NY State Senate Bill 2013-S5664

Senate Bill S5664

2013-2014 Legislative Session

Establishes a civil private cause of action by a policyholder who has suffered unfair claim settlement practices by an insurer

download bill text pdf

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

Please enter your contact information

First Name

Last Name

Email Address

A valid email address is required.

Home address is used to determine the senate district in which you reside. Your support or opposition to this bill is then shared immediately with the senator who represents you.

Optional services from the NY State Senate:

Create an account. An account allows you to officially support or oppose key legislation, sign petitions with a single click, and follow issues, committees, and bills that matter to you. When you create an account, you agree to this platform's terms of participation.

Include a custom message for your Senator? (Optional)

Enter a message to your senator. Many New Yorkers use this to share the reasoning behind their support or opposition to the bill. Others might share a personal anecdote about how the bill would affect them or people they care about.

Actions

View Actions

	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 08, 2014	referred to insurance
Jun 03, 2013	referred to insurance

2013-S5664 (ACTIVE) - Details

See Assembly Version of this Bill:: A7809
Current Committee:: Senate Insurance
Law Section:: Insurance Law
Laws Affected:: Add §2601-a, Ins L
Versions Introduced in Other Legislative Sessions:: 2015-2016: S4049, A257
2017-2018: A2832
2019-2020: A5623

2013-S5664 (ACTIVE) - Summary

Establishes a civil private cause of action by a policyholder who has suffered unfair claim settlement practices by an insurer.

2013-S5664 (ACTIVE) - Sponsor Memo

                                BILL NUMBER:S5664

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

PURPOSE:

To allow insurance policy holders to recover-damages when an insurance
company's refusal to pay or unreasonable delay in paying a claim was
not substantially justified.

SUMMARY OF PROVISIONS:

This bill grants insurance policy holders a private right of action to
seek damages if their insurer unreasonably refuses to pay or
unreasonably delays payment without Substantial justification.

An insurer would not be substantially justified in refusing to pay or
in unreasonably delaying payment when they:

1. Fail to provide the policy holder with accurate information
concerning policy provision relating to the coverage et issue; or

2. Fail 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. Fail 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. Fail 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. Fail 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.

6. Fail to advise a policy holder chat a claim may exceed policy
limits, that assigned counsel may be subject to a conflict of
interest, or that the policy holder may retain independent counsel;

7. Fail to provide, no request of the policy holder, reporters or
other documentation arising from the investigation of a claim;

8. Failing to pay a claim without conducting a reasonable
investigation;

9. Negotiating or settling a claim directly with a policy holder known
to be represented by an attorney without the attorneys knowledge;


10. Failed to pay on one or more elements of a claim where there is no
dispute as to liability notwithstanding the existence of disputes as
to other elements of the claim where payment can be made without
prejudice to either party;

11. Acted in violation of Sec. 2601 of the Insurance law.

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 equal to three times the
actual damages, reasonable attorney fees, and punitive damages where
violations of this section are part of a general business practice.

The bill also includes procedural rules 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.

Finally, in the event an insurer is found liable under this section,
the bill would prevent insurers from passing on the costs to consumers
in the form of higher premiums.

JUSTIFICATION:

Insurance companies have an overwhelming advantage in the handling of
a claim, with the power and financial incentive to deny or delay
coverage and otherwise avoid fair payment of legitimate claims. Under
current law, there is no consequence to the insurer when a denial or
delay of coverage is unfounded, or when the insurer offers an
unreasonably low settlement. The importance of this issue is becoming
apparent as an increasing number of the tens of thousands of New
Yorkers making claims in the aftermath of Hurricane Sandy are
experiencing unfair claims practices.

Currently Section 2601 of the insurance law regulates the conduct of
insurers, prohibiting 5 specific actions that constitute unfair claims
practices. However, only the Superintendent of the Department of
Financial Services can enforce these provisions. Furthermore, Sec.
2601 does not go far enough in regulating the types of unfair claims
practices we have seen across the state in the wake of recent natural
disasters.

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
withimpunity. Even if the policy holder sues and wins the full amount
of the claim, they will still not receive the benefits they paid for
under their policy because of the costs associated with bringing the
successful action. This gives insurers an unfair advantage in
negotiating a settlement of any claim - insurers are able to bear the
costs of litigation, but most ordinary New Yorkers cannot afford to do
so.

New Yorkers who pay insurance premiums should expect insurers to live
up to their obligation to deal in good faith with their policy
holders. When insurers do not meet this obligation it is important
that the consumer has a viable and effective means of seeking redress.
This bill gives them the legal means to achieve this goal.


LEGISLATIVE HISTORY:

None.

FISCAL IMPLICATIONS:

None.

