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A07285 Summary:

BILL NOA07285
 
SAME ASSAME AS S06813
 
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
 
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: A7285
 
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: 2019-20: A.5623 - Third Reading 2017-18: A.2832-A - Referred to 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
 
                               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 -- read once and
          referred to the Committee on Insurance
 
        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 was
    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) failed to  provide  the  policyholder  with  accurate  information
    13  concerning policy provisions relating to the coverage at issue;
    14    (2)  failed  to  effectuate a prompt and fair settlement of a claim or
    15  any portion thereof, in that the insurer failed 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 exposed  the  insured  to  a
    18  judgment in excess of the policy limits;
    19    (3)  failed  to  provide  a  timely written denial of a policyholder's
    20  claim with a full and complete explanation  of  such  denial,  including
    21  references to specific policy provisions wherever possible;
    22    (4)  failed  to make a final determination and notify the policyholder
    23  in writing of its position on both liability for and the insurer's valu-
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD11091-03-1

        A. 7285                             2
 
     1  ation of a claim within six months of the  date  on  which  it  received
     2  actual or constructive notice of the loss upon which the claim is based;
     3    (5) failed to act in good faith by compelling a policyholder to insti-
     4  tute  suit  to recover amounts due under its policy by offering substan-
     5  tially less than the amounts ultimately recovered  in  suit  brought  by
     6  such policyholder;
     7    (6)  failed  to  advise  a policyholder that a claim may exceed policy
     8  limits, that counsel assigned  by  the  insurer  may  be  subject  to  a
     9  conflict  of  interest,  or that the policyholder may retain independent
    10  counsel;
    11    (7) failed to provide, on request of the policyholder or their  repre-
    12  sentative,  all reports, letters or other documentation arising from the
    13  investigation of a claim and evaluating liability for  or  valuation  of
    14  such claim;
    15    (8)  refused  to  pay a claim without conducting a reasonable investi-
    16  gation;
    17    (9) negotiated or settled a claim directly with a  policyholder  known
    18  to  be  represented  by  an attorney without the attorney's knowledge or
    19  consent. The provisions of this paragraph shall not be deemed to prohib-
    20  it routine inquiries to a policyholder to obtain details concerning  the
    21  claim; or
    22    (10)  acted  in  violation  of section two thousand six hundred one of
    23  this article or any regulation promulgated pursuant thereto.
    24    (b) Any policyholder who establishes liability pursuant to  subsection
    25  (a) of this section shall be entitled to recover, in addition to amounts
    26  due  under  the  policy, costs and disbursements, consequential damages,
    27  reasonable attorneys' fees incurred by the policyholder,  interest  from
    28  the  date  of the loss, and punitive damages as determined by the finder
    29  of fact.
    30    (c) Any policyholder may recover damages from an insurer  doing  busi-
    31  ness  in this state pursuant to this section either as part of an action
    32  to recover under the terms of an  insurance  policy  or  in  a  separate
    33  action.
    34    (d)  In  any  trial  of  a cause of action asserted against an insurer
    35  pursuant to this section, evidence of settlement discussions written and
    36  verbal offers to compromise and other evidence relating  to  the  claims
    37  process  shall  be admissible. If causes of action relating to liability
    38  of the insurer under the policy and under this section  are  alleged  in
    39  the  same  action,  the court may bifurcate the trial of issues so as to
    40  avoid prejudice to the insurer on the issue of liability under the poli-
    41  cy and facilitate admissibility of evidence  on  the  causes  of  action
    42  asserted pursuant to this section.
    43    (e)  All  amounts  recovered from an insurer as damages and reasonable
    44  attorneys' fees in any  action  authorized  in  this  section  shall  be
    45  excluded  by  the  insurer in its determinations of the premiums it will
    46  charge all policyholders on all policies issued by it.
    47    (f) An action may also be maintained by any injured person  or  repre-
    48  sentative thereof including, but not limited to, a guardian, administra-
    49  tor, executor, individual with a power of attorney or any other personal
    50  representative against an insurer to recover damages including costs and
    51  disbursements, consequential damages, reasonable attorney's fees, inter-
    52  est  from  the time of failure to offer a fair and reasonable settlement
    53  in accordance with this section, and punitive damages as  determined  by
    54  the  finder  of fact or court, not limited to the policy limits, where a
    55  preponderance of the evidence establishes that  the  insurer  failed  to
    56  effectuate a prompt and fair settlement of a claim or any portion there-

