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Press Releases

N.Y. LEGISLATURE CREATES NEW AVENUE FOR INSURANCE FRAUD; FAILS TO ENACT REFORMS TO FIGHT FRAUD, CONTROL RISING RATES

ALBANY, July 8 – Declining to pass meaningful insurance reforms to reduce rampant auto insurance fraud in New York, the legislature enacted a measure that will only incite more fraud and litigation, driving auto insurance rates higher and making affordable coverage more difficult to obtain, according to the New York Insurance Association (NYIA).

The law would require auto insurers to offer and actively promote the sale of a new product “spousal liability insurance.”

No insurer currently offers this coverage in New York because of the high likelihood of collusion in lawsuits between spouses and the resulting fraud in a state already regarded as the nation’s insurance fraud capital, said NYIA president Bernard N. Bourdeau.

The measure will inspire a wave of frivolous lawsuits and staged auto accidents by participants in insurance fraud rings operated by corrupt medical professionals and attorneys, said Bourdeau, who urged Gov. George Pataki to veto the bill.

“The state’s auto insurance system is being looted today by bogus and inflated claims, phony medical mills and unscrupulous attorneys,” he said. “The new law will only give professional criminals another scam to rip-off honest policyholders and their insurers.”

Fraud in New York’s no-fault auto insurance system alone costs more than $700 million last year, adding $124 to the auto insurance costs of the typical driver in 2002.

Bourdeau pointed out that the legislature failed to enact anti-fraud proposals to stiffen the penalties for fraud, shorten deadlines for submitting bills to insurers, establish needed guidelines for treatment and decertify medical professionals convicted of insurance fraud.

Without meaningful reform, auto insurance rates in New York will soon surpass New Jersey’s as the highest in the nation, he said.

“These measures would have helped level the playing field between auto insurers and law enforcement on the one hand and perpetrators of staged accidents and operators of medical mills on the other,” he said. “By not closing loopholes in our current no-fault system the losses of auto insurers will continue to mount and rates will continue to rise.”

Bourdeau said the legislature also did not act to extend measures designed to help companies better manage their business and price their products more competitively.

These measures allow auto insurers to raise rates modestly to keep up with the rising costs of medical care and auto repair without regulatory approval and drop a small percentage of their customers, often for failure to pay premiums or suspected fraud.

“These provisions give insurers the freedom to price their products competitively,” said Bourdeau. “More competition in the marketplace means more choice for consumers and lower prices.”

Bourdeau also explained that by permitting insurers to cancel up to two percent of their customers without regulatory approval, they can quickly drop policyholders who have filed fraudulent claims. Without the ‘two percent rule’ auto insurers may have to carry suspected insurance criminals on their books, he said.

“When it comes to fighting fraud and working to control rising auto insurance costs, this year’s legislative session has failed New Yorkers,” Bourdeau said.

Archived Topics of Interest

Attached is the Insurance Department's Circular Letter No. 23 regarding supplemental spousal liability.

In order to be in compliance companies are advised to submit policy forms for this coverage to the Department for review and approval as soon as possible. Rates and rating rules associated with the coverage must also be filed and approved by the Superintendent.

This statute applies to all policies issued or renewed to be effective on or after January 1, 2003 and must be made available upon written request of the insured and payment of a reasonable premium. As you will note DOI interprets that coverage applies to personal and commercial policyholders.

Today the insurance industry won a major battle as the New York Supreme Court Appellate Division-First Department unanimously affirmed Judge Wetzel's lower court decision upholding Regulation 68 in its entirety.

The decision states that the suit "did not constitute improper legislative policy-making or an improper delegation of rule-making authority, and dismissing the proceedings insofar as it sought article 78 relief annulling revised Regulation 68 for failure to comply with the State Administrative Procedure Act, unanimously affirmed, without costs."

The decision affirms that the Superintendent did not overstep his authority and that shortening the time limits will not have the effect of excluding a significant number of legitimate claims.  It further states that the "petitioners' other arguments are also unavailing."

This is a major victory for insurers.  We assume that the plaintiffs will make a "motion for leave to appeal" to the New York Court of Appeals.  Such appeal is discretionary so it is up to the court to determine if they will hear the case or not.

By Emergency Rule the New York Insurance Department recently promulgated amendments to Regulation 172 which relate to the financial statement filings and accounting practices and procedures (aka codification).

The purpose of the amendments are to enhance consistency of accounting treatment of assets, liabilities, reserves, income and expenses by entities subject to the regulation, by setting forth accounting practices and procedures to be followed in completing annual and quarterly financial statements as required by law.  These amendments will take effect so that the accounting principles will be in place for use in the preparation of quarterly statements and annual statements for 2001.

A complete copy of the regulation (11 pages) can be obtained by either contacting NYIA or from the Department's website at http://www.ins.state.ny.us/acrobat/re172a1t.pdf.

NYIA Enacted Law Bulletin of September 30th details the bill (A.11821) which the Governor has now signed into law as Chapter 599.  This bill, which NYIA supported, amends the Insurance Law to allow insurers to count deferred tax assets as admitted assets under certain circumstances and within limits.

Governor Signs Bill that Will Encourage Insurance Fraud and Result in Higher Premiums for New Yorkers

ALBANY, NY – A bill signed into law by Governor Pataki last week is an open invitation to commit fraud and encourage frivolous lawsuits, according to New York State insurers.

The Governor signed the Supplemental Spousal Liability bill (A.10456) on September 24 mandating all insurers in New York offer coverage for injuries caused by a policyholder to his or her own spouse.

“This unprecedented bill actually rewards a claimant for their own negligence and culpable conduct,” said New York Insurance Association President Bernard N. Bourdeau. “It will only encourage even more insurance fraud and result in higher insurance premiums for New Yorkers.”

The insurance industry voiced strong opposition to the bill and argues that it considers an open invitation to commit fraud, he said.

New York is a no-fault auto insurance state which means those injured are entitled to receive medical benefits and lost wages regardless of which party is at fault. This bill will be an incentive for spouses to sue one another in an effort to collect additional money for pain and suffering, according to Bourdeau.

“Most states have enacted broader exclusions to prohibit members of the same household from suing each other,” he explained. New York is moving in the opposite direction and has now expanded the field of litigants.

Bourdeau stated that fraud will increase as this statute will make it easy for spouses to collude with one another for their joint monetary benefit.

“New York’s auto insurance costs are already significantly higher than most states due to the problems with rampant fraud,” he said. “By signing this legislation into law the Governor will be raising insurance costs for all New York drivers.

The Governor has signed the codification bill (A.11821) which puts New York on a level playing field with virtually every other state by adopting uniform accounting principles. This legislation eliminates the few areas of conflict between New York statutes and the new uniform statutory accounting guidelines adopted by most other states. Many of the new statutory accounting rules have already been adopted by the New York Insurance Department (Regulation 172). However, there were several key provisions which the Department had not yet adopted. This legislation seeks to codify those outstanding provisions.

Attached is the complete bill text, the sponsors' memo, and the NYIA memorandum in support.

As we originally reported, P&C carriers are exempt from Section 352 of the Patriot Act which relates to anti-money laundering. Below is a copy of the Treasury Department's press release issued on 9-18-02 which clarifies the various provisions of the Patriot Act.

You should note that the Treasury Department has not yet released the regulations for Section 326 which specifies the "Know Your Customer" provisions. We are hoping that P&C carriers will also be exempt from compliance, but won't know for certain until the regulations are actually released.

Unfortunately, P&C carriers have not yet been exempted from the OFAC (Office of Foreign Assets Control) requirements. These include comparing the OFAC list of foreigners that you are prohibited from doing business with to your customer list, employee list, and claimant list.

In addition, there have been some concerns raised about the applicability of the regulations to retroactive rating plans and claims settled with structured settlements.

We will be providing more details as they become available.

FROM THE OFFICE OF PUBLIC AFFAIRS

September 18, 2002
PO-3436

Treasury Announces Final and Proposed Rules Under USA Patriot Act

The Treasury Department today took major steps in its regulatory program to shore up the U.S. financial system against criminal and terrorist activity. It issued five rules pertaining to financial institutions, from casinos to hedge funds to shell banks. The rules address suspicious activity reporting, anti-money laundering program requirements, prohibitions on maintaining accounts for foreign shell banks, and information sharing between the government and the financial community. Written comments on the proposed rules may be submitted within 60 days of their publication in the Federal Register, which is expected to occur later this week.

