NY State Senate Bill 2021-S6813A

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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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Apr 27, 2022	print number 6813a
Apr 27, 2022	amend and recommit to insurance
Jan 05, 2022	referred to insurance
May 18, 2021	referred to insurance

Bill Amendments

Original

A (Active)

co-Sponsors

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2021-S6813 - Details

See Assembly Version of this Bill:: A7285
Current Committee:: Senate Insurance
Law Section:: Insurance Law
Laws Affected:: Add §2601-a, amd §§3425 & 2601, Ins L
Versions Introduced in 2023-2024 Legislative Session:: S1797, A7139

2021-S6813 - Summary

Relates to claim settlement practices when an insurer refuses to pay or is delaying payment of a settlement; provides a policyholder a private right of action against such insurer doing business in the state who has refused or delayed payment of an insurance claim.

2021-S6813 - Sponsor Memo

                                 
BILL NUMBER: S6813

SPONSOR: RAMOS
 
TITLE OF BILL:

An act to amend the insurance law, in relation to unfair claim settle-
ment practices

 
PURPOSE OF BILL:

To allow insurance policy holders and injured people 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 OF BILL:

Section 1 creates a new Insurance Law section 2601-a which grants insur-
ance policy claimants a private right of action to seek damages if the
insurer unreasonably refuses to pay or unreasonably delays payment with-
out substantial justification. An insurer would not be substantially
justified in refusing to pay or in unreasonably delaying payment when
it:

1. Fails to provide the claimant with accurate information regarding
policy provisions relating to the coverage at issue; or,

2. Fails to effectuate in good faith a prompt, fair and equitable
settlement of a claim or portion of a claim and where the insurer failed
to reasonably accord at least equal or more favorable consideration to
its insured's interests as it did to its own interests, and thereby
exposed the insured to a judgment in excess of the policy limits or
caused other damage to a claimant; or

3. Fails to provide a timely written denial of a claimant's claim, or
portion thereof, with a full and complete explanation of such denial,
including references to specific policy provisions wherever possible; or

4. Fails to act in good faith by compelling such claimant to initiate a
lawsuit to recover under the policy by offering substantially less than
the amounts ultimately recovered in such suit; or

5. Fails to timely provide, on request of the policy holder or the poli-
cy holder's representative, all reports or other documentation arising
from the investigation of a claim; or

6. Refuses to pay a claim without conducting a reasonable investigation
prior to such refusal.

Any policyholder who establishes liability shall be entitled to recover
amounts due under the policy, costs and disbursements, consequential
damages, reasonable attorney's fees, interest from the time of the loss
or failure to offer a fair and reasonable settlement and punitive
damages.

The bill also includes procedural rules to ensure a fair hearing for all
parties, including evidentiary issues, notice to the insurer, opportu-
nity to cure, discovery and the right to trial.


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.

Section 2 amends Insurance Law section 3425 to prohibit insurers from
refusing to issue or renew a policy because a consumer has brought an
action under section 1.

Section 3 amends Insurance Law section 2601 to update fair claims
settlement practices.

Section 4 is the effective date.

 
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 became increasingly apparent in
the aftermath of Superstorm Sandy, when tens of thousands of New Yorkers
making claims to insurers experienced unfair claims practices. More
recently, COVID-19 claims denials have left many victims without even a
settlement offer in the absence of the threat of a trial and many small
businesses in danger of shuttering after insurers refused to pay for
losses due to mandated closures.

Currently § 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, § 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 with impunity or offer an amount well below the value of the
loss. Even if the claimant sues and wins the full amount of the claim,
they will still not receive the benefits to which they should be enti-
tled under the policy because of the costs associated with bringing the
successful action. This gives insurers an unfair advantage in negotiat-
ing a settlement of any claim - insurers are able to bear the costs of
litigation, but most ordinary New Yorkers cannot afford to do so. In
addition, an insurer's bad faith conduct may leave a policy holder
exposed to a liability judgment in excess of the policy limit.

New Yorkers who pay insurance premiums should expect insurers to live up
to their obligation to deal in good faith with regard to claims submit-
ted under the policy. 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 consumers the legal means to achieve this goal.

 
LEGISLATIVE HISTORY:

2019-20: A.5623 - Third Reading

2017-18: A.2832-A -Referred to Ins.

2015-16: A.257-A - Third Reading

2013-14: A.7809 - Third Reading

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

None.

