BILL NUMBER:  S428

 TITLE OF BILL :

An act 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 remove the requirement for State Insurance Fund
policyholders to provide 30 days notice to withdraw from the Fund if
they have secured coverage with another insurance carrier.

 SUMMARY OF PROVISIONS :

Section 1. Amends section 94 of the workers' compensation law as it
relates to removing the requirement of policyholders of the State
Insurance Fund to provide 30 days notice of their intent to withdraw
from the Fund for employers who have secured insurance with another
insurance carrier. In the event that an employer secured another
insurance policy, the employer shall have to provide notice to the
Fund including intention to withdraw, demonstration they have secured
a new insurance policy and the effective date of cancellation which
shall be the date the new policy takes effect.

              

Section 2 is the effective date.

 JUSTIFICATION :

The State Insurance Fund (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 40 percent of the market.

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 as a private
insurance company, it is not licensed by the New York State DFS, 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.

As a result, 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 SIF 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.

To rectify one of these inequities, the bill would place SIF on an
even footing with other insurers providing workers' compensation
insurance by removing the 30 day notice requirement placed upon
policyholders who have secured a new insurance policy with another
carrier. 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.
Under the legislation, the 30 day notice requirement would only be
required when you are not replacing a policy. If you are replacing a
policy, the 30 day notice is not required and the effective date of
cancellation is the effective date of the new policy. Therefore, you
can move the policy at any point, even less than 30 days, if you can
demonstrate that you have a replacement policy and provide them with
notice.

Moreover, if SIF policyholders cannot provide 30 days notice, they
find themselves subject to excessive short-rate penalty provisions
that unfairly burden New York's businesses.

It is simply unfair to require policyholders of the SIF to provide
more notice than is required of policyholders of private carrier's.
This statutory provision has outlived its usefulness and has become an
article of anti-competitive protectionism for the Fund.

 LEGISLATIVE HISTORY :

S.5250 of 2016.

 FISCAL IMPLICATIONS :

None.

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