The Treasury Department issued a final rule implementing sections 313 and 319 (b), which are two key provisions of the Act aimed at preventing money laundering and terrorist financing through correspondent accounts maintained by U.S. banks and securities brokers on behalf of foreign banks. The final rule continues to authorize U.S. banks and securities brokers to use a certification form to comply with both the shell bank prohibition as well as the recordkeeping requirements of section 319(b). The form, which is sent to all foreign banks with correspondent accounts, requires the foreign banks to do the following: (1) certify that they are not shell banks; (2) certify that they will not permit shell banks access to the U.S. correspondent account; (3) identify the owners of the bank; and (4) identify a U.S. agent for service of process. While U.S. banks and securities brokers are not required to use this form to comply with the regulation, it is a safe harbor from liability for failing to comply with the regulation.

Treasury issued a final rule implementing section 314 that establishes procedures that encourage information sharing between governmental authorities and financial institutions, and among financial institutions themselves. The first part of the rule establishes a mechanism for law enforcement to communicate names of suspected terrorists and money launders to financial institutions in return for securing the ability to locate promptly accounts and transactions involving those suspects. Financial institutions receiving the names of those suspects must search their account and transaction records for potential matches. The second part of the rule outlines how financial institutions can share such information, and similar information concerning suspected terrorist activity and money laundering, with another financial institution under the protection of the statutory safe harbor from liability.

The Department issued a proposed rule requiring insurance companies to establish an anti-money laundering program, as specified under section 352 of the Act. Insurance companies are defined as life insurance companies and any other insurance company that offers products with investment features or features of stored value and transferability. Under the rule, a company must establish and maintain a written anti-money laundering program that at a minimum: (i) incorporates internal policies, procedures, and controls based on the company’s assessment of its money laundering risks; (ii) designates a compliance officer; (iii) establishes an ongoing employee training program; and (iv) establishes an independent audit function to test programs.

Treasury issued a proposed rule requiring investment companies not registered with the Securities and Exchange Commission to establish an anti-money laundering program as specified under section 352 of the Act. The unregistered investment companies covered by the proposed rule include hedge funds, commodity pools, and investment companies investing in real estate. Under the rule, these non-registered investment companies must establish an anti-money laundering program that includes, at a minimum, (i) the development of internal policies, procedures, and controls; (ii) the designation of a compliance officer; (iii) an ongoing employee training program; and (iv) an independent audit function to test programs. Section 352(c) of the Act directs the Secretary to prescribe regulations for anti-money laundering programs that are "commensurate with the size, location, and activities" of the financial institutions to which such regulations apply. Treasury deferred this rulemaking in April of this year.

Treasury also issued a final rule requiring all casinos and card clubs located in the United States with gross annual gaming revenue of more than $1 million to file a suspicious activity report (SAR) with Treasury’s Financial Crimes Enforcement Network on all transactions of at least $5,000 that the casino "knows, suspects, or has reason to suspect" fall into specific categories. This rule, which was issued under the Bank Secrecy Act, will take effect 180 days after its publication in the Federal Register. An accompanying SAR form is being published as well.

Attached is the Insurance Department's OGC opinion regarding terrorism exclusions. This opinion has created some confusion regarding Section 3404 as it applies to excess and surplus line carriers and whether or not carriers writing in the Free Trade Zone can use the ISO terrorism exclusion. NYIA reached out to the Insurance Department for clarification on this issue.

We were informed that "Section 3404 DOES apply to excess and surplus line carriers. Excess and surplus line carriers can use a terrorism exclusion for anything other than fire or fire following. Carriers writing in the Free Trade Zone can NOT use the ISO exclusion."

Although the answer may not be what we hoped for, we hope this clarifies the opinion for you.

We are soliciting your input in an effort to determine your general areas of interest. It is my hope that every company will serve on at least one committee. If you or someone else from your company is interested in serving, please fill out the attached form and email it to Stacey Gibson at sgibson@nyia.org or fax it to the office at
(518) 432-4220.

NU Online News Service, July 8, 4:02 p.m. EST—Describing it as an invitation to fraud, a New York insurers group called today for a veto of legislation that would permit husbands and wives to sue one another after an auto accident.

The bill that won final approval from the State Senate last week, is a "gift to trial lawyers," said Bernard N. Bourdeau president of the Albany-based New York Insurance Association. He also noted a variety of anti-fraud measures and rate regulation improvements had failed to pass.

His group predicted the spousal liability bill "will only incite more fraud and litigation, driving auto insurance rates higher and making affordable coverage more difficult to obtain."

Democratic Assemblywoman Helen Weinstein, a Brooklyn attorney who heads the Standing Committee on Judiciary, sponsored the spousal liability bill, A10456.

Under its provisions, insurers must let married couples know about the limitations to what they can collect under New York's no-fault insurance law when their spouse's actions behind the wheel result in injuries and the insurers must offer them supplemental spousal liability insurance.

Mr. Bourdeau said that up to now it has been legal for insurers to offer the insurance, but companies would not sell it because of their fears of collusion.

By way of example, he said that if a wife sues her husband to recover for injuries after an accident, claiming he violated the speed limit, the husband would have not inclination to fight the claim because "they are not adversarial parties."

A statement with the bill said it was introduced at the request of the New York State Law Revision Commission. It noted that an appeals court decision, which upheld the law exempting spousal liability, had called on the legislature to reconsider the spousal liability exemption calling it "anachronistic."

Also noted was a mention by the Commission that a former common law rule, which prevented suits between other family members based on the issue of collusion, had been rejected by the state's highest court.

The statement with the bill noted that a premium would offset the cost and exposure.

Mr. Bourdeau said the measure was co-sponsored by Republican Sen. James Seward of Oneonta and "came up as a complete surprise as the Senate was leaving town last Tuesday on recess," leaving his group with no time to stage a strong lobbying effort against it.

He said the message he got when he argued against it was "the leadership [Senate Leader Joseph L. Bruno, R-Saratoga Springs] wants it."

Mr. Bourdeau said he could only speculate what might be involved, but he agreed that the approaching election for the entire legislature and Republican Gov. George Pataki could be a factor.

Neither Sen. Seward nor Assemblywoman Weinstein responded to requests for comment.

Mr. Bourdeau said New York, under no-fault, is the auto "insurance fraud capital of the country" and if Gov. Pataki signs the bill "we're making it worse."

"The state's auto insurance system is being looted today by bogus and inflated claims, phony medical mills and unscrupulous attorneys," he said. "The new law will only give professional criminals another scam to rip-off honest policyholders and their insurers."

Mr. Bourdeau pointed out that the legislature failed to enact anti-fraud proposals to stiffen the penalties for fraud, shorten deadlines for submitting bills to insurers, establish needed guidelines for treatment and decertify medical professionals convicted of insurance fraud.

"These measures would have helped level the playing field between auto insurers and law enforcement on the one hand and perpetrators of staged accidents and operators of medical mills on the other," he said. "By not closing loopholes in our current no-fault system the losses of auto insurers will continue to mount and rates will continue to rise."

Mr. Bourdeau said the legislature also did not act to extend measures designed to help companies better manage their business and price their products more competitively.

"These provisions give insurers the freedom to price their products competitively," said Mr. Bourdeau. "More competition in the marketplace means more choice for consumers and lower prices."

He said by permitting insurers to cancel up to two percent of their customers without regulatory approval, they can quickly drop policyholders who have filed fraudulent claims. Without the "two percent rule," auto insurers may have to carry suspected insurance criminals on their books, he complained.

The New York Insurance Association is a trade association of property-casualty insurance companies that provide insurance coverage for autos, homes and businesses throughout New York State.

Aftermarket parts—There were many bills introduced regarding the use or limit of use of aftermarket, crash or non-OEM parts. Fortunately with everything else going on in the auto market this legislation seemed to take the back burner this session and no bills were seriously considered.

Attorney Fees—The bill which permits a private right of action and requires payment of attorney fees in instances where a carrier delays an appraisal (due to a coverage dispute) was again being seriously considered in the closing days of session (S.5446). NYIA initiated a grassroots campaign on this bill and we managed to get it stalled in committee.

