vehicle  Accident  Indemnification Corporation and
  approved by the superintendent, all sums, not exceeding a maximum amount
  or limit of twenty-five  thousand  dollars  exclusive  of  interest  and
  costs,  on  account  of  injury to and all sums, not exceeding a maximum
  amount or limit of fifty thousand  dollars  exclusive  of  interest  and
  costs,  on  account of death of one person, in any one accident, and the
  maximum amount or limit, subject to such limit for  any  one  person  so
  injured  of  fifty thousand dollars or so killed of one hundred thousand
  dollars, exclusive of interest and costs, on account of  injury  to,  or
  death of, more than one person in any one accident, which the insured or
  his legal representative shall be entitled to recover as damages from an
  owner  or  operator  of  an  uninsured motor vehicle, unidentified motor
  vehicle which leaves the scene of an accident, a  motor  vehicle  regis-
  tered  in  this  state as to which at the time of the accident there was
  not in effect a policy of liability insurance, A MOTOR VEHICLE FOR WHICH
  THE POLICY OF INSURANCE HAS BEEN  RESCINDED  OR  CANCELLED  PURSUANT  TO
  SECTION THREE THOUSAND FOUR HUNDRED FIFTY-FIVE OF THIS ARTICLE, a stolen
  vehicle,  A  MOTOR  VEHICLE INVOLVED IN AN INTENTIONAL AND/OR FRAUDULENT
  AND/OR STAGED ACCIDENT, EXCEPT SUCH  VEHICLE  OR  THOSE  VEHICLES  OWNED
  AND/OR  OPERATED  BY  THE PERPETRATOR OR PERPETRATORS OF THE INTENTIONAL
  AND/OR FRAUDULENT AND/OR STAGED ACCIDENT, a motor vehicle operated with-
  out permission of the owner, an insured motor vehicle where the  insurer
  disclaims  liability  or  denies  coverage  or  an  unregistered vehicle
  because of bodily injury, sickness or disease, including death resulting
  therefrom, sustained by the insured, caused  by  accident  occurring  in
  this  state and arising out of the ownership, maintenance or use of such

 S. 4507--B                          3

  motor vehicle. No payment for non-economic loss shall be made under such
  policy provision to a covered person unless such person has  incurred  a
  serious  injury,  as such terms are defined in section five thousand one
  hundred two of this chapter. Such policy shall not duplicate any element
  of  basic  economic  loss  provided  for under article fifty-one of this
  chapter. No payments of first party benefits  for  basic  economic  loss
  made  pursuant  to  such  article  shall diminish the obligations of the
  insurer under this policy provision for the payment of non-economic loss
  and economic loss in excess of basic economic loss. Notwithstanding  any
  inconsistent  provisions  of section three thousand four hundred twenty-
  five of this article, any such policy which does not contain the  afore-
  said  provisions  shall be construed as if such provisions were embodied
  therein.
    S 4. Subparagraph (A) of paragraph 2 of subsection (f) of section 3420
  of the insurance law, as separately amended by chapters 547 and  568  of
  the laws of 1997, is amended to read as follows:

    (A)  Any such policy shall, at the option of the insured, also provide
  supplementary  uninsured/underinsured  motorists  insurance  for  bodily
  injury,  in an amount up to the bodily injury liability insurance limits
  of coverage provided under such policy, subject  to  a  maximum  of  two
  hundred  fifty  thousand dollars because of bodily injury to or death of
  one person in any one accident  and,  subject  to  such  limit  for  one
  person,  up to five hundred thousand dollars because of bodily injury to
  or death of two or more persons in  any  one  accident,  or  a  combined
  single  limit  policy of five hundred thousand dollars because of bodily
  injury to or death of one or more persons in any one accident.  Provided
  however,  an  insurer  issuing  such  policy, in lieu of offering to the
  insured  the  coverages  stated   above,   may   provide   supplementary
  uninsured/underinsured  motorists  insurance  for  bodily  injury, in an
  amount up to the bodily injury liability insurance  limits  of  coverage
  provided under such policy, subject to a maximum of one hundred thousand
  dollars  because  of  bodily injury to or death of one person in any one
  accident and, subject to such limit for one person, up to three  hundred
  thousand  dollars  because  of  bodily injury to or death of two or more
  persons in any one accident, or a combined single limit policy of  three
  hundred  thousand dollars because of bodily injury to or death of one or
  more persons in any one accident, if such insurer also makes available a
  personal umbrella policy with liability coverage limits up to  at  least
  five  hundred  thousand dollars which also provides coverage for supple-
  mentary   uninsured/underinsured   motorists    claims.    Supplementary
  uninsured/underinsured  motorists  insurance  shall provide coverage, in
  any state or Canadian province, if the limits  of  liability  under  all
  bodily  injury  liability  bonds and insurance policies of another motor
  vehicle liable for damages INCLUDING BUT NOT LIMITED TO  A  VEHICLE  FOR
  WHICH  THE  POLICY OF INSURANCE HAS BEEN RESCINDED OR CANCELLED PURSUANT
  TO SECTION THREE THOUSAND FOUR HUNDRED FIFTY-FIVE  OF  THIS  ARTICLE,  A
  MOTOR VEHICLE INVOLVED IN AN INTENTIONAL AND/OR FRAUDULENT AND/OR STAGED
  ACCIDENT, EXCEPT THAT VEHICLE OR THOSE VEHICLES OWNED AND/OR OPERATED BY
  THE  PERPETRATOR  OR  PERPETRATORS  OF THE INTENTIONAL AND/OR FRAUDULENT
  AND/OR STAGED ACCIDENT, are in a lesser amount than  the  bodily  injury
  liability  insurance  limits  of  coverage provided by such policy. Upon
  written   request   by   any    insured    covered    by    supplemental
  uninsured/underinsured motorists insurance or his duly authorized repre-
  sentative  and  upon  disclosure  by the insured of the insured's bodily
  injury  and  supplemental  uninsured/underinsured  motorists   insurance
  coverage  limits,  the insurer of any other owner or operator of another

