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 failed to effectuate a prompt and fair settlement. While this type of legislation appears to protect the insurer, in reality it is another tactic by plaintiff’s attorneys to increase their leverage against insurance companies during settlement negotiations. Monetary incentives such as proposed in this legislation, will only foster litigation and likely force insurers to settle claims they should not pay and for larger sums than may be reasonable to minimize the risk of litigation costs.
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.Â 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.
This legislation 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. For these reasons we urge the legislature to disapprove this bill.