Relates to the use of local cost data when adjusting claims

Title of bill

An act to amend the insurance law, in relation to requiring out-of-state insurance adjusters employed to appraise in-state property damages arising from emergency situations to employ established rates used for appraisal by in-state insurance adjusters

Purpose

To ensure that temporary adjusters and insurers are utilizing cost data that is regionally appropriate.

Summary of provisions

Section one of this bill amends subsection (n) of section 2108 of the Insurance Law to require the use of regionally appropriate data for claim adjustments, and clarifies that rules should also apply to those granted a temporary adjuster's permit.

Section two creates a new paragraph (8) of subdivision (a)of section 2601 of the Insurance Law to prohibit lowering cost of adjusted claims through the use of data not appropriate to the region where the loss occurred.

Section three of this bill provides that this act shall take effect immediately.

Justification

Super Storm Sandy wreaked havoc in New York resulting in over $60 billion in damages. Thousands of claims were filed and the need to quickly provide relief to those who lost their homes and livelihoods forced insurance companies to import hundreds of out-of-state adjustors from across the country to handle the work load.

Out-of-state insurance adjusters are equipped with computer software that is supposed to adjust for local cost data to reflect the costs for repair and construction services in New York State. Unfortunately, that does not automatically occur and the cost data is inaccurate. Consequently, in many cases, policy holders cannot rebuild based on the reimbursement received from insurance companies.

In Veto Memorandum 228 of 2015, the Governor stated that this legislation "is duplicative of Insurance Regulation 64, which already provides that when no dispute as to coverage exists, it is the duty of every insurer to offer claimants amounts that are 'fair and reasonable.' The Department of Financial Services (DFS) has interpreted 'fair and reasonable' to require insurers to use cost data for the region of New York where the real property is located, and DFS is committed to using enforcement powers to respond to any claimant that demonstrates otherwise." While Insurance Regulation 64 (11 NYCRR 216.6(a)) does provide the fair and reasonable standard, the standard itself is not defined in the regulation. While the Governor believes that the DFS interpretation sufficiently resolves any issues in this area and negates the need for a statutory change, the fact that the DFS interpretation can be changed at any moment belies the Governor's belief. To ensure that the people of this State are adequately protected, there needs to be a statutory standard in place that cannot be administratively changed. By providing this standard in New York State law, we are giving New Yorkers peace of mind at a time when they need it most.

Legislative history

2015: S.4276 - Vetoed, Memo 228 2014: S.7876 - Passed Senate FISCAL IMPLICATIONS :

None.

Effective date

This act shall take effect immediately.