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A07285 Summary:

BILL NOA07285A
 
SAME ASSAME AS S06813-A
 
SPONSORWeinstein
 
COSPNSRCusick, Cymbrowitz, Hyndman, Paulin, Colton, Abinanti, Seawright, Santabarbara, Zebrowski, Taylor, Carroll, Dinowitz, Weprin, Jacobson, Gottfried, Simon, Griffin, Barron, Solages, Zinerman, Gonzalez-Rojas, Dickens, Anderson, Lunsford, Glick, Fernandez, Epstein
 
MLTSPNSRWilliams
 
Add §2601-a, amd §§3425 & 2601, Ins L
 
Relates to claim settlement practices when an insurer refuses to pay or is delaying payment of a settlement; provides a policyholder a private right of action against such insurer doing business in the state who has refused or delayed payment of an insurance claim.
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A07285 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A7285A
 
SPONSOR: Weinstein
  TITLE OF BILL: An act to amend the insurance law, in relation to unfair claim settle- ment practices   PURPOSE OF BILL: To allow insurance policy holders and injured people 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 OF BILL: Section 1 creates a new Insurance Law section 2601-a which grants insur- ance policy claimants a private right of action to seek damages if the insurer unreasonably refuses to pay or unreasonably delays payment with- out substantial justification. An insurer would not be substantially justified in refusing to pay or in unreasonably delaying payment when it: 1. Fails to provide the claimant with accurate information regarding policy provisions relating to the coverage at issue; or, 2. Fails to effectuate in good faith a prompt, fair and equitable settlement of a claim or portion of a claim and where the insurer failed to reasonably accord at least equal or more favorable consideration to its insured's interests as it did to its own interests, and thereby exposed the insured to a judgment in excess of the policy limits or caused other damage to a claimant; or 3. Fails to provide a timely written denial of a claimant's claim, or portion thereof, with a full and complete explanation of such denial, including references to specific policy provisions wherever possible; or 4. Fails to act in good faith by compelling such claimant to initiate a lawsuit to recover under the policy by offering substantially less than the amounts ultimately recovered in such suit; or 5. Fails to timely provide, on request of the policy holder or the poli- cy holder's representative, all reports or other documentation arising from the investigation of a claim; or 6. Refuses to pay a claim without conducting a reasonable investigation prior to such refusal. Any policyholder who establishes liability shall be entitled to recover amounts due under the policy, costs and disbursements, consequential damages, reasonable attorney's fees, interest from the time of the loss or failure to offer a fair and reasonable settlement and punitive damages. The bill also includes procedural rules to ensure a fair hearing for all parties, including evidentiary issues, notice to the insurer, opportu- nity to cure, discovery and the right to trial. Finally, in the event an insurer is found liable under this section, the bill would prevent insurers from passing on the costs to consumers in the form of higher premiums. Section 2 amends Insurance Law section 3425 to prohibit insurers from refusing to issue or renew a policy because a consumer has brought an action under section 1. Section 3 amends Insurance Law section 2601 to update fair claims settlement practices. Section 4 is the effective date.   JUSTIFICATION: Insurance companies have an overwhelming advantage in the handling of a claim, with the power and financial incentive to deny or delay coverage and otherwise avoid fair payment of legitimate claims. Under current law, there is no consequence to the insurer when a denial or delay of coverage is unfounded, or when the insurer offers an unreasonably low settlement. The importance of this issue became increasingly apparent in the aftermath of Superstorm Sandy, when tens of thousands of New Yorkers making claims to insurers experienced unfair claims practices. More recently, COVID-19 claims denials have left many victims without even a settlement offer in the absence of the threat of a trial and many small businesses in danger of shuttering after insurers refused to pay for losses due to mandated closures. Currently § 2601 of the insurance law regulates the conduct of insurers, prohibiting 5 specific actions that constitute unfair claims practices. However, only the Superintendent of the Department of Financial Services can enforce these provisions. Furthermore, § 2601 does not go far enough in regulating the types of unfair claims practices we have seen across the state in the wake of recent natural disasters. Under existing statutes and case law, an insurer can simply refuse to pay a claim with impunity or offer an amount well below the value of the loss. Even if the claimant sues and wins the full amount of the claim, they will still not receive the benefits to which they should be enti- tled under the policy because of the costs associated with bringing the successful action. This gives insurers an unfair advantage in negotiat- ing a settlement of any claim - insurers are able to bear the costs of litigation, but most ordinary New Yorkers cannot afford to do so. In addition, an insurer's bad faith conduct may leave a policy holder exposed to a liability judgment in excess of the policy limit. New Yorkers who pay insurance premiums should expect insurers to live up to their obligation to deal in good faith with regard to claims submit- ted under the policy. When insurers do not meet this obligation, it is important that the consumer has a viable and effective means of seeking redress. This bill gives consumers the legal means to achieve this goal.   LEGISLATIVE HISTORY: 2021: A.7285/S.6813 - A.Rules/S. Ins. 2019-20: A.5623 - Third Reading 2017-18: A.2832-A - A. Ins. 2015-16: A.257-A - Third Reading 2013-14: A.7809 - Third Reading   FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: None.   EFFECTIVE DATE: January 1st next succeeding the date on which it shall have become a law.
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A07285 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                         7285--A
 
