NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A5166
SPONSOR: Tannousis TITLE OF BILL:
An act to amend the insurance law, in relation to unfair claim settle-
ments after a natural disaster
PURPOSE OR GENERAL IDEA OF BILL::
The purpose of this bill is to define what would constitute an unfair
claims settlement practice during a declared state disaster emergency,
and create a private right of action for violations thereof.
SUMMARY OF PROVISIONS::
Section 1 would amend § 2601(a) of the Insurance Law to remove the
"general business practice" requirement when proving that an insurer
engaged in an unfair claim settlement practice during a declared state
emergency, and define additional practices that would constitute an
unfair claim settlement practice during the period of a declared state
disaster emergency. When the governor has declared a state disaster
emergency, the following practices shall be deemed unfair claim settle-
ment practices:
(A) attempting to settle a claim on the basis of a document that was
altered without notice to the consumer;
(B) making a material misrepresentation for the purpose of settling a
claim on less favorable terms than those provided in the policy;
(C) failing to promptly notify the insured of any additional information
necessary for the processing of the claim, as well as the reasons why
such information is necessary;
(D) failing to conduct an on-rite inspection within 7 business days from
submission of the claim;
(E) failing to provide the claimant with a copy of the adjuster's report
within 3 business days from the inspection;
(F) failing to provide a determination on the claim within 30 Calendar
days from furnishing claimant with a copy of the report;
(G) failing to provide a written denial of a policy holder's claim with
a full and complete explanation of such denial, including references to
specific policy provisions wherever possible; and
(H) if damages are determined to be covered under the policy, failing to
pay at least 20 percent of the total claim upon such determination and
the claim in full within 90 days of determination.
Section 2 would add § 2601-a to the Insurance Law, creating a civil
remedy for the newly added, aforementioned provisions. The insurer shall
be liable to the insured for damage upon proving that the insurer
conducted unfair claim settlement practices, as defined, during a
declared state disaster emergency.
JUSTIFICATION::
The aftermath of Tropical Storm Irene in 2011, followed shortly by the
devastation caused by Hurricane Sandy in 2012, exemplified the shortcom-
ings of our state's Insurance Law during times of crisis. While the
insurance business is a valuable industry to New York, public policy
dictates that certain measures must be employed to ensure reasonable and
timely procedures when dealing with customers placed under extreme
circumstances.
Under current law, an administrative remedy is available only upon prov-
ing that the unfair claim settlement practice was part of the general
business practice of the insurer. This legislation would expand this
requirement to provide an administrative remedy during a state disaster
emergency regardless of whether a pattern of behavior existed prior to
the indiscretion at issue. This would preserve the existing standard of
proof in cases outside of the state disaster emergency period. Following
Hurricane Sandy, the sponsors of this legislation filed complaints on
behalf of constituents who suffered severe damage and were experiencing
problems with insurance companies, such as being denied claims, having
multiple phone calls gone unanswered, and experiencing difficulty
obtaining an appointment with an adjuster.
This legislation would also narrowly define what would constitute an
"unfair claim settlement practice" during a declared state disaster
emergency, with explicit timeframes for when the insurer must accomplish
steps in the claims procedure. The recent natural disasters created a
common question of when the insured should expect information from their
insurer. This provision would better accommodate time-sensitive issues
like mold remediation and structural integrity during the time imme-
diately following the disaster and the accompanying heightened sense of
urgency. Finally, this legislation would create a private right of
action for the insured with regard to these unfair claim settlement
practices during a state disaster emergency. This would empower the
insured to recover the amount properly due under their policy along with
incidental damages and reasonable attorney's fees.
PRIOR LEGISLATIVE HISTORY::
2021 A6911 Held for consideration in Insurance
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS::
None.
EFFECTIVE DATE::
Upon enactment.
