Provides that an insurer doing business in this state shall be liable to a policy holder for such insurer's refusal to pay or unreasonable delay of payment to the policy holder if such refusal or delay was not substantially justified; enumerates instances whereby an insurer's refusal or delay of payment is not substantially justified including intentional negligence, failure to act in good faith, failure to provide written denial of claim, failure to make final determination of claim within six months, and failure to promptly proceed with the appraisal process.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A921
SPONSOR: Bichotte TITLE OF BILL: An act to amend the insurance law, in relation to
unfair claim settlement practices
PURPOSE:
To allow holders of property and casualty insurance policies 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:
This bill provides that an insurer doing business in this state shall be
liable to a holder of property and casualty insurance policy for damages
upon such policy holder proving that such insurer's refusal to pay or
unreasonable delay in payment to the policy holder of amounts claimed to
be due there under was not substantially justified.An insurer would not
be substantially justified in refusing to pay or in unreasonably delay-
ing payment when: I. Intentionally, recklessly or by gross negligence
failed to provide the policy holder with accurate information concerning
policy provision relating to coverage at issue; or2. Failed to effectu-
ate, in good faith, a prompt, fair and equitable settlement of a claim
submitted by such policy holder in which liability of such insurer to
such policy holder was reasonably clear; or3. Failed to provide a writ-
ten denial of a policy holder's claim with a full and complete explana-
tion of such denial, including references to specific policy provisions
wherever possible; or4. Failed to make a final determination and notify
the policy holder in writing of its position on both the liability for,
and the insurer's valuation of, a claim within six months of the date on
which it received actual or constructive notice of the loss upon which
the claim is based; or5. Failed to act in good faith by compelling the
policy holder to initiate a lawsuit to recover under the policy by
offering substantially less than the amounts ultimately recovered in the
suit by the policy Holder or 6. Failed to promptly proceed with the
appraisal process once such has been demanded in any claim where cover-
age for a portion of the claim has been accepted by such insurer and a
disagreement exists between the insured and the insurer with respect to
the value of covered property or the amount, or extent of the covered
loss.Any policy holder who establishes liability shall be entitled to
recover, in addition to amounts due under the policy, interest, costs,
and disbursements, compensatory damages and reasonable attorneys fees.
Finally, there are procedural rules established to insure that the
insurer receives a fair trial on the issue of liability under the term-
sof the policy before the issue of substantial justification is consid-
ered.
JUSTIFICATION:
Existing law provides a code of conduct for insurers in this state.
Insurance Law Section 2601 now provides that no insurer in this state
shall engage in five enumerated unfair claims settlement practices. Yet,
only the Superintendent of Insurance can enforce these provisions
against the company. The holders of property and casualty insurance
policies who have incurred substantial costs in obtaining reimbursement
under the policy terms have no remedy. Any doubt about this unfortunate
state of the law was removed by the Court of Appeals in its 1994 deci-
sion in ROCANOVA V. EQUITABLE LIFE, 83 NY2nd 603 (1984). "The law of
this State does not currently recognize a private cause of action under
Insurance Law § 2601. To the extent that a variety of appellate division
decisions hold otherwise, they are not to be followed". ROCANOVA V.
EQUITABLE LIFE, 83 NY2d at 614-515. (emphasis added). Citizens of this
state who pay insurance premiums should expect insurers to live up to
their policy obligations.Under existing statutes and case law, an insur-
er can simply refuse to pay a claim or offer an amount well below the
value of the loss with impunity. SEE E.G. LTS CONTRACTORS V. HARTFORD
INS., 99 AD2d 644 (4th Dept. 1984) no remedy for unreasonable delay in
payment; UNILAND DEV. V. HOME INS., 97 AD2d 973 (4th Dept. 1983) no
remedy for intentional refusal to pay Even if the policy holder sues and
wins the full amount of the claim, he or she loses because of the costs
and counsel fees associated with bringing the successful action. This
fact gives insurers a terribly unfair advantage in negotiating a settle-
ment of any claim because of the ability of the insurers to financially
bear the burden of litigation which the ordinary citizen cannot afford
to do. top 1 The Superintendent of Insurance regulates the industry
within the constraints of available resources Each citizen should be
entitled to prove his or her claim in court when an insurer takes a
position in settling a claim which is found not to have been substan-
tially justified.
LEGISLATIVE HISTORY:
S.486-A of 1997-98;
S.545 of 1999-00;
S.577 of 2001-02;
S.1486-A of 2003-04;
S.51 of 2005-06;
S.1269/A.10307 of 2007-08;
S.4735/A.5589 of 2011-2012;
2013-2014 - S.2544/A.3305
2015-2016 - A. 8025; referred to insurance.
FISCAL IMPLICATIONS:
None.
EFFECTIVE DATE:
January 1st next succeeding the date on which it shall have become a
law.