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

2021-S6813 - Bill Text download pdf

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   6813
 
                        2021-2022 Regular Sessions
 
                             I N  S E N A T E
 
                               May 18, 2021
                                ___________
 
 Introduced  by  Sen.  RAMOS  -- 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:
   § 2601-A. UNFAIR CLAIM SETTLEMENT PRACTICES;  CIVIL  REMEDY.  (A)  THE
 HOLDER  OF A POLICY ISSUED OR RENEWED PURSUANT TO ARTICLE THIRTY-FOUR OF
 THIS CHAPTER OR INJURED PERSON SHALL HAVE  A  PRIVATE  RIGHT  OF  ACTION
 AGAINST ANY INSURER DOING BUSINESS IN THIS STATE FOR DAMAGES AS PROVIDED
 IN  THIS SECTION UPON PROOF BY A PREPONDERANCE OF THE EVIDENCE THAT SUCH
 INSURER'S REFUSAL TO PAY OR UNREASONABLY DELAY PAYMENT  TO  THE  POLICY-
 HOLDER OR INJURED PERSON OF AMOUNTS CLAIMED TO BE DUE UNDER A POLICY WAS
 NOT  REASONABLY  JUSTIFIED.  AN  INSURER  IS NOT REASONABLY JUSTIFIED IN
 REFUSING TO PAY OR IS UNREASONABLY 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 A PROMPT AND FAIR SETTLEMENT OF A CLAIM OR
 ANY PORTION THEREOF, IN THAT THE INSURER FAILED TO REASONABLY ACCORD  AT
 LEAST  EQUAL  OR MORE FAVORABLE CONSIDERATION TO ITS INSURED'S INTERESTS
 AS IT DID TO ITS OWN INTERESTS, AND THEREBY EXPOSED  THE  INSURED  TO  A
 JUDGMENT IN EXCESS OF THE POLICY LIMITS;
   (3)  FAILED  TO  PROVIDE  A  TIMELY 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;
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.

                                                            LBD11091-03-1

 S. 6813                             2
 
   (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-
 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. THE PROVISIONS OF THIS PARAGRAPH SHALL NOT BE DEEMED TO PROHIB-
 IT ROUTINE INQUIRIES TO A POLICYHOLDER TO OBTAIN DETAILS CONCERNING  THE
 CLAIM; OR
   (10)  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, COSTS AND DISBURSEMENTS, CONSEQUENTIAL DAMAGES,
 REASONABLE ATTORNEYS' FEES INCURRED BY THE POLICYHOLDER,  INTEREST  FROM
 THE  DATE  OF THE LOSS, AND PUNITIVE DAMAGES AS DETERMINED BY THE FINDER
 OF FACT.
   (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) AN ACTION MAY ALSO BE MAINTAINED BY ANY INJURED PERSON  OR  REPRE-
 SENTATIVE THEREOF INCLUDING, BUT NOT LIMITED TO, A GUARDIAN, ADMINISTRA-
 TOR, EXECUTOR, INDIVIDUAL WITH A POWER OF ATTORNEY OR ANY OTHER PERSONAL
 REPRESENTATIVE AGAINST AN INSURER TO RECOVER DAMAGES INCLUDING COSTS AND
 DISBURSEMENTS, CONSEQUENTIAL DAMAGES, REASONABLE ATTORNEY'S FEES, INTER-
 EST  FROM  THE TIME OF FAILURE TO OFFER A FAIR AND REASONABLE SETTLEMENT
 IN ACCORDANCE WITH THIS SECTION, AND PUNITIVE DAMAGES AS  DETERMINED  BY
 THE  FINDER  OF FACT OR COURT, NOT LIMITED TO THE POLICY LIMITS, WHERE A
 PREPONDERANCE OF THE EVIDENCE ESTABLISHES THAT  THE  INSURER  FAILED  TO
 EFFECTUATE A PROMPT AND FAIR SETTLEMENT OF A CLAIM OR ANY PORTION THERE-
 OF, IN THAT UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANCES RELATED TO
 THE  CLAIM,  THE  INSURER  FAILED TO REASONABLY ACCORD AT LEAST EQUAL OR

