Significant attention has been given in the media to the New York Assembly’s recent passage of several bills, apparently motivated by Storm Sandy, that would impact property insurance claim handling and litigation. None of these bills have been passed by the state senate yet, or signed by the governor. Some of them have been inaccurately described in some media reports.  Here is a quick summary of some key provisions (I have not included everything contained in these bills, only what jumped out at me):

  • Anti-Concurrent Causation Clauses: Bill 7455-A would not, contrary to some media reports, outlaw anti-concurrent causation clauses in New York (something that only California and North Dakota have done by statute). This bill would, however, specify that where there is both excluded flood damage and covered damage (such as wind damage), the insurer would pay for the covered portion of the damage and not for the excluded flood damage. The bill would also require additional specificity in causation-related provisions in an insurance policy, and require that disclosure of these provisions be provided to the policyholder prior to purchase of the policy. How these policy provisions would be written raises some potentially difficult questions because there are all kinds of circumstances that can involve one cause leading to another cause, and capturing these in policy language (as the bill appears to require) could create some challenges. The bill states that it would take effect immediately and apply to all policies issued or renewed thereafter (it is unclear how this would play out where insurers cannot, as a practical matter, change their policy language immediately). Bill 7452-A also relates to causation, and would prohibit certain denials of business interruption claims in certain circumstances as set forth therein (this one is difficult to summarize briefly). This bill states that it would take effect immediately and apply to all policies issued or renewed thereafter.
  • New Bad Faith Statutory Claim: Bill 5780 would create a private right of action for violation of N.Y. Ins. Law § 2601, an unfair claim settlement practice statute which does not currently provide for a private right of action.  This would apply only to claims arising from certain disasters (declared as such by the governor). Remedies potentially available would include actual damages, punitive damages for “willfully and knowingly” violating the statute, and reasonable attorneys’ fees to a prevailing plaintiff.  This bill states that it would take effect immediately.
  • Expediting Insurance Claim Litigation: Bill 5570 would provide, with respect to certain insurance litigation in New York state courts arising out of disasters, among other things, that: (1) mandatory early settlement conferences must be held; (2) discovery must be completed within 60 days; and (3) all pretrial motions must be made within 30 days of the notice of issue. This bill states that it would take effect immediately.
  • Timeframes for Claim Decisions:  Bill 1092A would require, with respect to disaster-related claims (as defined therein) that “an insurer shall, within fifteen business days of receipt of all items, statements and forms requested [in accordance with regulations promulgated by the Department of Financial Services] from the claimant . . . advise the claimant in writing whether the insurer has accepted or rejected the claim.”  The insurer could grant itself one extension of 15 business days by notifying the insured in writing with an explanation of why additional time is needed.  This bill states that it would take effect immediately.

It will be interesting to see which, if any, of these bills become law, and if they are amended along the way.  Stay tuned.