        A. 7285                             3
 
     1  of, in that under the totality of the facts and circumstances related to
     2  the  claim,  the  insurer  failed to reasonably accord at least equal or
     3  more favorable consideration to its insured's interests as it did to its
     4  own interests.
     5    (g) At least thirty days prior to the filing of any action pursuant to
     6  this  section, a written demand for relief, identifying the claimant and
     7  reasonably describing the unfair claim settlement act  or  practice  and
     8  the  injury  suffered, shall be mailed or delivered to any insurer doing
     9  business in this state. Any insurer doing business in this state receiv-
    10  ing such a demand for relief who, within thirty days of the  mailing  or
    11  delivery  of the demand for relief, makes a written tender of settlement
    12  which is rejected by the claimant may, in any  subsequent  action,  file
    13  the written tender and an affidavit concerning its rejection and thereby
    14  limit  any  recovery  to the relief tendered if the finder of fact finds
    15  that the relief tendered was reasonable in relation to the injury  actu-
    16  ally suffered by the claimant. In all other cases, if the finder of fact
    17  finds  for  the  claimant,  recovery  shall  be  in the amount of actual
    18  damages; or up to three but not less than two times such amount  if  the
    19  finder  of  fact  finds that the unfair claim settlement act or practice
    20  was a willful or knowing violation of subsection  (a)  or  (f)  of  this
    21  section  or that the refusal to grant relief upon demand was not reason-
    22  ably justified with knowledge or reason to know that the act or practice
    23  complained of violated subsection (a) or (f) of this  section.  For  the
    24  purposes  of this chapter, the amount of actual damages to be multiplied
    25  by the finder of fact shall be the amount of the damages  as  determined
    26  by the finder of fact on all claims arising out of the same and underly-
    27  ing  transaction or occurrence, regardless of the existence or nonexist-
    28  ence of insurance coverage available in payment of the claim.  In  addi-
    29  tion,  the  court  shall award such other equitable relief, including an
    30  injunction, as it deems to be necessary and proper.  The demand require-
    31  ments of this subsection shall not apply if the claim is asserted by way
    32  of counterclaim or cross-claim.
    33    (h) The rights enumerated in this section are not the exclusive  reme-
    34  dies  available  to the policyholder or injured person or representative
    35  thereof including, but not limited to, a guardian, administrator, execu-
    36  tor, individual with power of attorney or any other  personal  represen-
    37  tative  and  do  not  preclude  any common law claims or other statutory
    38  claims that may exist or arise.
    39    (i) Upon demand of a claimant policyholder or injured person  pursuant
    40  to  this  section,  an  insurer  shall make available to the claimant or
    41  injured person the entire claim file within thirty days.
    42    (j) A policyholder or injured person shall have the right to  a  trial
    43  by  jury. No mandatory arbitration agreement within or part of any writ-
    44  ten contract for insurance shall prohibit an  action  pursuant  to  this
    45  section.
    46    §  2.  Section  3425  of  the insurance law is amended by adding a new
    47  subsection (t) to read as follows:
    48    (t) No insurer shall refuse to issue or renew a covered policy  solely
    49  on  the  grounds that the policyholder has brought an action pursuant to
    50  section two thousand six hundred one-a of this chapter.
    51    § 3. Paragraph 4 of subsection (a) of section 2601  of  the  insurance
    52  law,  as  amended by chapter 547 of the laws of 1997, is amended to read
    53  as follows:
    54    (4) [not attempting in good faith] where the insurer failed to  effec-
    55  tuate  a  prompt[,]  and  fair [and equitable settlements] settlement of
    56  [claims submitted in which liability  has  become  reasonably  clear]  a

        A. 7285                             4

     1  claim  or  any portion thereof, in that the insurer failed to reasonably
     2  accord at least equal or more favorable consideration to  its  insured's
     3  interests  as  it  did  to  its  own  interests, and thereby exposed the
     4  insured to a judgment in excess of the policy limits, except where there
     5  is  a  reasonable  basis supported by specific information available for
     6  review by the department that the claimant has caused the loss to  occur
     7  by arson. After receiving a properly executed proof of loss, the insurer
     8  shall  advise  the  claimant of acceptance or denial of the claim within
     9  thirty working days;
    10    § 4. This act shall take effect on the first of January next  succeed-
    11  ing  the date on which it shall have become a law and shall apply to all
    12  acts and omissions by insurers occurring  on  or  after  such  effective
    13  date.
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