NEW YORK, N.Y., September 15 – The Insurance Department has reminded insurers that when they enter into an agreement to settle a no-fault claim dispute for a monetary amount, they must itemize the principal and interest components of such amount.

A circular letter was sent regarding this matter to remind insurers of their obligations with respect to settling claims that are subject to Regulation 68-C.

The department noted that it became aware of a practice whereby parties involved in settling no-fault claims were not itemizing these components, and the department explained, This practice does not comply with the provisions of 11 NYCRR 65-3.9(e) and 11 NYCRR 65-3.9(f), which require the separate identification of any interest payment from the principal, and that interest payments are not to be included in rate-making calculations. Also, insurers are prohibited from taking credit for interest payments in calculating whether the maximum aggregate policy limits have been reached. Therefore, if the terms of a settlement include interest, the insurer should separately identify the amounts allocable to the principal and the interest in each case.

The circular letter adds, In addition, insurers are reminded that 11 NYCRR 65-3.9(b) provides that an insurer ...shall not suggest or require, as a condition to settlement of a claim, that the interest due be waived. This rule is designed to encourage the prompt payment of claims and resolution of disputes while preventing insurers from exercising undue influence on applicants by inducing them to waive their rights to the payment of accrued interest as a condition of obtaining a quick settlement of their claims. Insurers are required to take all necessary steps to ensure compliance with this provision.

The department also reminded insurers that they are to distribute copies of the regulation to those directly responsible for handling the settlement of their claims for mandatory and additional first party benefits, and that such personnel should be thoroughly conversant with the regulation.

The letter was signed by Mark Presser, assistant deputy superintendent. It was reported by IIABNY and PIANY in their respective newsletters.