Auto 2% extender – The Assembly passed a bill early in the session (A.9418) which extends the 2% non-renewal/cancellation statute for private passenger auto until 6/20/04. The Senate passed a bill which includes 2% and flex rating (S.6058) until 6/30/04. In addition in the closing days of session the Senate introduced and passed a similar bill (S.7836) which included the extension of 2% and delayed flex rating program—0% flex this year, 5% flex 2003-2004, and 7% flex for 2005-2006. There is no companion to this bill in the Assembly. The original 2% statute expired 8/1/01.

Auto flex rating—Renewed negotiations with the Assembly during the last week indicated that there might be some movement to adopt some form of flex rating, but nothing could be agreed upon before they adjourned. The Assembly bill (A.9437) permits downward flex-rating only (up to 10%) and an excess profit study for private passenger auto until 6/30/04. The Senate bill (S.7836) passed, but there is no companion in the other house. The original flex rating statute expired 8/1/01.

Auto no-fault reform—The Assembly Insurance Committee Chair remains firm that any reform package must include language to create a consumer advocate. The industry was adamantly opposed to a Consumer Advocate. No agreement could be reached on this issue, so unfortunately nothing was done to amend the no-fault system.

Boiler bill—Both houses passed the bill to authorize advance premium cooperatives to write boiler and machinery coverage. NYIA remains optimistic that the Governor will sign the bill (S.6722/A.11070).

Captives—The Senate passed a bill (S.7816) which allows the City of New York to form a captive insurance company to provide coverage for activities at or near the World Trade Center in response to the attacks 9/11/01. It also permits the State Insurance Fund to form pure and group captive insurance companies in New York State. No Assembly companion bill was introduced.

Champerty—This bill would permit the purchasing of claims for the purpose of instituting lawsuits. We thought this bill was dead and buried, but in the last few weeks of session it was resuscitated and was once again being considered (S.7609). Fortunately it did not make it out of the Rules Committee for a vote.

Codification—Before they adjourned the Legislature came to agreement on codification. New York is the only state in the country that has yet to adopt the uniform accounting principles. The bill passed both houses and we are hopeful that the Governor will sign the bill (S.7790/A.11821).

Commercial Deregulation—There was no action on commercial deregulation. After September 11^th the issue fell by the way side as many believe there would have been chaos in a deregulated market after the events of September 11^th.

CDW—This bill permits rental car companies to sell collision damage waivers in New York and passes along rental claims to personal auto policies. It has now passed both houses and the industry will request that the Governor veto it (S.1894/A.7742).

Collateral estoppel—Legislation was once again introduced regarding the admittance of collateral estoppel issues decided by arbitrators. This bill made it out of committee in the Assembly, but did not move in the Senate (S.1469/A.392).

Credit Scoring—The industry lucked out this year as New York did not adopt a bill to limit the use of credit scoring or credit history this session (S.2952/A.1785). We continue to watch this debate being played out across the country and only hope New York will use common sense and not pass similar legislation.

Domestic Partner—The Governor will now have to consider legislation which permits and defines “domestic partners” for the purpose of recovery of certain disability benefits, including losses from the September 11^th and the World Trade Center (S.7685/A.11307).

Domestic Violence—The Insurance Department is still reviewing the comments receive regarding the proposed amendments to Regulation 168 regarding domestic violence confidentiality. The industry wrote in opposition to the strict mandatory participation in media efforts to educate the public about privacy as well as many other onerous provisions in the regulation.

DMV IIES for-hire vehicles—This bill reduces the time frame from 45 days to 20 days that a carrier must notify DMV for cancellation of a for-hire vehicle. The bill has passed both houses and will hopefully be signed by the Governor (S.6865/A.7051).

Excess Line Double-Taxation—The Association supports legislation to prohibit double-taxation of excess line carriers (A.11591/S.7288). The Senate bill has passed and the Assembly bill is in Ways & Means.

Graduated Licensing—Both houses of the legislature passed a graduated licensing bill (S.7714/A.3513) and it will be sent to the Governor for signature. The industry supports this bill as it has passed in many other states and reduces accidents and injuries for youthful and inexperienced drivers.

Mold—The Insurance Department did not respond to the numerous industry requests which called for exclusions on mold-related claims. Similarly the Legislature did not adopt any legislation to deal with the issue.

Physical Therapy—This proposal eliminates the mandatory referral from a doctor for treatment by a physical therapist. The proponents have recently excluded no-fault from the bill and it does not apply to workers’ comp claims, so the industry is neutral. The bill passed the Assembly, but was never moved out of Senate Rules (S.4748/A.7029).

Prejudgment interest—This proposal permits pre-judgment interest in personal injury actions. Fortunately this bill never made it out of committee (A.550).

Producer Licensing—The Association supports the concept of uniform producer licensing. The Assembly bill (A.11834) and the Senate bill (S.5585) are not “same as” bills. NYIA supports legislation which exempts customer service representatives (CSRs) from having to be licensed. No agreement could be reached between the Senate and Assembly, so producer licensing was left unresolved.

Regulation 68 no-fault reform—The Insurance Department continues to litigate their proposed amendments to the no-fault regulation which would assist the industry in curbing fraud and abuse. We anticipate the Appellate court to return their verdict in early 2003 and remain optimistic that we will prevail.

Reinsurance double taxation—The bill which prohibits double taxation of excess line reinsurance transactions has passed the Senate. We remain hopeful that if the Assembly returns they will also pass the bill (S.7288/A.11591).

Runners—Serious consideration was given to legislation which would increase penalties for acting as a “runner” by establishing a class E felony for unlawful procurement of clients, patients or customers. This legislation has passed the Senate, but the Assembly failed to adopt the proposal (S.123/A.2097).

Spousal liability—This bill mandates that auto insurers not only offer, but actively promote the sale of "spousal liability insurance". Current law allows auto insurers to offer the product, but because of the high likelihood of collusion in spousal lawsuits, no insurer in New York currently offers the coverage. Considering the outright fraud rampant in the No-Fault system, that fear appears justified. New York is the insurance fraud capital of the United States and the Legislature not only failed to fix the system during the past session, but decided instead to make matters worse. This bill passed the Assembly and was released on the very last Rules Report in the Senate. NYIA will initiate a grassroots campaign urging the Governor to veto the bill (S.6581/A.10456).

Structured settlements—This bill protects recipients of structured settlements from factoring companies regarding personal injury lawsuits and workers’ compensation claims. This bill passed both houses and NYIA will request that the Governor sign the bill into law (S.7810/A.6936).

Terrorism—There was no state legislation enacted to clearly define terrorism or to exclude terrorism coverage. Last week the U.S. Senate passed a proposal which would implement a federal backstop for acts of terrorism, but the House has not yet agreed to the proposal.

Unfair claims—The industry managed to stall enactment of legislation which would permit a private right of action for unfair claims settlement practices. There were a few variations of this bill (A.321 and S.577/A.4724), but most legislation did not even make it out of committee this year.

Workers’ comp—There was no agreement on a benefit increase to raise the weekly workers’ compensation benefit rate from the current $400/week. Various proposals were introduced and were considered. Some included mandating that the State Insurance Fund write employers’ liability, including coverage for Labor Law Section 240 claims. The industry asked that any benefit increase proposal must also include reform (e.g. cap on permanent partial disabilities, medical guidelines, etc.) to offset the total increase. We were not optimistic that meaningful reform would accompany any benefit increase and we were right.

Wrongful death—There were various proposals introduced to expand wrongful death actions to include non-economic damages. Fortunately for the industry we managed to fend this one off for another year.

Re: Proposed Regulation 168 (11 NYCRR 244) Address Confidentiality Program for Victims of Domestic Violence

May 17, 2002
Ms. Joan Siegel
Associate Attorney
New York State Insurance Department
25 Beaver Street
New York, NY 10004

The New York Insurance Association (NYIA) represents over 75 property/casualty insurers collectively writing in excess of $7 billion in annual premium on New York risks. The members of NYIA have concerns regarding the proposed Regulation 168 which will require insurance companies to expend considerable sums to notify policyholders and advertise address confidentiality protocols for victims of domestic violence.

