Relates to claims against insurers for petroleum spills, providing that all direct and indirect damages relating to a discharge of petroleum shall be considered insurable property damage, creating an affirmative defense for insurers that the insured failed to take reasonable steps to prevent such discharge and requiring insurers provide a notice in every homeowner's policy that the insured is responsible to take reasonable steps to prevent petroleum discharges.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A7943
SPONSOR: Englebright TITLE OF BILL: An act to amend the navigation law, in relation to
claims against insurers for petroleum spills
PURPOSE:
To protect homeowners from the onerous costs related to the remediation
of petroleum discharges on residential property. Unless the insurer
prevails on the affirmative defense, the standard homeowner's insurance
policy should cover the claim.
SUMMARY OF PROVISIONS:
Section 1 amends Section 190 of the Navigation Law to add the following
provisions:
(a) requires all homeowners' policies of insurance to cover the cleanup
and removal costs and all direct and indirect damages relating to a
discharge of petroleum;
(b) establishes an affirmative defense against a claim for coverage of
the costs and damages relating to a discharge of petroleum if the
insured had actual knowledge of a condition which a reasonable person
would have understood to pose an imminent risk of a discharge of petro-
leum and that the insured failed to take reasonable steps to prevent the
discharge;
(c) requires insurers to provide notice in every homeowner's policy,
newly issued or renewed which insures against damage to property that
states in part "You have a responsibility to prevent a discharge from
your petroleum tanks and associated pipelines"; and
(d) establishes that nothing in this section shall be construed to limit
any pre-existing right in which the insured may have had compensation
from the insurer for cleanup and removal costs and all direct and indi-
rect damages relating to the discharge of petroleum.
Section 2 provides for an effective date of the first of January next
succeeding the date on which it shall have become a law.
BACKGROUND AND JUSTIFICATION:
A petroleum discharge or spill is a serious threat to the environment.
Spills that occur on residential properties can cost anywhere from
several thousand dollars to hundreds of thousands of dollars to clean
up. Many of these spills involve petroleum storage systems in which
tanks or lines have leaked, allowing oil to seep into the soil and
impact groundwater which is a typical source of drinking water. Remedi-
ation may include soil excavation, tank removal and replacement (if the
tank was the source), and groundwater monitoring or treatment. The home-
owner is strictly liable for the discharge or spill and the subsequent
clean-up costs. Insurance companies have routinely included absolute
"pollution exclusions" in all homeowners' policies and denied coverage
of these costs. This legislation requires these costs to be covered in
homeowner policies. These cases, though they often constitute a severe
financial burden to individual homeowners and are a threat to the envi-
ronment, are limited and should not impose a burden on insurance compa-
nies.
Therefore, the Comptroller urges passage of this legislation.
LEGISLATIVE HISTORY:
S. 5818 and A. 8562 of 2009-2010
S. 6344 and A. 7640 of 2011-2012
S.4041 of 2013
FISCAL. IMPLICATIONS:
None to the State.
EFFECTIVE DATE:
This act shall take effect on the first of January next succeeding the
date on which it shall have become a law.
