Removes the state insurance fund's exemption from licensing and other requirements of the insurance law; requires the superintendent of insurance to approve the rules adopted by the state insurance fund for the conduct of its business; removes the requirement for policyholders to provide thirty days notice to withdraw from the state insurance fund.
BILL NUMBER:S6755 REVISED MEMO 03/06/2014
TITLE OF BILL: An act to amend the insurance law, in relation to removing the exemption of the state insurance fund from licensing and other requirements; to amend the workers' compensation law, in relation to requiring the superintendent of insurance to approve the rules adopted by the state insurance fund for the conduct of its business; and to amend the workers' compensation law, in relation to the requirement for policyholders to provide 30 days notice to withdraw from the state insurance fund
The bill would require that the State Insurance Fund (SIF) be licensed by the Department of Financial Services (DFS) and subject to the same requirements as other insurance companies providing workers' compensation insurance. The bill would also require that the Superintendent of DFS approve the rules adopted by SIF for the conduct of its business. It would also delete the requirement for SIF policy holders to provide 30 days notice to withdraw from the Fund.
SUMMARY OF PROVISIONS:
Section 1. Amends section 1108 of the Insurance Law by deleting subsection (c) which exempts the state insurance fund from licensing and other requirements of the Insurance Law.
Section 2. Replaces the Commissioner of Labor with the Superintendent of DFS as the person who must approve the rules adopted by SIF for the conduct of its business. It also deletes the provision allowing for rules to be adopted if not approved by the Commissioner of Labor within 30 days.
Section 3. Deletes the requirement of policyholders of SIF to provide 30 days notice of their intent to withdraw from the Fund. Instead, policyholders would have to provide written notice of the effective date of cancellation.
New York Insurance Law section 1108 exempts certain insurers, including SIF from licensing and other requirements of the Insurance Law. SIF is a non-profit agency of the State of New York established in 1914 to provide a guaranteed source of workers' compensation insurance coverage for employers in New York State. SIF is the largest single carrier of workers' compensation insurance in the State, with approximately 37 percent of the market. SIF is administered by nine Commissioners, including the Commissioner of Labor and eight members who are appointed by the Governor with the consent of the Senate. The Commissioners appoint an executive director who is responsible for the direction and operation of SIF. SIF is completely self sustaining, acquiring all of its operating and reserve funds from the premiums it collects from its policyholders and its investment income. Although a quasi-public agency, SIF was intended by the Legislature to be treated the same as a private insurance company. See Commissioners of State insurance Fund v. Low, 285 App. Div. 525, 138 N.Y.S.2d 437 (3rd Dept 1955). It is more closely equated to an insurance company than to a
typical state agency. Martin Minkiowtiz, PRACTICE COMMENTARIES, N.Y. Work. Comp. Section 76 (McKinney 1994). Despite the fact that SIF was intended to be treated a s a private insurance company, it is not licensed by the New York State DFS, not is it subject to the Department's oversight and regulation. As a result, SIF policyholders are put at a disadvantage when compared to policyholders of private workers' compensation insurers If a SIF policyholder has a dispute with SIF regarding an unfair insurance practice, they have no recourse other than to bring the matter up with SIF. In contract, policyholders of private carriers may appeal to the DFS if they have a dispute with their insurer. SIF policyholders have reported various unfair practices which have gone unchecked. One common complaint is that SIF takes retaliatory actions against policyholders who seek to move their business from SIP to another coverage provider. Policyholders have reported aggressive and unfair tactics, such as SIF suddenly revising audits and questioning classifications in an effort to charge a departing customer a higher premium. Additionally, private insurance carriers who must be licensed by the DFS and subject to insurance law, are also placed at a competitive disadvantage compared to the SIF which is not subject to the same rules and regulations. To rectify these inequities, the bill would place SIF on an even footing with other insurers providing workers' compensation insurance by removing SIFs exemption from licensing and other insurance requirements. The bill would also insert the Superintendent of DFS, as opposed to the Commissioner of Labor, as the appropriate person to approve the rules adopted by the commissioners of SIF for the conduct of its business. These rules of conduct include those pertaining to the issuance of policies and their terms and conditions, the fixing of premium rates, record keep, payroll audits, billing and collection of premiums, inspection of risks and setting standards of safety and the adjustment and payment of claims and awards.
