The Business Council opposes this legislation which would increase the maximum penalties for Insurance Law violations from $1,000 per offense to the greater of $10,000 per offense or twice the damages or economic gain attributable to the violation. The proposal would also empower the Superintendent of the Department of Financial Services (DFS) to initiate, prosecute and retain control over a civil action to recover monetary penalty or to enforce a DFS order, or, at the Superintendent’s discretion, to refer such action to the Attorney General for prosecution.
The memo in support of the Executive’s proposal does not explain nor justify any need for this significant increase in the penalty amount. As current law provides that each policy with a violation of the Insurance Law is a separate and distinct violation and for a company found to have incurred violations, the penalty amount can reach an exorbitant amount very quickly.
DFS is aggressive in issuing violations and fees against companies. However, increasing each penalty by ten times the current amount – an action that is in the sole discretion of the Superintendent of DFS – will have additional ramifications. In the short term it benefits the state coffers by boosting revenues, but ultimately will negatively impact businesses and consumers by driving up premiums.
The proposal also provides discretionary authority to the Superintendent to initiate and control any civil action to recover a money judgment or to enforce a DFS order. This again is an expansion of the Department of Financial Services’ authority to prosecute and to seek injunctive relief without referring such actions to the Department of Law.
For these reasons The Business Council opposes this proposal, and urges its rejection by the Senate and the Assembly.