The proposed regulation far exceeds the statutory requirement in section 2612 of the Insurance Law for the Superintendent, in consultation with the Department of Social Services and the Office for the Prevention of Domestic Violence, to promulgate rules “to guide and enable insurers to guard against the disclosure of the address and location of an insured who is a victim of domestic violence.” As drafted the regulation is extremely costly, is duplicative, and will not target the specific individuals for which the regulation is intended to serve.

The proposed Regulation 168 is inconsistent with the mandates imposed in Regulation 169 (privacy standards re Gramm/Leach/Bliley Act). In fact, with the recent implementation of the privacy regulation, NYIA believes Regulation 168 is conflicting, duplicative and unnecessary. The intent behind Regulation 168 is to afford privacy protections for victims of domestic violence—a very small fraction of the entire insured population. NYIA believes the costs associated with promulgating this regulation far exceed the limited and uncertain benefit of implementation. As we suggested in the original proposal, we propose that the regulation be clarified to apply to personal lines policies only. Commercial carriers do not have the connection with the individual insureds. We would suggest that the definition of insurance contract in paragraph one of subdivision (c) of section 244.1 be changed to add the standard used in Gramm/Leach/Bliley and the Fair Credit Reporting Act. This would read as follows:

This language would also further harmonize the strong privacy provisions of Gramm/Leach/Bliley with this proposed regulation.

Specifically, proposed section 244.4 requires insurance companies to expend considerable expenses to advertise the protocols in the heavily saturated (and expensive) New York City media markets. Subdivision (a) of section 244.4 would require an insurer on its own or in conjunction with other insurers to prominently publish each year for a week mandated information in at least two newspapers. Subdivision (c) requires an additional week of broadcast on peak radio listening or peak television viewing times of public service announcements by carriers. Even though the regulation permits carriers to join efforts in order to comply, the expense is staggering. One can easily see this statewide media campaign amounting to millions of dollars. We are also sensitive to the concerns of smaller insurers which may sell policies in only a limited geographic area of the state. Why should they be required, even on a pro rata basis, to buy expensive media outlets in New York City and the surrounding suburbs? Many of these small companies struggle to meet the statutory expense cap. Forcing smaller companies to incur an expense like this could cause them to exceed the expense cap and subject them to Insurance Department fines.

We believe the most effective approach is to require the front line agencies which deal with victims of domestic violence to inform victims how and where they can find information regarding confidentiality. These local agencies will have a better chance in reaching the intended beneficiaries. NYIA believes that victims should be protected and that all businesses should have established procedures to protect customer confidentiality (e.g. telephone companies, gas/electric companies, cable television, financial institutions, schools, etc.). The onus of informing victims on how to obtain information should not be placed solely on the insurance industry. Additionally, government is better suited to obtain public service announcements, and it is suggested that this be pursued by the appropriate state and local agencies.

Because of the tremendous cost of the mandates for public service announcements and for advertising in the media, we propose an alternate approach to the costly provisions of section 244.4. This proposal would be to add a new subdivision, 244.4(e), to read as follows:

This proposal would provide a notice option to carriers and allow each to choose the most cost effective method. To summarize, NYIA believes that there is a much more cost effective method to implement this regulation and we urge the Department to utilize that approach.

Thank you again for this opportunity to comment on the regulation. If you have any questions, please do not hesitate to contact me.

I am writing on behalf of the New York Insurance Association (NYIA) which represents over 75 property/casualty insurance companies collectively writing in excess of $7 billion in annual premium on New York risks.

Many insurers are still reeling from the losses of September 11^th. You can help stir economic development, lower insurance premiums and keep businesses in New York by repealing Sections 240 & 241 of the Labor Law which mandates strict liability (regardless of fault) for accidents involving injuries sustained from elevated surface (scaffolding, roof, etc.). Every other state in the country has either repealed this law or moved to a comparative negligence standard. New York must modify this out-dated statute to remain competitive.

Lawsuit abuse leads to higher taxes, and higher costs for all products and services made or sold here. The structural unfairness of our state’s legal system is the basis for this problem.

It creates huge economic incentives which lead to too many lawsuits, far too of which are frivolous -- both of which damage the climate for business and job-creation. Specifically we would like to see the immediate reform to the Section 240 & 241 of the Labor Law to eliminate the strict liability standard.

The members of NYIA support the efforts of the Coalition for Civil Justice Reform and urge you to enact meaningful tort reform this year.

An act to amend the general business law, in relation to the maximum liability for damage to a rental vehicle by an authorized driver

The New York Insurance Association represents over 75 property/casualty insurance companies collectively writing in excess of $7 billion annually on New York risks. The Association opposes the above referenced legislation.

Since 1988 liability for loss or damage to rental vehicles has been capped at $100. This cap was established due to the lack of responsibility shown by the rental companies. Before 1988 many rental companies were operating unscrupulously and would often commit fraud. If there is damage to a vehicle, a rental company may collect sufficient compensation from the renter's insurance company. This arrangement actually created an incentive for the rental companies to commit fraud. It was common for rental companies to "jack-up" the price of losses in order to collect more money from the insurance carriers. In many instances rental companies would submit claims for damages which never actually occurred. By capping the amount a rental company could collect at $100 it has helped to eliminate the incentive for fraud on behalf of the rental companies.

Under the terms of this legislation, not only could car rental companies surcharge drivers, but motorists could still be held liable for damages in a number of ways. In addition, the driver or its insurer has only seven days to inspect the vehicle.

Since the money does not come directly out of the consumers pocket, but rather the insurance company's pocket, raising the cap or eliminating the cap will not make consumers more responsible. The costs that insurers will be forced to carry will likely be passed on to all policyholders, not just those renting vehicles. It is estimated that only 5% of the population actually rent vehicles. Therefore, since automobile insurance is compulsory, it is unfair to expect the majority of individuals who pay for private passenger auto insurance to accept an increase, especially if they never rent vehicles. Increasing the cost to insurers will only create a subsidy to the car rental companies. There is no justification to support the need for this subsidy.

For the reasons stated above the New York Insurance Association opposes this legislation and respectfully requests that it not be enacted.

The Reinsurance Association of America is offering a basic reinsurance skill-building course on May 13-15 in Chicago, Illinois. This is an introduction to reinsurance for employees of and consultants to ceding and assuming insurers. The program was initiated in 2001 by the Kelley Insurance Center at Drake University in partnership with the Reinsurance Association of America.

We would appreciate it if you could disseminate information about the conference to your members and I have attached an electronic brochure for ease of distribution. The registration form is included in the brochure and we would like to offer the New York Insurance Association the RAA member rate of $595 ($100 off the regular rate). Please ask your members to check the space for the RAA member price and then write down “NY Ins. Assn. member” next to it.

This program includes two full days of instruction and is based on a time-tested curriculum used to teach reinsurance basics to more than 3,000 state insurance regulators, reinsurance buyers and sellers. It’s an excellent way to kick off a training program for staff new to the field or to reward reinsurance executives with a chance to problem solve with their peers basic contract, risk transfer, regulation, program design and accounting issues. The curriculum covers basics of property and casualty reinsurance. The course is designed to include two full days of teaching coupled with two half days of travel so staff’s time out of the office is limited to three days.

Information on the reinsurance education programs offered by the RAA is also available on our website at www.reinsurance.org. Click on the Re Ed icon. Questions can be directed to cohen@reinsurance.org or ph: 202/783-8329.

N.Y. Insurance Department Must Provide Guidance on Terror Exclusions, Consider Sub-Limits, Says NYIA

ALBANY, NY, Feb. 25 – Property/casualty insurance companies doing business in New York State need guidance from the New York State Insurance Department on what are acceptable exclusions for terrorism or limits, the New York Insurance Association (NYIA) said today.

Speaking at a department-sponsored public forum to assess the insurance marketplace, Bernard N. Bourdeau, president of NYIA, also asked the department to consider approving policy sub-limits for terrorism as means of helping the market.

“It is our understanding that appropriate sub-limits may encourage reinsurers to step forward and provide some additional terrorism coverage, thus easing the current situation,” he said. Bourdeau also urged congressional enactment of a federal terrorism backstop.

“We remain hopeful that a federal terrorism solution may still be enacted, but New York needs to act and act soon, with or without a federal backstop,” he said.