Lastly, the bill would remove a requirement placed upon policyholders of SIF that does not apply to policyholders of private insurers. Currently, SIF policyholders that want to cancel their policy with SIF because they have found other coverage must provide SIF with 30 days advance written notice. During this notice period, policyholders report that SIF employs aggressive and retaliatory tactics in an effort to retain the business. It is simply unfair to require policyholders of the SIF to provide more notice than is required of policyholders of private carriers.
2012 S.3836; 2009-10 S.1662; 2007-08 S.7673;
This act shall take effect on the ninetieth day after it shall have become law.
STATE OF NEW YORK ________________________________________________________________________ 6755 IN SENATE March 6, 2014 ___________Introduced by Sen. LAVALLE -- 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 removing the exemption of the state insurance fund from licensing and other requirements; to amend the workers' compensation law, in relation to requiring the superintendent of insurance to approve the rules adopted by the state insurance fund for the conduct of its business; and to amend the work- ers' compensation law, in relation to the requirement for policyhold- ers to provide 30 days notice to withdraw from the state insurance fund THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Section 1108 of the insurance law, subsection (c) as amended by chapter 838 of the laws of 1985, subsection (j) as added by section 2 of part R of chapter 56 of the laws of 2010, subsection (k) as added by chapter 181 of the laws of 2012, subsection (l) as added by chapter 246 of the laws of 2012, subsection (l) as relettered and subsection (m) as added by chapter 203 of the laws of 2013, is amended to read as follows: S 1108. Insurers exempt from licensing and other requirements. The following insurers, their officers, agents, representatives and employ- ees shall be exempt from licensing and other requirements imposed by the provisions of this chapter (except article seventy-four hereof) to the extent specified below: (a) Any charitable annuity society which complies with the require- ments of section one thousand one hundred ten of this article, to the extent therein stated. (b) Any fraternal benefit society, membership corporation or other organization exempted under the provisions of article forty-five of this chapter, to the extent therein stated.
[(c) The state insurance fund of this state, except as to the provisions of subsection (d) of section two thousand three hundred thir- ty-nine, section three thousand one hundred ten, subsection (a), para- graph one of subsection (b), paragraph three of subsection (c) and(C) Any corporate trustee or board of trustees acting pursuant to the banking law in relation to the fund for insurance of deposits in savings banks or the fund for insurance of shares of savings and loan associations.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD14064-01-4 S. 6755 2
subsection (d) of section three thousand two hundred one, sections three thousand two hundred two, three thousand two hundred four, subsections (a) through (d) of section three thousand two hundred twenty-one, subsections (b) and (c) of section four thousand two hundred twenty- four, section four thousand two hundred twenty-six and subsections (a) and (b) and (g) through (j) of section four thousand two hundred thir- ty-five of this chapter and except as otherwise specifically provided by the laws of this state. (d)]
[(e)](D) Any corporation, organized under the laws of any state, solely to provide gratuitously for support or relief of the priests, clergy or ministers of any religious denomination, or their dependents, is exempt from all provisions of this chapter, except that any such corporation, created by special act of incorporation of this state, which by the provisions of such act is subject to the requirement of examination by, and making annual reports to, the superintendent, shall be subject to the provisions of article three of this chapter relating to examinations and statements or reports by insurers. [(f)](E) Any retirement system or pension fund that was doing busi- ness on January first, nineteen hundred forty under the education law, the civil service law, the mental hygiene law, any special act of incor- poration of this state, or any municipal charter adopted under the laws of this state, exclusively for the benefit of the members of such system or fund or for all or any classes of the employees of this state or any municipality thereof, shall be exempt from the provisions of this chap- ter, except that if the law under which such system or fund was organ- ized subjects it to examination by, and the making of annual reports to, the superintendent, such system or fund shall be subject to the provisions of article three of this chapter relating to examinations and statements or reports by insurers. [(g)](F) Any membership corporation or voluntary association organ- ized and operating in this state prior to January first, nineteen hundred thirty-nine and its members may act as indemnitors of a licensed property/casualty insurance company in respect to surety bonds or poli- cies of insurance required to be filed by such members pursuant to section three hundred seventy of the vehicle and traffic law and are exempted from the requirement of having an insurer's license; but no such membership corporation or association shall become a surety on any such bond or otherwise do an insurance business. [(h)](G) Any relief department or pension plan of any common carrier subject to the [the]Railroad Retirement Act of 1974 (45 U.S.C. S 31), whose privileges and membership are confined to employees or former employees of such carrier or its affiliated or subsidiary companies, or to any association of such common carriers which administers any such department or plan. [(i)](H) Every blood credit system established by a city, pursuant to section twenty-one-d of the general city law. [(j)](I) Any group of employers authorized by the workers' compen- sation board to provide workers' compensation benefits for the employees of all member employers pursuant to subdivision three-a of section fifty of the workers' compensation law.S. 6755 3
