NY FAIR Plan Expires Caught In Political Crunch

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By Daniel Hays

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NU Online News Service, May 2, 2:28 p.m.EDT?Callers reaching the New York State Fair Plan propertyinsurance pool today can hear a taped message telling them that theoperation is no longer in business.

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Once again, New York State lawmakers have allowed the enablinglegislation for the plan known as the New York Property InsuranceUnderwriting Association, to expire.

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The NYPIUA operation, which provides coverage for 56,000homeowners and businesses, has been put in limbo as the result ofan angry dispute between the Republican-controlled State Senate andDemocrat-led Assembly over how to legislate insurance issues.

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Both sides have approved measures to extend the NYPIUA operatingauthority, but the Senate version goes further and includeslanguage to restore a New York law that under certain conditionsallows auto insurers to change rates without prior regulatoryapproval.

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Yesterday, before the NYPIUA program expired at midnight, thechairman of the Assembly Insurance Committee Alexander "Pete"Grannis, D-Manhattan issued a press release attacking Senate"foolishness," accusing the GOP-led chamber of taking the Fair Planhostage.

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On Long Island, where Hurricane exposure has meant NYPIA is theonly available insurer for many, Mr. Grannis said 14,000policyholders are at risk.

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He singled out for criticism Senate Insurance Committee ChairmanJames Seward, R-Milford, accusing him of including auto insurancein the Senate's NYPIUA measure "to appease his friends in theinsurance industry."

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The auto insurance provision, he said, would let carriers imposeannual premium increases--"possibly as high as 30 percent ayear--under a system known as ?flex rating,' which does not requirereview or prior approval of the state's insurance department."

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"With New York's auto premiums already among the most expensivein the nation, this is intolerable and irresponsible," Mr. Grannisconcluded.

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In response, Duncan Davie, chief of staff for Sen. Seward, saidMr. Grannis is "playing a typical political blame game."

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He said the Senate measure extending NYPIUA three years, S3467,is a more "comprehensive package of legislation designed to addressthe broad availability of property and auto insurance.".

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Mr. Davie said the Assembly was taking action on the Fair Plan"and they don't want to deal with the crisis in auto insurance."Senator Seward's position, he said, is that "you cannot address theneed for stability in just certain segments without dealing with abigger need for stability in auto insurance rates across thestate.

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Mr. Davie said the issue would probably not be resolved untilthe state's budget is approved. That process is currently snaggedin a dispute between the legislature and Republican Gov. GeorgePataki over proposals to meet a deficit with new taxes.

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Once the budget passes, Sen. Seward will discuss the issue, Mr.Davie said, but if Mr. Grannis' position is "'It's the Fair Plan ornothing,' then we'll have to think about that."

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Sen. Seward, he said wanted to create a marketplace foraffordable insurance by creating a climate where insurers arecompeting for motorists business. He noted that the Senate measurehad gained passage with broad bipartisan support.

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According to Mr. Grannis, on several occasions, Gov. Pataki hassubmitted legislation to make NYPIUA permanent. Bills calling forpermanency have been approved by the Assembly for the past fiveyears, but have never reached the Senate floor for a vote.

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NYPIUA, according to Mr. Grannis' office, provides basicproperty insurance coverage for 49,000 homes and 7,000 businessowners unable to obtain private insurance.

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NYPIUA, on its tape, said as of April 30, "we will discontinueaccepting new business applications." The agency said it haddiscontinued renewal of policies effective April 29.

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Mr. Grannis said lacking NYPUIA coverage, there will be adisruption in property sales closings, affecting the banking andreal estate industries as well as buyers and sellers.

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The Assembly legislation to make NYPIUA permanent was approvedunanimously on March 10 (A.4525) and a separate bill to extend itsauthorization for three years on April 28 (A.30,000).

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Fair Plans were enacted in every state pursuant to federal lawfollowing the inner-city riots of the mid-1960s. New York andAlabama are the only states that have not made their Fair Planspermanent.

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NYPIUA, did not immediately respond to a call for comment.According to Mr. Grannis the agency has 50 or so applicationsdaily. Without prompt action, nonrenewal notices for policiescoming up for renewal will be sent out within weeks, he said.

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NYPIUA said on tape it will continue to service existingpolicies.

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If history is a guide the NYPIUA will eventually be reinstated.Legislative contretemps have allowed the agency to lapse before- in1997 for 20 days and in 1998 for five days.

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