New York Governor Signs Late-Notice Reform Bill

July 29, 2008

New York Gov. David A. Paterson has signed into law legislation that makes it more difficult for insurers to deny claims based on “late notice” provisions.

The legislation requires insurers to clearly demonstrate how a delayed claim has affected their ability to defend it before denying a claim under a late notice clause.

Agents’s trade groups had sought the legislation bill in response to what they said was a increasing trend of insurers denying claims for late notices. When that happens, agents who wrote policies have a possible legal liability, according to The Professional Insurance Agents of New York.

Martin Koles, president of the group, said the new legislation “is a long-overdue change to insurance law that will benefit New York’s insurance-buying public.”

It was not the first time legislative changes to late-notice provisions in New York were proposed. Last year, an alternate version of the bill won approval of the lawmakers, but was ultimately vetoed by Gov. Eliot Spitzer. That version of the bill was opposed by the Independent Insurance Agents and Brokers of New York, for what the groups says were provisions that would have allowed attorneys to shop around for lucrative lawsuits by allowing them to sue policyholders to find out what coverages and limits are available before liability against the policyholder was established.

The recently passed version of the bill includes a statute explicitly stating that, if notice is given within two years of the time required by the policy, the burden of proving prejudice rests on the insurer and if later, the insured. It also establishes procedures for claimants to confirm from an insurer that an insurance policy was in effect on a particular date.

The legislation takes effect next year.

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