With a legislative session dominated by wrangling over a $9 Billion budget deficit and rapidly plunging state revenues, New York’s Insurance Industry has had a very difficult time getting the legislature to focus on providing many needed changes. The dynamics of the session were changed even further when the New York Insurance Department dumped a large number of departmental bills on the desks of Insurance Committee staffers in mid-June requesting action by the end of the session. Thus, as may be expected, the past few weeks have seen a flurry of activity on insurance matters but there is precious little to show for it to this point.

 

While Governor Paterson proceeded to issue nearly 6600 line item vetoes to a budget bill forced on him, both legislative houses agreed to take a break for the July 4th holiday and the week after. The Senate has promised to return the week of July 12th ready to go. There is some indication that Speaker Silver has no intention of bringing the Assembly back this year, but I cannot imagine that he would refuse to convene his house if a budget deal is worked out. One cannot help to wonder that with all of the contentiousness over the budget, what level of attention will be left over to deal with insurance issues before the legislature finally adjourns for the summer. So I include a short summary of what insurance legislation has been passed so far and my best guess (as long as you don’t hold me to it) as to what may happen in several important areas.

 

No-fault/fraud reform

 

This session has seen more discussion and examination of the State’s nofault system than any session in many years. The Senate Insurance Committee held a hearing in March and the Assembly Insurance Committee held a “roundtable” discussion. Insurers have run radio ads in the Albany market to highlight the need for no-fault/fraud reform. The Insurance Department has issued several requests for statutory changes, including asking for the power to unilaterally decertify physicians who commit fraud without having to obtain the agreement of any other agency with supervisory obligations over those physicians.

 

After all of the discussion and deliberation, the two insurance committee chairs, Senator Breslin (D-Albany) and Assemblyman Morelle (D-Irondequoit) introduced a bill on June 29th entitled “Automobile Fraud Prevention Act of 2010” ( A.11596/S.8414). The bill appears to be a compromise measure, designed to incorporate some of the desired changes from all sides because my informants tell me that many parties to the discussion oppose it. From the insurers perspective, the bill positively includes a modified fix to the Presbyterian Hospital decision and lifts preclusion against insurers for denials when the services or items were never provided, fees charged exceed the schedule by more than 10%, the accident was based on an “intent to defraud” and coverage is contested. Further, the bill allows insurers 60 days to deny a claim due to a lack of medical necessity and requires the insurer to send copies of health provider’s report to other parties within 30 days. Finally, the bill gives the denial of claims forms, verification requests, and proofs of payment a rebuttable presumption.

 

Unfortunately for the insurance industry, the bill also expands the “serious injury” definition by adding two new categories: 1) a complete tear or rupture of a nerve, tendon, ligament, cartilage or muscle, and 2) a tear, rupture or impingement of a nerve, tendon, ligament, cartilage or muscle which results in a significant impairment of a body organ, member, function or system. The bill fails to mandate arbitration and it removes the doctrine of collateral estoppels of issues decided by an arbitrator at a serious injury trial, except for coverage issues. Further, the bill expands the grounds for reversing an arbitrator’s award to include factual, legal and procedural errors.

 

It appears to me that the insurers have determined that there are far too many pro-trial lawyer provisions in the bill that would increase the cost of litigation to offset the savings that would be experienced from the insurer supported measures. However it is my understanding that the trial lawyers oppose the bill as well. I have also heard that the Insurance Department and the Governor’s office do not support the bill. However, given the vast differences between the interested groups involved in this in this debate, this bill may be the best compromise that can be worked out. Given the apparent fact that the two committee chairs have put the bill out with their names on it, there will be significant legislative momentum to pass the bill if both houses return. Stay tuned.

 

Medical liability insurance

 

The issues surrounding medical liability insurance are complex and receive plenty of legislative attention every year. Physicians and hospitals pay far too much for the insurance, which could jeopardize New Yorker’s ability to receive treatment in some medical specialties. On this other side, insurers in this field have serious solvency concerns brought on, or so they allege, by the failure of the Insurance Department to approve higher rates. On top of all that is the problem of excessive jury verdicts in medical malpractice cases, which puts the trial lawyers in the middle of the fight. This year, however, both houses of the legislature seemed intent on developing more long-term solution than the usual rate freezes and medical malpractice insurance pool (MMIP) extenders. In this light, Senator Breslin held a public hearing in February that elicited all of the arguments about what is wrong with the medical liability system from doctors, trial lawyers, insurers and others. Both legislative committees began extensive private discussions with all parties. The Insurance Department has been publicly silent on the issue ever since the special task force on medical liability insurance, created by then Governor Spitzer, failed to reach any meaningful conclusion. Nonetheless, the Department has been active in the private discussions and has pushed for reform on the rate-making side of the equation.

 

Individual legislators, who have dealt with the problem for many years, have introduced their “pet” bills to address the problem. There have been both attempts to lower the required primary layer of coverage from $1.3 million to $1 million in S.2959 (Hannon), and attempts to extend the medical malpractice insurance pool (MMIP). Senator Craig Johnson introduced S.8074-A which would create an exemption for medical liability insurers from the traditional risk based capital standards that apply to other liability insurers as well as adding a new section to the insurance law to allow carriers to limit the application of contingent liabilities to the financial statements of medical liability insurers. That bill also extends the prohibition on the Superintendent from seeking an order of rehabilitation or liquidation for a medical liability carrier. The bill was amended to include a provision authorizing the Superintendent to devise a system which would provide for a reduction in medical liability rates for those physicians who meaningfully implement an electronic medical records system.

