Relates to arbitration of no-fault insurance claims

BILL NUMBER:A8798

Title of bill

An act to amend the insurance law, in relation to the arbitration of no-fault insurance claims

This is one in a series of measures being introduced at the request of the Chief Administrative Judge on the recommendation of his Local Courts Advisory Committee.

This measure amends section 5106 of the Insurance Law to require manda- tory arbitration of no-fault motor vehicle insurance claims and to lower the interest rate on overdue insurance claims from two percent to one percent per month.

Section 5106(a) of the Insurance Law authorizes the commencement of either an arbitration proceeding or a civil court action to recover a no-fault personal injury claim not paid within 30 days of submission of proof of the claim to an insurer, and authorizes an award to include interest of two percent per month on the amount of the claim as well as attorney's fees incurred in securing the award. Arbitration proceed- ings,which are governed by the procedures set forth in 11 NYCRR §65.17, are subject to limited review by the courts. An arbitration award is binding on all parties to the arbitration, unless vacated or modified by a master arbitrator. The award of a master arbitrator in turn is also binding on the parties to the proceeding, unless vacated or modified by a court on any of the grounds set forth in Article 75 of the Civil Prac- tice Law and Rules. Moreover, where the amount of the award of a master arbitrator is $5,000 or more, exclusive of interest or attorney's fees, a claimant may obtain a de novo court review of his or her claim.

Despite the availability of arbitration, and the fact that almost all overdue payment claims fall far below $5,000, most claimants proceed by court action. As a result, the case dockets of courts where these claims have been filed has experienced a dramatic increase in size. In. the New York City Civil Court, for example, no-fault cases have been prima- rily responsible for the rise of the caseload of that court from 212,000 filings in 2000 to 414,000 filings in 2004. The rise in the number of case filings has placed a significant administrative burden on the courts.

Amending the Insurance Law to provide for mandatory arbitration of over- due insurance claims will assure the competent disposition of these claims by arbitrators, qualified to review issues involved in no-fault insurance disputes, while achieving the important objective of reducing the administrative burden that these claims place on the courts. The courts will continue to have the authority to review the award of master arbitrators, in accordance with Article 75 of the Civil Practice Law and Rules, and conduct a de novo review of such awards in excess of $5,000. Moreover, amending the Insurance Law to reduce the interest on an over- due insurance claim will make it less lucrative to file a large number of such claims and reduce the burden on the arbitration panel.

This measure, which would have no fiscal impact on the State or its local governments and would significantly improve court administration, would take effect one year after it shall have become a law.

Legislative history

2005-2006 S6755 (Seward) 2005-2006 A10545 (M. of A. Grannis) 2007-2008 S5773 (Seward)

Effective date

This act shall take effect on the two hundred seventi- eth day after it shall have become a law and shall apply to all claims made on or after such effective date