N.Y. Proposes Establishing Private Right of Action for Insureds Suffering Disaster Losses

March 13, 2013

A New York legislator proposed a new bill that would establish a private right of action for the insured for unfair insurance settlement practices when the claim relates to loss or injury in regions where the governor has declared a disaster emergency.

The bill, A05780, was introduced by Assemblywoman Helene Weinstein (D-Brooklyn) on March 6. The measure seeks to amend the insurance law by establishing a private right of action for consumers who have been affected by unfair claims practices by insurers. It would also provide for punitive damages where there is a finding of an insurer’s willful or knowing violation of section 2601 of the New York insurance law.

The bill would apply to any loss or injury sustained relating to an insurance claim for property damage in an area encompassed by executive order declaring a disaster emergency as per section 28 of the Executive Law.

“Unfortunately, there is evidence that some insurers have taken advantage of insured as concerns the adjusting of losses sustained in disaster emergencies declared by the governor pursuant to section 28 of the Executive Law,” the bill states.

The proposed bill states that insurers have every right to attempt to lawfully deny claims, but “all too often these attempts create unreasonable situations for homeowners attempting to simply access the benefits to which they are entitled.” This is especially acute in situations where the homeowner may have lost most or even all of their possessions due to a storm declared emergency, according to the bill.

This bill would allow insureds to institute claims against their insurers for unfair claims practices proscribed by the insurance law. More importantly, the proposal stated, “this bill would amend section 2601 of the insurance law to allow insured homeowners who have suffered property loss to take direct action against their insurers for unfair claims practices where the claimed losses were sustained within the area declared as a disaster emergency.”

“A private right of action is necessary, in addition to the possibility of administrative action, to make certain that insurers are held responsible for unfair claims practices,” according to the bill.

Additionally, this proposal would permit an award of punitive damages for an insurer’s willful unfair claims practices in violation of section 2601 of the insurance law.

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