BILL NUMBER: S166
SPONSOR: RAMOS
 
TITLE OF BILL:
An act to amend the insurance law, in relation to unfair claim settle-
ment practices
 
PURPOSE:
To allow insurance policy holders and injured people 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:
Section 1 creates a new Insurance Law section 2601-grants insurance
policy claimants a private right of action to seek damages if the insur-
er unreasonably refuses to pay or unreasonably delays payment without
substantial justification. An insurer would not be substantially justi-
fied in refusing to pay or in unreasonably delaying payment when it:
1. Fails to provide the claimant with accurate information regarding
policy provisions relating to the coverage at issue; or,
2. Fails to effectuate in good faith a prompt, fair and equitable
settlement 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 in excess of the policy limits or
caused other damage to a claimant; or
3. Fails to provide a timely written denial of a claimant's claim, or
portion thereof, with a full and complete explanation of such denial,
including references to specific policy provisions wherever possible; or
4. Fails to act in good faith by compelling such claimant to initiate a
lawsuit to recover under the policy by offering substantially less than
the amounts ultimately recovered in such suit; or
5. Fails to timely provide, on request of the policy holder or the poli-
cy holder's representative, all reports or other documentation arising
from the investigation of a claim; or
6. Refuses to pay a claim without conducting a reasonable investigation
prior to such refusal.
Any policyholder who establishes liability shall be entitled to recover
amounts due under the policy, costs and disbursements, consequential
damages, reasonable attorney's fees, interest from the time of the loss
or failure to offer a fair and reasonable settlement and punitive
damages.
The bill also includes procedural rules to ensure a fair hearing for all
parties. including evidentiary issues, notice to the insurer, opportu-
nity to cure, discovery and the right to trial.
Finally, in the event an insurer is found liable under this section, the
bill would prevent insurers from passing on the costs to consumers in
the form of higher premiums.
Section 2 amends Insurance Law section 3425 to prohibit insurers from
refusing to issue or renew a policy because a consumer has brought an
action under section 1.
Section 3 amends Insurance Law section 2601 to update fair claims
settlement practices.
Section 4 is the effective date.
 
JUSTIFICATION:
Insurance companies have an overwhelming advantage in the handling of a
claim, with the power and financial incentive to deny or delay coverage
and otherwise avoid fair payment of legitimate claims. Under current
law, there is no consequence to the insurer when a denial or delay of
coverage is unfounded, or when the insurer offers an unreasonably low
settlement. The importance of this issue became increasingly apparent in
the aftermath of Superstorm Sandy, when tens of thousands of New Yorkers
making claims to insurers experienced unfair claims practices. More
recently, COVID-19 claims denials have left many victims without even a
settlement offer in the absence of the threat of a trial and many small
businesses in danger of shuttering after insurers refused to pay for
losses due to mandated closures.
Currently § 2601 of the insurance law regulates the conduct of insurers,
prohibiting 5 specific actions that constitute unfair claims practices.
However, only the Superintendent of the Department of Financial Services
can enforce these provisions. Furthermore, § 2601 does not go far enough
in regulating the types of unfair claims practices we have seen across
the state in the wake of recent natural disasters. Under existing stat-
utes and case law, an insurer can simply refuse to pay a claim with
impunity or offer an amount well below the value of the loss. Even if
the claimant sues and wins the full amount of the claim, they will still
not receive the benefits to which they should be entitled under the
policy because of the costs associated with bringing the successful
action. This gives insurers an unfair advantage in negotiating a settle-
ment of any claim - insurers are able to bear the costs of litigation,
but most ordinary New Yorkers cannot afford to do so. In addition, an
insurer's bad faith conduct may leave a policyholder exposed to a
liability judgment in excess of the policy limit.
New Yorkers who pay insurance premiums should expect insurers to live up
to their obligation to deal in good faith with regard to claims submit-
ted under the policy. When insurers do not meet this obligation. It is
important that the consumer has a viable and effective means of seeking
redress. This hill gives consumers the legal means to achieve this goal.
 
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:
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.

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