What's happening
This bill allows certain parties to sue liability insurers for damages exceeding policy limits if the insurer fails to promptly and fairly settle claims.
Why it matters
Increases accountability for insurers. By allowing lawsuits for damages beyond policy limits, the bill pressures liability insurers to prioritize fair and timely settlements, rather than risking their insured clients’ financial exposure.
Protects insured individuals and claimants. The amendment empowers not only those directly insured, but also people with judgments against an insured party, to seek full compensation if the insurer acts in bad faith during settlement negotiations.
Establishes a clear standard for insurer conduct. Insurers must give at least equal consideration to their insured’s interests as to their own; failing to do so—and thereby exposing the insured to excess judgments—can now trigger substantial legal and financial consequences.
May impact insurance practices and premiums. The threat of lawsuits for bad-faith settlement practices could lead insurers to settle claims more promptly, but could also result in higher premiums or altered claims-handling procedures to mitigate legal risks.
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Who cares
Liability insurers
They could face liability for the full judgment beyond policy limits, plus interest, if their settlement failures meet the bill’s standards.
Insured individuals and businesses
The bill would provide recourse when an insurer fails to give their interests at least equal consideration and thereby exposes them to a judgment above policy limits.
People authorized to sue under Insurance Law § 3420(b)
They could pursue damages beyond policy limits by proving the required settlement failures by a preponderance of the evidence, with interest measured from the failure to offer a fair and reasonable settlement.
Headline styles
Insurers Pay Over Policy Limits
Plain English, a few words. Used as the page title.
Sponsors
History
- Referred to insurance
- Print number 3634b
- Amend and recommit to insurance
- Print number 3634a
- Amend and recommit 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.
Hold Insurers Accountable for Settlements
In Assembly Committee · Codes · Sponsor Helene Weinstein
Full text
1 pageUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
3634--B
2019-2020 Regular Sessions
IN SENATE
February 11, 2019
Introduced by Sens. BRESLIN, SEWARD, FELDER, GAUGHRAN -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee
AN ACT to amend the insurance law, in relation to maintaining an action against a liability insurer seeking compensatory damages in excess of the policy limits where such insurer failed to engage in prompt and fair settlement of the claim
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Section 3420 of the insurance law is amended by adding a new subsection (b-1) to read as follows:
(b-1) An action may also be maintained by the persons identified in paragraphs one, two and three of subsection (b) of this section against the insurer to recover damages including compensatory damages and interest measured from the time of failure to offer a fair and reasonable settlement in accordance with this section, from such insurer to the full extent of the judgment against the insured, not limited to the policy limits and not subject to the limitations and conditions of paragraph two of subsection (a) of this section, where a preponderance of the evidence establishes that the insurer failed to effectuate a prompt and fair settlement of a claim or any portion thereof, and where under the totality of the facts and circumstances related to the claim, the insurer failed to reasonably accord at least equal or more favorable consideration to its insured's interests as it did to its own interests, and thereby exposed the insured to a judgment in excess of the policy limits.
§ 2. This act shall take effect immediately.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD00917-05-9
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 maintaining an action against a liability insurer seeking compensatory damages in excess of the policy limits where such insurer failed to engage in prompt and fair settlement of the claim
Purpose or general idea of bill
To clarify the duties of liability and casualty insurers to their insureds.
Summary of specific provisions
This bill amends Insurance Law section 3420(b) regarding standard provisions for liability insurance and the rights of the injured person, to add that such person may also recover compensatory damages from the insurer where the insurer failed to effectuate a prompt and fair settle- ment of a claim or portion of a claim, and where the insurer failed to reasonably accord at least equal or more favorable consideration to its insured's interests as it did to its own interests, and thereby exposed the insured to a judgment above the policy limits.
Justification
Under current New York law, insurers have a financial incentive to deny or delay fair payment of legitimate claims, and may offer an unreason- ably low settlement that exposes the insured to a judgment in excess of the policy. New Yorkers who pay insurance premiums should be able to expect insurers to live up to their duty to act in good faith, according at least equal or more favorable consideration to the policyholder's interests as to its own business interests. When insurers do not meet this obligation it is important that the person who has been harmed by such conduct has a viable, effective remedy. This bill provides this remedy.
Prior legislative history
2018: A.8004/8.6556 - A. Cal/S.Ins. 2017: A.8004/S.6556 - A. RR Cal/S.Rules
Fiscal implications for state and local governments
None.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.