Friday, June 13, 2008

STATUS UPDATE (Part III) -- Direct DJ/Late Notice/Prejudice Bill Released by NYS Governor's Office

Earlier this week, the NYS Governor's Office released Program Bill #65, which is the direct DJ/late notice/prejudice bill discussed in my May 14th post. The most recent version dated June 5, 2008 appears to be identical to the May 7th version, and its provisions are discussed in my Status Update (Part II) blog.

The Governor's memorandum gives the following purpose for this bill:

This bill: (1) permits a party suing an individual in a personal injury or wrongful death case to commence a simultaneous declaratory judgment action against the insurer, in limited circumstances, to challenge the insurer's denial of coverage based on the failure to provide timely notice; and (2) prohibits certain liability insurers from denying coverage for a claim based on the failure to provide timely notice, unless the insurer suffers prejudice as a result of the delayed notice.

As its Statement in Support of the late notice/material prejudice portion of this bill, the Governor's memorandum states:

An insured who files a late notice of claim must demonstrate that it was not reasonably possible to have given such notice within the prescribed time, and that notice of the claim was provided as soon as was reasonably possible. The insurer need not show any prejudice as a result of the late notice in order to disclaim, leaving the burden of proof squarely on the insured. New York is in the minority of states in the country because most states require insurers to suffer some form of prejudice before coverage may properly be denied for late notice. Current law, therefore, leads to an inequitable outcome with insurers collecting billions of dollars in premiums annually, and disclaiming coverage over an inconsequential technicality.
If passed, this bill will become effective 180 days after it becomes law.

The New York State Legislature has only five days left in its 2008 January-June legislative session and given the amount of input the insurance industry already reportedly has had in the drafting of this bill, most expect this bill to be both introduced and passed this month.

June 24, 2008 -- The Governor's Program Bill #65 passed yesterday. See my Status Update (Part IV) post and related posts for details.


Hugh Fustercluck said...

Whew, thank goodness. For far too long, insureds have been burdened with the unreasonable requirement of reporting occurrences and claims to their insurers in a timely manner. What's the big rush, anyway? The accident already happened. It's not like reporting it quickly is going to make the situation any better. We live in a society that moves too fast and causes people stress. So instead of the requirement that an occurrence be reported "timely," insurance policies should say, "In the event of an occurrence that may lead to a claim, relax. You're under enough stress as it is. Take your time reporting it to us. We'll be here when you're ready. Believe us, we have plenty of other things to do. We'll be sitting by the phone whenever you get around to it. That's the kind of cool, laid-back company we are."

You have to love the priorities of our Legislature. Judges haven't had a raise in 10 years, we can't get a single piece of legislation passed that gives any relief to our struggling middle class, but if a plaintiff's attorney misses out on a fee because a homeowner didn't bother to report that someone broke their hip on his front steps, our lawmakers become galvanized into action.

Roy A. Mura said...

Thanks for the comment, Hugh. Maybe in your experience as well, mine has been that most liability insurers have for years been reluctant to disclaim for late notice unless there IS some kind of prejudice or the reporting delay is egregious and unexcused. Late notice disclaimers have been hard enough to sustain in litigation, but the "trial lawyers" aka plaintiffs' bar, alike electricity, prefer the path of least resistance to the $$$ (not that there's anything wrong with that), and hence, in my opinion, the Governor's unfortunate and misguided use of the term "inconsequential technicality" to refer to an important and purposeful condition precedent to coverage.

Let's be honest, the primary goal of this bill is to squelch late notice disclaimers. It will be interesting to watch whether that goal will be achieved. With the "irrebuttable presumption" and burden of proof provisions, some insureds and injured parties who previously may not have faced late notice disclaimers likely will be now, and will find themselves shouldering the burden of proving a negative.