Bourdeau pointed out that “virtually every business in New York State can purchase terrorism coverage, except the insurance industry” which cannot obtain reinsurance coverage for terrorism.

“By requiring insurers to cover acts of terrorism where no reinsurance is available the insurance department concentrates almost the entire risk of a future terrorist attack on one industry – the insurance industry,” he said.

Bourdeau said that it is a violation of good public policy and risk management practices to confine these risks to one industry. “A major principle of insurance is to spread risk, not to concentrate it.”

The New York Insurance Association is a trade association of property/casualty insurance companies that provide insurance coverage for autos, homes and businesses throughout New York State.

Good morning. My name is Bernard Bourdeau and I am president of the New York Insurance Association—the state trade association representing 75 property/casualty insurers collectively writing in excess of $7 billion in annual premium on New York risks. I am pleased to testify at this public forum before the insurance department today to discuss the impact of september 11^th on the insurance marketplace, especially the availability and adequacy of coverage for homeowners, small businesses and large commercial risks.

Prior to the attack of september 11^th there was an obvious increased hardening of the commercial lines market. According to the insurance information institute prices in the commercial sector were already rising somewhere between 10 and 30% depending on the line. After declines in insurance premiums for much of the 1990’s, prices have been driven up by increases in construction costs, medical costs, and jury awards. But even with these increases, policyholders are still generally paying less for insurance today than they were a decade ago. Many carriers had already filed rate increases after experiencing several months of triple digit combined loss ratios. Insurance prices have been on the rise for several years, so businesses will see premiums generally rising for reasons that have little to do with the attacks on the world trade center.

There is market dislocation after every catastrophe. Over time the market will stabilize as insurers are better able to assess the new risk and price it accordingly. As much as 70% of catastrophe reinsurance contracts were renewed on January 1^st. Most contain terrorist exclusion language. This has forced the primary carrier to respond in one of the following ways: either write the risk bare and be totally exposed to future acts of terrorism, attempt to price the risk (obtaining insurance department approval for the necessary increase in premiums) to include acts of terrorism, or reconsider whether to write the risk at all. Our members do not like any of these options and neither will policyholders. While the sky did not fall in on January 1 as many predicted, consumers are faced with affordability issues. If nothing is done, this situation will soon turn to an availability issue.

We support temporary federal intervention in this particular instance and feel it is essential. While insurers have enough capital to cover the recent events, future coverage without reinsurance or federal backing of some kind will have a significant affect on the market and rates—rates that were already on the rise. Unfortunately no federal solution has been enacted and the clock continues to tick for insurers.

The bottom line is virtually every business in New York State can purchase terrorism coverage, except the insurance industry. By requiring insurers to cover acts of terrorism where no reinsurance is available, the insurance department concentrates almost the entire risk of a future terrorist attack on one industry—the insurance industry. It is a violation of good public policy and risk management practices to confine these risks to one industry. A major principle of insurance is to spread risk, not concentrate it.

We urge the department to provide insurers with further guidance and more specifics on what will constitute acceptable terrorist exclusions or limits. We also recommend the department consider approving sublimits for acts of terrorism. It is our understanding that appropriate sublimits may encourage reinsurers to step forward and provide some additional terrorism coverage thus easing the current situation. We remain hopeful that a federal solution may still be enacted, but New York needs to act and act soon, with or without a federal backstop.

We appreciate this opportunity and look forward to continued dialogue with the administration on this issue.

NYIA is pleased to inform members that the industry has obtained a major victory in the long-awaited decision on Regulation 68. Today the Supreme Court issued the favorable judgment in Medical Society of State of New York v. Serio stating that the petition in all respects has been denied. This means the new regulation as previously promulgated should now be in effect. NYIA anticipates that the Insurance Department will be providing guidance on compliance within the next few days.

When the industry introduced legislation to modify the time frames for no-fault billings, the trial bar opposed stating that the legislation unnecessarily usurps the authority vested in the Superintendent of Insurance. When the Superintendent promulgated regulation to modify the time frames the trial bar argued that the changes could only be made by legislation.

In the 11-page ruling Judge Wetzel discloses his perspective on the case with several interesting comments:

We applaud the court for siding with New York consumers against the criminal elements and their defendants. We are confident that our opponents will file an appeal with the higher court.

If you would like a complete copy of the decision, please contact Francine Grinnell in the NYIA office at fgrinnell@nyia.org.

NU Online News Service, Jan. 28, 4:17 p.m. EST—The head of a New York insurance company association said carriers would write broad terrorism exclusions into property-casualty policies if only New York’s insurance regulator would give them direction.

New York Insurance Association’s Bernie Bourdeau said insurers are looking for direction from the department over what exclusions would be acceptable, but have not received it.

The president of the Albany, N.Y.--based association made his comments today when asked about recent comments from state Insurance Superintendent Gregory V. Serio.

Mr. Bourdeau was critical of the superintendent for being "a little less than forthcoming" in his desire to see acceptable language on exclusions.

He said that 48 states have approved language developed by the National Association of Insurance Commissioners to set threshold damage levels for exclusions, and he is "disappointed" in the superintendent for not suggesting "what would be approved."

Last week, Mr. Serio reiterated his stance on terrorism exclusions to a group of insurance professionals during the Metro Regional Awareness Program, in Brooklyn, N.Y., sponsored by the Professional Insurance Agents of New York, based in Glenmont.

He said the department has received several filings for exclusions that were improvements over previous filings, but they were still under examination. He as rejected language prepared for members of the Insurance Services Office in Jersey City, N.J.

The department, he said, would not approve exclusions "that do not properly articulate the risk to be covered" or are "not in the public interest."

"Where the conflict arises is what does this exclusion really mean," Mr. Serio said.

The NAIC’s model language, which was written by ISO, would cap property losses at $25 million and physical injuries to 50 employees or less. Mr. Serio has said that these caps are inadequate given the reality of New York City property values and concentration of workers.

The department remains in discussions with individual companies over language, but no approvals are pending, Mr. Serio said.

Mr. Bourdeau agreed that exclusion language would have to be broader than the ISO language, but discussions to find acceptable language with the department are at an impasse.

"We need dialogue and we are disappointed the department has not engaged us in dialogue," Mr. Bourdeau said.

N.Y. Insurers Disappointed at Department's Failure
to Stabilize Insurance Market with Terrorism Exclusion

NEW YORK, January 9 – Insurance companies doing business in New York continue to face catastrophic losses from terrorist attacks and possible insolvency as a result of the New York Insurance Department’s failure to approve a terrorist exclusion from commercial insurance policies, the New York Insurance Association (NYIA) said today.

Without an exclusion from terrorism losses, individual insurance companies will have to decide what level of risk they can assume and what prices they must charge for a risk that is essentially uninsurable, said Bernard Bourdeau, president of NYIA.

“The department and its Superintendent Greg Serio passed up an opportunity to stabilize the commercial property insurance market in New York,” said Bourdeau. “We’re very disappointed in a decision we regard as harmful not only to insurance companies, but to insurance buyers as well.”

Bourdeau also expressed concern that the department’s failure to approve the exclusion could force some businesses to seek coverage in the unregulated insurance market of insurers not licensed to do business in the state.

He pointed out that the department rejected a model terrorist exclusion endorsed by the National Association of Insurance Commissioners that has been approved by insurance regulators in 36 states and territories. Most states approved the exclusion after Congress failed to enact a federal backstop for terrorism losses.

Property/casualty insurance companies are expected to pay from $40 billion to $70 billion in claims from the September 11 terrorist attacks.

Gregory V. Serio, Superintendent
New York Department of Insurance
Agency Building 1 – ESP 8^th Floor
Albany, NY 12257

I write to you today to express my deepest concerns that New York could have a potentially serious commercial insurance availability problem after January 1.

As you know, Congress has adjourned and will not return until late January, so future enactment of a Federal backstop is months away at best. Meanwhile many insurers’ CAT treaties take effect on January 1 and many have no, or severely limited, coverage for acts of terrorism. Insurers cannot insure commercial risks without adequate reinsurance or a federal backstop.

It is therefore absolutely imperative that the New York Insurance Department begin approving terrorist act exclusions in policies. Ideally the Department will approve language identical to the language being used by most other states. I fear that the failure of the Department to act immediately will cause severe problems for New York’s businesses after January 1.

