Thursday, November 29, 2012

Emergency Adoption of the Twelfth Amendment to New York Insurance Regulation 64

This afternoon New York Governor Andrew Cuomo announced four new measures or actions being taken in New York purportedly to expedite and in response to Sandy-related insurance claims:
  1. today's issuance by the New York Department of Financial Services of an emergency amendment to New York Insurance Regulation 64 (11 NYCRR Part 216) reducing from 15 business days to 6 business days the time for insurers "to commence" an investigation of certain types of claims "occurring from October 26, 2012 through November 15, 2012" in the 10 designated counties (Bronx, Kings, Nassau, New York, Orange, Queens, Richmond, Rockland, Suffolk or Westchester) and, if they wish their investigation to include an inspection of the damaged or destroyed property, to conduct that inspection within that 6-day period; 
  2. the inclusion within that emergency regulation of a provision allowing claimants to commence certain repairs immediately and before the insurer has had an opportunity to inspect the damaged property "[w]here necessary to protect health or safety" and provided the claimant submits proof of loss documentation; 
  3. the issuance of Executive Order Number 82 temporarily suspending from today and until further notice the requirements of New York Insurance Law § 2108 so that the DFS may more easily issue temporary public adjuster licenses that authorize such temporary licensees to adjust property/casualty insurance claims in the counties of Bronx, Kings, Nassau, New York, Orange, Queens, Richmond, Rockland, Suffolk and Westchester that are commenced during the period this executive order remains in effect; and 
  4. the launching of an "online report card system concerning insurance companies who are operating in the areas that were affected by Hurricane Sandy."
  You can watch the Governor's press conference, including the Q&A at its end, here:


New York property insurers should take note of the following:

Twelfth Amendment to New York Insurance Regulation 64 (11 NYCRR Part 216)

Amendment of Existing Subsection 216.5(a)

Notwithstanding what the Governor's and DFS's press releases say or imply, there never was and still is no actual requirement in Regulation 64 that a New York property insurer inspect a claimed loss.  Until today section 216.5(a) only required insurers subject to that section to "establish procedures to commence an investigation of any claim filed by a claimant, or by a claimant’s authorized representative, within 15 business days of receipt of notice of claim."  That subdivision was amended ever so slightly by renumbering it as 216.5(a)(1) -- to allow for the addition of subsection (a)(2) -- and by deleting the words "establish procedures to" and changing ""receipt of" to "receiving".  The amended subsection, which is applicable to ALL insurers that are subject to section 216.5, now begins by providing that such an insurer
shall commence an investigation of any claim filed by a claimant, or by a claimant’s authorized representative, within 15 business days of receiving notice of claim.
Of course, the regulation nowhere defines what suffices to "commence" an investigation of a filed claim.  Presumably that is something more than merely acknowledging a claim, however, inasmuch as section 216.4(a) already requires insurers within 15 business days to acknowledge in writing their receipt of all claim notifications.

Addition of New Subsection 216.5(a)(2)

The bulk of today's emergency regulation is its new paragraph (2) of section 216.5(a).  Here's the language of that new paragraph, which took effect today:
(2)(i) Notwithstanding paragraph one of this subdivision, for claims that would otherwise be subject to the provisions of paragraph one the provisions of this paragraph shall instead apply, with respect to any claim occurring from October 26, 2012 through November 15, 2012 in the counties of Bronx, Kings, Nassau, New York, Orange, Queens, Richmond, Rockland, Suffolk or Westchester, including their adjacent waters, with respect to
(a) loss of or damage to real property;
(b) loss of or damage to personal property; or
(c) other liabilities for loss of, damage to, or injury to persons or property.
(ii) Every insurer shall commence an investigation of any claim filed by a claimant, or by a claimant’s authorized representative, within six business days of receiving notice of claim, provided, however, that if a claimant, or the claimant’s authorized representative, filed a claim
between October 26, 2012 and November 29, 2012, then the insurer shall commence an investigation of the claim within six business days after November 29, 2012 or 15 business days of receiving notice of claim, whichever is sooner. If the insurer wishes its investigation to include an inspection of the damaged or destroyed property, the inspection, whether performed by the insurer, an independent adjuster, or other representative of the insurer, must occur within the time frames specified in this paragraph.

(iii) An insurer shall furnish to every claimant, or claimant's authorized representative, a notification of all items, statements and forms, if any, that the insurer reasonably believes will be required of the claimant, within six business days of receiving notice of the claim.

(iv) A claim filed with an agent of an insurer shall be deemed to have been filed with the insurer unless, consistent with law or contract, the agent notifies the person filing the claim that the agent is not authorized to receive notices of claim.

