NY State Senate Bill 2011-S3836

Senate Bill S3836

2011-2012 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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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 04, 2012	referred to insurance
Mar 07, 2011	referred to insurance

2011-S3836 (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:: 2009-2010: S1662
2013-2014: S6755
2015-2016: S254
2017-2018: S4558

2011-S3836 (ACTIVE) - Summary

Removes the state insurance fund's 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; removes the requirement for policyholders to provide thirty days notice to withdraw from the state insurance fund.

2011-S3836 (ACTIVE) - Sponsor Memo

                                BILL NUMBER:S3836

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 SIF 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 rules for the conduct of Its business without
approval from the Superintendent of Insurance. Unlike policyholders
of private workers' compensation insurers, policyholders of SIP 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 SIF
from licensing and other requirements of the Insurance Law. SIP 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. SIF 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, SIF 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.
Comp. §76 (McKinney 1994).

Despite the fact that SIF 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, SIF policyholders are put at a disadvantage
when compared to policyholders of private workers' compensation
insurers. If a SIF policyholder has a dispute with SIF regarding an
unfair insurance practice, they have no recourse other than to bring
the matter up with SIF. In contrast, policyholders of private
carriers may appeal to the Insurance Department if they have a
dispute with their insurer. SIF 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
SIF 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 SIF which is not subject
to the same rules and regulation. To illustrate the competitive
advantage, SIF recently announced that it would not charge the same
assessment announced by the Compensation Insurance Rating Board
applicable to all workers' compensation policies. SIF
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 SIP on an even
footing with other insurers providing workers' compensation insurance
by removing SIP'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 SIP that does not apply to policyholders of private insurers.
Currently, SIP policyholders that want to cancel their policy with
SIP because they have found other coverage must provide SIP with 30
days advance written notice. During this notice period, policyholders
report that SIP employs aggressive and retaliatory tactics in an
effort to retain the business. It is simply unfair to require
policyholders of the SIP to provide more notice than is required of
policyholders of private carriers.

LEGISLATIVE HISTORY:

2009-10 S.1662; 2007-08, S.7673.

FISCAL IMPLICATIONS:

EFFECTIVE DATE:

This act shall take effect on the ninetieth day after it shall have
become law.

2011-S3836 (ACTIVE) - Bill Text download pdf

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

                                  3836

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                              March 7, 2011
                               ___________

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 and subsection (j) as added
by section 2 of part R of chapter 56 of the laws of 2010, 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

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD09918-01-1

S. 3836                             2

subsection (d) of section three thousand two hundred one, sections three
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.
  [(j)]  (I)  Any  group of employers authorized by the workers' compen-
sation board to provide workers' compensation benefits for the employees
of all member employers pursuant to subdivision three-a of section fifty
of the workers' compensation law.
  S 2. Paragraph 2 of subsection (a) of section 4522  of  the  insurance
law is amended to read as follows:

S. 3836                             3

  (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
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 34 of the laws of 2010, 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 six affirma-
tive votes shall be required for the adoption of any rule, or the amend-
ment  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] 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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