PIANY legislative roundup—2007 regular session
By Ellen D. Kiehl, Ph.D., CAE
Lawmakers address "late notice" denial issue; pass one-year extenders
Other important actions included “straight extenders” of one year (to June 30, 2008) ensuring continuity for:
One top PIANY priority was addressed when a bill passed that would require insurers to show “material prejudice” in order to deny a claim for late notice. Following a veto based mainly on technical reasons, PIANY is working with the New York State Insurance Department to develop an acceptable bill. Another bill would require general liability insurance for contractors doing construction or demolition jobs in New York City. Legislation also passed requiring a study of the availability and affordability of homeowners and health insurance policies for child-care providers.
Here are details on legislation passing both houses of the New York Legislature that may be of interest to PIANY members. Where the bill has been signed into law, this is indicated. Where no signature is noted, the bill is awaiting the governor's action. This resource kit will be updated as the governor's decisions are reported.
Links provided for each bill take you to a summary page which contains a link to the actual bill text.
Insurance rating; auto nonrenewals. New York's intricate rating law contains many sunsets. The sunsets affect sections providing exceptions to the prior approval of insurance rates, which is the state's default position. A.9028 by Assemblyman Joseph Morelle extends for an additional year, to June 30, 2008, these more liberal rating law provisions, as well as the “2 percent” and “two-for-one” formulas for calculating an insurer's maximum annual number of personal auto policy nonrenewals. (Interestingly, the sponsor's memo states that “some provisions may require future analysis”; Assemblyman Morelle sponsors a bill that would further liberalize most property/casualty rate setting procedures.) Signed July 18, 2007, Chapter 268, effective immediately.
Domestic stock life insurers' surplus. A.9035 by Assemblyman Joseph Morelle extends, through Dec. 31, 2008, provisions allowing domestic stock life insurers that issue participating policies to use a risk-based capital analysis as the basis for determining their maximum surplus.
Derivative and replication transactions. S.804-a by Sen. James Seward extends authorization for domestic life, property/casualty, reciprocal, mortgage guaranty, co-operative property/casualty and financial guaranty insurers to enter into derivative and replication transactions for purposes of hedging investment risk. The authorization extends through June 30, 2008. Signed July 18, 2007, Chapter 275, effective immediately.
Agents & Brokers
The new provisions apply to a defined category of employee known as “commission salespersons,” a term which appears to be replacing the term “commission salesman.” A “commission salesman” “means any employee whose principal activity is the selling of any goods, wares, merchandise, services, real estate, securities, insurance or any article or thing and whose earnings are based in whole or in part on commissions. The term ‘commission salesman' does not include an employee whose principal activity is of a supervisory, managerial, executive or administrative nature.” [Labor Law, Section 190(6)]
The term “commission salesman” was not changed by the new law in this definition section; however, the term was amended (from “commission salesman” to “commission salespersons”) in the section dealing with employment agreement requirements for such employees.
The applicable definitions of “employee” and “employer” here are the definitions of Article 6, which are NOT the familiar workers' compensation definitions. These Labor Law definitions are broad and inclusive.
The changes require that certain details regarding payments to commission salespersons be in writing and signed by both the employee and the employer. The new requirement states that, for a “commission salesperson,”
Although employers are only required to maintain the written agreement on file for at least three years, PIANY believes it would be prudent for employers to maintain their written agreements for at least six years, which is the statute of limitations for breach of contract claims in New York and for wage claims under the New York State Labor Law.
This was a Department of Labor bill. According to the sponsor's memo, the law was enacted because of difficulties the Department of Labor encountered in determining when commissions were due where such agreements were not in writing. “While the new law will add certainty regarding how commissions are calculated and when they are earned, employers unaware of the law or who fail to comply with it will face a hurdle when disagreements arise with commissioned salespersons,” the sponsor's memo said.
Further, the memo warns: “A commission plan between an employer and its commissioned salespersons already in place may not be sufficient if it does not fulfill the requirements of the new law. Employers should review immediately their existing compensation disclosures to commissioned salespersons for compliance with this new law. As with any writing describing the terms and conditions of employment, if the employee is ‘at will,' it should be included in the writing.”