 S. 6813                             3
 
 MORE FAVORABLE CONSIDERATION TO ITS INSURED'S INTERESTS AS IT DID TO ITS
 OWN INTERESTS.
   (G) AT LEAST THIRTY DAYS PRIOR TO THE FILING OF ANY ACTION PURSUANT TO
 THIS  SECTION, A WRITTEN DEMAND FOR RELIEF, IDENTIFYING THE CLAIMANT AND
 REASONABLY DESCRIBING THE UNFAIR CLAIM SETTLEMENT ACT  OR  PRACTICE  AND
 THE  INJURY  SUFFERED, SHALL BE MAILED OR DELIVERED TO ANY INSURER DOING
 BUSINESS IN THIS STATE. ANY INSURER DOING BUSINESS IN THIS STATE RECEIV-
 ING SUCH A DEMAND FOR RELIEF WHO, WITHIN THIRTY DAYS OF THE  MAILING  OR
 DELIVERY  OF THE DEMAND FOR RELIEF, MAKES A WRITTEN TENDER OF SETTLEMENT
 WHICH IS REJECTED BY THE CLAIMANT MAY, IN ANY  SUBSEQUENT  ACTION,  FILE
 THE WRITTEN TENDER AND AN AFFIDAVIT CONCERNING ITS REJECTION AND THEREBY
 LIMIT  ANY  RECOVERY  TO THE RELIEF TENDERED IF THE FINDER OF FACT FINDS
 THAT THE RELIEF TENDERED WAS REASONABLE IN RELATION TO THE INJURY  ACTU-
 ALLY SUFFERED BY THE CLAIMANT. IN ALL OTHER CASES, IF THE FINDER OF FACT
 FINDS  FOR  THE  CLAIMANT,  RECOVERY  SHALL  BE  IN THE AMOUNT OF ACTUAL
 DAMAGES; OR UP TO THREE BUT NOT LESS THAN TWO TIMES SUCH AMOUNT  IF  THE
 FINDER  OF  FACT  FINDS THAT THE UNFAIR CLAIM SETTLEMENT ACT OR PRACTICE
 WAS A WILLFUL OR KNOWING VIOLATION OF SUBSECTION  (A)  OR  (F)  OF  THIS
 SECTION  OR THAT THE REFUSAL TO GRANT RELIEF UPON DEMAND WAS NOT REASON-
 ABLY JUSTIFIED WITH KNOWLEDGE OR REASON TO KNOW THAT THE ACT OR PRACTICE
 COMPLAINED OF VIOLATED SUBSECTION (A) OR (F) OF THIS  SECTION.  FOR  THE
 PURPOSES  OF THIS CHAPTER, THE AMOUNT OF ACTUAL DAMAGES TO BE MULTIPLIED
 BY THE FINDER OF FACT SHALL BE THE AMOUNT OF THE DAMAGES  AS  DETERMINED
 BY THE FINDER OF FACT ON ALL CLAIMS ARISING OUT OF THE SAME AND UNDERLY-
 ING  TRANSACTION OR OCCURRENCE, REGARDLESS OF THE EXISTENCE OR NONEXIST-
 ENCE OF INSURANCE COVERAGE AVAILABLE IN PAYMENT OF THE CLAIM.  IN  ADDI-
 TION,  THE  COURT  SHALL AWARD SUCH OTHER EQUITABLE RELIEF, INCLUDING AN
 INJUNCTION, AS IT DEEMS TO BE NECESSARY AND PROPER.  THE DEMAND REQUIRE-
 MENTS OF THIS SUBSECTION SHALL NOT APPLY IF THE CLAIM IS ASSERTED BY WAY
 OF COUNTERCLAIM OR CROSS-CLAIM.
   (H) THE RIGHTS ENUMERATED IN THIS SECTION ARE NOT THE EXCLUSIVE  REME-
 DIES  AVAILABLE  TO THE POLICYHOLDER OR INJURED PERSON OR REPRESENTATIVE
 THEREOF INCLUDING, BUT NOT LIMITED TO, A GUARDIAN, ADMINISTRATOR, EXECU-
 TOR, INDIVIDUAL WITH POWER OF ATTORNEY OR ANY OTHER  PERSONAL  REPRESEN-
 TATIVE  AND  DO  NOT  PRECLUDE  ANY COMMON LAW CLAIMS OR OTHER STATUTORY
 CLAIMS THAT MAY EXIST OR ARISE.
   (I) UPON DEMAND OF A CLAIMANT POLICYHOLDER OR INJURED PERSON  PURSUANT
 TO  THIS  SECTION,  AN  INSURER  SHALL MAKE AVAILABLE TO THE CLAIMANT OR
 INJURED PERSON THE ENTIRE CLAIM FILE WITHIN THIRTY DAYS.
   (J) A POLICYHOLDER OR INJURED PERSON SHALL HAVE THE RIGHT TO  A  TRIAL
 BY  JURY. NO MANDATORY ARBITRATION AGREEMENT WITHIN OR PART OF ANY WRIT-
 TEN CONTRACT FOR INSURANCE SHALL PROHIBIT AN  ACTION  PURSUANT  TO  THIS
 SECTION.
   §  2.  Section  3425  of  the insurance law is amended by adding a new
 subsection (t) to read as follows:
   (T) NO INSURER SHALL REFUSE TO ISSUE OR RENEW A COVERED POLICY  SOLELY
 ON  THE  GROUNDS THAT THE POLICYHOLDER HAS BROUGHT AN ACTION PURSUANT TO
 SECTION TWO THOUSAND SIX HUNDRED ONE-A OF THIS CHAPTER.
   § 3. Paragraph 4 of subsection (a) of section 2601  of  the  insurance
 law,  as  amended by chapter 547 of the laws of 1997, is amended to read
 as follows:
   (4) [not attempting in good faith] WHERE THE INSURER FAILED to  effec-
 tuate  A  prompt[,]  AND  fair [and equitable settlements] SETTLEMENT of
 [claims submitted in which liability  has  become  reasonably  clear]  A
 CLAIM  OR  ANY PORTION THEREOF, IN THAT THE INSURER FAILED TO REASONABLY
 ACCORD AT LEAST EQUAL OR MORE FAVORABLE CONSIDERATION TO  ITS  INSURED'S

