Relates to standard fire insurance policies

Title of bill

An act to amend the insurance law and the civil practice law and rules, in relation to standard fire insurance policies

Purpose

To authorize the Court, upon motion, to compel either party to a standard fire insurance policy to submit to the appraisal process in such policy and to authorize either party to the standard fire insurance policy to commence a special proceeding to specifically enforce the appraisal clause in such policy.

Summary of provisions

Section One. Amends subsection (g) of Section 3404 of the Insurance Law to give the Court discretion, upon motion of either party to a standard fire insurance policy, to compel the parties to submit to the appraisal process in a standard fire policy.

Section Two. Adds a new subsection (c) to Section 3408 of the Insurance Law to provide that whenever either party to a fire insurance policy fails to proceed with an appraisal on demand, then either party may apply to court for an order directing compliance. In the event an appraisal is ordered, then it shall be limited to a determination of actual cash value and/or replacement cost, or the amount of loss which shall be determined as specified in the policy and shall proceed pursuant to the terms of the applicable appraisal clause of the insurance policy and not as an arbitration.

Section Three. Amends Section 7601 of the civil Practice Law and Rules by removing the exemption currently granted to standard fire insurance policies, and allows a party to such a policy to bring a special proceeding to enforce the appraisal clause. This section further provides that any special proceeding brought pursuant to the appraisal clause will go forward and be enforced by appraisal and not as if it were an arbitration agreement.

Section Four. Provides for an immediate effective date.

Justification

The appraisal provision required by law in the standard fire insurance policy is a vehicle to assist in quickly settling contract disputes between the insured and insurer, rather than more time consuming litigation. Without the appraisal process the insured is forced to accept an offer from the carrier that they think is deficient or to pursue recovery through litigation which is made cast prohibitive by the expenses of bringing the action. A 2002 decision of the Supreme Court, Appellate Division, Fourth Department (THOMAS H. FAHRENHOLZ V. SECURITY MUTUAL INSURANCE COMPANY AND THE KREINER COMPANY, INC), pointed out that further legislative action is required to eliminate the prohibition set forth in CPLR 7601 against seeking specific performance of the appraisal provision in the standard fire insurance policy Section 7601 of the Civil Practice Law and Rules which now allows an individual to start a special proceeding to enforce a contract or agreement, exempts fire insurance policies from such proceedings. This bill would remedy the problems inherent in CPLR 7601 by providing clear language to allow either party to utilize the appraisal process more frequently and thereby avoid the high costs and delays inherent in protracted litigation.

Legislative history

2009 (S.2008 - Passed Senate) (A.4758A - Passed Assembly) 2007/2008 (S.5078/A.10462) Passed Senate/Reported to Assembly Codes Committee 2005/2006 (S.3012-C) Passed Senate 2003/2004 (S.324) Referred to Senate Insurance Committee

Fiscal implications

None.

Local fiscal implications

None.

Effective date

Immediately.