The New York Legislature has passed a bill that would prevent insurers from denying claims for injury or property damage based on late notice by the claimant unless the insurer can show that it was prejudiced by the late notice.
The bill was introduced at the request of the governor, and sponsored by John DeFransisco, R-Syracuse, in the Senate and Helene Weinstein, D-Brooklyn, in the Assembly.
The late notice provision is similar to legislation passed by the legislature last year but vetoed by then Gov. Eliot Spitzer because of disagreements over a separate declaratory judgment provision in the bill.
In his veto statement at the time, Mr. Spitzer said that "if this bill merely permitted late notices of claim where there is no prejudice to the insurer, I would sign it."
According to this year's bill, failure to give notice of a claim to an insurer within the time period prescribed in the policy will not invalidate the claim unless the insurer can show that it was prejudiced by the late notice.
The bill states that if an insurer alleges that it was prejudiced because of the late notice, then it bears the burden of proof if notice was given within two years of the time period required by the policy.
If notice is given after two years, then the insured must prove that the insurer has not been prejudiced by the late notice.
Michael Barrett, legislative representative for the Independent Insurance Agents and Brokers of New York (IIABNY), said the late notice provision in this year's bill is similar to last year's.
He said it essentially puts rules into place regarding late notice of claims. Because such rules were not in place previously, he said insurance companies were administering their own versions of late notice, which varied from company to company.
Matthew Guilbault, government affairs council for the Professional Insurance Agents of New York (PIANY), said the bill recognizes "that people are paying for policies with the expectation that their claims will be paid and not denied on a technicality."
He questioned why insurers had been able to give technical denials for late notice in instances where the notice had not hindered their ability to pay a claim.
In his veto statement last year, Mr. Spitzer said of the late notice provision, "The late notice provisions of the bill are an important reform because they would prevent insurers from denying coverage to insureds based on a technicality, thereby eliminating the extreme hardship that is brought to bear on those who pay their premiums religiously only to find at a time of need that their policy is not available.
"Indeed, these changes bring New York's laws into alliance with the laws in a majority of other states."
Paul Tetrault, state affairs manager-northeast region for the National Association of Mutual Insurance Companies (NAMIC), said he does not believe the bill is warranted or helpful, but he noted that its passage was not unexpected.
Mr. Tetrault said, "Since it is a governor's program bill, there is not much of an expectation for a veto this time around."
Gary Henning, assistant vice president, northeast, for the American Insurance Association (AIA), said that while there are still some ambiguities in the bill with respect to late notice, AIA appreciates that the Insurance Department and governor's office worked with insurers to improve upon last year's bill.
"Do we love that our rights are being pared back? No, but we understand that this is something that [New York] wanted to do," Mr. Henning said.
Regarding AIA's objection to the idea of the late notice provision in general, Mr. Henning said that an insurance policy is a contract, and insureds should abide by the language in the contract with respect to filing claims. "We feel very strongly about the sanctity of the contract," he said.
However, Mr. Henning said that AIA understands that there are concerns regarding whether an insurer is really prejudiced if a claim is filed one day after a given deadline.
Paul Magaril, regional manager and counsel for the Property Casualty Insurers Association of America (PCI), said that while the bill is an improvement over last year's version, PCI feels that allowing claimants to file notice up to two years late while still placing the burden on insurers to prove that they were prejudiced is unfair, and he pointed out the difficulty of insurers having to "prove a negative."
Mr. Barrett said IIABNY, which opposed the bill last year, feels the declaratory judgment provision in this year's bill is much narrower in scope, and therefore less harmful to insurers.
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