                               2021-2022 Regular Sessions
 
                   IN ASSEMBLY
 
                                       May 3, 2021
                                       ___________
 
        Introduced  by  M. of A. WEINSTEIN, CUSICK, CYMBROWITZ, HYNDMAN, PAULIN,
          COLTON, ABINANTI, SEAWRIGHT, SANTABARBARA, ZEBROWSKI, TAYLOR, CARROLL,
          DINOWITZ, WEPRIN, JACOBSON, GOTTFRIED, SIMON, GRIFFIN, SOLAGES, ZINER-
          MAN, GONZALEZ-ROJAS, DICKENS, ANDERSON, LUNSFORD, GLICK -- Multi-Spon-
          sored by -- M. of A. WILLIAMS -- read once and referred to the Commit-
          tee on Insurance -- reported and referred to the Committee on Codes --
          recommitted to the Committee on Codes in accordance with Assembly Rule
          3, sec. 2 -- committee discharged, bill amended, ordered reprinted  as
          amended and recommitted to said committee
 
        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:
 
     1    Section 1. The insurance law is amended by adding a new section 2601-a
     2  to read as follows:
     3    §  2601-a.  Unfair  claim  settlement practices; civil remedy. (a) The
     4  holder of a policy issued or renewed pursuant to article thirty-four  of
     5  this  chapter  or  injured  person  shall have a private right of action
     6  against any insurer doing business in this state for damages as provided
     7  in this section upon proof by a preponderance of the evidence that  such
     8  insurer's  refusal  to  pay or unreasonably delay payment to the policy-
     9  holder or injured person of amounts claimed to be due under a policy  is
    10  not  reasonably  justified.  An  insurer  is not reasonably justified in
    11  refusing to pay or is unreasonably delaying payment when the insurer:
    12    (1) fails  to  provide  the  policyholder  with  accurate  information
    13  concerning policy provisions relating to the coverage at issue;
    14    (2) fails to effectuate a prompt and fair settlement of a claim or any
    15  portion  thereof,  in that the insurer (i) fails to reasonably accord at
    16  least equal or more favorable consideration to its  insured's  interests
    17  as  it  did  to  its own interests, and thereby exposes the insured to a
    18  judgment in excess of the policy limits, or (ii) refuses  to  settle  in
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD11091-04-2