EFFECTIVE DATE:

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

2013-S5664 (ACTIVE) - Bill Text download pdf

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

                                  5664

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                              June 3, 2013
                               ___________

Introduced  by  Sen.  LANZA  -- 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 unfair  claim  settle-
  ment practices

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

  Section 1. The insurance law is amended by adding a new section 2601-a
to read as follows:
  S 2601-A. UNFAIR CLAIM SETTLEMENT PRACTICES; CIVIL REMEDY.    (A)  THE
HOLDER OF A POLICY ISSUED OR RENEWED PURSUANT TO THIS CHAPTER SHALL HAVE
A  PRIVATE  RIGHT  OF  ACTION AGAINST ANY INSURER DOING BUSINESS IN THIS
STATE FOR DAMAGES AS PROVIDED IN THIS  SECTION  UPON  SUCH  POLICYHOLDER
PROVING  BY  A PREPONDERANCE OF THE EVIDENCE THAT SUCH INSURER'S REFUSAL
TO PAY OR UNREASONABLE DELAY IN PAYMENT TO THE POLICYHOLDER  OF  AMOUNTS
CLAIMED  TO  BE  DUE  UNDER A POLICY WAS NOT SUBSTANTIALLY JUSTIFIED. AN
INSURER IS NOT SUBSTANTIALLY JUSTIFIED IN REFUSING TO PAY OR  IN  UNREA-
SONABLY DELAYING PAYMENT WHEN THE INSURER:
  (1)  FAILED  TO  PROVIDE  THE  POLICYHOLDER  WITH ACCURATE INFORMATION
CONCERNING POLICY PROVISIONS RELATING TO THE COVERAGE AT ISSUE;
  (2) FAILED TO EFFECTUATE IN GOOD FAITH A PROMPT,  FAIR  AND  EQUITABLE
SETTLEMENT  OF A CLAIM SUBMITTED BY SUCH POLICYHOLDER IN WHICH LIABILITY
OF SUCH INSURER TO SUCH POLICYHOLDER WAS REASONABLY CLEAR;
  (3) FAILED TO PROVIDE A WRITTEN DENIAL OF A POLICYHOLDER'S CLAIM  WITH
A  FULL AND COMPLETE EXPLANATION OF SUCH DENIAL, INCLUDING REFERENCES TO
SPECIFIC POLICY PROVISIONS WHEREVER POSSIBLE;
  (4) FAILED TO MAKE A FINAL DETERMINATION AND NOTIFY  THE  POLICYHOLDER
IN WRITING OF ITS POSITION ON BOTH LIABILITY FOR AND THE INSURER'S VALU-
ATION  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;
  (5) FAILED TO ACT IN GOOD FAITH BY COMPELLING A POLICYHOLDER TO INSTI-
TUTE SUIT TO RECOVER AMOUNTS DUE UNDER ITS POLICY BY  OFFERING  SUBSTAN-