The situation in Washington is changing almost hourly. There is still a possibility of a compromise solution before adjournment, but given the arcane rules of the Senate those who wish to delay have the upper hand. We remain concerned that the solutions being discussed do not adequately address the unique issues of small and medium size insurers. We are in close contact with NAMIC and we will keep you updated on developments which may go into the weekend.

On the state front the New York Insurance Department continues to remain silent on the issue of terrorism exclusions. The Department is developing a policy, but nothing has been issued. We have learned the Department does not believe they can allow a terrorist exclusion for the peril of fire because of the standard fire policy (remember the World Trade Centers actually collapsed due to fire, not the terrorist act of the plane crash). In addition, the matter is further complicated by the issue of bio terrorism. We’ve heard that some CAT renewals are now including terrorist coverage, but specifically exclude bio terrorism. The Department is overflowing with filings for various types of exclusions (terrorism, bio terrorism, caps on terrorism, and mold) and the backlog continues to mount. NYIA has had very frank conversations with the Department about the potential impact of their non-action.

Please be assured that the Association is monitoring this issue and taking appropriate action on your behalf. Unfortunately at this point in time we may have exhausted much of our resources. The 9-11 Task Force has agreed to principles that must be included in a federal backstop. We have already activated a grassroots lobbying campaign and members have corresponded with the entire New York delegation. NYIA has had a conference call with Senator Schumer’s office, and we continue to communicate our concerns with the Insurance Department. We continue to search for new and creative ways to emphasize the importance of emergency federal and/or state action.

NYIA will continue to represent the interests of the membership and will keep members informed as the situation evolves. We appreciate the effort from the members in assisting us in reaching a sensible solution.

This morning NYIA participated in a conference call with Senator Schumer’s office to discuss the federal proposals regarding terrorism. NAMIC (Pam Allen & Monte Ward) arranged the call and other participants included Associated Mutual (Zane Morganstein), Preferred Mutual (Robert Wadsworth), Utica First (Richard Zick) and Utica Mutual (Doug Robinson).

The purpose of the call was to emphasize the urgent need for a federal backstop for future terrorist attacks. NYIA recommended that a program should be equitable and must contain an individual company retention to address the needs of small companies. Participants suggested that personal lines should also be included, but no cross-subsidization should exist between personal and commercial lines. All agreed that a quota-share program would be more effective than a loan program.

Senator Schumer’s office acknowledged that this is a capacity issue and not a liquidity issue--at least for the time being. The Senators who have been principally interested in this legislation reached an agreement last week on the provisions of a package. The Senate proposal includes an individual company retention based on individual company commercial market share. The calculation is as follows: Take the national commercial industry premium of $134 billion and divide it by your commercial writings to get your market percentage. Take your market percentage and apply it to $10 billion to get your individual company retention dollar amount. Once your claims get above your individual company retention amount you are then eligible for the federal program. Losses that exceed a company's retention but fall under the $10 billion aggregated industry retention would be reimbursed by the federal government based on an 80/20 quota share. Losses that exceed a company's retention but fall above the $10 billion aggregated industry retention would be reimbursed by the federal government based on an 90/10 quota share. There is no assessment or payback provision. Participation would be mandatory for commercial lines and voluntary for personal lines. According to this proposal companies will only be on the hook for their own losses. The tort provision would require suits to be filed through one venue or court with punitive damage limitations.

The Treasury is currently circulating a draft package. At this point in time it is uncertain whether the terrorism proposal will be included in an economic stimulus package. It could be acted upon later this week or possibly next week.

We will continue to keep you informed as NYIA tracks this issue. If you have any questions, please don’t hesitate to contact us.

As you know, the primary insurance information source for the WTC disaster is the NY State Insurance Department web site. The site's password has just been changed, as part of routine maintenance to keep password protected information directed strictly to the insurance community. Please note the change:

Yesterday, an interdenominational memorial service for the families of the more than 5,000 people dead or still missing from the World Trade Center attacks was held at ground zero. Security and access will be tougher than usual.

The NY Disaster Coalition is aware that insurers and your contractors are having increasing difficulty getting access to some areas. We are putting a full court press on redefining procedures and seeking increased cooperation with the City. We will communicate the results of those efforts to you next week. Meanwhile, note the current procedures below for credential/access assistance.

Everyone is responsible for knowing and following the City's safety rules. Anyone needing access to "Green Zone" areas must wear a respirator and a hard hat.

NY Insurance Department is staffing Pier 92's (54th St. & 12th Ave.) temporary headquarters with Frauds Bureau personnel. Personnel are prepared to help any insurer that needs credentials, or is having difficulty with access. Either stop by Pier 92, or call the Frauds Bureau staff member on duty for assistance. Phone: 646-756-6264, hours: 8 a.m. - 8 p.m., seven days/week.

The NY Insurance Frauds Bureau office is staffed from 8:00 a.m. to 8:00 p.m., Monday through Friday; and 8:00 a.m. to 4:00 p.m. Saturday and Sunday. Investigators are ready and able to handle problems or answer questions. Phone: 212-480-6074

The NYC Department of Law opened a web site Monday, http://www.wtcrelief.info/ where donors can research charities collecting money for victims of the WTC attack. The site lists about 180 organizations that are registered with the Department and includes information about their financial filings and goals.

The Governor signed the NYIA initiative which permits an assessment corporation to amend its charter and be licensed to issue boiler and machinery insurance. The bill (S.5293 Seward / A.8950 Parment) was signed into law as Chapter 379 on October 23. Thank you to all the NYIA members that assisted in the grassroots lobbying campaign on this bill. It appears that our hard work paid off.

Several of our member companies have contacted NYIA about the potential problems of renewing commercial policies during the period of uncertainty about whether terrorism coverage will be available either in the private market or through a federally backed pool. I have had several discussions with the Insurance Department leadership on this subject and I have asked NYIA counsel Bob Pastel to review the applicable provisions of Insurance law. Bob's analysis of the company options under Insurance law is below for your information. The Department is well aware of the dilemma commercial insurers face with respect to this issue but they believe that they are unable to "waive" the provisions of law governing notice of cancellation and non renewal. Bob Pastel concurs with that opinion. We have a conference call scheduled with the Superintendent on Thursday afternoon and will update NYIA members right after the call. Everyone believes that some form of terrorism reinsurance pool will be created but unfortunately it will not be created in time for companies to make decisions on renewals coming on and after January 1 2002.

To: Bernard Bourdeau, President, NYIA
From: Robert Pastel, Pastel & Rosen
October 24, 2001

Re: Section 3426 cancellation of commercial risk, professional liability insurance or public entity insurance policies.

Section 3426 provides rights to commercial insurance policy holders, it prevents midterm cancellations and also requires advance notice of non-renewals. Additionally, carriers must provide at least 45 days advance notice to the Insurance Department of blanket or mass non-renewal notices for a “market,” as that term is defined in the Insurance Law (it does not include for-hire vehicles.) This notice of blanket non-renewals does not require Insurance Department approval, but the carrier must file a plan for orderly withdrawal.

Section 3426 requires carriers to give commercial policy holders advance notice of non-renewals. The key date is the policy expiration date. If notice is given after the policy expiration date, the carrier can be on the risk for the next year. Also, carriers must keep detailed (electronic) record of their non-renewals. The failure to maintain the record of non-renewals can subject the carrier to harsh penalties.

The statute gives the carrier three options. At least 60 days but not more than 120 days in advance of the policy expiration date, the carrier must give notice to the insured and his agent or broker the insurer’s intention:

Generally, there is a little leeway with the non-renewal notice and the conditional renewal notice. If these notices are sent prior to the expiration date, the insurer coverage continues on for 60 days from when notice is sent out. If the these notices go out after the expiration date of the insured can continue to with the carrier for an additional year. If the carrier decides to use the “I do not know” notice, the notice is valid only if it sent timely, at least 60 days, but not more than 120 days, in advance of the policy’s expiration date.

On Wednesday I met with Insurance Superintendent Greg Serio for a fairly lengthy discussion of the status of the commercial insurance market in New York. I described the concerns being expressed by many NYIA members. The Superintendent acknowledged the problems and expressed an understanding of the dilemma that NYIA members are facing. He asked me to convey the following points to the NYIA members, and I do so herein.