        A. 7285--A                          2
 
     1  response  to  a  fair  and reasonable settlement offer within the policy
     2  limits from an injured party;
     3    (3) fails to provide a timely written denial of a policyholder's claim
     4  with  a  full  and complete explanation of such denial, including refer-
     5  ences to specific policy provisions wherever possible;
     6    (4) fails to make a final determination and notify the policyholder in
     7  writing of its position on both liability for and  the  insurer's  valu-
     8  ation  of  a  claim within a reasonable time not to exceed six months of
     9  the date on which it received actual or constructive notice of the  loss
    10  upon which the claim is based;
    11    (5)  fails to act in good faith by compelling a policyholder to insti-
    12  tute suit or compel appraisal to recover amounts due under its policy by
    13  offering substantially less than the  amounts  ultimately  recovered  in
    14  suit or by appraisal;
    15    (6)  fails  to  advise  a  policyholder that a claim may exceed policy
    16  limits, that counsel assigned  by  the  insurer  may  be  subject  to  a
    17  conflict  of  interest,  or that the policyholder may retain independent
    18  counsel;
    19    (7) fails to provide, on request of the policyholder or  their  repre-
    20  sentative,  all reports, letters or other documentation arising from the
    21  investigation of a claim and evaluating liability for  or  valuation  of
    22  such claim;
    23    (8)  refuses  to  pay a claim without conducting a reasonable investi-
    24  gation;
    25    (9) negotiates or settles a claim directly with a  policyholder  known
    26  to  be  represented  by  an attorney without the attorney's knowledge or
    27  consent. The provisions of this paragraph shall not be deemed to prohib-
    28  it routine inquiries to a policyholder to obtain details concerning  the
    29  claim;
    30    (10)  negotiates or settles a claim directly with a policyholder known
    31  to be represented by a licensed public adjuster;
    32    (11) negotiates or settles a claim directly with a contractor or unli-
    33  censed public adjuster;
    34    (12) requires a  policyholder  to  submit  duplicative  or  repetitive
    35  information already submitted by a policyholder or an injured party; or
    36    (13) acts in violation of section two thousand six hundred one of this
    37  article or any regulation promulgated pursuant thereto.
    38    (b)  Any policyholder who establishes liability pursuant to subsection
    39  (a) of this section shall be entitled to recover, in addition to amounts
    40  due under the policy, costs and  disbursements,  consequential  damages,
    41  reasonable  attorneys'  fees incurred by the policyholder, interest from
    42  the date of the loss, and punitive damages as determined by  the  finder
    43  of fact.
    44    (c)  Any  policyholder may recover damages from an insurer doing busi-
    45  ness in this state pursuant to this section either as part of an  action
    46  to  recover  under  the  terms  of  an insurance policy or in a separate
    47  action.
    48    (d) In any trial of a cause of  action  asserted  against  an  insurer
    49  pursuant to this section, evidence of settlement discussions written and
    50  verbal  offers  to  compromise and other evidence relating to the claims
    51  process shall be admissible. If causes of action relating  to  liability
    52  of  the  insurer  under the policy and under this section are alleged in
    53  the same action, the court may bifurcate the trial of issues  so  as  to
    54  avoid prejudice to the insurer on the issue of liability under the poli-
    55  cy  and  facilitate  admissibility  of  evidence on the causes of action
    56  asserted pursuant to this section.