 S. 4507--B                          4

  motor vehicle against which a claim has been made  for  damages  to  the
  insured shall disclose, within forty-five days of the request, the bodi-
  ly  injury liability insurance limits of its coverage provided under the
  policy  or all bodily injury liability bonds. The time of the insured to
  make any supplementary uninsured/underinsured motorist claim,  shall  be
  tolled  during  the period the insurer of any other owner or operator of
  another motor vehicle that may be liable for  damages  to  the  insured,
  fails to so disclose its coverage. As a condition precedent to the obli-
  gation    of    the    insurer    to   pay   under   the   supplementary
  uninsured/underinsured  motorists  insurance  coverage,  the  limits  of
  liability  of  all  bodily  injury liability bonds or insurance policies
  applicable at the time of the accident shall be exhausted by payment  of
  judgments or settlements.
    S  5.  Paragraph  1 of subsection (b) of section 5103 of the insurance
  law is amended to read as follows:

    (1) Intentionally causes his own injury,  EXCEPT  ANY  OCCUPANT  OF  A
  MOTOR  VEHICLE  OR OTHER PERSON INVOLVED IN AN INTENTIONAL AND/OR STAGED
  AND/OR FRAUDULENT ACCIDENT WHO IS WITHOUT KNOWLEDGE OF  THE  STAGING  OR
  ARRANGING OF THE ACCIDENT.
    S  6.  Paragraph  2 of subsection (a) of section 5103 of the insurance
  law is amended to read as follows:

    (2) The named insured and members of his household, other  than  occu-
  pants  of  a motorcycle, for loss arising out of the use or operation of
  (i) an uninsured motor vehicle or motorcycle, OR A VEHICLE WHOSE  COVER-
  AGE  IS  RESCINDED  OR CANCELLED PURSUANT TO SECTION THREE THOUSAND FOUR
  HUNDRED FIFTY-FIVE OF THIS CHAPTER, within the United States, its terri-
  tories or possessions, or Canada; and (ii) an insured motor  vehicle  or
  motorcycle  outside  of  this  state  and  within the United States, its
  territories or possessions, or Canada.
    S 7. Paragraph (a) of subdivision 1 of section 313 of the vehicle  and
  traffic  law,  as amended by chapter 569 of the laws of 1981, is amended
  to read as follows:

    (a) [No] EXCEPT AS PROVIDED FOR IN SECTION THREE THOUSAND FOUR HUNDRED
  FIFTY-FIVE OF THE INSURANCE LAW, NO contract of insurance  for  which  a
  certificate  of  insurance has been filed with the commissioner shall be
  terminated by cancellation by the insurer until  at  least  twenty  days
  after  mailing to the named insured at the address shown on the policy a
  notice of termination by regular mail, with a  certificate  of  mailing,
  properly endorsed by the postal service to be obtained, except where the
  cancellation  is  for  non-payment of premium in which case fifteen days
  notice of cancellation by the insurer  shall  be  sufficient,  provided,
  however,  if  another  insurance  contract has been procured, such other
  insurance contract shall, as of its effective date and  hour,  terminate
  the  insurance  previously  in effect with respect to any motor vehicles
  designated in both contracts. No  contract  of  insurance  for  which  a
  certificate of insurance has been filed with the commissioner in which a
  natural  person  is  the  named  insured  and  the motor vehicle is used
  predominantly for non-business  purposes  shall  be  non-renewed  by  an
  insurer  unless  at  least  forty-five,  but not more than sixty days in
  advance of the renewal date the insurer mails or delivers to  the  named
  insured  at  the  address  shown  on  the policy a written notice of its
  intention not to renew. No such contract of insurance in which the named
  insured is not a natural person or the motor vehicle  is  used  predomi-
  nantly  for  business purposes shall be non-renewed by an insurer unless
  at least twenty days in advance of the renewal date the insurer mails or
  delivers to the named insured at the address shown on the policy a writ-

 S. 4507--B                          5

  ten notice of its intention not to renew.  All  notices  of  non-renewal
  shall  be  sent  by regular mail with a certificate of mailing, properly
  endorsed by the postal service to be obtained.  Time  of  the  effective
  date  and  hour of termination stated in the notice shall become the end
  of the policy period. Every notice or acknowledgement of termination for
  any cause whatsoever sent to the insured shall include in type of  which
  the  face  shall not be smaller than twelve point a statement that proof
  of financial security is required to be maintained continuously through-
  out the registration period and a notice prescribed by the  commissioner
  indicating  the punitive effects of failure to maintain continuous proof
  of financial security and actions which may be taken by the  insured  to
  avoid such punitive effects.
    S 8. This act shall take effect immediately.