NY State Senate Bill 2015-S254

Senate Bill S254

2015-2016 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, 2016	referred to insurance
Jan 07, 2015	referred to insurance

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2015-S254 (ACTIVE) - Details

See Assembly Version of this Bill:: A2904
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
2011-2012: S3836
2013-2014: S6755, A9797
2017-2018: S4558

2015-S254 (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.

2015-S254 (ACTIVE) - Sponsor Memo

                                 BILL NUMBER:  S254

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

 SUMMARY OF PROVISIONS :

Section 1. Amends section 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. Replaces the Commissioner of Labor with the Superintendent

of DFS 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. 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.

 JUSTIFICATION :  New York Insurance Law section 1108 exempts certain
insurers, including SIF 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 SIF. 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 Dept 1955). It is more closely equated to an
insurance company than to a typical state agency. Martin Minkiowtiz,
PRACTICE COMMENTARIES, N.Y. Work.  Comp. Section 76 (McKinney 1994)
Despite the fact that SIF was intended to be treated a s a private
insurance company, it is not licensed by the New York State DFS, not
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 contract, policyholders of private carriers may appeal to the
DFS if they have a dispute with their insurer. SIF policyholders have
reported various unfair practices which have gone unchecked. One
common complaint is that SIF 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 DFS 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 regulations. To rectify these inequities, the bill
would place SIF on an even footing with other insurers providing
workers' compensation insurance by removing SIFs exemption from
licensing and other insurance requirements. The bill would also insert
the Superintendent of DFS, as opposed to the Commissioner of Labor, as
the appropriate person to approve the rules adopted by the
commissioners of SIF 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 keep,
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 :  2014 S.6755/A.9797; 2012 S.3836; 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.

2015-S254 (ACTIVE) - Bill Text download pdf

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

                                   254

                       2015-2016 Regular Sessions

                            I N  S E N A T E

                               (PREFILED)

                             January 7, 2015
                               ___________

Introduced  by Sens. LAVALLE, MARTINS -- 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, subsection (j) as added by
section 2 of part R of chapter 56 of the laws of 2010, subsection (k) as
added by chapter 181 of the laws of 2012, subsection  (l)  as  added  by
chapter  246  of  the  laws  of  2012,  subsection (l) as relettered and
subsection (m) as  added  by  chapter  203  of  the  laws  of  2013  and
subsection  (n)  as added by chapter 454 of the laws of 2014, 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.

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD03339-01-5

S. 254                              2

  (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
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.

S. 254                              3

  [(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.
  [(k)] (J) A charitable bail organization holding a certificate  issued
by  the  superintendent  pursuant  to section six thousand eight hundred
five of this chapter.
  [(l)] (K) An institution of higher education, as defined in  paragraph
two of subsection (a) of section one thousand one hundred twenty-four of
this  article,  that has a certificate of authority from the superinten-
dent and complies with the requirements  of  section  one  thousand  one
hundred twenty-four of this article, to the extent therein stated.
  [(m)]  (L)  A freelancers association, as defined in section one thou-
sand one hundred twenty-five of this article, that obtains and maintains
a demonstration program waiver from the superintendent and complies with
the requirements of section one thousand one hundred twenty-five of this
article, to the extent therein stated.
  [(n)] (M) A resolution facility established pursuant to section  seven
thousand seven hundred nineteen of this chapter.
  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
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 FINANCIAL SERVICES.
  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

S. 254                              4

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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Senate Bill S254

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Sponsored By

Kenneth P. LaValle