(v) Where necessary to protect health or safety, a claimant may commence immediate repairs to heating systems, hot water systems, and necessary electrical connections, as well as exterior windows, exterior doors, and, for minor permanent repairs, exterior walls, in order to enable property to retain heat, and any policy requirement that the policyholder exhibit the remains of the property may be satisfied by the policyholder submitting proof of loss documentation of the damaged or destroyed property, including photographs or video recordings; material samples, if applicable; and inventories, as well as receipts for any repairs to or replacement of property. This subparagraph does not apply to claims under flood policies issued under the national flood insurance program.
Insurers subject to section 216.5(a)(2) should take note of the following:
Temporal Limitation of 216.5(a)(2) -- 216.5(a)(2)(i)
This new subdivision expressly only applies to "any claim occurring from October 26, 2012 through November 15, 2012".  Now, I'm not sure when a claim "occurs" and whether this new subsection should have read "any loss occurring", but this new subsection does seems to be temporally limited to claims "occurring from October 26, 2012 through November 15, 2012".  If someone could explain why November 15th was selected as the end date, I would be appreciative.  That's a period of 20 calendar days.
Territorial Limitation of 216.5(a)(2) -- 216.5(a)(2)(i)
This new subdivision applies only to claims "occurring" in the counties of Bronx, Kings, Nassau, New York, Orange, Queens, Richmond, Rockland, Suffolk or Westchester, and their adjacent waters.  Once again, I presume the Department meant loss rather than claim when speaking of something "occurring".  I don't know what it means for a claim to "occur" in the Bronx, or Staten Island, or Long Island.  Claims stems from losses and are asserted, filed, or made; they don't really occur, do they?  Nevertheless, whatever is meant by "occurring", it must have taken place in one of these 10 counties or their adjacent waters for this new paragraph and its new requirements to apply. 
Type Limitation of 216.5(a)(2) -- 216.5(a)(2)(i)
This new subdivision only applies to three types of claims or losses:
  1.  loss of or damage to real property; 
  2. loss of or damage to personal property; or
  3. other liabilities for loss of, damage to, or injury to persons or property.
I know what Types 1 and 2 are and think Type 3s are 3rd-party BI and PD liability losses and resulting claims.  Right?  

Contrary to what may become or already is a widespread belief, however, no part of this emergency regulation is limited to Sandy-related claims.  As long as a claim "occurs" within the designated period and within one of the designated counties and is of one of the above three types, the new requirements ostensibly apply.
Reduction of Time to "Commence" Investigation to Six (6) Business Days -- 216.5(a)(2)(ii)
For claims to which new subsection 216.5(a)(2) applies (see above), the insurer's time to "commence" its investigation of such claims is now either
six (6) business days after today, November 29, 2012 -or-
15 business days of receiving notice of the claim
 whichever is sooner.  During Governor Cuomo's press conference, Superintendent Lawsky explained that if a claim was already filed with the insurer, the insurer would have the lesser of either the balance of the previous 15-day period or 6 days from today to commence its investigation and, if desired, to inspect the loss.  I'm interpreting and adding the latter part; both Governor Cuomo and Superintendent Lawsky made it sound like this new emergency regulation would impose an obligatory inspection requirement on all applicable insurers for all applicable claims, but it doesn't read that way.  Notice that the second sentence of 216.5(a)(2)(ii) reads:
If the insurer wishes its investigation to include an inspection of the damaged or destroyed property, the inspection, whether performed by the insurer, an independent adjuster, or other representative of the insurer, must occur within the time frames specified in this paragraph.
The inspection is not a "shall"; it's an "if".  And only if it's desired on qualifying claims must it then be conducted "within the time frames specified in this paragraph" which presumably (hedge here) is the sooner of either six business days from today or 15 business days from when the insurer received notice of the claim.  
Reduction of Time to to Six (6) Business Days to Furnish to Claimants Stuff that Will Be Required of Them -- 216.5(a)(2)(iii)
This seems relatively straightforward.  For qualifying claims, insurers shall furnish to every claimant, or claimant's authorized representative, a notification of all items, statements and forms, if any, that the insurer reasonably believes will be required of the claimant, within six (6) business days of receiving notice of the claim.
Claims Filed with the Insurer's Agent -- 216.5(a)(2)(iv)
Also pretty straightforward.  Unless a producing agent notifies the the person filing the claim that the agent is not authorized to receive notices of claim, claims filed with an agent of a qualifying insurer will be deemed to have been filed with the insurer.
Immediate Repairs Provision -- 216.5(a)(2)(v)
Notwithstanding the new provisions of 216.5(a)(2)(ii), claimants of qualifying claims (see above) may commence certain immediate repairs "[w]here necessary to protect health or safety".   Immediate repairs may be made to
heating systems, hot water systems, and necessary electrical connections -and-

