NY State Senate Bill 2009-S1662

Senate Bill S1662

2009-2010 Legislative Session

Removes the state insurance funds exemption from licensing and other requirements of the insurance law

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Archive: Last Bill Status - In Senate Committee Insurance Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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Actions

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 06, 2010	referred to insurance
Feb 04, 2009	referred to insurance

2009-S1662 (ACTIVE) - Details

Current Committee:: Senate Insurance
Law Section:: Insurance Law
Laws Affected:: Amd §§1108 & 4522, Ins L; amd §§83 & 94, Work Comp L
Versions Introduced in Other Legislative Sessions:: 2011-2012: S3836
2013-2014: S6755
2015-2016: S254
2017-2018: S4558

2009-S1662 (ACTIVE) - Summary

Removes the state insurance funds exemption from licensing and other requirements of the insurance law; requires the superintendent of insurance to approve the rules adopted by the state insurance fund for the conduct of its business; and to remove the requirement for policyholders to provide thirty days notice to withdraw from the state insurance fund.

2009-S1662 (ACTIVE) - Sponsor Memo

                                 BILL NUMBER:  S7673

 TITLE OF BILL :

An act to amend the insurance law, in relation to removing the
exemption of the state insurance fund from licensing and other
requirements; to amend the workers' compensation law, in relation to
requiring the superintendent of insurance to approve the rules adopted
by the state insurance fund for the conduct of its business; and to
amend the workers' compensation law, in relation to the requirement
for policyholders to provide 30 days notice to withdraw from the state
insurance fund


 PURPOSE :

The bill would require that the State Insurance Fund (SIF) be licensed
by the Insurance Department and subject to the same requirements as
other insurance companies providing workers' compensation insurance.
The bill would also require that the Superintendent of Insurance
approve the rules adopted by SIP for the conduct of its business. It
would also delete the requirement for SIF policyholders to provide 30
days notice to withdraw from the Fund.

 SUMMARY OF PROVISIONS :

Section 1 of the bill amends § 1108 of the Insurance Law by deleting
subsection (c) which exempts the state insurance fund from licensing
and other requirements of the Insurance Law.

Section 2 of the bill replaces the Commissioner of Labor with the
Superintendent of Insurance as the person who must approve the rules
adopted by SIF for the conduct of its business. It also deletes the
provision allowing for rules to be adopted if not approved by the
Commissioner of Labor within 30 days.

Section 3 of the bill deletes the requirement of policyholders of SIF
to provide 30 days notice of their intent to withdraw from the Fund.
Instead, policyholders would have to provide written notice of the
effective date of cancellation.

 EXISTING LAW :

Currently SIF is not subject to licensing and other requirements that
apply to private insurance carriers providing workers' compensation
insurance and may adopt roles for the conduct of its business without
approval from the Superintendent of Insurance. Unlike policyholders of
private workers' compensation insurers, policyholders of SIF are
required to provide 30 days advance notice if they want to discontinue
their policy.

 JUSTIFICATION :

New York Insurance Law §1108 exempts certain insurers, including SIP
from licensing and other requirements of the Insurance Law. SIF is a
non-profit agency of the State of New York established in 1914 to
provide a guaranteed source of workers' compensation insurance
coverage for employers in New York State. SIF is the largest single
carrier of workers' compensation insurance in the State, with
approximately 37 percent of the market. SIF is administered by nine
Commissioners, including the Commissioner of Labor and eight members
who are appointed by the Governor with the consent of the Senate. The
Commissioners appoint an executive director who is responsible for the
direction and operation of SIP. SIP is completely self-sustaining,
acquiring all of its operating and reserve funds from the premiums it
collects from its policyholders and its investment income.
Although a quasi-public agency, SIP was intended by the Legislature to
be treated the same as a private insurance company. See Commissioners
of State Insurance Fund v. Low. 285 App. Div.  525,138 N.Y.S.2d 437
(3rd Dep't 1955). It is more closely equated to an insurance company
than to a typical state agency. Martin Minkowitz, Practice
Commentaries. N.Y. Work. Compo §76 (McKinney 1994).

Despite the fact that SIP was intended to be treated as a private
insurance company, it is not licensed by the New York State Insurance
Department, nor is it subject to the Department's oversight and
regulation. As a result, SIP policyholders are put at a disadvantage
when compared to policyholders of private workers' compensation
insurers. If a SIP policyholder has a dispute with SIP regarding an
unfair insurance practice, they have no recourse other than to bring
the matter up with SIP. In contrast, policyholders of private carriers
may appeal to the Insurance Department if they have a dispute with
their insurer. SIP policyholders have reported various unfair
practices which have gone unchecked. One common complaint is that SIP
takes retaliatory actions against policyholders who seek to move their
business from SIP to another coverage provider.  Policyholders have
reported aggressive and unfair tactics, such as SIP suddenly revising
audits and questioning classifications in an effort to charge a
departing customer a higher premium.