I was immensely pleased by the Superintendent's response and greatly comforted by his understanding of the reality NYIA members face. I too truly believe that a federal solution is forthcoming and we will work this out together.

Having said that, however, and having been an observer of this industry and the political process for over 25 years, I must add my own observations.

NYIA has just been informed that the Boiler Coverage legislation, A.8950, has just been delivered to Governor Pataki for his consideration. We encourage all NYIA members affected by this bill to make their support known as soon as possible by writing or emailing the Governor's office. Make certain to reference the bill by number. Again, the version being looked at is A. 8950. It was also known as S. 5293.

Senator Jim Lack from Long Island has introduced S.5798 which would prohibit insurers from selling an insurance policy in the state which contains a “terrorism” exclusion. Since we expect that many reinsurers will be requiring terrorism exclusions in their contract renewals, the effect of such a law on most NYIA member companies will be devastating. We have had a number of our members tell us that if there are terrorism exclusions in the reinsurance treaty and none available in the primary market, they will effectively be “out of business.”

This bill is seriously being considered by the Senate and it has 15 Senate Republican sponsors. It is absolutely essential that this bill be derailed as quickly as possible. Use these talking points in your arguments.

Here’s what to do. Go to the NYIA Legislative Action Center in the Members Only section of the NYIA website http://www.nyia.org/. Enter your zip code and pull up the email/fax your legislators. Send an email personalized to your company’s own situation. In addition, if you personally know another legislators in a nearby district email him/her as well.

Those of you who have a presence in any of these districts should be aware that the following Republican Senators have co-sponsored this bill. You should ask them directly to withdraw their name as a sponsor of the bill.

In response to several requests from the insurance industry, and in consideration of the impact of the tragic World Trade Center attack in New York City, the state has decided to change the date bar-coded insurance cards will be required to complete DMV transactions. The new date is January 7, 2002. Any insurance card with an effective date on or after January 7, 2002 must contain a compliant two-dimensional bar code that can be successfully scanned by DMV. There is no change to the schedule for issuance of renewal documents. Companies should still plan to begin issuing the bar-coded renewal cards starting January 1, 2002 and have them to all customers by January 15, 2003.

We encourage any licensed producer, who needs to generate insurance cards but who has not obtained their software, key and PIN from the State Insurance Department, do so immediately by going to www.ins.state.ny.us, selecting Agent/Broker news and reading the information concerning the Insurance Information and Enforcement System (IIES). Likewise, any company developing it’s own software to generate the new cards must not delay their effort to complete certification.

Everyone who already has the ability to issue bar-coded cards should continue to do so as it will help DMV collect policy numbers which will be helpful to insurance companies whenever we have to request a mandatory verification (MVF) of coverage. Producers are reminded that e-mail distribution of cards is the best way to ensure a customer receives a card as fast as possible that will be successfully scanned. The poor quality of the fax machine of either the producer or the customer/dealer can render a document unscannable and therefore unacceptable, creating difficulties for everyone involved in the transaction Again, we commend everyone for their efforts to date.

Governor Issues Order to Help Families of Missing, Deceased Cope With Estate and Financial Matters

New York's Life Insurers to Accept Affidavits in Lieu of Death Certificates Workers' Comp Board Suspends Death Certificate Requirement to Obtain Benefits

Governor George E. Pataki today issued an Executive Order streamlining court procedures and providing quick access to needed assets to help the families of missing victims of the World Trade Center attack cope with estate and financial matters. The Governor's order will help families make insurance claims, disburse estates and gain access to bank accounts.

The Governor also announced that New York State's life insurance companies will accept uniform affidavits in place of death certificates From World Trade Center disaster victims' next of kin, easing the burden on families of victims and expediting payments. In addition, the Governor announced that the New York State Workers' Compensation Board will suspend its practice of requiring dependents to produce a death certificate in order to obtain workers' compensation benefits.

"This unspeakable tragedy has caused tremendous pain and suffering for thousands of families and we intend to do everything in our power to provide comfort, support and assistance to them during this difficult time," Governor Pataki said. "By helping with crucial estate and financial matters, we hope to provide a measure of comfort to the many families affected by this terrible tragedy."

For World Trade Center victims, the Governor's Executive Order removes all requirements for the payment of filing fees in any matter relating to the estates or affairs of those who are missing or deceased as a result of the September 11 attack. In addition, the order provides that families will not have to comply with the requirement that notice of the proceedings must be provided through publication in a newspaper. Under the Governor's order, families may also file proceedings in any county they choose, rather than only in the decedent's home county.

The Governor's Executive Order also provides help so families can get quick access to needed assets that may be in bank accounts held in the name of their relative who was a victim of September 11's horrific events. A victim's spouse, or if there is no spouse, the guardian or care-giver to the victim's children, will be able to make withdrawals from the victim's bank accounts and money market mutual fund accounts by submitting affidavits (on Banking Department forms) to the financial institutions holding such accounts. Spouses and guardians/caregivers will be able to withdraw up to an aggregate total of $15,000 from all such accounts.

Also, all insurers licensed to do business in New York State will accept affidavits from next of kin of victims of the World Trade Center, Pentagon and Pennsylvania disasters when a death certificate is not available. In addition, the Governor requested the Workers' Compensation Board to adopt a plan that would designate missing workers as "deceased" for the purpose of workers' compensation, regardless of whether a death certificate has been issued. This will relieve families from having to prove their missing loved one is actually deceased. It will also enable the Board to process claims and award benefits and will allow insurers to commence payments. Instead of being compelled to testify, families will be required to simply sign statements indicating that they are indeed dependents of a missing victim.

The Governor announced that Chief Administrative Judge Jonathan Lippman is in the process of issuing uniform forms and guidelines for expediting the Surrogate's Court procedures In addition, the Governor's office is working with bar associations to assemble a group of experienced Surrogate's Court practitioners who will be available to provide free legal assistance to the families.

The Governor also stressed again that family members should be aware that: (1) if they have joint bank accounts with the victims, they can access those funds immediately to take care of the victims and their families, and (2) if the decedent's estate is $20,000 or less, they will be able to settle the estate with little court involvement.

The Department of Insurance has now activated the Disaster Coalition and several of the large carriers have sent their designated disaster contact representative to the Department's Albany office. These representatives have direct access to State Emergency Management Office (SEMO) situation reports and are feeding information to the Department. If you have an "800" number or cat center location, you may notify the Department and they will post it to their website.

The Department of Insurance (DOI) New York City offices remain closed, but the DOI is now able to send and receive e-mail. The toll-free number is also available to contact the Department for any concerns: 1-800-339-1759. All on-line temporary adjuster permits must be submitted by a company (company must "certify" the applications).

I have attached the DOI's Circular letter #26 regarding cancellation and non-renewal moratoriums which may be utilized at the Superintendent's discretion.

Until further notice, the Consumer Services Bureau requests that all facsimile transmissions be directed to the following number: (518) 486-1503. This is a temporary measure due to the closing of the New York City Office as part of the emergency response to the World Trade Center disaster.

Our thoughts and prayers go out to our friends and colleagues who have been affected by this tragedy.

Gregory V. Serio, Superintendent
New York Insurance Department
Agency Building 1 – 8^th Floor
Empire State Plaza
Albany, NY 12257

On behalf of our member companies, the New York Insurance Association (NYIA) hereby urges the Superintendent to exercise the emergency authority granted to him under the Insurance Law, to suspend or otherwise adjust the provisions relating to cancellation and non-renewal deadlines. This action is necessary for commercial policies (covered by Section 3426) in light of the tragedy in downtown New York and the interruption to all insurer operations, as well as the operations of some national and regional brokers.

The New York commercial lines non-renewal statute (Section 3426) requires carriers to provide insureds with written notice of non-renewal at least 60 days prior to the expiration of the policy period, stating therein the specific reasons for non-renewal. If the carrier fails to meet this 60-day notice requirement, the carrier is required to provide the insured with a renewal policy, containing a fresh limit of liability at the same terms, conditions and premium for another year. The only exception to this requirement is that if the policy has not yet expired, the insurer can extend the policy for the days necessary to meet the 60-day requirement. For example, if there are 29 days remaining before the policy expires, the carrier can effectively non-renew the policy, provided that the notice extends the policy’s expiration for an additional 31 days.