STATE OF NEW YORK
________________________________________________________________________
5166
2023-2024 Regular Sessions
IN ASSEMBLY
March 3, 2023
___________
Introduced by M. of A. TANNOUSIS -- read once and referred to the
Committee on Insurance
AN ACT to amend the insurance law, in relation to unfair claim settle-
ments after a natural disaster
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Section 2601 of the insurance law, paragraph 4 of
2 subsection (a) as amended by chapter 547 of the laws of 1997, paragraph
3 5 of subsection (a) as amended by section 27 of part H of chapter 60 of
4 the laws of 2014 and paragraphs 6 and 7 as amended and paragraph 8 of
5 subsection (a) as added by chapter 458 of the laws of 2018, is amended
6 to read as follows:
7 § 2601. Unfair claim settlement practices; penalties. (a) No insurer
8 doing business in this state shall engage in unfair claim settlement
9 practices. Any of the following acts by an insurer, if committed without
10 just cause and performed with such frequency as to indicate a general
11 business practice, shall constitute unfair claim settlement practices,
12 provided, however, that in the event the governor has pursuant to
13 section twenty-nine-a of the executive law suspended any statute in this
14 chapter as a result of a state disaster emergency, such act shall
15 constitute an unfair claim settlement practice without respect to wheth-
16 er such act was indicative of a general business practice:
17 (1) knowingly misrepresenting to claimants pertinent facts or policy
18 provisions relating to coverages at issue;
19 (2) failing to acknowledge with reasonable promptness pertinent commu-
20 nications as to claims arising under its policies;
21 (3) failing to adopt and implement reasonable standards for the prompt
22 investigation of claims arising under its policies;
23 (4) not attempting in good faith to effectuate prompt, fair and equi-
24 table settlements of claims submitted in which liability has become
25 reasonably clear, except where there is a reasonable basis supported by
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD05126-01-3
A. 5166 2
1 specific information available for review by the department that the
2 claimant has caused the loss to occur by arson. After receiving a prop-
3 erly executed proof of loss, the insurer shall advise the claimant of
4 acceptance or denial of the claim within thirty working days;
5 (5) compelling policyholders to institute suits to recover amounts due
6 under its policies by offering substantially less than the amounts ulti-
7 mately recovered in suits brought by them;
8 (6) failing to promptly disclose coverage pursuant to subsection (d)
9 or subparagraph (A) of paragraph two of subsection (f) of section three
10 thousand four hundred twenty of this chapter;
11 (7) submitting reasonably rendered claims to the independent dispute
12 resolution process established under article six of the financial
13 services law; or
14 (8) artificially deflating or otherwise lowering cost data used for
15 adjusted claims, or using cost data that is not appropriate for the
16 region of the state where the loss occurred; this shall include but is
17 not limited to claims adjusted by a person issued a temporary permit
18 pursuant to subsection (n) of section two thousand one hundred eight of
19 this chapter[.]; or
20 (9) In addition to the foregoing, when the governor has declared a
21 state disaster emergency, the following practices shall be deemed unfair
22 claim settlement practices:
23 (A) attempting to settle a claim on the basis of a document that was
24 altered without notice to the consumer;
25 (B) making a material misrepresentation for the purpose of settling a
26 claim on less favorable terms than those provided in the policy;
27 (C) failing to promptly notify the insured of any additional informa-
28 tion necessary for the processing of the claim, as well as the reasons
29 why such information is necessary;
30 (D) failing to conduct an on-site inspection within seven business
31 days from submission of the claim;
32 (E) failing to provide the claimant with a copy of the adjuster's
33 report within three business days from the inspection;
34 (F) failing to provide a determination on the claim within thirty
35 calendar days from furnishing claimant with a copy of the report; and
36 (G) if damages are determined to be covered under the policy, failing
37 to pay at least twenty percent of the total claim upon such determi-
38 nation and the claim in full within thirty days of determination.