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD11339-01-3

S. 5664                             2

TIALLY  LESS  THAN  THE  AMOUNTS ULTIMATELY RECOVERED IN SUIT BROUGHT BY
SUCH POLICYHOLDER;
  (6)  FAILED  TO  ADVISE  A POLICYHOLDER THAT A CLAIM MAY EXCEED POLICY
LIMITS, THAT COUNSEL ASSIGNED  BY  THE  INSURER  MAY  BE  SUBJECT  TO  A
CONFLICT  OF  INTEREST,  OR THAT THE POLICYHOLDER MAY RETAIN INDEPENDENT
COUNSEL;
  (7) FAILED TO PROVIDE, ON REQUEST OF THE POLICYHOLDER OR THEIR  REPRE-
SENTATIVE,  ALL REPORTS, LETTERS OR OTHER DOCUMENTATION ARISING FROM THE
INVESTIGATION OF A CLAIM AND EVALUATING LIABILITY FOR  OR  VALUATION  OF
SUCH CLAIM;
  (8)  REFUSED  TO  PAY A CLAIM WITHOUT CONDUCTING A REASONABLE INVESTI-
GATION;
  (9) NEGOTIATED OR SETTLED A CLAIM DIRECTLY WITH A  POLICYHOLDER  KNOWN
TO  BE  REPRESENTED  BY  AN ATTORNEY WITHOUT THE ATTORNEY'S KNOWLEDGE OR
CONSENT. THIS SHALL NOT PROHIBIT ROUTINE INQUIRIES TO A POLICYHOLDER  TO
OBTAIN DETAILS CONCERNING THE CLAIM;
  (10)  FAILED  TO PAY ON ONE OR MORE ELEMENTS OF A CLAIM WHERE THERE IS
NO DISPUTE AS TO LIABILITY NOTWITHSTANDING THE EXISTENCE OF DISPUTES  AS
TO  OTHER  ELEMENTS  OF THE CLAIM WHERE SUCH PAYMENT CAN BE MADE WITHOUT
PREJUDICE TO EITHER PARTY; OR
  (11) ACTED IN VIOLATION OF SECTION TWO THOUSAND  SIX  HUNDRED  ONE  OF
THIS ARTICLE OR ANY REGULATION PROMULGATED PURSUANT THERETO.
  (B)  ANY POLICYHOLDER WHO ESTABLISHES LIABILITY PURSUANT TO SUBSECTION
(A) OF THIS SECTION SHALL BE ENTITLED TO RECOVER, IN ADDITION TO AMOUNTS
DUE UNDER THE POLICY, INTEREST, COSTS AND DISBURSEMENTS:
  (1) COMPENSATORY DAMAGES EQUAL TO THREE TIMES THE ACTUAL DAMAGES;
  (2) SUCH ADDITIONAL PUNITIVE DAMAGES AS THE  COURT  MAY  ALLOW,  ON  A
SHOWING THAT THE ACTS GIVING RISE TO LIABILITY OCCUR WITH SUCH FREQUENCY
AS TO INDICATE A GENERAL BUSINESS PRACTICE; AND
  (3)  REASONABLE  ATTORNEYS' FEES INCURRED BY THE POLICYHOLDER FROM THE
DATE OF THE LOSS, IN RECOVERING MONIES DUE PURSUANT TO THE TERMS OF  THE
POLICY.
  (C)  ANY  POLICYHOLDER MAY RECOVER DAMAGES FROM AN INSURER DOING BUSI-
NESS IN THIS STATE PURSUANT TO THIS SECTION EITHER AS PART OF AN  ACTION
TO  RECOVER  UNDER  THE  TERMS  OF  AN INSURANCE POLICY OR IN A SEPARATE
ACTION.
  (D) IN ANY TRIAL OF A CAUSE OF  ACTION  ASSERTED  AGAINST  AN  INSURER
PURSUANT TO THIS SECTION, EVIDENCE OF SETTLEMENT DISCUSSIONS WRITTEN AND
VERBAL  OFFERS  TO  COMPROMISE AND OTHER EVIDENCE RELATING TO THE CLAIMS
PROCESS SHALL BE ADMISSIBLE. IF CAUSES OF ACTION RELATING  TO  LIABILITY
OF  THE  INSURER  UNDER THE POLICY AND UNDER THIS SECTION ARE ALLEGED IN
THE SAME ACTION, THE COURT MAY BIFURCATE THE TRIAL OF ISSUES  SO  AS  TO
AVOID PREJUDICE TO THE INSURER ON THE ISSUE OF LIABILITY UNDER THE POLI-
CY  AND  FACILITATE  ADMISSIBILITY  OF  EVIDENCE ON THE CAUSES OF ACTION
ASSERTED PURSUANT TO THIS SECTION.
  (E) ALL AMOUNTS RECOVERED FROM AN INSURER AS  DAMAGES  AND  REASONABLE
ATTORNEYS'  FEES  IN  ANY  ACTION  AUTHORIZED  IN  THIS SECTION SHALL BE
EXCLUDED BY THE INSURER IN ITS DETERMINATIONS OF THE  PREMIUMS  IT  WILL
CHARGE ALL POLICYHOLDERS ON ALL POLICIES ISSUED BY IT.
  (F)   NOTHING   IN   THIS  SECTION  SHALL  BE  CONSTRUED  TO  LIMIT  A
POLICYHOLDER'S RIGHT TO A TRIAL BY JURY FOR  ANY  CLAIMS  ARISING  UNDER
THIS SECTION.
  S  2. This act shall take effect on the first of January next succeed-
ing the date on which it shall have become a law, and shall apply to all
acts and omissions by insurers occurring  on  or  after  such  effective
date.

Comments

Open Legislation is a forum for New York State legislation. All comments are subject to review and community moderation is encouraged.

Comments deemed off-topic, commercial, campaign-related, self-promotional; or that contain profanity, hate or toxic speech; or that link to sites outside of the nysenate.gov domain are not permitted, and will not be published. Attempts to intimidate and silence contributors or deliberately deceive the public, including excessive or extraneous posting/posts, or coordinated activity, are prohibited and may result in the temporary or permanent banning of the user. Comment moderation is generally performed Monday through Friday. By contributing or voting you agree to the Terms of Participation and verify you are over 13.

Create an account. An account allows you to sign petitions with a single click, officially support or oppose key legislation, and follow issues, committees, and bills that matter to you. When you create an account, you agree to this platform's terms of participation.