Additionally, private insurance carriers who must be licensed by the
Insurance Department and subject to insurance law, are also placed at
a competitive disadvantage compared to the SIP which is not subject to
the same rules and regulation. To illustrate the competitive
advantage, SIP recently announced that it would not charge the same
assessment announced by the Compensation Insurance Rating Board
applicable to all workers' compensation policies. SIP determined it
would not change the 8.9% portion of the assessment applicable to the
Special Disability Fund, although required by law to do so. The fact
that SIP is allowed to charge a lesser amount creates an unfair
marketplace advantage for SIP and results in an overcharge to
consumers who buy their insurance from private insurers.  To rectify
these inequities, the bill would place SIF on an even footing with
other insurers providing workers' compensation insurance by removing
SIF's exemption from licensing and other insurance requirements. The
bill would also insert the Superintendent of Insurance, as opposed to
the Commissioner of Labor, as the appropriate person to approve the
rules adopted by the commissioners of SIP for the conduct of its
business. These rules of conduct include those pertaining to the
issuance of policies and their terms and conditions, the fixing of
premium rates, record keeping, payroll audits, billing and collection
of premiums, inspection of risks and setting standards of safety, and
the adjustment and payment of claims and awards.

Lastly, the bill would remove a requirement placed upon policyholders
of SIF that does not apply to policyholders of private insurers.
Currently, SIF policyholders that want to cancel their policy with SIF
because they have found other coverage must provide SIF with 30 days
advance written notice. During this notice period, policyholders
report that SIF employs aggressive and retaliatory tactics in an
effort to retain the business. It is simply unfair to require
policyholders of the SIF to provide more notice than is required of
policyholders of private carriers.

 LEGISLATIVE HISTORY :

2007-08:  S.7673

 FISCAL IMPLICATIONS :


 EFFECTIVE DATE :
This act shall take effect on the ninetieth day after it shall have
become a law.

2009-S1662 (ACTIVE) - Bill Text download pdf

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  1662

                       2009-2010 Regular Sessions

                            I N  S E N A T E

                            February 4, 2009
                               ___________

Introduced  by  Sen. LAVALLE -- read twice and ordered printed, and when
  printed to be committed to the Committee on Insurance

AN ACT to amend the insurance law, in relation to removing the exemption
  of the state insurance fund from licensing and other requirements;  to
  amend  the  workers'  compensation  law,  in relation to requiring the
  superintendent of insurance to approve the rules adopted by the  state
  insurance fund for the conduct of its business; and to amend the work-
  ers'  compensation law, in relation to the requirement for policyhold-
  ers to provide 30 days notice to withdraw  from  the  state  insurance
  fund

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. Section 1108  of  the  insurance  law,  subsection  (c)  as
amended  by  chapter  838  of  the  laws  of 1985, is amended to read as
follows:
  S 1108. Insurers exempt from licensing  and  other  requirements.  The
following  insurers, their officers, agents, representatives and employ-
ees shall be exempt from licensing and other requirements imposed by the
provisions of this chapter (except article seventy-four hereof)  to  the
extent specified below:
  (a)  Any  charitable  annuity society which complies with the require-
ments of section one thousand one hundred ten of this  article,  to  the
extent therein stated.
  (b)  Any  fraternal  benefit  society, membership corporation or other
organization exempted under the provisions of article forty-five of this
chapter, to the extent therein stated.
  [(c) The state  insurance  fund  of  this  state,  except  as  to  the
provisions of subsection (d) of section two thousand three hundred thir-
ty-nine,  section  three thousand one hundred ten, subsection (a), para-
graph one of subsection (b),  paragraph  three  of  subsection  (c)  and
subsection (d) of section three thousand two hundred one, sections three

