Legislative Memo

Ken Pokalsky
Vice President of Government Affairs
T 518.465.7511


A.5780 (Weinstein)



Lawsuits for Unfair Insurance Settlement Practices



May 22, 2013


The Business Council opposes this legislation, which would duplicate existing state enforcement authority in response to alleged "unfair claim settlement practices" with a private right of action.

We believe existing law, Section 2601 of the Insurance Law, is adequate and appropriate. It addresses unfair claim settlement practices and gives enforcement authority to the Department of Financial Services (Department). It allows for a civil penalty up to $1,000 for each instance of non-compliance with this section.

The need for this legislation is questionable at best. It implies that the Department is either unwilling or unable to bring enforcement actions against entities alleged to have been engaged in unfair claim settlement practices. We do not believe either to be true.

Also, the Court of Appeals has already held that a policyholder can recover consequential damages for an insurance company's breach of the insurance contract's implied covenants of good faith and fair dealing. Bi-Economy Market v. Harleysville, 10 NY3d 187 (2008). The Court found that these damages must "place the insured in the position it would have been in had the contract been performed," see Bi-Economy page 195.
This bill basically creates a citizen suit provision, allowing individuals to act in addition to, instead of, or contrary to, state enforcement, and allow individuals who believe they have been the victim of unfair claim settlement practices to ask the courts to award them the ability to seek injunctive relief for such alleged unlawful act or practice and damages for their actual harm. The courts could also award punitive damages. 

Moreover, this bill would allow for private "enforcement" even if the Department has taken action, or has heard a complaint and decided that enforcement was not warranted. It would allow for "private" penalties against the violator, in addition to state-imposed civil penalties.

We see no need for multiple levels of enforcement for unfair claim settlement practices and believe the Department already has sufficient statutory authority to address alleged incidents of these practices.

For these reasons, The Business Council opposes approval of A.5780.