exterior windows, exterior doors, and, for minor permanent repairs, exterior walls, in order to enable property to retain heat[.]
This subdivision further provides that any policy requirement that the policyholder exhibit the damaged property "may be satisfied by the policyholder submitting proof of loss documentation of the damaged or destroyed property, including photographs or video recordings; material samples, if applicable; and inventories, as well as receipts for any repairs to or replacement of property."
Public Adjuster-repped Claims
Our governor today announced the temporary suspension of certain licensing requirements of Insurance Law § 2108 so that more public adjusters could be temporarily licensed to help New York insureds with their property claims, but did anyone at the DFS consider that section 216.2(d) of Regulation 64 already provides, and continues to provide, since it was left unamended and unaffected by this emergency regulation, that
... subdivision (a) of section 216.5 of this Part shall not be applicable to policies of insurance where the claimant is represented by a public adjuster or a person acting in the capacity of a public adjuster pursuant to the provisions of article 21 of the Insurance Law[?]
So what become of the new requirements of subparagraph (2) of 216.5(a) in PA-repped qualifying claims?  Certainly an argument could be made they don't apply. 

Executive Order Number 82

Which brings us to Executive Order Number 82, which you can read in its entirety for yourself if you care to.  My read of this executive order is that it merely permits or creates the category of a temporary public adjuster who, upon issuance of such a license, will be authorized only "to adjust property/casualty insurance claims in the counties of Bronx, Kings, Nassau, New York, Orange, Queens, Richmond, Rockland, Suffolk and Westchester that are commenced during the period for which this Executive Order is effective[.]"

Once again, I'm not sure what is meant by "claims ... that are commenced" within this executive order's period, but presumably it means claims filed on and after today and for as long as this executive order, which itself has a "until further notice" expiration date, remains in effect. 

Under this executive order, the requirements to obtain such a temporary PA license are:
  1. completion of an application on a form prescribed by the Superintendent of Financial Services;
  2. signing of such application form by a public adjuster who is licensed in this State pursuant to Section 2108 of the Insurance Law, whose license is in good standing, and who will be responsible for both the supervising of the temporary licensee either in an employer/employee relationship or other arrangement whereby the licensed public adjuster has control over the temporary licensee and the satisfactory completion of all adjustment undertaken by the temporary licensee;
  3. the temporary licensee has not had an insurance license revoked, suspended or otherwise terminated for cause in any state in the United States in the last ten years;
  4. the temporary licensee has not been charged with, been convicted of, or pleaded guilty to or nolo contendere with respect to a crime or misdemeanor in any state in the United States in the last ten years; 
  5. the temporary licensee has not been found liable for misrepresentation, fraud, or unethical conduct in any state in the United States in the last ten years; and 
  6. the temporary licensee is presently licensed in another state as a public or independent adjuster to adjust property/casualty insurance claims; or has 5 years prior experience within the last ten years as a public or independent adjuster adjusting property/casualty insurance claims in the United States; or has been licensed as a public or independent adjuster in New York State within the last 5 years.
Online Insurer Report Cards

For the stated purpose of "hold[ing] insurance companies accountable to consumers and allow[ing] New Yorkers to see the performance of their insurance company compared to other companies", today the DFS published online "report cards" of certain, but certainly not all, auto and property insurers that "are operating in the areas that were affected by Hurricane Sandy."  (Wait, I thought it wasn't a hurricane, Governor Cuomo and Superintendent Lawsky?) 

Those lucky 24 insurers or insurer groups are:  
 In his press conference this afternoon, Governor Cuomo spoke (at 2:00 of the video, to be exact) of the "many, many complaints" insureds have made about their insurers following the ravaging Hurricane Super Storm Really Big Storm Sandy.  Yes, Governor, I suppose 742 complaints could be called "many".  But that number is the total of all complaints of the 329,156 claims reported on those report cards as of November 27, 2012, or less than ¼ of 1% of all claims filed.  99.78% is a pretty good grade on any report card in any school or industry, I would say.  And the number of complaints that were warranted must be less than that.  Which is why, I suppose, New Yorkers needed this emergency regulation and additional executive order right now, right?

Somewhere, some law professor who teaches administrative law must be salivating over what Governor Cuomo and Superintendent Lawsky have gifted him or her for syllabus material for an upcoming semester.  Moratoriums, executive orders, and emergency regulations, oh my. 

Law and sausage