New York Governor David Paterson has signed into law a bill that prevents 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.
Gov. Paterson had requested the introduction of the bill, and it was sponsored by John DeFransisco, R-Syracuse, in the Senate and Helene Weinstein, D-Brooklyn, in the Assembly.
New York insurance agents had supported the measure, while some insurance company associations said it was unnecessary but not unexpected.
The late notice provision in the new law 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.
The language of the declaratory judgment provision was re-worked in this version of the bill to the satisfaction of industry members that had raised objections last year.
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.
Professional Insurance Agents of New York (PIANY) president Martin Koles said the bill "represents years of hard work by PIANY on behalf of our members, and it is a long-overdue change to insurance law that will benefit New York's insurance-buying public."
He added, "This new law ends once and for all a practice engaged in by insurers which was patently unfair to policyholders who had paid their premiums expecting coverage."
Neal L. Sullivan, chairman of the Independent Insurance Agents and Brokers of New York (IIABNY), said, "This legislation, which IIABNY worked very hard to secure, corrects a serious problem for insurance producers and their customers by creating a statutory definition of 'late notice.'"
Mr. Sullivan said his group has seen "a dramatic increase in the number of claims denied for late notice in the last several years, along with different procedures from company to company, and this legislation will greatly benefit the insurance-buying public."
William Passannante, co-chair of the insurance coverage group at Anderson Kill & Olick, P.C., said, "The legislature and the governor have recognized that New York's treatment of late notice was unfair to policyholders, and they have acted to uphold insurance coverage.
"While far from perfect, this legislation represents a substantial improvement for policyholders under New York's late notice law and is a long overdue step in the right direction for New York's insurance law in general."
At the time the bill was passed by the legislature, Paul Tetrault, state affairs manager-northeast region for the National Association of Mutual Insurance Companies (NAMIC), said he did not believe the measure was warranted or helpful, but he noted that its passage was not unexpected.
Gary Henning, assistant vice president, northeast, for the American Insurance Association (AIA), had said, "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 added 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.
But he noted that AIA understands there were 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 when the bill was passed that PCI feels 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 because insurers would have to "prove a negative."
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