 

The Superintendent of Insurance has sought legislation which would create a “Rate making Organization” for medical liability insurance, in an effort to bring down premiums. Some of the insurers seek tort reform as a remedy for the market problems. However, there seems to be no daylight in the insurance industry’s efforts to obtain tort reform, despite their renewed efforts, and relief in this area seems more remote than ever.

 

Given the wide gaps in positions to the parties to this debate, it may be expected that if both houses return a modest bill, providing the necessary extenders, and perhaps, the rate making organization supported by the Superintendent may be all that passes. Long term structural relief for insurers and physicians in this marketplace may be some time away.

 

Producer licensing

 

Sadly, insurance producers, once again, leave the table without achieving the final step to New York’s full adoption of the NAIC’s Producer Licensing Model Act. The bill A.3551, sponsored by Chairman Morelle at the request of the Insurance Department, would have added three new lines of authority, credit, crop and surety. Further, the bill also provides a number of changes to heightens the qualifications that individuals seeking to be licensed pursuant to Article 21 of the Insurance Law must meet.

 

The bill builds upon the success of the 2003 law which implemented much of the NAIC’s Producer Licensing Model Act, which, if I may say, has been a tremendous success. Back then, we used the need to bring a major GEICO facility to the Buffalo area to push the bill through. Without the impetus of the desire to bring GEICO jobs to Western New York, I’m not sure we would have gotten the first bill. It is a shame that New York has never completed the full implementation of the national model law and this bill would have completed the process of bringing New York’s licensing scheme into a level of full reciprocity with the rest of the nation. The bill also would create parity for the resident licensees with nonresidents who achieved reciprocity by the implementation of the national model. I know there was much disappointment inside the Department that this bill did not get through this time.

 

Title Insurance

 

Little formal activity has occurred since the Insurance Department’s bill, S. 3550/A. 7127 (Breslin/Morelle) was committed to the Insurance Committees in early January of this year. The Department has held many meetings and floated many drafts between interested parties. The bill seeks to bring greater Departmental oversight to this industry in the form of a formal licensing process for title insurance agents. Complicating the matter is the presence of many attorneys in this marketplace who sell title insurance and their desire not to become licensees of the Department. Further issues involve extensive negotiations with the Department and the legislature over the nature and extent of conflict of interest requirements. A broad-based consensus has not developed yet and the outlook for passage of this legislation in this session is bleak. The Department has been attempting to increase its regulation in this market for nearly seven years now.

 

Auto Insurance Fraud

 

On a more positive note, A.1003-A (Gunther)/S.638-A (Larkin), passed both houses and was signed into law by Governor Paterson on March 23rd. This legislation would amend section 405(d) of the Insurance Fraud article to require the Insurance Department’s Fraud Bureau to include, in its annual report to the legislature, a section on the incidence of misrepresentation by insureds of the principal place where motor vehicles are garaged and driven. This bill is intended to be a first step toward dealing with the pervasive New York City problem of individuals misrepresenting the place where an automobile is garaged and driven in a dishonest attempt to avoid paying the higher auto insurance rates experienced by New York City residents. We used to remark to the legislature about the inordinate number of Pennsylvania license plates that one sees on Brooklyn streets on a daily basis. These dishonest efforts cause an imbalance in the insurance pools between regions of the state or between New York and other states. This bill had traditionally died in the Senate but in this hotly contested election year it rose to passage in the senior body. It is expected that when the number of these incidents are made known to the Governor and the legislature, action may finally take place in the future to curtail this fraudulent practice.

 

Auto Insurance

 

The end of session saw passage of A.4916 (Pheffer)/S.4651 (Sampson) to establish that insurers providing rental vehicle reimbursement coverage shall not require an insured to utilize a particular rental vehicle company. In addition the bill requires insurers to disclose to the insured that the insured has the right to utilize any particular rental vehicle company, rental vehicle company location or a particular concern. This notice must be in the form of a separate written document. The legislature is fighting insurer steering of their customers into one particular rental vehicle company. The bill was inspired by Insurance Law section 2610 which prohibits insurers from requiring an insured to use a particular repair shop. While I understand the desire to give insureds the maximum choice in reimbursement options, not letting the insurer take advantage of cost savings that may be obtained from placing a large amount of rental business to one company could push auto rates higher for the consumer. Perhaps in the future, the legislature will seek to regulate the level and quality of service given to insureds by vendors selected by insurers instead of preventing insurers from moving insureds into one particular business and deriving significant cost savings from doing so.

 

Long term care insurance

 

Bill number A.217 (Latimer)/ S.5456 (Diaz) passed both houses and was signed into law by the Governor in April. This bill would require insurance companies to authorized their senior citizen clients to designate a third party for written notification in the event such company must forward notification of an impending cancellation of the senior citizen’s long term care and health insurance policies. The third party may be the competent adult child, competent sibling under the age of sixty-five, an competent grandchild, niece of nephew 18 years of age or older, or a person whose name and address the subscriber has provided for the insurance company pursuant to section 3216 of the Insurance Law. Well, the legislative session may not be over just yet so a full post mortem analysis is not possible. Several major pieces of legislation remain unresolved and could possibly pass at some point later in the year. However, when the developments described above are combined with previous legislative developments such as the reinstitution of prior approval for health insurance rates and approval of the large amount of sub-allocations from the Insurance Department budget to other agencies and programs, 2010 has not been a good year for the insurance industry. Hope springs eternal, and anything may happen during the balance of the year!