Should You Wish To Increase Your Consumer Complaint Ratio

It's never been easier to drive a New York insurer's consumer complaint ratio higher. Insureds or their "authorized" representatives can now sit at their computers at all hours of the day and night (just like coverage bloggers) and file online electronic complaints against their insurers. Beats licking a 42¢ stamp.

What I've never understood is the seeming eagerness of some insurers to promote or facilitate the filing of consumer complaints -- not by misbehaving, but by tacitly inviting their insureds to complain, in every piece of correspondence that leaves the insurer's offices. Earlier today, for example, I saw such a misplaced invitation in a letter denying commercial auto liability coverage to a general contractor for injuries from a workplace accident. I'll explain.

Most New York insurers know that Regulation 64 (11 NYCRR Part 216) requires certain letters to "prominently set out" the following advisory paragraph (see Editor's Note of 01.28.14 below):

Should you wish to take this matter up with the New York State Insurance Department, you may file with the Department either on its website at www.ins.state.ny.us/complhow.htm or you may write or visit the Consumer Services Bureau, New York State Insurance Department, at: 25 Beaver Street, New York, NY 10004; One Commerce Plaza, Albany, NY 12257; 200 Old Country Road, Suite 340, Mineola, NY 11501;or Walter J. Mahoney Office Building, 65 Court Street, Buffalo, NY 14202.

Many New York insurers apparently remain uncertain, however, of what kinds of letters must actually include that advisory paragraph. Under Regulation 64, there are only two kinds of letters that must do so:

1. letters "rejecting any element of a claim involving personal property insurance" (11 NYCRR § 216.6[h]); and
2. letters explaining or rejecting any element of a claim for auto physical damage (11 NYCRR § 216.7[d][3]).

Let's take these in reverse order. Everyone knows what an "auto physical damage" claim is, right? We're talking first-party, not third-party claims. Indeed, § 216.7 begins by stating that “[t]his section is applicable to claims arising under motor vehicle collision or comprehensive coverages”. Thus, by implication, letters regarding third-party property damage claims need not include the advisory paragraph. Notice also that § 216.7(d)(3) is somewhat broader in its scope than § 216.6(h) in that the advisory paragraph must be included in both coverage rejection and explanation letters.

Which brings us to letters "rejecting any element of a claim involving personal property insurance", the first type of letter in which the advisory paragraph must be included. A letter rejecting an element of a personal property claim is not:

• an acknowledgement letter;
• an ROR letter;
• a non-waiver agreement;
• a letter written solely to explain personal property coverage or payments;
• a letter forwarding payment to an insured;
• a disclaimer and denial letter written solely with respect to other than personal property claims, such as real property/structure or ALE/LOU claims, or liability coverage claims; or
• every other letter that leaves the insurer's office addressed to an insured or claimant.

In a January 6, 2004 opinion letter, the NYS Insurance Department's OGC (Office of General Counsel) opined:

The term "personal property insurance" in Section 216.6(h) limits the applicability of subdivision (h) to personal lines property insurance. Thus, subdivision (h) is not applicable to commercial lines property insurance or to liability insurance.

Letters rejecting commercial lines property insurance -- no advisory paragraph required.
Letters rejecting (disclaiming/denying) liability coverage -- no advisory paragraph required.

See?

I'm a less-is-more, strict constructionist, kind of coverage attorney when it comes to regulatory issues such as this. If it were my call (which I openly concede it is not), I'd follow the reg. Reduce toner usage AND one's consumer complaint ratio at the same time. What could be better? You insurer Reg 64 compliance people won't mind, I'm sure. Unless you really like responding to consumer complaints, in which case you may want to consider printing the advisory paragraph on bills and policy forms, as well. Or not.

Editor's Note (12.07.10) ~~  Since originally posting this back in May 2008, it has come to my attention that the New York State Insurance Department takes the position that if a policy under which coverage is being denied includes personal property coverage, sch as a homeowners policy, a letter rejecting any element of the claim must include the advisory paragraph regardless of whether the claim is just for building or dwelling coverage.  For that reason and although I may disagree with the Insurance Department on this point, I've struck the reference to denials for other than personal property claims in the above bullet list.

Editor's Note (01.28.14) ~~ See today's blog post for the updated verbiage of the advisory paragraph.