Authors Carl J.Pernicone, FrederickJ. Pomerantz, Stacey B.Rowland, and Sandy M.Smith are attorneys with New York law firm WilsonElser.

A year after Superstorm Sandy came ashore, the New YorkDepartment of Financial Services issued Circular Letter No 8 of 2013 to inform New Yorklicensed P&C insurers of the regulatory standards they shouldexpect to encounter the next time a federal or state disasteremergency is declared. This regulatory guidance echoes the variousactions that the DFS implemented prior to the onslaught ofSuperstorm Sandy and for several months thereafter.

While the DFS outlines the various regulatory guidelines it mayimpose when a State Disaster Emergency is declared, the CircularLetter also cautions that the DFS may implement additionalstandards based on the specific circumstances of the emergency,including but not limited to tornados, flooding and earthquakes.The letter then details the types of actions that the DFS may takein a future disaster. These actions are substantively similar tothe actions that the DFS took in the wake of Superstorm Sandy, asnoted below.

Premium Payments Specifically with respect tothe difficulties involved in making premium payments during a stateof emergency and pursuant to New York Insurance Law Section 3425(p), the DFS states that it is empowered to impose a moratorium onthe termination, cancellation and renewal provisions of that lawfor a period not to exceed three months. A three-month extensionperiod is also permitted under the statute. As to Superstorm Sandy,the DFS began a moratorium of this nature effective October 26,2012, and pursued its mandate into February 2013. Further, the DFSreiterated the position it maintained earlier this year in CircularLetter No. 1 of 2013, requesting insurers to allow policyholders indisaster areas flexibility in terms of making premium payments.

Prompt Action Required Additionally, the letterprovides that insurers should take prompt action upon receipt of anotice of claim, particularly where the claim is a direct result ofthe disaster. The DFS sets forth a number of steps that the insurershould take in a prompt fashion, including informing claimants ofnecessary documentation, providing fast and accurate responses toclaimants, and promptly reimbursing them for additional livingexpenses and temporary repairs. Again, the DFS warns insurers thatadditional claims-handling procedures may be initiated based on thenature of the Disaster Emergency. As to Superstorm Sandy, the DFSrelaxed certain standards relative to documentation needed forproof of loss, per Circular Letter No. 8 of 2012.

Claims Data Reporting The DFS states that itnot only might require claims data reporting in accordance with theform and requirements adopted by the Northeast Zone of the NationalAssociation of Insurance Commissioners but also impose additionaldata reports to supplement this information. Such reporting can berequired on a daily, weekly or other schedule, based on thespecific circumstances of the disaster. The data would be used tocompile insurer “report cards” such as the ones assembled followingSuperstorm Sandy.

Mediation Program Also, the DFS announced thata mediation program may be established to aid in the resolution ofdisputed claims. Such a program may not be available for certaintypes of claims, including claims involved in civil actions, claimsmade under the National Flood Insurance Program and claims madewhere there is a dispute as to coverage. With respect to SuperstormSandy, a mediation program was instituted pursuant to a specialamendment to New York Insurance Regulation 64 governingSandy-related claims.

Expedited Licensing Procedure Finally, theCircular Letter states that the DFS may develop an expeditedlicensing procedure for independent and public adjusters. Anexpedited process was employed to address the need for adjustersafter Superstorm Sandy, which, among other things, permittedadjusters licensed in other states to apply for a temporaryadjuster's licenses in New York.

What actions should Insurers take based on this newregulatory guidance? Given the Department's issuance ofCircular Letter No. 8 of 2013, insurers should consider taking thefollowing actions to promote compliance in the event of a futuredisaster emergency:

• Insurers should review the various issues related to premiums,claims and administrative procedures experienced as a result ofSandy-related claims. This review process should identify the areaswhere the insurer would have difficulty complying with thestandards set forth in the Circular Letter.
• The insurer should then develop and incorporate into itsdisaster plans processes and procedures aimed at addressing anycompliance issues. These processes and procedures should include aninternal monitoring system for the adjudication of disaster-relatedclaims to facilitate reporting to the Department, particularlywhere such reporting is required on a daily or weekly basis.