 S. 6813                             4
 
 INTERESTS  AS  IT  DID  TO  ITS  OWN  INTERESTS, AND THEREBY EXPOSED THE
 INSURED TO A JUDGMENT IN EXCESS OF THE POLICY LIMITS, except where there
 is a reasonable basis supported by specific  information  available  for
 review  by the department that the claimant has caused the loss to occur
 by arson. After receiving a properly executed proof of loss, the insurer
 shall advise the claimant of acceptance or denial of  the  claim  within
 thirty working days;
   §  4. 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.

co-Sponsors

View additional co-sponsors

2021-S6813A (ACTIVE) - Details

See Assembly Version of this Bill:: A7285
Current Committee:: Senate Insurance
Law Section:: Insurance Law
Laws Affected:: Add §2601-a, amd §§3425 & 2601, Ins L
Versions Introduced in 2023-2024 Legislative Session:: S1797, A7139

2021-S6813A (ACTIVE) - Summary

2021-S6813A (ACTIVE) - Sponsor Memo

                                 
BILL NUMBER: S6813A

SPONSOR: RAMOS
 
TITLE OF BILL:

An act to amend the insurance law, in relation to unfair claim settle-
ment practices

 
PURPOSE OF BILL:

To allow insurance policy holders and injured people 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 OF BILL:

Section 1 creates a new Insurance Law section 2601-grants insurance
policy claimants a private right of action to seek damages if the insur-
er unreasonably refuses to pay or unreasonably delays payment without
substantial justification. An insurer would not be substantially justi-
fied in refusing to pay or in unreasonably delaying payment when it:

1. Fails to provide the claimant with accurate information regardingpol-
icy provisions relating to the coverage at issue; or,

2. Fails to effectuate in good faith a prompt, fair and equitable
settlement of a claim or portion of a claim and where the insurer failed
to reasonably accord at least equal or more favorable consideration to
its insured's interests as it did to its own interests, and thereby
exposed the insured to a judgment in excess of the policy limits or
caused other damage to a claimant; or

3. Fails to provide a timely written denial of a claimant's claim, or
portion thereof, with a full and complete explanation of such denial,
including references to specific policy provisions wherever possible; or

4. Fails to act in good faith by compelling such claimant to initiate a
lawsuit to recover under the policy by offering substantially less than
the amounts ultimately recovered in such suit; or

5. Fails to timely provide, on request of the policy holder or the poli-
cy holder's representative, all reports or other documentation arising
from the investigation of a claim; or

6. Refuses to pay a claim without conducting a reasonable investigation
prior to such refusal.

Any policyholder who establishes liability shall be entitled to recover
amounts due under the policy, costs and disbursements, consequential
damages, reasonable attorney's fees, interest from the time of the loss
or failure to offer a fair and reasonable settlement and punitive
damages.