[(k)](J) A charitable bail organization holding a certificate issued by the superintendent pursuant to section six thousand eight hundred five of this chapter. [(l)](K) An institution of higher education, as defined in paragraph two of subsection (a) of section one thousand one hundred twenty-four of this article, that has a certificate of authority from the superinten- dent and complies with the requirements of section one thousand one hundred twenty-four of this article, to the extent therein stated. [(m)](L) A freelancers association, as defined in section one thou- sand one hundred twenty-five of this article, that obtains and maintains a demonstration program waiver from the superintendent and complies with the requirements of section one thousand one hundred twenty-five of this article, to the extent therein stated. S 2. Paragraph 2 of subsection (a) of section 4522 of the insurance law is amended to read as follows: (2) Organizations which limit their membership to the employees of a particular city or town, or of a designated business corporation or firm, or of one or more business corporations or firms having business interests in common, except as otherwise provided in subsection [(f)](E) of section one thousand one hundred eight of this chapter. Any such organization which limits its membership to the employees of a corpo- ration having more than five thousand employees may provide for hospi- tal, surgical and medical benefits for the employee, his or her spouse, and his or her child or children not over eighteen years of age. S 3. Section 83 of the workers' compensation law, as amended by chap- ter 34 of the laws of 2010, is amended to read as follows: S 83. Rules. The [commissioner]COMMISSIONERS shall adopt rules for the conduct of the business of the state fund, and may from time to time alter, amend or repeal any rule therefore adopted. At least six affirma- tive votes shall be required for the adoption of any rule, or the amend- ment or repeal of any rule. No rule, and no resolution proposing to alter, amend or repeal any rule, shall be effective unless approved by the [commissioner of labor. If the commissioner of labor fails to act upon any such rule or resolution within thirty days after it is communi- cated to him or her, such rule or resolution shall be deemed to have been approved]SUPERINTENDENT OF INSURANCE. The rules of the commissioners shall provide for the conduct of the business of the state insurance fund, including the issuance of policies and their terms and conditions, the fixing of premium rates, the keeping of records, auditing of payrolls, and the billing and collection of premiums therefor, the inspection of risks and the setting of the stand- ards of safety, the adjustment and payment of claims and awards, and the investigation of all matters relating thereto, the medical examination of persons claiming compensation and the furnishing and supervision of medical and surgical treatment to persons injured as set forth in this chapter, the conduct of the legal business of the fund and the enforce- ment of the subrogated rights of the fund against third parties, the investment of the surplus and reserves of the fund, and the collection and analysis of statistics of payrolls, premiums, losses and expenses and the actuarial consideration thereof. S 4. Subdivision a of section 94 of the workers' compensation law, as amended by chapter 635 of the laws of 1996, is amended to read as follows: a. Any employer may, upon complying with subdivision two or three of section fifty of this chapter, withdraw from the fund by turning in his insurance contract for cancellation, [provided he has given writtenALONG WITH WRITTEN NOTICE OF THE EFFECTIVE DATE OF THE CANCELLATION. Upon receipt of such notice the fund shallS. 6755 4
notice to the fund of his intention to withdraw not less than thirty days before the effective date of such cancellation]
[, at least ten days prior to the effective date]file in the office of the chairman a notice of such cancellation date. [In no event shall the insurance contract be deemed cancelled until at least ten days after the date of such filing, any earlier date mentioned in the notice to the contrary notwithstanding.]If an employer withdraws from the fund upon complying with subdivision two of section fifty of this chapter, the new insurance contract with the stock corporation, mutual corporation or reciprocal insurer shall be deemed not to take effect until the cancellation of such employer's contract with the state insurance fund has become effective. S 5. This act shall take effect on the ninetieth day after it shall have become a law; provided that the amendments to subsections (l) and (m) of section 1108 of the insurance law made by section one of this act shall not affect the expiration of subsection (l) and the repeal of subsection (m) and shall expire and be deemed repealed therewith.