BILL NUMBER: S3516A

SPONSOR: BRESLIN
 
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 OR GENERAL IDEA OF BILL:

The purpose of this bill is to remove the requirement for New York State
Insurance Fund (NYSIF) policyholders to provide a 30-day notice to with-
draw from the Fund if they have secured insurance with another insurance
carrier.

 
SUMMARY OF PROVISIONS:

Section one of the bill amends section 94(a) of the Workers' Compen-
sation Law to establish that when an employer has given written notice
to NYSIF of his intention to withdraw from the Fund, which includes the
              

effective date of cancellation and proof that the employer has secured
insurance with another insurance carrier, such employer shall not be
required to provide such notice 30 days before the effective date of
such cancellation. The effective date of cancellation of such employer's
contract with NYSIF shall be the date that the new insurance contract
with the stock corporation, mutual corporation or reciprocal insurer
takes effect.

Section two the bill sets forth an effective date of 90 days after
enactment.

 
DIFFERENCE BETWEEN ORIGINAL AND AMENDED VERSION (IF APPLICABLE):

The amended version makes technical changes to ensure that if an employ-
er meets the requirements of the new undesignated paragraph, the rest of
the subdivision shall not apply.

 
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 insur-
ance company, it is not licensed by the New York State DES, 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 SW take s retal-
iatory 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 demon-
strate 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 arti-
cle of anti-competitive protectionism for the Fund.

 
PRIOR LEGISLATIVE HISTORY:

S.428 of 2018
S.5250 of 2016.

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

None.

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