What's happening
This bill allows insurance policyholders to sue insurers for unfair claim settlement practices and recover damages, fees, and penalties.
Why it matters
Empowers policyholders to challenge insurer behavior. By allowing lawsuits for unfair claim settlement practices, the bill gives individuals and businesses more leverage to hold insurers accountable for delays, inadequate payouts, or poor communication regarding claims.
Broadens insurer liability for specific bad faith actions. The bill defines several actionable behaviors—including failure to provide accurate policy information, unreasonable delays, lowball settlement offers, and lack of timely written explanations—making it easier for policyholders to prove wrongdoing.
Expands available remedies and increases potential costs for insurers. Successful plaintiffs can recover not just the amount due under the policy, but also interest, compensatory and consequential damages, reasonable attorneys’ fees, and punitive damages up to twice the covered loss—significantly raising the financial stakes for insurers who engage in unfair practices.
Establishes pre-lawsuit notice and cure period, but preserves other legal options. Insurers are given 60 days to “cure” alleged violations after receiving a detailed notice, potentially reducing litigation. However, the bill explicitly states that this new right does not limit policyholders’ ability to pursue other statutory or common law claims, broadening the legal avenues for redress.
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Who cares
Headline styles
Punish Unfair Insurance Delays
Plain English, a few words. Used as the page title.
Sponsors
History
- Referred to insurance
- Referred to insurance
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Punish Unfair Insurance Payouts
In Assembly Committee · Insurance · Sponsor Rodneyse Bichotte Hermelyn
Full text
3 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
242
2017-2018 Regular Sessions
IN SENATE (Prefiled)
January 4, 2017
Introduced by Sen. DeFRANCISCO -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance
AN ACT to amend the insurance law, in relation to unfair claim settlement practices
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. The insurance law is amended by adding a new section 2601-a to read as follows:
§ 2601-a. Unfair claim settlement practices; civil remedy. (a) An insurer doing business in this state shall be liable to the holder of a policy issued or renewed pursuant to article thirty-four of this chapter for damages as provided in this section upon such policy holder proving by a preponderance of the evidence that such insurer's refusal to pay or unreasonable delay in payment to the policy holder of amounts claimed to be due under a policy was not substantially justified. An insurer is not substantially justified in refusing to pay or in unreasonably delaying payment when the insurer:
(1) intentionally, recklessly or by gross negligence failed to provide the policy holder with accurate information concerning policy provisions relating to the coverage at issue;
(2) failed to effectuate in good faith a prompt, fair and equitable settlement of a claim submitted by such policy holder in which liability of such insurer to such policy holder was reasonably clear;
(3) failed to provide a timely written denial of a policy holder's claim with a full and complete explanation of such denial, including references to specific policy provisions wherever possible;
(4) failed to make a final determination and notify the policy holder in writing of its position on both liability for, and the insurer's valuation of, a claim within six months of the date on which it received actual or constructive notice of the loss upon which the claim is based;
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD02148-01-7
S. 242 2
(5) failed to act in good faith by compelling the policy holder to institute suit to recover amounts due under its policy by offering substantially less than the amounts ultimately recovered in suit brought by such policy holder; or
(6) failed to promptly proceed with the appraisal process once such has been demanded in any claim where coverage for a portion of the claim has been accepted by such insurer and a disagreement exists between the insured and the insurer with respect to the value of covered property or the amount, or extent of the covered loss.
(b) Any policy holder who establishes liability pursuant to subsection (a) of this section shall be entitled to recover, in addition to amounts due under the policy, interest, costs, and disbursements, compensatory damages, consequential damages and reasonable attorneys' fees incurred by the policy holder from the date of the loss, in recovering monies due pursuant to the terms of the policy as well as punitive damages capped at two times the value of the covered loss established at trial.
(c) Any policy holder may recover damages from an insurer doing business in this state pursuant to this section either as part of an action to recover under the terms of an insurance policy or in a separate action.
(1) As a condition to any recovery pursuant to subsection (a) of this section, a civil remedy notice of the alleged violation must be filed with both the insurer and the department at least sixty days prior to commencement of an action seeking relief pursuant to subsection (a) of this section.
(2) The civil remedy notice must be on a form approved by the department and include the following information, if such information is reasonably known to the insured:
(A) The statutory provision, including the specific language of the statute which the insurer is alleged to have violated.
(B) The facts and circumstances giving rise to the violation.
(C) The name of any individual involved in the violation.
(D) Reference to specific policy language that is relevant to the violation, if any.
(E) A statement that the notice is given in order to protect the right to pursue the civil remedy.
(3) The insurer who is the subject of the civil remedy notice shall have sixty days from the filing of the required notice to cure the violation. No civil action under this section will be sustainable if, within sixty days after the required notice filing, the damages sought are paid.
(4) The rights enumerated herein are not the exclusive remedies available to the insured and do not preclude any common law claims or other statutory claims that may exist.
