BILL NUMBER: S166A
SPONSOR: RAMOS
 
TITLE OF BILL:
An act to amend the insurance law, in relation to unfair claim settle-
ment practices
 
PURPOSE:
The bill would define what constitutes an unlawful unfair claims settle-
ment practice by an insurance company, and create a private right of
action to enforce these provisions.
 
SUMMARY OF PROVISIONS:
Section one of the bill entitles the legislation the fair insurance
settlement practice act (FISPA).
Section two of the bill creates a new section 2601-a of the insurance
law setting forth acts and omissions that shall constitute an unlawful
unfair claims settlement practice. It also creates a private right of
action for victims of such unlawful practices, with a requirement that
victims notify insurers and ask for relief prior to filing such an
action. The section allows double damages and attorneys fees to be
imposed on defendants who violate the act willfully and with intent to
defraud.
Section two further states that no contract for insurance issued or
delivered in New York can require an insured to waive the right to a
jury trial to adjudicate a dispute arising from a violation of the new
section 2601-a of the insurance law.
Section three of the bill creates a new subsection (t) of section 3425
of the insurance law stating that no insurer shall refuse to issue or
renew a covered policy solely on the grounds that the policyholder has
brought an action alleging an unfair settlement claim practice.
Section four of the bill states that the act shall take effect ninety
days after it shall have become a law, and shall apply to any act or
omission occurring on or after such effective date; provided that the
provision prohibiting waiver of a jury trial shall only apply to insur-
ance contracts entered into after the effective date of this legis-
lation.
 
JUSTIFICATION:
New York law currently imposes a common law requirement on liability
insurers to act in "good faith" when negotiating, paying, and settling
claims. This requires liability insurers to give equal or more favorable
consideration to the interests of its policyholders as it does to its
own financial interests.
However, New York's bad faith laws are outdated and lack an effective
enforcement mechanism Unlike many other states, New York has failed to
enact modern bad-faith insurance measures adopting common sense measures
that: (1) statutorily delineate and proscribe common bad-faith disclo-
sure and litigation practices by insurance companies that would, today,
give rise to a bad-faith cause of action; and (2) allow accident victims
to bring a bad faith suit against an insurance company without needing
the permission of the wrongdoer (the policyholder). The absence of these
measures prevents legitimate allegations of bad-faith practices from
being filed. The result is that insurers flout their legal duties with-
out being held accountable or deterred. This harms accident and disaster
victims and their families who are forced to litigate or accept settle-
ments less than the law allows and less than their needs require. It
also harms policyholders, since an insurer's bad faith refusal to settle
a case for a policy's maximum coverage puts the policyholder's assets at
risk for the excess amount a jury ultimately awards. And it also harms
taxpayers, who often have to pay for health care or disaster aid when
insurers, in bad faith, do not pay claims.
This bill rectifies these problems by enacting a modern unfair claim
settlement practices statute, creating a private right of action for
victims, and by ensuring that victims alleging bad faith insurance prac-
tices have the option of a jury trial.
This bill also protects insurers' interests by requiring potential
claimants to notify them of an allegation of bad faith prior to filing
suit, thus allowing insurers to rectify any issues and/or clear up any
misunderstanding.
 
LEGISLATIVE HISTORY:
2023-24: S1797 (Ramos) Referred to Insurance / A7139 (Weinstein)
referred to codes
2021-22: S6813A (Ramos) Referred to Insurance / A7285A (Weinstein)
advanced to third reading cal. 603
 
FISCAL IMPACT:
TBD
 
EFFECTIVE DATE:
Shall take effect on the ninetieth days after it shall have become a law
and shall apply to any act or omission occurring on or after such effec-
tive date; provided that paragraph (4) of subsection b of section 2601-a
of the insurance law shall only apply to insurance contracts entered
into after the effective date of the legislation.

Statutes affected:
S166: 3425 insurance law, 2601 insurance law, 2601(a) insurance law
S166A: 3425 insurance law