The Independent Insurance Agents & Brokers of New York Inc. said it has sent a letter to the top property-casualty companies operating in New York asking them to refrain from denying claims because of late notice until the state legislature adopts changes.
The association said it sent the letter on Sept. 24 asking the carrier executives responsible for their operations in New York not to invoke "late notice unless there is material prejudice."
The letter, authored by Stephen R. Zogby, IIABNY chairman, and Richard A. Poppa, the association's president and chief executive officer, states that the late notice denial of claims has escalated to a "very serious problem" for the association's members and the companies' policyholders.
"We urge your company to take a public stand with your agents that you will not use a late notice denial unless such late notice has prejudiced your rights to effectively investigate, negotiate a settlement or defend the claim," Mr. Zogby and Mr. Poppa wrote.
Companies issue late notices when the carrier believes the policyholder has not reported a claim in a prompt and reasonable amount of time.
In an interview with National Underwriter, Mr. Zogby said that in New York the issuing of a late notice is at the discretion of the carrier. There are no regulations that define when or how a late notice can be issued.
When asked how many carriers are issuing the notices, he said, "We have heard of many instances from many carriers."
A bill vetoed by Gov. Eliot Spitzer in August would have limited insurers when denying claims due to late notice.
The bill would have allowed the plaintiff attorneys to seek a declaratory judgment to determine the amount of coverage owed by an insurer before a verdict was rendered.
It would also have prevented carriers from denying claims based on late notice unless the carrier could show material prejudice because of the delay in notice.
IIABNY said it agreed with the governor's veto. The association contends that the bill would have permitted attorneys to "shop around" and sue policyholders to find out what coverages and limits are available before liability against the policyholder was established.
IIABNY said it is continuing to work with the state insurance department to draft legislation that would implement changes to late notice procedures. The association said that a second draft of the legislation is likely in the near future, and will incorporate the association's initial comments.
Mr. Zogby said the association's position is that no real time frame should be legislated, but that carriers should only be allowed to issue a late notice when the delay in reporting has resulted in "material prejudice" in the carrier's ability to adjust the claim.
In response to a request for comment Paul Magaril, regional manager and counsel for the Property Casualty Insurers Association of America said in an e-mail, "Property and casualty insurers will continue to comply with the public policy of the state as determined by the legislature, the governor, and the courts, rather than the wishes of a trade group with a different position on the issue. It is inappropriate and presumptuous to publicly suggest otherwise.
"We are disappointed that our partners in the industry chose to unnecessarily confront insurers without first consulting with us on the issue. It would be far more productive for the agents to engage the industry in direct discussions on the issue and to provide us with more information. For example, we have yet to see any data justifying the claim that there is a problem, much less a 'very serious' one."
(This story was updated Sept. 28 at 10:18 a.m.)
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