        A. 7285--A                          3
 
     1    (e) All amounts recovered from an insurer as  damages  and  reasonable
     2  attorneys'  fees  in  any  action  authorized  in  this section shall be
     3  excluded by the insurer in its determinations of the  premiums  it  will
     4  charge all policyholders on all policies issued by it.
     5    (f)  An  action may also be maintained by any injured person or repre-
     6  sentative thereof including, but not limited to, a guardian, administra-
     7  tor, executor, individual with a power of attorney or any other personal
     8  representative against an insurer to recover damages including costs and
     9  disbursements, consequential damages, reasonable attorney's fees, inter-
    10  est from the time of failure to offer a fair and  reasonable  settlement
    11  in  accordance  with this section, and punitive damages as determined by
    12  the finder of fact or court, not limited to the policy limits,  where  a
    13  preponderance  of  the  evidence  establishes  that the insurer fails to
    14  effectuate a prompt and fair settlement of a claim or any portion there-
    15  of, in that under the totality of the facts and circumstances related to
    16  the claim, the insurer fails to reasonably accord at least equal or more
    17  favorable consideration to its insured's interests as it did to its  own
    18  interests.
    19    (g) At least thirty days prior to the filing of any action pursuant to
    20  this  section, a written demand for relief, identifying the claimant and
    21  reasonably describing the unfair claim settlement act  or  practice  and
    22  the  injury  suffered, shall be mailed or delivered to any insurer doing
    23  business in this state. Any insurer doing business in this state receiv-
    24  ing such a demand for relief who, within thirty days of the  mailing  or
    25  delivery  of the demand for relief, makes a written tender of settlement
    26  which is rejected by the claimant may, in any  subsequent  action,  file
    27  the written tender and an affidavit concerning its rejection and thereby
    28  limit  any  recovery  to the relief tendered if the finder of fact finds
    29  that the relief tendered was reasonable in relation to the injury  actu-
    30  ally suffered by the claimant. In all other cases, if the finder of fact
    31  finds  for  the  claimant,  recovery  shall  be  in the amount of actual
    32  damages; or up to three but not less than two times such amount  if  the
    33  finder  of  fact  finds that the unfair claim settlement act or practice
    34  was a willful or knowing violation of subsection  (a)  or  (f)  of  this
    35  section  or that the refusal to grant relief upon demand was not reason-
    36  ably justified with knowledge or reason to know that the act or practice
    37  complained of violated subsection (a) or (f) of this  section.  For  the
    38  purposes  of this chapter, the amount of actual damages to be multiplied
    39  by the finder of fact shall be the amount of the damages  as  determined
    40  by the finder of fact on all claims arising out of the same and underly-
    41  ing  transaction or occurrence, regardless of the existence or nonexist-
    42  ence of insurance coverage available in payment of the claim.  In  addi-
    43  tion,  the  court  shall award such other equitable relief, including an
    44  injunction, as it deems to be necessary and proper.  The demand require-
    45  ments of this subsection shall not apply if the claim is asserted by way
    46  of counterclaim or cross-claim.
    47    (h) The rights enumerated in this section are not the exclusive  reme-
    48  dies  available  to the policyholder or injured person or representative
    49  thereof including, but not limited to, a guardian, administrator, execu-
    50  tor, individual with power of attorney or any other  personal  represen-
    51  tative  and  do  not  preclude  any common law claims or other statutory
    52  claims that may exist or arise.
    53    (i) Upon demand of a claimant policyholder or injured person  pursuant
    54  to  this  section,  an  insurer  shall make available to the claimant or
    55  injured person the entire claim file within thirty days.

        A. 7285--A                          4

     1    (j) A policyholder or injured person shall have the right to  a  trial
     2  by  jury. No mandatory arbitration agreement within or part of any writ-
     3  ten contract for insurance shall prohibit an  action  pursuant  to  this
     4  section.
     5    §  2.  Section  3425  of  the insurance law is amended by adding a new
     6  subsection (t) to read as follows:
     7    (t) No insurer shall refuse to issue or renew a covered policy  solely
     8  on  the  grounds that the policyholder has brought an action pursuant to
     9  section two thousand six hundred one-a of this chapter.
    10    § 3. Paragraph 4 of subsection (a) of section 2601  of  the  insurance
    11  law,  as  amended by chapter 547 of the laws of 1997, is amended to read
    12  as follows:
    13    (4) [not attempting in good faith] where the insurer fails to effectu-
    14  ate a prompt[,] and  fair  [and  equitable  settlements]  settlement  of
    15  [claims  submitted  in  which  liability  has become reasonably clear] a
    16  claim or any portion thereof, in that the insurer  fails  to  reasonably
    17  accord  at  least equal or more favorable consideration to its insured's
    18  interests as it did to  its  own  interests,  and  thereby  exposes  the
    19  insured to a judgment in excess of the policy limits, except where there
    20  is  a  reasonable  basis supported by specific information available for
    21  review by the department that the claimant has caused the loss to  occur
    22  by arson. After receiving a properly executed proof of loss, the insurer
    23  shall  advise  the  claimant of acceptance or denial of the claim within
    24  thirty working days;
    25    § 4. This act shall take effect on the first of January next  succeed-
    26  ing  the date on which it shall have become a law and shall apply to all
    27  acts and omissions by insurers occurring  on  or  after  such  effective
    28  date.
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