The bill also includes procedural rules to ensure a fair hearing for all
parties. including evidentiary issues, notice to the insurer, opportu-
nity to cure, discovery and the right to trial.



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.

Section 2 amends Insurance Law section 3425 to prohibit insurers from
refusing to issue or renew a policy because a consumer has brought an
action under section 1.

Section 3 amends Insurance Law section 2601 to update fair claims
settlement practices.

Section 4 is the effective date.

 
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 became increasingly apparent in
the aftermath of Superstorm Sandy, when tens of thousands of New Yorkers
making claims to insurers experienced unfair claims practices. More
recently, COVID-19 claims denials have left many victims without even a
settlement offer in the absence of the threat of a trial and many small
businesses in danger of shuttering after insurers refused to pay for
losses due to mandated closures.

Currently § 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, § 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 with impunity or offer an amount well below the value of the
loss. Even if the claimant sues and wins the full amount of the claim,
they will still not receive the benefits to which they should be enti-
tled under the policy because of the costs associated with bringing the
successful action. This gives insurers an unfair advantage in negotiat-
ing a settlement of any claim - insurers are able to bear the costs of
litigation, but most ordinary New Yorkers cannot afford to do so. In
addition, an insurer's bad faith conduct may leave a policy holder
exposed to a liability judgment in excess of the policy limit.

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

 
LEGISLATIVE HISTORY:

2021: A.7285/S.6813 - A.Rules/S.Ins.

2019-20: A.5623 - Third Reading
2017-18: A.2832-A - A. Ins.

2015-16: A.257-A - Third Reading

2013-14: A.7809 - Third Reading

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

None.

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

2021-S6813A (ACTIVE) - Bill Text download pdf

                             
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                  6813--A
 
                        2021-2022 Regular Sessions
 
                             I N  S E N A T E
 
                               May 18, 2021
                                ___________
 
 Introduced  by Sens. RAMOS, GAUGHRAN, KRUEGER, RIVERA, SALAZAR, STAVISKY
   -- read twice and ordered printed, and when printed to be committed to
   the Committee on Insurance -- recommitted to the Committee  on  Insur-
   ance in accordance with Senate Rule 6, sec. 8 -- committee discharged,
   bill  amended,  ordered  reprinted  as amended and recommitted to said
   committee
 
 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:
   § 2601-A. UNFAIR CLAIM SETTLEMENT PRACTICES;  CIVIL  REMEDY.  (A)  THE
 HOLDER  OF A POLICY ISSUED OR RENEWED PURSUANT TO ARTICLE THIRTY-FOUR OF
 THIS CHAPTER OR INJURED PERSON SHALL HAVE  A  PRIVATE  RIGHT  OF  ACTION
 AGAINST ANY INSURER DOING BUSINESS IN THIS STATE FOR DAMAGES AS PROVIDED
 IN  THIS SECTION UPON PROOF BY A PREPONDERANCE OF THE EVIDENCE THAT SUCH
 INSURER'S REFUSAL TO PAY OR UNREASONABLY DELAY PAYMENT  TO  THE  POLICY-
 HOLDER  OR INJURED PERSON OF AMOUNTS CLAIMED TO BE DUE UNDER A POLICY IS
 NOT REASONABLY JUSTIFIED. AN INSURER  IS  NOT  REASONABLY  JUSTIFIED  IN
 REFUSING TO PAY OR IS UNREASONABLY DELAYING PAYMENT WHEN THE INSURER:
   (1)  FAILS  TO  PROVIDE  THE  POLICYHOLDER  WITH  ACCURATE INFORMATION
 CONCERNING POLICY PROVISIONS RELATING TO THE COVERAGE AT ISSUE;
   (2) FAILS TO EFFECTUATE A PROMPT AND FAIR SETTLEMENT OF A CLAIM OR ANY
 PORTION THEREOF, IN THAT THE INSURER (I) FAILS TO REASONABLY  ACCORD  AT
 LEAST  EQUAL  OR MORE FAVORABLE CONSIDERATION TO ITS INSURED'S INTERESTS
 AS IT DID TO ITS OWN INTERESTS, AND THEREBY EXPOSES  THE  INSURED  TO  A
 JUDGMENT  IN  EXCESS  OF THE POLICY LIMITS, OR (II) REFUSES TO SETTLE IN
 RESPONSE TO A FAIR AND REASONABLE SETTLEMENT  OFFER  WITHIN  THE  POLICY
 LIMITS FROM AN INJURED PARTY;
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD11091-05-2
 S. 6813--A                          2