Some existing provisions of the law, which were NOT changed by the amendments, include provisions regarding the frequency of payments to a “commission salesman” or “commission salespersons.” Such employees “shall be paid the wages, salary, drawing account, commissions and all other monies earned or payable in accordance with the agreed terms of employment, but not less frequently than once in each month and not later than the last day of the month following the month in which they are earned; provided, however, that if monthly or more frequent payment of wages, salary, drawing accounts of commissions are substantial, then additional compensation earned, including but not limited to extra or incentive earnings, bonuses and special payments, may be paid less frequently than once in each month, but in no event later than the time provided in the employment agreement or compensation plan. The employer shall furnish a commission salesman, upon written request, a statement of earnings paid or due and unpaid.”
PIA 's technical staff prepared a sample employment agreement for members' use. To get a copy, simply e-mail email@example.com , and request QS31233.
Snowmobile accident reporting. S.3990 by Sen. Mary Lou Rath raises the property damage threshold for reporting snowmobile accidents, from $100 currently to $1,000. Snowmobile operators involved in any accident resulting in property damage equaling or exceeding the threshold must report the accident in writing to the Office of Parks, Recreation and Historic Preservation, with a copy to the sheriff of the county in which the accident occurred, within seven days of the accident. Signed July 3, 2007, Chapter 194, effective immediately.
VETOED: Segways on highways. S.1353-a would have allowed a “self-balancing, two nontandem-wheeled device designed to transport one person by means of an electric propulsion system” to operate on New York 's roadways. VETOED Aug. 15, 2007, Memo 105.
The bill also would have allowed a party who brings a claim against another party to ask for a declaratory judgment determining the existence or extent of coverage applicable to the claim.
PIANY has sought a solution to the increasing problems that members have reported regarding insurers citing “late notice” and denying claims out of hand. PIANY met with the New York State Insurance Department (NYSID) to discuss these concerns, along with the Council of Insurance Brokers of Greater New York and the Independent Insurance Agents and Brokers of New York. The producer groups followed up with a letter to superintendent of Insurance Eric Dinallo that provided a summary of members' reports to PIANY and asked for the Superintendent's help in addressing cases where the late notice denials appear unfair to the policyholder.
According to the bill's sponsors, “With respect to the ‘material prejudice' standard proposed in the bill, it is inherently unfair for an insurance company to deny a claim based on late notice, where in fact such late notice has no negative effect on the insurer`s ability to respond to the claim. Such denials amount to a windfall to the insurer based upon a technicality.”
The bill contained an exception for already-existing time frames established for filing no-fault claims—an important anti-fraud provision that PIANY was concerned to protect.
With respect to the declaratory action provisions, according to the bill's sponsors, “where a party is being sued, and there is a question as to whether their insurance will cover the action, the bill permits commencement of an action to determine the question of insurance coverage.... Current law permits a declaratory judgment action on the question of insurance coverage only after a verdict has been reached.... Under current law, the question of whether an insurance policy covers a particular claim may not be determined until after a verdict has been rendered. This causes substantial delay, is an inefficient use of judicial resources and only adds to the burden of an injured party who is waiting for whatever monetary award a jury or judge had determined is appropriate due to their injury. This bill would correct this circumstance, permitting the question of insurance coverage to be determined at the onset of a lawsuit, thus providing for a more streamlined litigation process, along with certainty and prompt payment for a plaintiff.”
However, such determinations also could weaken the insurer's position in settlement negotiations and/or influence a jury's award. An early determination of no coverage could cut short the insurer's defense.
This bill was VEOTED Aug. 1, 2007, Memo 98.
“Risk Based Capital” (RBC) as applied to insurance carriers is the approach of a model act developed by the National Association of Insurance Commissioners. It provides a theoretical model used to compute the minimum amount of capital that an insurance company should maintain in order to support its business operations, considering the company's size and risk profile.
This new law is New York 's version of the model geared primarily to the state's domestic property/casualty insurers. RBC already prevails around the country and has been in effect here for life and health insurers since 1993. The model's uniform approach is designed to assist regulators in knowing when to intervene in a company's affairs; reduce costs of company insolvencies by catching them early. The formula is said to be simple enough to apply to all companies, yet comprehensive enough to adequately distinguish all possible risks.
According to the sponsors' memo: “The [new law] effectively raises the statutory capital level from its current arbitrary and generally low fixed dollar amounts to a more flexible and realistic base that changes in relation to the size of the insurer and the level of risk inherent in an insurer's operations. RBC is intended to strengthen the safety net that statutory surplus currently provides for policyholder obligations.” The new law states that “an excess of capital over the amount produced by the RBC requirements contained in this bill is desirable in the business of insurance. Accordingly, insurers should seek to maintain capital above the RBC levels required by [Section 1324].”
The law creates a new Section 1324 of the Insurance Law. It allows the NYSID to take increasingly assertive steps at various levels of impairment and requires carriers to develop and adhere to plans to improve their finances. The superintendent can exempt from its provisions medical malpractice carriers and certain insurers writing only in New York whose annual writings total only $20 million or less.
Importantly, the law provides authority for the superintendent to take action against an authorized foreign insurer to protect the interests of New York policyholders, where the insurer's state of domicile has neither adopted the RBC law nor taken action as provided by the RBC law.
The new law establishes the filing date of required RBC reports for domestic insurers. If the NYSID disputes the data it is given, the law provides for the submission of adjusted RBC reports.
While many might like to see the data in such reports, the law provides for strict confidentiality. All RBC plans filed with the superintendent and all reports, analyses and corrective orders arising under the new law must be kept confidential and are not to be made public or subject to subpoena, except to the extent the superintendent finds that release of information is necessary to protect the public.
While agents and brokers might think the RBC data could be a new tool in their exercise of due diligence, the law provides that the RBC formula is a regulatory tool and should not be used to rate or rank an insurer. It also prohibits the disclosure by licensees of information on RBC levels to the public, saying the information may be “misleading.” The law prohibits the superintendent from using RBC results in applying laws governing premium rates.
The law provides for a “company action level event” if the RBC report indicates that an insurer's capital falls below a certain level. This condition requires the company to take actions that satisfy the superintendent that the conditions which caused the event will be corrected.
A more serious financial deficit is known as a “regulatory action level event.” This requires the superintendent to analyze the company's financial condition and to issue an order aimed at correcting the conditions which led to the event.
Next, the law establishes the “authorized control level event.” This condition permits the superintendent to take the necessary actions to cause a domestic insurer to be placed into rehabilitation or liquidation.
Finally, the law provides for a “mandatory control level event.” This condition mandates that the superintendent take the necessary actions to force a domestic insurer to stop writing new or renewal business or to cause a domestic insurer to be placed into rehabilitation or liquidation, unless the insurer has demonstrated within 90 days that the condition which led to the event can be corrected or unless the insurer already is running off the business under a state-approved plan.
According to the sponsors' memo: “In 1993, the New York Legislature applied RBC standards to life and accident and health insurers through the enactment of Section 1322 of the Insurance Law. This bill will extend RBC standards to the property/casualty insurance industry by incorporating an an RBC formula that has been designed by regulators from throughout the nation to establish minimum capital requirements based upon the risks applicable to the operations of property/casualty insurers.” Signed Aug. 28, 2007, effective immediately.
Managed care organizations. S.3986-a enhances consumer protections by: imposing limitations on when pre-authorized services may be denied; enhancing protections when a provider leaves a network; permitting external appeal of out-of-network denials when a health insurance plan is proposing an alternative in-network treatment; requiring the collection and dissemination of data on PPOs; and establishing time frames for submission of claims to managed care providers and family health insurance plans. Signed Aug. 1, 2007, Chapter 450, with various effective dates.