(d) In any trial of a cause of action asserted against an insurer pursuant to this section, evidence of settlement discussions written and verbal offers to compromise, loss reserve amounts and other evidence relating to the claims process shall be admissible. If causes of action relating to liability of the insurer under the policy and under this section are alleged in the same action, the court may bifurcate the trial of issues so as to avoid prejudice to the insurer on the issue of liability under the policy and facilitate admissibility of evidence on the causes of action asserted pursuant to this section.
(e) All amounts recovered from an insurer as actual damages, consequential damages, reasonable attorneys' fees and punitive damages in any action authorized in this section shall be excluded by the insurer in
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its determinations of the premiums it will charge all policy holders on all policies issued by it.
§ 2. This act shall take effect on the first of January next succeeding the date on which it shall have become a law, and shall apply to all acts and omissions by insurers occurring on or after such effective date.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the insurance law, in relation to unfair claim settlement practices
Purpose
To allow holders of property and casualty insurance policies to recover damages when an insurance company's refusal to pay or unreasonable delay in paying a claim was not substantially justified.
Summary of provisions
This bill provides that an insurer doing business in this state shall be liable to a holder of property and casualty insurance policy for damages upon such policy holder proving that such insurer's refusal to pay or unreasonable delay in payment to the policy holder of amounts claimed to be due there under was not substantially justified. An insurer would not be substantially justified in refusing to pay or in unreasonably delaying payment when:
Read the full memo (828 words)
1. Intentionally, recklessly or by gross negligence failed to provide the policy holder with accurate information concerning policy provision relating to coverage at issue; or
2. Failed to effectuate, in good faith, a prompt, fair and equitable settlement of a claim submitted by such policy holder in which liability of such insurer to such policy holder was reasonably clear; or
3. Failed to provide a written denial of a policy holder's claim with a full and complete explanation of such denial, including references to specific policy provisions wherever possible; or
4. Failed to make a final determination and notify the policy holder in writing of its position on both the liability for, and the insurer's valuation of, a claim within six months of the date on which it received actual or constructive notice of the loss upon which the claim is based; or
5. Failed to act in good faith by compelling the policy holder to initiate a lawsuit to recover under the policy by offering substantially less than the amounts ultimately recovered in the suit by the policy holder or
6. Failed to promptly proceed with the appraisal process once such has been demanded in any claim where coverage for a portion of the claim has been accepted by such insurer and a disagreement exists between the insured and the insurer with respect to the value of covered property or the amount, or extent of the covered loss.
Any policy holder who establishes liability shall be entitled to recover, in addition to amounts due under the policy, interest, costs, and disbursements, compensatory damages and reasonable attorneys fees.
Finally, there are procedural rules established to insure that the insurer receives a fair trial on the issue of liability under the terms of the policy before the issue of substantial justification is considered.
Justification
Existing law provides a code of conduct for insurers in this state. Insurance Law Section 2601 now provides that no insurer in this state shall engage in five enumerated unfair claims settlement practices. Yet, only the Superintendent of Insurance can enforce these provisions against the company. The holders of property and casualty insurance policies who have incurred substantial costs in obtaining reimbursement under the policy terms have no remedy. Any doubt about this unfortunate state of the law was removed by the Court of Appeals in its 1994 decision in (ROCANOVA V. EQUITABLE LIFE), 83 NY2nd 603 (1984). "The law of this State does not currently recognize a private cause of action under Insurance Law § 2601... To the extent that a variety of appellate division decisions hold otherwise, they are not to be followed". (ROCANOVA V. EQUITABLE LIFE), 83 NY2d at 614-515. (emphasis added). Citizens of this state who pay insurance premiums should expect insurers to live up to their policy obligations. Under existing statutes and case law, an insurer can simply refuse to pay a claim or offer an amount well below the value of the loss with impunity. (SEE E.G. LTS CONTRACTORS V. HARTFORD INS.), 99 AD2d 644 (4th Dept. 1984) no remedy for unreasonable delay in payment; (UNILAND DEV. V. HOME INS.), 97 AD2d 973 (4th Dept. 1983) no remedy for intentional refusal to pay. Even if the policy holder sues and wins the full amount of the claim, he or she loses because of the costs and counsel fees associated with bringing the successful action. This fact gives insurers a terribly unfair advantage in negotiating a settlement of any claim because of the ability of the insurers to financially bear the burden of litigation which the ordinary citizen cannot afford to do.
The Superintendent of Insurance regulates the industry within the constraints of available resources. Each citizen should be entitled to prove his or her claim in court when an insurer takes a position in settling a claim which is found not to have been substantially justified.
Legislative history
S.486-A of 1997-98; S.545 of 1999-00; S.577 of 2001-02; S.1486-A of 2003-04; S.51 of 2005-06; S.1269/A.10307 of 2007-08; S.4735/A.5589 of 2011-2012; 2013-2014 - S.2544/A.3305; 2015-2016 - S.29A/A.8025
Fiscal implications
None.
Effective date
January 1st next succeeding the date on which it shall have become a law.
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