The problem we foresee relates to the accounts that have policy expiration dates spanning the time that insurers have been unable to access files in downtown NY locations.

Similarly, the conditional renewal requirements proscribed by Section 3426 require that carriers provide 60-day notice of the exact amount of the change in premium at renewal, as well as specifically identify the change in policy terms, reduction in limits or increase in deductibles. Obviously, this will be difficult, if not impossible to comply with if insurers have not received the renewal underwriting information either because they are unable to access underwriting files or because the regional broker is unable to send the appropriate information. Some of our member insurers had no access to their offices for up to a week, and two of the largest commercial brokers have been devastated by the events at the World Trade Center. Again, if an insurer misses the 60-day conditional renewal deadline, it is obligated to remain on risk, with a new limit of liability, at the same terms and conditions and premium for an additional year. It is not fair to penalize insurers where the delay at hand is totally out of their control.

We recommend that in circumstances where an insurer can reasonably establish that its failure to meet the conditional renewal and/or non-renewal notice deadlines was due to the recent events in downtown New York, the insurer should be given the flexibility to extend the policy for 60 days to meet the Law’s notice requirements. This should be acceptable given that the insurer is still giving each insured the requisite 60 days to allow them to seek alternative quotes or replacement coverage.

There are a number of claims-related statutes and regulations, as well, in which the deadlines should be similarly suspended or adjusted.

In sum, any provisions in the Insurance Law or regulations relating to deadlines or limitations should be reviewed in light of the events in New York and the Superintendent should give great consideration to suspending or adjusting those time-frames, assuming a showing by an insurer that any delay was caused directly by the current situation in New York.

If you have any questions or wish to discuss this further, please don’t hesitate to contact me.

As many of you are aware the Governor recently signed off on the amendments to Regulation 68.  The amendments are scheduled to be published in the State Register on August 22nd and will become effective on September 1, 2001.  The good news is there are no substantive changes to the previously-published amendments.  Once the regulation is published NYIA will be asking members to send in public comment in support.

Insurance Department Superintendent Greg Serio states "Regulation 68 will provide important weapons to fight fraud and abuse in our continuing effort to control automobile insurance costs.  Regulation 68 provides better safeguards for the consumer and returns the no-fault automobile insurance system to its roots as a system that provides for the prompt and fair adjudication of automobile insurance claims."

If adopted, Regulation 68 will institute new timeframes for accident victims to report a claim and medical providers to submit claims for payment--eliminating existing loopholes that have been exploited as
opportunities for fraud and abuse. It reduces the time medical providers have from each treatment to submit claims for payment from 180 days to 45 days while it maintains the amount of time the carrier has to pay on claims.

At this point in time it remains uncertain whether or not the proposal will again be challenged in court.  NYIA will keep members informed as the amendments advance through the regulatory process.

For a complete review of the regulation you can visit the New York Insurance Department's website at www.ins.state.ny.us and look under the "regulations - final adoptions" section or http://www.ins.state.ny.us/acrobat/r68ftext.pdf.

The Committee on Nominations will be recommending nominations for offices which will be filled at the Annual Meeting in the fall. We are interested in determining which members may be interested in serving on the Board of Directors, as an Officer, or on a Committee in the future. Please be advised that the Board is currently in the process of reviewing our committee structure and governance. Committees may be slightly modified next year, but we are soliciting your input in an effort to determine your general areas of interest. If you or someone else from your company is interested in serving, please fill out the form below and fax it to the NYIA office at (518)432-4220 or email it to fgrinnell@nyia.org.

Assembly Democrats apparently just won't rest until they've made it absolutely impossible for New Yorkers to get car insurance.

As The Post's Ken Lovett reported this week, the Dems intentionally refused to renew certain state laws, so insurers will now have to get special approval every time they want to raise rates even a little or drop costly drivers.

The lawmakers' goal: to freeze rates and regulate every practice that insurers use to make a profit.

They think that'll win them points with voters for being pro-consumer. "Insurers should be required to justify every penny of their rate hikes," said Assembly Insurance Committee Chairman Alexander Grannis (D-Manhattan).

To no one's surprise, of course, insurers responded by threatening a big, collective "toodle-oo."

The Assembly's action, says Bernard Bourdeau of the New York Insurance Association, "will force companies to seriously consider whether or not to write new business in New York . . ."

So motorists might soon find themselves up the road without a policy. Think that will never happen? Then take a gander across the Hudson to the Garden State, where - as Steven Malanga noted on these pages yesterday - four insurers have already announced plans to cut and run, rather than subject themselves to onerous regulation and red-ink-producing rate caps.

As Malanga says, it's a shame the Assembly chose the cynical path. Because it's had a chance to really improve things for New York motorists - by passing legislation that cracks down on rate-bloating fraudulent claims.

Would the Democrats really try to fool voters and score points, even if it makes things worse for New Yorkers?

Well, consider this: If the car-insurance market remains a mess, voters next year may well take it out on Gov. Pataki, who's up for re-election. High car-insurance rates, remember, almost did in of the 1997 re-election bid New Jersey's then-Gov. Christie Whitman.

So the Dems' bid to sucker voters might yet prove good politics. Unfortunately, it may leave car owners without insurance.

New York Insurance Association Blasts State Legislature for Failing to Address Auto Law

ALBANY, NY, AUG. 3, 2001 – The New York Insurance Association (NYIA) strongly criticized the New York State Legislature today for allowing several provisions in the state auto insurance law to expire, effectively impeding competition between insurers and limiting consumer choices when shopping for auto insurance.

Flex rating, a statute which allowed insurance companies to raise or lower rates up to seven percent without regulatory approval has now expired. In addition, the legislature failed to extend the two percent non-renewal provision that permits insurers some flexibility in managing their book of business.

“We are extremely disappointed in the outcome,” said Bernard N. Bourdeau, CAE, president, NYIA. “The Legislature’s failure to extend important provisions of the auto law in New York will have detrimental consequences for auto consumers throughout the state,” he said. “These provisions helped foster price competition,” he added. “Now insurers must seek prior approval from the state insurance department before private and commercial auto insurance rates can be set. How can companies effectively compete when a bureaucracy sets prices?”

“Without the two percent rule, which allowed companies to cancel or non-renew up to two percent of their book of business in any rating territory, insurers are severely restricted as to which risks they may non-renew” Bourdeau explained. “The inability to non-renew certain risks will force companies to seriously consider whether or not to write new business in New York, which will further burden our already troubled auto market.”

“By refusing to renew these important provisions, the Legislature has sent a clear message to the New York state insurance industry,” said Bourdeau. “They do not support healthy competition in New York’s auto insurance market, which could result in rising rates and diminished availability of coverage.”

The New York Insurance Association is a trade association of property/casualty insurance companies that provide insurance coverage for autos, homes and businesses throughout New York State.

June 21, 2001
Bernard Bourdeau
President
New York Insurance Association, Inc.
130 Washington Avenue
Albany, NY 12210

Re: Compliance with Regulation 169-Privacy of Consumer Financial and Health Information

It has been brought to our attention that some insurers are requesting that consumers provide their social security number in order to exercise their right to opt out of having their nonpublic personal information shared with nonaffiliated third parties. It is the Department’s position that requiring a consumer’s social security number in order for that consumer to exercise the consumer’s opt out right is inconsistent with the language and the intent of Regulation 169. The Department believes that your association can provide an effective means for efficiently disseminating the Department’s position on this issue.

While the Department has concluded that an opt out notice can include a request for a social security number, compliance with such request must be optional on the part of the consumer. In addition, the fact that it is optional must be disclosed to the consumer and opt out notices without social security numbers must be treated as a valid exercise of the consumer’s opt out right.

The Department realizes that insurers may have sent their opt out notices in advance of the July 1, 2001 compliance date. The Department would prefer that these insurers that sent opt out notices requiring that a consumer provide their social security number resend opt out notices without the requirement of a social security number. The Department recognizes, however, that such action may be cost prohibitive and confusing to consumers. Therefore, in light of an immediate re-mailing of appropriate opt out notices, the Department will require that: