Friday, January 26, 2018

The Should-You-Wish-to-Complain-About-Your-Insurance-Company Advisory Paragraph of New York Insurance Regulation 64

This marks the sixth of many times since May 2008 that I've blogged about what I like to call the consumer advisory paragraph of New York Insurance Regulation 64 (11 NYCRR Part 216).  Insurers that do business in New York State should know that Regulation 64 requires certain letters to "prominently set out" a certain paragraph advising those to whom your letters are addressed that they may complain about you or your coverage position to New York's insurance regulator, formerly known as the New York State Insurance Department and now known since October 2011 as the New York State Department of Financial Services

Effective February 1, 2017 the consumer advisory paragraph changed with a new Garden City address for the NYS DFS's Long Island office.  Pursuant to the Sixteenth Amendment to 11 NYCRR Part 216, the paragraph now reads (new language highlighted):
Should you wish to take this matter up with the New York State Department of Financial Services, you may file with the Department either on its website at http://www.dfs.ny.gov/consumer/fileacomplaint.htm or you may write to or visit the Consumer Assistance Unit, Financial Frauds and Consumer Protection Division, New York State Department of Financial Services, at: One State Street, New York, NY 10004; One Commerce Plaza, Albany, NY 12257; 1399 Franklin Avenue, Garden City, NY 11530; or Walter J. Mahoney Office Building, 65 Court Street, Buffalo, NY 14202.
As demonstrated by the claim file materials we continue to receive in my office, a number of insurers doing business in New York apparently remain uncertain 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 motor vehicle physical damage (11 NYCRR § 216.7[d][3]).
Let's take these in reverse order. 

11 NYCRR § 216.7(d)(3)'s Requirement

Everyone knows what a "motor vehicle physical damage" claim is, right?  Claims for collision or comprehensive coverage.  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 required by 216.7(d)(3) must be included in both coverage rejection and explanation letters.

11 NYCRR § 216.6(h)'s Requirement

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 liability coverage declination letter; or
  • every single 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 property insurance ↔ no advisory paragraph required.
Letters rejecting (disclaiming/denying) liability coverage ↔ no advisory paragraph required.

See?

Over the 23+ years that my office has been open I've seen the advisory paragraph included in letters in which it is not required.  If you don't care about your company's consumer complaint ratios, then by all means continue including the consumer advisory paragraph in everything written that leaves your desk or office.  If, however, after reading this sixth missive you still are not sure whether the paragraph belongs in a certain letter or not, call or email me.  We'll figure it out.

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