On June 4, 2013, the New York State Assembly approved several insurance bills that address consumer concerns raised in the aftermath of Superstorm Sandy. The most significant, A. 7455-A, would prohibit insurer reliance on anti-concurrent causation (ACC) insurance clauses to deny coverage for property damage caused in part by an otherwise excluded flood event.
The ACC bill is designed to apply to all policies issued or renewed immediately after the law is approved by the state Senate and signed by the governor. A similar bill, A. 7452-A, applies to business interruption coverage.
As originally drafted, A. 7455-A was not limited to flood events, but applied to any property damage where both covered and excluded causes led to a loss. The legislation was amended by the Insurance Committee before being voted on by the full Assembly. Currently, the state Senate is considering language in a companion bill, S. 5581, which mirrors the original Assembly legislation.
If A. 7455-A becomes law, insurers issuing policies with ACC clauses will also have to disclose to prospective policyholders when the clauses could be triggered and, in those circumstances, whether causation must be proximate or remote.
New York would become the fifth state in the country to eliminate or limit the application of ACC clauses by statute or case law, following California, North Dakota, West Virginia and Washington.
The State Assembly also passed:
- A. 5780, which would allow policyholders sustaining damage in an area where the governor has declared a disaster emergency to seek punitive damages and attorneys’ fees from insurers who violate New York’s unfair claims settlement practices law.
- A. 1092A, which would cut in half the length of time an insurer has to accept or deny a claim where the claim emanates from a declared disaster and would establish additional claims-handling standards.
- A. 2729, which would mandate the establishment of uniform disclosure requirements and triggering standards for hurricane/windstorm deductibles included in homeowners and fire policies.
- A. 1093, which requires the creation of a task force to study insurers’ response to disasters and ways government agencies can help connect claimants with insurers. A goal of the task force is to determine if policyholders and communities have adequate insurance coverage.
- A. 7453, which requires the development of standardized definitions for commonly used terms and phrases in personal lines policies.
- A. 5570, which would tighten normal court deadlines in litigation resulting from disaster-related property claims. In those cases, all counsel or parties appearing at a preliminary court conference must be authorized to dispose of the case. Additionally, all discovery would have to be completed within 60 days from the date of the conference, a settlement conference must be held within 14 days from the filing of a Note of Issue and pre-trial motions must be made within 30 days after the Note of Issue is filed.
If any of these bills are enacted into law, insurers may need to revise their policy forms and re-evaluate their underwriting guidelines, claim handling processes and premiums charged. Some of these changes would require the approval of the New York Department of Financial Services.
The Assembly bills have been referred to the state Senate for consideration, where the prospects of adoption are uncertain. Given that the legislative session ends on June 20, 2013, there is the potential for last-minute political maneuvering to ensure passage of part or all of the insurance package. New York Governor Andrew Cuomo has not publicly stated his position on the measures.