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Legislative Memo

Cate Tully
Director of Government Affairs
T 518.465.7511
www.bcnys.org

BILL:

S.242 (DeFrancisco) / A.921 (Bichotte)

Support

SUBJECT:

Authorizes a Private Right of Action Against Insurance Companies for Unfair Claim Settlement Practices

 

DATE:

March 3, 2017

 

The Business Council opposes this legislation which would allow a private right of action by policyholders alleging unfair claims settlement practices by insurance companies.  This bill substantially and unfairly impacts insurance carriers which will result in increased premiums for all policyholders while ignoring a long-standing and successful administrative remedy. 

Under this legislation, a policyholder could bring a judicial proceeding, claiming recovery under the policy plus interest, costs and policyholder attorney’s fees by asserting that an insurance company’s refusal to pay or unreasonable delays in payment to the policyholder was not substantially justified.   The legislation would also authorize compensatory and punitive damages.

Monetary incentives such as these will only foster litigation and temper the use of statutory and regulatory mechanisms that are in place to address such delays in payment. 

The bill includes a limitation on insurers from recovering any costs associated with this legislation in premium charges.  The limitation is unfair; it negatively impacts the business climate in New York and could ultimately affect insurance availability and the competitiveness of the insurance business in the State of New York.

The Department of Financial Services (“DFS”) regulates and enforces an administrative remedy to resolve disputes involving settlement practices of every insurance company transaction business in New York.  Article 26 of the Insurance Law provides guidelines for unfair practices and provides policyholders with recourse through the DFS Financial Fraud and Consumer Protection Division.  

DFS is authorized to penalize insurance companies for unfair claims settlement practices and, where there is a finding that a pattern of misconduct exists, the Department has been aggressive in issuing violations and fines against the companies. 
There is no evidence to support the premise that taking a claim through the judicial system will result in a more expeditious outcome.  This will clog the courts with claims that already have reasonable means of resolution through negotiation and the use of the processes available through DFS.

Enactment of this bill will only serve to increase litigation in New York and to increase insurance premiums (automobile, home and business) without any discernible benefit to the consumer who is alleging a claim against an insurance policy.  There are sufficient remedies in place in law, regulation and currently through the judiciary that obviate the need for this bill.

For these reasons we urge the legislature to disapprove this bill.