39 (b) Evidence as to numbers and types of complaints to the department
40 against an insurer and as to the department's complaint experience with
41 other insurers writing similar lines of insurance shall be admissible in
42 evidence in any administrative or judicial proceeding under this section
43 or article twenty-four or seventy-four of this chapter, but no insurer
44 shall be deemed in violation of this section solely by reason of the
45 numbers and types of such complaints.
46 (c) If it is found, after notice and an opportunity to be heard, that
47 an insurer has violated this section, each instance of noncompliance
48 with subsection (a) [hereof] of this section may be treated as a sepa-
49 rate violation of this section for purposes of ordering a monetary
50 penalty pursuant to subsection (b) of section one hundred nine of this
51 chapter. A violation of this section shall not be a misdemeanor.
52 § 2. The insurance law is amended by adding a new section 2601-a to
53 read as follows:
54 § 2601-a. Unfair claim settlement practices during state disaster
55 emergency; civil remedy. (a) In the event the governor has pursuant to
56 section twenty-nine-a of the executive law suspended any statute in this
A. 5166 3
1 chapter as a result of a state disaster emergency an insurer doing busi-
2 ness in this state shall be liable to the holder of a policy issued or
3 renewed pursuant to article thirty-four of this chapter for damages as
4 provided in this section upon such policy holder proving by a preponder-
5 ance of the evidence that such insurer's refusal to pay or unreasonable
6 delay in payment to the policy holder of amounts claimed to be due a
7 policy was not substantially justified. An insurer is not substantially
8 justified in refusing to pay or in unreasonably delaying payment when
9 the insurer:
10 (1) intentionally, recklessly or by gross negligence failed to provide
11 the policy holder with accurate information concerning policy provisions
12 relating to the coverage at issue;
13 (2) failed to effectuate in good faith a prompt, fair and equitable
14 settlement of a claim submitted by such policy holder in which liability
15 of such insurer to such policy holder was reasonably clear;
16 (3) failed to provide a written denial of a policy holder's claim with
17 a full and complete explanation of such denial, including references to
18 specific policy provisions wherever possible;
19 (4) failed to make a final determination and notify the policy holder
20 in writing of its position on both liability for, and the insurer's
21 valuation of, a claim within ninety days of the date on which it
22 received actual or constructive notice of the loss upon which the claim
23 is based;
24 (5) failed to act in good faith by compelling policy holder to insti-
25 tute suit to recover amounts due under its policy by offering substan-
26 tially less than the amounts ultimately recovered in suit brought by
27 such policy holder; or
28 (6) has engaged in any other unfair claim settlement practice as
29 defined in paragraph nine of subsection (a) of section two thousand six
30 hundred one of this article.
31 (b) Any policy holder who establishes liability pursuant to subsection
32 (a) of this section shall be entitled to recover, in addition to amounts
33 due under the policy, interest, costs, and disbursements, compensatory
34 damages and reasonable attorneys' fees incurred by the policy holder
35 from the date of the loss, in recovering monies due pursuant to the
36 terms of the policy.
37 (c) Any policy holder may recover damages from an insurer doing busi-
38 ness in this state pursuant to this section either as part of an action
39 to recover under the terms of an insurance policy or in a separate
40 action.
41 (d) In any trial of a cause of action asserted against an insurer
42 pursuant to this section, evidence of settlement discussions written and
43 verbal offers to compromise and other evidence relating to the claims
44 process shall be admissible. If causes of action relating to liability
45 of the insurer under the policy and under this section are alleged in
46 the same action, the court may bifurcate the trial of issues so as to
47 avoid prejudice to the insurer on the issue of liability under the poli-
48 cy and facilitate admissibility of evidence on the causes of action
49 asserted pursuant to this section.
50 (e) All amounts recovered from an insurer as actual damages and
51 reasonable attorneys' fees in any action authorized in this section
52 shall be excluded by the insurer in its determinations of the premiums
53 it will charge all policy holders on all policies issued by it.
54 § 3. This act shall take effect immediately.
