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New York Governor Vetoes Legislation Opposed by NAMIC

INDIANAPOLIS (Aug. 2, 2007) - The National Association of Mutual Insurance Companies (NAMIC) today applauded New York Gov. Eliot Spitzer's decision to veto legislation that would have posed significant problems for the insurance claims process and led to higher rates for consumers and businesses. The bill addressed direct action and late notice of claims.

"This legislation would have drastically altered the processes and procedures under which insurance claims are negotiated and settled," said Paul Tetrault, NAMIC's state affairs manager for the northeast region. "In doing so, it would have placed New York far outside the mainstream regarding insurance claim practices, making it more difficult and costly for businesses to operate in the state."

The legislation, S-6306/A-8362, included two sections. The first would allow a third-party claimant, who is not a party to the insurance contract, to file a direct action against a defendant's insurer to determine whether the claim is covered. "This would unnecessarily upset well-established principles of statutory and case law and drive up claims costs dramatically," Tetrault wrote in a letter asking the governor to veto the legislation. "It would enable plaintiffs to interfere with the insurer-insured relationship in order to press for higher settlements, resulting in a huge expansion of litigation, in which insurers would engage in costly legal proceedings against parties with which they have no relationship."

The second section would change the legal requirements for denying a claim based on late notice, Tetrault explained. Currently, insureds must give notice of the circumstances for a claim within a reasonable time, and insurers must make their coverage position known as soon as reasonably possible - a requirement that is typically inapplicable if the insured has a reasonable excuse. "This legislation would dramatically alter the dynamics of the insurer/insured relationship so that an insurer would have to show it had been materially prejudiced in order to deny a claim for late notice," he said. "Requiring insurers to make such a showing creates a heavy, unbalanced and improper burden."

For further information, contact
Nancy Grover
(202) 628-1558 Tel
(202) 628-1601 Fax
ngrover@namic.org