 
   (3) FAILS TO PROVIDE A TIMELY WRITTEN DENIAL OF A POLICYHOLDER'S CLAIM
 WITH  A  FULL  AND COMPLETE EXPLANATION OF SUCH DENIAL, INCLUDING REFER-
 ENCES TO SPECIFIC POLICY PROVISIONS WHEREVER POSSIBLE;
   (4) FAILS 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 A REASONABLE TIME NOT TO EXCEED  SIX  MONTHS  OF
 THE  DATE ON WHICH IT RECEIVED ACTUAL OR CONSTRUCTIVE NOTICE OF THE LOSS
 UPON WHICH THE CLAIM IS BASED;
   (5) FAILS TO ACT IN GOOD FAITH BY COMPELLING A POLICYHOLDER TO  INSTI-
 TUTE SUIT OR COMPEL APPRAISAL TO RECOVER AMOUNTS DUE UNDER ITS POLICY BY
 OFFERING  SUBSTANTIALLY  LESS  THAN  THE AMOUNTS ULTIMATELY RECOVERED IN
 SUIT OR BY APPRAISAL;
   (6) FAILS 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)  FAILS  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) REFUSES TO PAY A CLAIM WITHOUT CONDUCTING  A  REASONABLE  INVESTI-
 GATION;
   (9)  NEGOTIATES  OR SETTLES A CLAIM DIRECTLY WITH A POLICYHOLDER KNOWN
 TO BE REPRESENTED BY AN ATTORNEY WITHOUT  THE  ATTORNEY'S  KNOWLEDGE  OR
 CONSENT. THE PROVISIONS OF THIS PARAGRAPH SHALL NOT BE DEEMED TO PROHIB-
 IT  ROUTINE INQUIRIES TO A POLICYHOLDER TO OBTAIN DETAILS CONCERNING THE
 CLAIM;
   (10) NEGOTIATES OR SETTLES A CLAIM DIRECTLY WITH A POLICYHOLDER  KNOWN
 TO BE REPRESENTED BY A LICENSED PUBLIC ADJUSTER;
   (11) NEGOTIATES OR SETTLES A CLAIM DIRECTLY WITH A CONTRACTOR OR UNLI-
 CENSED PUBLIC ADJUSTER;
   (12)  REQUIRES  A  POLICYHOLDER  TO  SUBMIT  DUPLICATIVE OR REPETITIVE
 INFORMATION ALREADY SUBMITTED BY A POLICYHOLDER OR AN INJURED PARTY; OR
   (13) ACTS 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, COSTS AND DISBURSEMENTS, CONSEQUENTIAL DAMAGES,
 REASONABLE ATTORNEYS' FEES INCURRED BY THE POLICYHOLDER,  INTEREST  FROM
 THE  DATE  OF THE LOSS, AND PUNITIVE DAMAGES AS DETERMINED BY THE FINDER
 OF FACT.
   (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
 S. 6813--A                          3
 
 EXCLUDED  BY  THE  INSURER IN ITS DETERMINATIONS OF THE PREMIUMS IT WILL
 CHARGE ALL POLICYHOLDERS ON ALL POLICIES ISSUED BY IT.
   (F)  AN  ACTION MAY ALSO BE MAINTAINED BY ANY INJURED PERSON OR REPRE-
 SENTATIVE THEREOF INCLUDING, BUT NOT LIMITED TO, A GUARDIAN, ADMINISTRA-
 TOR, EXECUTOR, INDIVIDUAL WITH A POWER OF ATTORNEY OR ANY OTHER PERSONAL
 REPRESENTATIVE AGAINST AN INSURER TO RECOVER DAMAGES INCLUDING COSTS AND
 DISBURSEMENTS, CONSEQUENTIAL DAMAGES, REASONABLE ATTORNEY'S FEES, INTER-
 EST FROM THE TIME OF FAILURE TO OFFER A FAIR AND  REASONABLE  SETTLEMENT
 IN  ACCORDANCE  WITH THIS SECTION, AND PUNITIVE DAMAGES AS DETERMINED BY
 THE FINDER OF FACT OR COURT, NOT LIMITED TO THE POLICY LIMITS,  WHERE  A
 PREPONDERANCE  OF  THE  EVIDENCE  ESTABLISHES  THAT THE INSURER FAILS TO
 EFFECTUATE A PROMPT AND FAIR SETTLEMENT OF A CLAIM OR ANY PORTION THERE-
 OF, IN THAT UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANCES RELATED TO
 THE CLAIM, THE INSURER FAILS TO REASONABLY ACCORD AT LEAST EQUAL OR MORE
 FAVORABLE CONSIDERATION TO ITS INSURED'S INTERESTS AS IT DID TO ITS  OWN
 INTERESTS.
   (G) AT LEAST THIRTY DAYS PRIOR TO THE FILING OF ANY ACTION PURSUANT TO
 THIS  SECTION, A WRITTEN DEMAND FOR RELIEF, IDENTIFYING THE CLAIMANT AND
 REASONABLY DESCRIBING THE UNFAIR CLAIM SETTLEMENT ACT  OR  PRACTICE  AND
 THE  INJURY  SUFFERED, SHALL BE MAILED OR DELIVERED TO ANY INSURER DOING
 BUSINESS IN THIS STATE. ANY INSURER DOING BUSINESS IN THIS STATE RECEIV-
 ING SUCH A DEMAND FOR RELIEF WHO, WITHIN THIRTY DAYS OF THE  MAILING  OR
 DELIVERY  OF THE DEMAND FOR RELIEF, MAKES A WRITTEN TENDER OF SETTLEMENT
 WHICH IS REJECTED BY THE CLAIMANT MAY, IN ANY  SUBSEQUENT  ACTION,  FILE
 THE WRITTEN TENDER AND AN AFFIDAVIT CONCERNING ITS REJECTION AND THEREBY
 LIMIT  ANY  RECOVERY  TO THE RELIEF TENDERED IF THE FINDER OF FACT FINDS
 THAT THE RELIEF TENDERED WAS REASONABLE IN RELATION TO THE INJURY  ACTU-
 ALLY SUFFERED BY THE CLAIMANT. IN ALL OTHER CASES, IF THE FINDER OF FACT
 FINDS  FOR  THE  CLAIMANT,  RECOVERY  SHALL  BE  IN THE AMOUNT OF ACTUAL
 DAMAGES; OR UP TO THREE BUT NOT LESS THAN TWO TIMES SUCH AMOUNT  IF  THE
 FINDER  OF  FACT  FINDS THAT THE UNFAIR CLAIM SETTLEMENT ACT OR PRACTICE
 WAS A WILLFUL OR KNOWING VIOLATION OF SUBSECTION  (A)  OR  (F)  OF  THIS
 SECTION  OR THAT THE REFUSAL TO GRANT RELIEF UPON DEMAND WAS NOT REASON-
 ABLY JUSTIFIED WITH KNOWLEDGE OR REASON TO KNOW THAT THE ACT OR PRACTICE
 COMPLAINED OF VIOLATED SUBSECTION (A) OR (F) OF THIS  SECTION.  FOR  THE
 PURPOSES  OF THIS CHAPTER, THE AMOUNT OF ACTUAL DAMAGES TO BE MULTIPLIED
 BY THE FINDER OF FACT SHALL BE THE AMOUNT OF THE DAMAGES  AS  DETERMINED
 BY THE FINDER OF FACT ON ALL CLAIMS ARISING OUT OF THE SAME AND UNDERLY-
 ING  TRANSACTION OR OCCURRENCE, REGARDLESS OF THE EXISTENCE OR NONEXIST-
 ENCE OF INSURANCE COVERAGE AVAILABLE IN PAYMENT OF THE CLAIM.  IN  ADDI-
 TION,  THE  COURT  SHALL AWARD SUCH OTHER EQUITABLE RELIEF, INCLUDING AN
 INJUNCTION, AS IT DEEMS TO BE NECESSARY AND PROPER.  THE DEMAND REQUIRE-
 MENTS OF THIS SUBSECTION SHALL NOT APPLY IF THE CLAIM IS ASSERTED BY WAY
 OF COUNTERCLAIM OR CROSS-CLAIM.
   (H) THE RIGHTS ENUMERATED IN THIS SECTION ARE NOT THE EXCLUSIVE  REME-
 DIES  AVAILABLE  TO THE POLICYHOLDER OR INJURED PERSON OR REPRESENTATIVE
 THEREOF INCLUDING, BUT NOT LIMITED TO, A GUARDIAN, ADMINISTRATOR, EXECU-
 TOR, INDIVIDUAL WITH POWER OF ATTORNEY OR ANY OTHER  PERSONAL  REPRESEN-
 TATIVE  AND  DO  NOT  PRECLUDE  ANY COMMON LAW CLAIMS OR OTHER STATUTORY
 CLAIMS THAT MAY EXIST OR ARISE.
   (I) UPON DEMAND OF A CLAIMANT POLICYHOLDER OR INJURED PERSON  PURSUANT
 TO  THIS  SECTION,  AN  INSURER  SHALL MAKE AVAILABLE TO THE CLAIMANT OR
 INJURED PERSON THE ENTIRE CLAIM FILE WITHIN THIRTY DAYS.
   (J) A POLICYHOLDER OR INJURED PERSON SHALL HAVE THE RIGHT TO  A  TRIAL
 BY  JURY. NO MANDATORY ARBITRATION AGREEMENT WITHIN OR PART OF ANY WRIT-
 S. 6813--A                          4
 
 TEN CONTRACT FOR INSURANCE SHALL PROHIBIT AN  ACTION  PURSUANT  TO  THIS
 SECTION.
   §  2.  Section  3425  of  the insurance law is amended by adding a new
 subsection (t) to read as follows:
   (T) NO INSURER SHALL REFUSE TO ISSUE OR RENEW A COVERED POLICY  SOLELY
 ON  THE  GROUNDS THAT THE POLICYHOLDER HAS BROUGHT AN ACTION PURSUANT TO
 SECTION TWO THOUSAND SIX HUNDRED ONE-A OF THIS CHAPTER.
   § 3. Paragraph 4 of subsection (a) of section 2601  of  the  insurance
 law,  as  amended by chapter 547 of the laws of 1997, is amended to read
 as follows:
   (4) [not attempting in good faith] WHERE THE INSURER FAILS to effectu-
 ate A prompt[,] AND  fair  [and  equitable  settlements]  SETTLEMENT  of
 [claims  submitted  in  which  liability  has become reasonably clear] A
 CLAIM OR ANY PORTION THEREOF, IN THAT THE INSURER  FAILS  TO  REASONABLY
 ACCORD  AT  LEAST EQUAL OR MORE FAVORABLE CONSIDERATION TO ITS INSURED'S
 INTERESTS AS IT DID TO  ITS  OWN  INTERESTS,  AND  THEREBY  EXPOSES  THE
 INSURED TO A JUDGMENT IN EXCESS OF THE POLICY LIMITS, except where there
 is  a  reasonable  basis supported by specific information available for
 review by the department that the claimant has caused the loss to  occur
 by arson. After receiving a properly executed proof of loss, the insurer
 shall  advise  the  claimant of acceptance or denial of the claim within
 thirty working days;
   § 4. 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.

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Senate Bill S6813A

Sponsored By

Archive: Last Bill Status - In Senate Committee Insurance Committee

Bill Amendments

co-Sponsors

2021-S6813 - Details

2021-S6813 - Summary

2021-S6813 - Sponsor Memo

2021-S6813 - Bill Text download pdf

co-Sponsors

2021-S6813A (ACTIVE) - Details

2021-S6813A (ACTIVE) - Summary

2021-S6813A (ACTIVE) - Sponsor Memo

2021-S6813A (ACTIVE) - Bill Text download pdf

Comments

Senate Bill S6813A

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Sponsored By

Archive: Last Bill Status - In Senate Committee Insurance Committee

Bill Amendments

co-Sponsors

2021-S6813 - Details

2021-S6813 - Summary

2021-S6813 - Sponsor Memo

2021-S6813 - Bill Text download pdf

co-Sponsors

2021-S6813A (ACTIVE) - Details

2021-S6813A (ACTIVE) - Summary

2021-S6813A (ACTIVE) - Sponsor Memo

2021-S6813A (ACTIVE) - Bill Text download pdf

Comments