Establishes a private right of action for the insured for unfair insurance settlement practices when the claim relates to loss or injury in an area where the governor has declared a disaster emergency.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A5780
TITLE OF BILL: An act to amend the insurance law, in relation to
establishing a private right of action for unfair claim settlement prac-
tices by an insurer
PURPOSE OF BILL:
This bill amends the insurance law by establishing a private right of
action for consumers who have been affected by unfair claims practices
by insurers and also provides for punitive damages where there is a
finding of an insurer's willful or knowing violation of section 2601 of
the insurance law. The bill would apply to any loss or injury sustained
relating to an insurance claim for property damage in an area affected
encompassed by executive order declaring a disaster emergency as per
section twenty-eight of the Executive Law.
SUMMARY OF PROVISIONS OF BILL:
Section 1 would create a private right of action for any unfair claims
practices by insurers relative to a disaster emergency as per section
twenty-eight of the Executive Law. Section 2 is the effective date.
Unfortunately, there is evidence that some insurers have taken advantage
of insured as concerns the adjusting of losses sustained in disaster
emergencies declared by the Governor pursuant to section twenty-eight of
the Executive Law.
Insurers have every right to attempt to lawfully deny claims, but all
too often these attempts create unreasonable situations for homeowners
attempting to simply access the benefits to which they are entitled.
This is especially acute in situations where the homeowner may have lost
most or even all of their possessions due to a storm declared emergency.
This bill would allow insureds to institute claims against their insur-
ers for unfair claims practices proscribed by the Insurance Law. More
importantly, this bill would amend section 2601 of the Insurance Law to
allow insured homeowners who have suffered property loss to take direct
action against their insurers for unfair claims practices where the
claimed losses were sustained within the area declared as a disaster
emergency. A private right of action is necessary, in addition to the
possibility of administrative action, to make certain that insurers are
held responsible for unfair claims practices.
Additionally, this proposal would permit an award of punitive damages
for an insurer's willful unfair claims practices in violation of section
2601 of the insurance law.
LEGISLATIVE HISTORY: New bill, 2013.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: None.
EFFECTIVE DATE: Immediately.
STATE OF NEW YORK
2013-2014 Regular Sessions
March 6, 2013
Introduced by M. of A. WEINSTEIN -- read once and referred to the
Committee on Insurance
AN ACT to amend the insurance law, in relation to establishing a private
right of action for unfair claim settlement practices by an insurer
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, paragraphs 4 and 5 of
2 subsection (a) as amended by chapter 547 of the laws of 1997 and para-
3 graph 6 of subsection (a) as amended by chapter 388 of the laws of 2008,
4 is amended to read as follows:
5 § 2601. Unfair claim settlement practices; penalties. (a) No insurer
6 doing business in this state shall engage in unfair claim settlement
7 practices. Any of the following acts by an insurer, if committed without
8 just cause and performed with such frequency as to indicate a general
9 business practice, shall constitute unfair claim settlement practices:
10 (1) knowingly misrepresenting to claimants pertinent facts or policy
11 provisions relating to coverages at issue;
12 (2) failing to acknowledge with reasonable promptness pertinent commu-
13 nications as to claims arising under its policies;
14 (3) failing to adopt and implement reasonable standards for the prompt
15 investigation of claims arising under its policies;
16 (4) not attempting in good faith to effectuate prompt, fair and equi-
17 table settlements of claims submitted in which liability has become
18 reasonably clear, except where there is a reasonable basis supported by
19 specific information available for review by the department that the
20 claimant has caused the loss to occur by arson. After receiving a prop-
21 erly executed proof of loss, the insurer shall advise the claimant of
22 acceptance or denial of the claim within thirty working days;
23 (5) compelling policyholders to institute suits to recover amounts due
24 under its policies by offering substantially less than the amounts ulti-
25 mately recovered in suits brought by them; [or]
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
 is old law to be omitted.
A. 5780 2
1 (6) failing to promptly disclose coverage pursuant to subsection (d)
2 or subparagraph (A) of paragraph two of subsection (f) of section three
3 thousand four hundred twenty of this chapter.
4 (b) Evidence as to numbers and types of complaints to the department
5 against an insurer and as to the department's complaint experience with
6 other insurers writing similar lines of insurance shall be admissible in
7 evidence in any administrative or judicial proceeding under this section
8 or article twenty-four or seventy-four of this chapter, but no insurer
9 shall be deemed in violation of this section solely by reason of the
10 numbers and types of such complaints.
11 (c) If it is found, after notice and an opportunity to be heard, that
12 an insurer has violated this section, each instance of noncompliance
13 with subsection (a) [hereof] of this section may be treated as a sepa-
14 rate violation of this section for purposes of ordering a monetary
15 penalty pursuant to subsection (b) of section one hundred nine of this
16 chapter. A violation of this section shall not be a misdemeanor.
17 (d) Where the governor has declared a disaster emergency pursuant to
18 section twenty-eight of the executive law, in addition to the right of
19 action granted to the department pursuant to this section, any person
20 who has suffered loss or injury by reason of any violation of this
21 section relating to an insurance claim for property damage in an
22 affected area encompassed by the executive order declaring the disaster
23 emergency may bring an action in his or her own name as a plaintiff to
24 enjoin such unlawful act or practice and an action to recover his or her
25 actual damages. The court may, in its discretion, award punitive
26 damages, if the court finds that the defendant insurer willfully or
27 knowingly violated this section. The court may award reasonable attor-
28 ney's fees to a prevailing plaintiff.
29 § 2. This act shall take effect immediately.