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD06092-01-9

S. 1662                             2

thousand  two  hundred two, three thousand two hundred four, subsections
(a) through (d)  of  section  three  thousand  two  hundred  twenty-one,
subsections  (b)  and  (c)  of section four thousand two hundred twenty-
four,  section  four thousand two hundred twenty-six and subsections (a)
and (b) and (g) through (j) of section four thousand two  hundred  thir-
ty-five of this chapter and except as otherwise specifically provided by
the laws of this state.
  (d)] (C) Any corporate trustee or board of trustees acting pursuant to
the  banking  law  in  relation to the fund for insurance of deposits in
savings banks or the fund for insurance of shares of  savings  and  loan
associations.
  [(e)]  (D)  Any  corporation,  organized  under the laws of any state,
solely to provide gratuitously for support or  relief  of  the  priests,
clergy  or ministers of any religious denomination, or their dependents,
is exempt from all provisions of this  chapter,  except  that  any  such
corporation,  created  by  special  act  of incorporation of this state,
which by the provisions of such act is subject  to  the  requirement  of
examination  by, and making annual reports to, the superintendent, shall
be subject to the provisions of article three of this  chapter  relating
to examinations and statements or reports by insurers.
  [(f)]  (E)  Any retirement system or pension fund that was doing busi-
ness on January first, nineteen hundred forty under the  education  law,
the civil service law, the mental hygiene law, any special act of incor-
poration  of this state, or any municipal charter adopted under the laws
of this state, exclusively for the benefit of the members of such system
or fund or for all or any classes of the employees of this state or  any
municipality  thereof, shall be exempt from the provisions of this chap-
ter, except that if the law under which such system or fund  was  organ-
ized subjects it to examination by, and the making of annual reports to,
the  superintendent,  such  system  or  fund  shall  be  subject  to the
provisions of article three of this chapter relating to examinations and
statements or reports by insurers.
  [(g)] (F) Any membership corporation or voluntary  association  organ-
ized  and  operating  in  this  state  prior  to January first, nineteen
hundred thirty-nine and its members may act as indemnitors of a licensed
property/casualty insurance company in respect to surety bonds or  poli-
cies  of  insurance  required  to  be  filed by such members pursuant to
section three hundred seventy of the vehicle and  traffic  law  and  are
exempted  from  the  requirement  of having an insurer's license; but no
such membership corporation or association shall become a surety on  any
such bond or otherwise do an insurance business.
  [(h)]  (G) Any relief department or pension plan of any common carrier
subject to the [the] Railroad Retirement Act of 1974 (45 U.S.C.  S  31),
whose  privileges  and  membership  are  confined to employees or former
employees of such carrier or its affiliated or subsidiary companies,  or
to  any  association  of such common carriers which administers any such
department or plan.
  [(i)] (H) Every blood credit system established by a city, pursuant to
section twenty-one-d of the general city law.
  S 2. Paragraph 2 of subsection (a) of section 4522  of  the  insurance
law is amended to read as follows:
  (2)  Organizations  which limit their membership to the employees of a
particular city or town, or of  a  designated  business  corporation  or
firm,  or  of one or more business corporations or firms having business
interests in common, except as otherwise provided  in  subsection  [(f)]
(E)  of section one thousand one hundred eight of this chapter. Any such

S. 1662                             3

organization which limits its membership to the employees  of  a  corpo-
ration  having  more than five thousand employees may provide for hospi-
tal, surgical and medical benefits for the employee, his or her  spouse,
and his or her child or children not over eighteen years of age.
  S  3. Section 83 of the workers' compensation law, as amended by chap-
ter 149 of the laws of 2000, is amended to read as follows:
  S 83. Rules. The [commissioner] COMMISSIONERS shall  adopt  rules  for
the conduct of the business of the state fund, and may from time to time
alter,  amend or repeal any rule therefore adopted. At least four affir-
mative votes shall be required for the adoption  of  any  rule,  or  the
amendment or repeal of any rule. No rule, and no resolution proposing to
alter,  amend  or repeal any rule, shall be effective unless approved by
[the commissioner of labor. If the commissioner of labor  fails  to  act
upon any such rule or resolution within thirty days after it is communi-
cated  to  him  or  her, such rule or resolution shall be deemed to have
been approved] THE SUPERINTENDENT OF INSURANCE.
  The rules of the commissioners shall provide for the  conduct  of  the
business of the state insurance fund, including the issuance of policies
and their terms and conditions, the fixing of premium rates, the keeping
of  records,  auditing  of  payrolls,  and the billing and collection of
premiums therefor, the inspection of risks and the setting of the stand-
ards of safety, the adjustment and payment of claims and awards, and the
investigation of all matters relating thereto, the  medical  examination
of  persons  claiming compensation and the furnishing and supervision of
medical and surgical treatment to persons injured as set forth  in  this
chapter,  the conduct of the legal business of the fund and the enforce-
ment of the subrogated rights of the fund  against  third  parties,  the
investment  of  the surplus and reserves of the fund, and the collection
and analysis of statistics of payrolls, premiums,  losses  and  expenses
and the actuarial consideration thereof.
  S  4. Subdivision a of section 94 of the workers' compensation law, as
amended by chapter 635 of the laws  of  1996,  is  amended  to  read  as
follows:
  a.  Any  employer may, upon complying with subdivision two or three of
section fifty of this chapter, withdraw from the fund by turning in  his
insurance  contract  for  cancellation,  [provided  he has given written
notice to the fund of his intention to withdraw  not  less  than  thirty
days  before the effective date of such cancellation] ALONG WITH WRITTEN
NOTICE OF THE EFFECTIVE DATE OF THE CANCELLATION. Upon receipt  of  such
notice  the  fund shall[, at least ten days prior to the effective date]
file in the office of the chairman a notice of such cancellation date.
  [In no event shall the insurance contract be deemed cancelled until at
least ten days after the date of such filing, any earlier date mentioned
in the notice to the contrary notwithstanding.]
  If an employer withdraws from the fund upon complying with subdivision
two of section fifty of this chapter, the new  insurance  contract  with
the stock corporation, mutual corporation or reciprocal insurer shall be
deemed  not  to  take  effect  until the cancellation of such employer's
contract with the state insurance fund has become effective.
  S 5. This act shall take effect on the ninetieth day  after  it  shall
have become a law.

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