NYS DFS Announces Sandy Mediation Program – New Requirements for Insurers
The New York State Department of Financial Services has enacted an emergency amendment to Insurance Regulation 64, effective February 25, 2013, targeting claims resulting from Hurricane Sandy. The amendment applies to any claim for loss or damage, other than claims made under flood policies issued under the national flood insurance program, that occurred from October 26, 2012 through November 15, 2012, in the counties of Bronx, Kings, Nassau, New York, Orange, Queens, Richmond, Rockland, Suffolk, or Westchester. The amendment is limited to loss or damage to real property or personal property, other than damage to a motor vehicle.
The amended regulation places an exacting burden on insurers. Under the regulation, in the event of one of the contingencies listed below, an insurer is required to inform the policyholder of a right to mediation; include instructions on how to request mediation; and provide the insurer’s address and phone number so the policyholder can request additional information. The insurer is required to forward a policyholder’s request for mediation to an approved organization within three business days of receiving same and must also pay the mediating organization’s fee within five business days of receiving a bill. Under subsection (b)(1) of the regulation the obligation to advise the policyholder of this new “right to request mediation” accrues:
- at the time the insurer denies a claim in whole or in part;
- within 10 business days of the date that the insurer receives notification from a claimant that the claimant disputes a settlement offer made by the insurer, provided that the difference between the insurer and claimant is $1,000 or more;
- within two business days when the insurer has not offered to settle within 45 days after it has received a properly executed proof of loss and all items, statements, and forms that the insurer had requested from the claimant.
The regulation applies retroactively to disclaimers already issued and includes contingencies that trigger the obligation to advise of the policyholder’s right to mediation in such circumstances. The regulation requires notice to the policyholder of the right to mediation if “prior to the effective date of this section: the insurer denied a claim in whole or in part…”
The insurer is charged with mediating any claims in good faith. In addition, the insurer must send a representative who is knowledgeable of the claim; who has authority to make binding claims decisions; and the representative must bring a copy of the entire claims file, including relevant documentation and correspondence with the claimant.
This regulation imposes a new burden on insurers while concurrently granting a un-contracted for right onto policyholders, raising threshold issues of constitutionality. Clearly, this represents an effort by the NYS DFS to further pressure insurers to resolve claims arising out of Hurricane Sandy.
For more information, please contact any member of Goldberg Segalla’s Global Insurance Services practice group.