Real estate professionals' disclosures. S.5089-a adds new definitions and language to existing provisions requiring disclosures by real estate agents and brokers and makes corresponding changes in the disclosure forms they must use, starting in 2008. In view of current discussions regarding disclosure by insurance agents and brokers, it's interesting to review these new and existing provisions. Real estate professionals' disclosures are geared toward clarifying the role that the individual is playing in any given transaction: i.e., whom the professional is representing and undertaking to advocate for. Signed Aug. 15, 2007, Chapter 549, effective Jan. 1, 2008.
Swimming pool enclosures. A.339-b by Assemblyman William Magnarelli requires temporary swimming pool enclosures to be replaced with permanent enclosures that comply with state and local building codes within 90 days. Signed July 18, 2007, Chapter 234, effective 180 days after signature. A.723 by Assemblywoman Francine Delmonte requires retail sellers and installers of swimming pools to provide notice to consumers of the swimming pool barrier requirements contained in the New York State Uniform Fire Prevention and Building Code and the building code of the City of New York. The Department of State would establish and maintain a Web page summarizing the current requirements. Signed July 3, 2007, Chapter 100, effective 90 days after signature; applies to sales and/or installations on or after that date.
Child care providers. S.2140-a by Sen. James Seward requires the Office of Children and Family Services to conduct a study of availability, accessibility and affordability of homeowners and health insurance for child-care providers. Results of the study are due by Jan. 1, 2009. Signed June 4, 2007, (Chapter 65), effective 30 days after signature.
Construction and demolition jobs in New York City—insurance requirement. S.5246-a by Sen. Frank Padavan would amend the administrative code of the City of New York to require all persons engaged in construction activities in the city to obtain general liability insurance. Currently there is no such insurance requirement in the Building Code. Contractors would be required to submit proof of insurance when applying for a permit to undertake construction or demolition work. The amount of the required insurance would be set by the city's Department of Buildings.The bill also establishes new safety provisions when undertaking certain excavations. It deletes provisions in the New York City Building Code that provide that a person performing excavation work has no duty to support adjacent properties when excavating less than 10 feet. Signed Aug. 28, 2007, Chapter 664, effective immediately.
Unemployment insurance. A.3626-a by Assemblywoman Susan John would provide that the last employer of a person who has filed for unemployment benefits, which normally would be charged for 100 percent of the employee's benefits for the first seven weeks of the claim, may have benefit charges recalculated if it paid the claimant less in total wages than the seven weeks of benefits. The recalculation would allocate the remainder of the charge among other former employers. Under prior rules, the last chargeable employer is required to pay 100 percent of benefits for the first seven weeks of a claim, regardless of wages paid. Signed July 3, 2007, Chapter 106, effective Jan. 1, 2009.
This last point addresses reports that some consumers have been unable to obtain such reports. Some of the identity theft remedies provided under the federal Fair Credit Reporting Act require victims to present a report from a law enforcement agency. These include the right to block the reporting of theft-related information from a credit file and the right to place a seven-year fraud alert on a credit file. VETOED Aug. 1, 2007, Memo 76.
VETOED: Mortgage, auto loan rate quotes. A.1416 by Assemblyman Adam Bradley would prohibit consumer reporting agencies from considering requests for certain rate quotes when determining a person's credit score. The bill covers the fact or frequency of a consumer's inquiries to mortgage companies, banks or other financial institutions in relation to a mortgage or automobile loan. Also, consumer reporting agencies would be precluded from using the inquiries by mortgage companies, banks or other financial institutions concerning a consumer's credit in relation to a mortgage or automobile loan. According to the bill's sponsors, currently, when a consumer is shopping for the most competitive mortgage rate, their FICO credit score (one of the most popular scores used by lenders) is adversely affected when they engage in comparison-shopping. VETOED Aug. 15, 2007, Memo 124.
Do-not-call list. S.3543 by Sen. Charles Fuscillo revises New York's state law governing telemarketing to conform state law to the federal rules. The latest federal regulation requires telemarketers and businesses to use a version of the National “Do-Not-Call” Registry obtained from the Federal Trade Commission no more than 31 days prior to the date any call is made, rather than three months prior to the date any call is made. Signed June 4, 2007, (Chapter 69) effective immediately.
