BILL NUMBER:S4735

TITLE OF BILL:
An act
to amend the insurance law, in relation to unfair claim settlement
practices

PURPOSE:
To allow holders of property and casualty insurance policies to
recover damages when an insurance company's refusal to payor
unreasonable delay in paying a claim was not substantially justified.

SUMMARY OF PROVISIONS:
This bill provides that an insurer doing business in this state shall
be liable to a holder of property and casualty insurance policy for
damages upon such policy holder proving that such insurer's refusal
to payor unreasonable delay in payment to the policy holder of
amounts claimed to be due there under was not substantially justified.

An insurer would not be substantially justified in refusing to payor
in unreasonably delaying payment when:

1. Intentionally, recklessly or by gross negligence failed to provide
the policy holder with accurate information concerning policy
provision relating to coverage at issue; or

              

2. Failed to effectuate, in good faith, a prompt, fair and equitable
settlement of a claim submitted by such policy holder in which
liability of such insurer to such policy holder was reasonably clear;
or

3. Failed 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; or

4. Failed to make a final determination and notify the policy holder
in writing of its position on both the liability for, and the
insurer's valuation of, a claim within six months of the date on
which it received actual or constructive notice of the loss upon
which the claim is based; or

5. Failed to act in good faith by compelling the policy holder to
initiate a lawsuit to recover under the policy by offering
substantially less than the amounts ultimately recovered in the suit
by the policy holder.

Any policy holder who establishes liability shall be entitled to
recover, in addition to amounts due under the policy, interest,
costs, and disbursements, compensatory damages and reasonable
attorneys fees.

Finally, there are procedural rules established to insure that the
insurer receives a fair trial on the issue of liability under the
terms of the policy before the issue of substantial justification is
considered.


JUSTIFICATION:
Existing law provides a code of conduct for insurers in this state.
Insurance Law Section 2601 now provides that no insurer in this state
shall engage in five enumerated unfair claims settlement practices.
Yet, only the Superintendent of Insurance can enforce these
provisions against the company. The holders of property and casualty
insurance policies who have incurred substantial costs in obtaining
reimbursement under the policy terms have no remedy. Any doubt about
this unfortunate state of the law was removed by the Court of Appeals
in its 1994 decision in ROCANOVA V. EQUITABLE LIFE, 83 NY2nd 603
(1984). "The law of this State does not currently recognize a private
cause of action under Insurance Law §2601... To the extent that a
variety of appellate division decisions hold otherwise, they are not
to be followed". ROCANOVA V. EQUITABLE LIFE, 83 NY2d at 614-515.
(emphasis added). Citizens of this state who pay insurance premiums
should expect insurers to live up to their policy obligations.

Under existing statutes and case law, an insurer can simply refuse to
pay a claim or offer an amount well below the value of the loss with
impunity. SEE E.G. LTS CONTRACTORS V. HARTFORD INS., 99 AD2d 644
(4th Dept. 1984) no remedy for unreasonable delay in payment; UNILAND
DEV. V. HOME INS., 97 AD2d 973 (4th Dept. 1983) no remedy for
intentional refusal to pay. Even if the policy holder sues and wins
the full amount of the claim, he or she loses because of the costs
and counsel fees associated with bringing the successful action. This
fact gives insurers a terribly unfair advantage in negotiating a
settlement of any claim because of the ability of the insurers to
financially bear the burden of litigation which the ordinary citizen
cannot afford to do.

The Superintendent of Insurance regulates the industry within the
constraints of available resources. Each citizen should be entitled
to prove his or her claim in court when an insurer takes a position
in settling a claim which is found not to have been substantially
justified.

LEGISLATIVE HISTORY:
S.486A of 1997-98; S.545 of 1999-00; S.577 of 2001-02;
S.1486A of 2003-04; S.51 of 2005-06; S.1269/A.10307 of 2007-08.

FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
January 1st next succeeding the date on which it shall have become a
law.