Authorizes the New York Liquidation Bureau to establish a program to evaluate and reimburse eligible local educational agencies for monetary liabilities arising from civil claims or settlement agreements related to certain acts that occurred during a period covered by a liability insurance policy issued by an insolvent insurer.
STATE OF NEW YORK
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8174--A
2025-2026 Regular Sessions
IN SENATE
May 19, 2025
___________
Introduced by Sen. MARTINEZ -- read twice and ordered printed, and when
printed to be committed to the Committee on Insurance -- recommitted
to the Committee on Insurance in accordance with Senate Rule 6, sec. 8
-- committee discharged, bill amended, ordered reprinted as amended
and recommitted to said committee
AN ACT to amend the insurance law, in relation to authorizing the New
York Liquidation Bureau to establish a reimbursement program for
eligible local educational agencies
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Legislative findings and intent. The legislature acknowl-
2 edges that local educational agencies (LEAs), including public school
3 districts and special education providers, are facing unanticipated and
4 significant financial liabilities resulting from settled civil claims
5 brought under the Child Victims Act. These settlements often arise from
6 misconduct occurring during periods when LEAs were insured by liability
7 carriers that have since become insolvent.
8 In many cases, the current LEAs are now required to satisfy settle-
9 ments or judgments without the avail of expected insurance coverage.
10 Under the Child Victims Act, the lookback window for civil claims was
11 originally set for one year and later extended by an additional year due
12 to the COVID-19 pandemic. However, the state has not yet accounted for
13 or addressed this extended period in relation to claims involving insol-
14 vent insurers. The New York Liquidation Bureau, under the Department of
15 Financial Services, administers the estates of insolvent insurers but is
16 not currently authorized to reimburse LEAs for such liabilities or
17 pursue reciprocal claims due to expired statutory limitations.
18 The legislature hereby finds that this legal gap creates an inequita-
19 ble burden on public educational institutions and threatens the fiscal
20 functionality of school systems throughout the state. Furthermore, the
21 legislature recognizes that the inability of LEAs to reach or fund
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD13170-03-6
S. 8174--A 2
1 settlements due to insolvency risks directly undermines the ability of
2 victims to obtain timely restitution and resolution of their claims.
3 Accordingly, this act authorizes the Bureau to establish a reimbursement
4 program for eligible LEAs and empowers the Bureau and the State of New
5 York to supplement insolvent estates where necessary. This authorization
6 shall not apply to educational entities located within the City of New
7 York, which operates under separate and distinct educational funding
8 structures.
9 § 2. The insurance law is amended by adding a new section 7438 to read
10 as follows:
11 § 7438. Reimbursement program for local educational agencies impacted
12 by insolvent insurers. (a) As used in this section, the following terms
13 shall have the following meanings:
14 (1) "Local educational agency" or "LEA" means any public school
15 district or approved board of cooperative educational services, exclud-
16 ing those located within a city having a population of one million or
17 more.
18 (2) "Bureau" means the New York Liquidation Bureau.
19 (3) "Insolvent insurer" means any insurer that has been adjudicated
20 insolvent pursuant to an order of liquidation by a court of competent
21 jurisdiction of this state under this article, and whose estate is or
22 has been administered by the Bureau.
23 (4) "Child Victims Act" means chapter eleven of the laws of two thou-
24 sand nineteen and any subsequent laws extending the statute of limita-
25 tions for civil claims based on child sexual abuse.
26 (b) Notwithstanding any other provision of law, the superintendent,
27 through the Bureau, is authorized to establish a program to evaluate and
28 reimburse eligible LEAs for monetary liabilities arising from civil
29 claims or settlement agreements related to acts that occurred during a
30 period covered by a liability insurance policy issued by an insolvent
31 insurer, provided that such claims are brought pursuant to the Child
32 Victims Act.
33 (c) A LEA shall be eligible for reimbursement under this section if
34 it:
35 (1) demonstrates that the insurer which issued the policy, or any
36 successor insurer that has assumed the issuing insurer's obligations,
37 has been adjudicated insolvent pursuant to an order of liquidation by a
38 court of competent jurisdiction of this state under this article;
39 (2) provides documentation that the incident giving rise to the claim
40 occurred during the period the policy was in effect;
41 (3) provides evidence of financial liability, whether by court order,
42 settlement agreement, or payment to a claimant; and
43 (4) certifies that no other insurance or indemnification source is
44 available to satisfy the claim.
45 (d) Reimbursements under this section shall be made from available
46 assets of the insolvent insurer's estate. The superintendent shall
47 promulgate a fixed amount to be paid to LEAs from these assets. Applica-
48 tions may be submitted prior to a final judgment and shall include all
49 supporting documentation required by the Bureau.
50 (e) In the event that assets from the insolvent estate are insuffi-
51 cient, the superintendent shall promulgate a secondary reimbursement
52 mechanism, which may include but not be limited to:
53 (1) recoveries from reinsurers of the insolvent insurer;
54 (2) subrogation or third-party recoveries;
55 (3) any interest the Bureau may generate from existing funds;
56 (4) residual balances from closed estates; and
S. 8174--A 3
1 (5) voluntary contributions from other insurers or industry sources,
2 to the extent permitted by law.
3 (f) In cases where reimbursements are limited, the Bureau shall prior-
4 itize LEAs demonstrating significant financial hardship, based on crite-
5 ria established by the Bureau in consultation with the education depart-
6 ment.
7 § 3. This act shall take effect on the one hundred twentieth day after
8 it shall have become a law.