Workers' compensation/World Trade Center victims
This legislation does the following:
Much of the reforms are pointed toward returning employees to work as effectively as possible. The law's provisions take effect on various dates. A complete summary is provided in PIANY 's QuickSource document No. QS31382.
Jockey Injury Compensation Fund. S.1581 by Sen.William Larkin clarifies that coverage under this fund is limited to protecting only jockeys, apprentice jockeys and exercise persons who are currently licensed. The fund procures workers' compensation coverage on a blanket policy basis from the State Insurance Fund, paid by assessments levied each year on all licensed owners and trainers. Signed July 3, 2007, Chapter 169, effective immediately.
Time frame to file WTC-related WC claims. S.4067 extends by a year the deadline to complete registration of participation in World Trade Center rescue, recovery and clean-up operations with the Workers' Compensation Board. Specifically, Section 162 of the Workers' Compensation Law is amended to provide more time for the filing of Form WTC-12. The new deadline is Aug. 14, 2008. According to the sponsors, without the special registration procedure “hundreds of New Yorkers who are just now discovering that they may have illnesses related to their work at the World Trade Center site were time-barred from filing worker' compensation claims.” The Workers' Compensation Law was changed to allow for claims to be filed two years after discovery of the potential 9/11-related illness. However, all persons who may potentially have 9/11-related workers' compensation claims must register with the WCB no later than Aug. 14, 2008, even if they are not ill at this time, in order to receive any workers' compensation benefits at a later date. Failure to register by timely filing a Form WTC-12 with the WCB would prevent, on procedural grounds, a worker from ever receiving benefits, even if the claim were substantively valid. Signed July 3, 2007, Chapter 199, effective immediately.
Hospital workers. S.6521 was signed into law Oct. 31, 2007, as Chapter 689. This legislation amends the Workers' Compensation Law to authorize compensation for the death, permanent or temporary partial disability as a result of rescue activity by an employee of a private voluntary hospital at or in the vicinity of the site of the 9/11 terrorist attack on the World Trade Center. The bill increases the salary replacement for disabled first responders to 75 percent of their salary at the time of disability and increases the workers' compensation survivors' benefits for the families of those killed at Ground Zero to reflect this salary benefit.
This action marks another effort by the Legislature to improve benefits for victims of the terrorist tragedy. The governor vetoed three earlier versions of this bill. According to its sponsors, this newest bill addressed concerns raised in the prior veto messages. Further, the federal government has re-appropriated $125 million to New York that can be used to provide the increased workers' compensation and death benefits required by this bill. The proposal becomes effective immediately and is further deemed to have been in full force and effect on Sept.11, 2001.
VETOED: New York City repair shop workers. S.6107 by Sen. Martin Golden would have included certain workers in New York City vehicle repair shops within the definition of participating in World Trade Center rescue, recovery or clean-up operations. This change would have provided workers' compensation benefits to persons who repaired, cleaned or rehabilitated vehicles or equipment owned by the City of New York that were contaminated by the Sept. 11, 2001, terrorist attack.
Chapter 446 of the Laws of 2006 created workers' compensation benefits for other members of the state and city workforce who participated in the World Trade Center rescue, recovery and clean-up operations. However, to be eligible for the benefit, the employee had to have worked at least 40 hours from Sept. 11, 2001, to Sept. 12, 2002, at the World Trade Center site, the Fresh Kills Landfill,the New York City morgue or temporary morgue or manned the barges between the World Trade Center site and Fresh Kills landfill. Not covered in the original legislation were the automotive mechanics who were exposed to the same contaminants but serviced contaminated vehicles and equipment at city garages instead of being at the sites outlined in the original legislation.
The veto message said the expansion would have included too many people. VETOED Aug. 1, 2007, Memo 97.
Counseling for 9/11 victims. A.6621 by Assembly Speaker Sheldon Silver extends the provisions of executive orders that fund counseling for victims of the World Trade Center attacks and for their family members. Signed April 17, 2007, effective immediately. 11/07
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