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PIANY legislative roundup—2005 regular session
Resource kit 31059
By Ellen D. Kiehl, Ph.D., CAE
This resource kit contains a summary of the major legislative activity on issues affecting PIANY members, their clients and the insurance industry in 2005.
Auto/motor vehicles
Anti-fraud: decertification. A.8376 was signed into law on Aug. 2, 2005, and took effect immediately. However, it will require the development of regulations by the Insurance Department and the Health Department before its provisions actually are implemented.
The two departments are required to develop standards and procedures for investigating and lifting the authorization for health care providers to submit claims under no-fault law. The procedures will afford due process protections to providers on a par with existing workers' compensation certification rules.
A list of providers who are not authorized to submit no-fault claims will be available online and via a toll-free number. A provider can lose authorization based on the following types of conduct in connection with services rendered to no-fault claimants:
- professional or other misconduct or incompetence;
- exceeding professional competence;
- false statements in connection with claims;
- soliciting no-fault patients;
- refusal to cooperated in an investigation;
- patterns of overcharging; or
- excessive treatment.
Providers who lose authorization are required to refrain from treating for remuneration, as a private patient, any person seeking medical treatment. Patients are protected from direct billing for claims relating to services by providers who have lost their authorization. Signed Aug. 2, 2005, Chapter 423, effective immediately, but depends on adoption of implementing regulations.
Anti-fraud: "file and serve" requirement. PIANY supported A.7255-b, designed to foil a type of no-fault abuse in which crooked medical providers swamp insurers with baseless legal actions. The bill requires plaintiffs to secure a court index number from certain lower courts in New York, before serving a summons in the action. (This already is standard procedure in some other courts.) Requiring plaintiffs to acquire and pay a fee (currently $45) for an index number will deter the practice of filing a blizzard of frivolous lawsuits, often in connection with dubious claims, with the aim of forcing a bulk settlement. It also will help the courts' workflow.
In addition, the bill provides expedited hearings by the Workers' Compensation Board when there's a question whether an accident was work-related and provides for expedited determinations when no-fault benefits may be due from multiple insurers.
Because of its likely impact on no-fault fraud, A.7255-b was a priority bill of New York First, a coalition effort by PIANY and others to protect and strengthen New York's no-fault system. Signed Aug. 9, 2005, Chapter 452, effective 30 days after signature and applies to action commenced on and after the effective date.
DMV fees, uninsured penalties. Changes made by New York's budget legislation to various Department of Motor Vehicles fees, fines and the important 'grace period' for insurance lapses all take effect Oct. 1, 2005. The effective date of these changes was moved up three months in a separate 'chapter amendment' (S.4271/A.7298) made to the original budget bill (S.3671/A.6845), which had slated them for Jan. 1, 2006. Both bills were signed into law April 12, 2005.
The original budget bill summary estimated the revenue from these (plus a few other DMV fee changes) at $42.8 million in state fiscal year 2005-06 and $165.8 million when fully implemented. Presumably, the Oct. 1, 2005, effective date boosts revenue projections.
DMV MVR fees. The charge for accessing a driver's motor vehicle record goes from $6 to $10 for manual searches conducted by DMV staff and from $5 to $7 for searches done electronically.
Uninsured operation: 'grace period.' Also effective on Oct. 1, 2005, penalties for uninsured vehicles will be calculated on a graduated basis depending on the length of the lapse. Another noteworthy change will trigger these penalties if a motor vehicle remains registered and uninsured more than seven days. The original statutory figure was 15 days. Both the original and new periods are calculated on a calendar-day basis. (S.3671/A.6845 would have reduced this period to five 'business' days, but the final figure is seven days thanks to the S.4271/A.7298 chapter amendment.)
Under this 'grace period' in Section 318 of the Vehicle and Traffic Law, a registrant is not penalized if there is only one insurance lapse in any three-year period (unless the vehicle is being operated while uninsured), so long as the lapse does not exceed the grace period. Starting Oct. 1, 2005, the grace period is reduced from 15 to seven days. Any subsequent or longer period without insurance is a "chargeable lapse," which initiates a DMV suspension letter.
Uninsured operation: fines. In lieu of serving a registration suspension, in certain cases an uninsured registrant can pay a daily fine. The daily fine had been $8 a day, up to 90 days. (For a lapse of over 90 days or any subsequent lapse within a three-year period, there is no option to pay a fine and suspension becomes mandatory.)
The 2005 budget changes this formula. The figure stays at $8 a day for each uninsured day up to 30 days. From the 31st through the 60th day, the daily fine goes to $10 and for each day from the 61st through the 90th day, the fine goes to $12.
Auto insurance notices: warning. Under law, insurance companies must reference these penalties when an insurance policy providing required financial responsibility for a vehicle registrant is terminated. The DMV is revising its regulation implementing this requirement as well as the language of its suspension notices and other documents it supplies to motorists.
Motor Vehicle Law Enforcement fees stay at $5. Another budget provision will extend the collection of a Motor Vehicle Law Enforcement Fee set at $5 per vehicle for another year. The fee had been slated to return to its original $1 level if the $5 provision was not extended.
Leaving the scene. S.4584 raises penalties for leaving the scene of a motor vehicle accident. Brings penalties for leaving the scene of an accident resulting in serious injury or death more in line with those for vehicular assault and vehicular manslaughter. Without this change (for example) an intoxicated driver who causes a fatal accident faces a more serious charge by staying at the scene than leaving to sober up. Signed May 24, 2005, Chapter 49. Effective Nov. 1, 2005.
Liability limits—rental vehicles and for-hire. S.4719-a removes the cap on the maximum amount of liability insurance carried on vehicles with a seating capacity of seven or less carrying passengers for hire and rental vehicles. According to the sponsor's memo, the bill was needed because "existing law [Vehicle & Traffic Section 370 (1)(a)] actually bars livery vehicles, taxicabs and rental vehicles from carrying more than $100,000 in liability insurance." Signed Sept. 20, 2005, effective immediately.
Snowmobiles. S.3158-b is a major bill regarding snowmobiles in New York. It describes responsibilities of snowmobile owners, operators and entities that maintain trails. It broadens the insurance requirement to apply when operating on any nonowned land (not just on roadways or road shoulders) and prohibits leaving the scene of a snowmobile accident. It re-vamps conditions applying to young operators, increases registration fees, adds new trail-maintenance fees and sets a speed limit of 55 mph on public and or trails. Signed Aug. 30, 2005, effective 180 days after signature, except the fees take effect April 30, 2006.
No-fault payments for emergency treatment of DWI drivers (vetoed). A.5158 would have deleted the statutory exclusion of no-fault payments to health care providers for emergency medical treatment of insureds who were operating a vehicle while in an intoxicated condition. This bill was vetoed Aug. 16, 2005, veto memo 49. A similar repeal effort was vetoed in 2001. Most states have had an exclusion on the books for years, but at least seven states repealed or liberalized their exclusions since 2001.
Impounded vehicles (vetoed). A.2156 was vetoed on Aug. 2, 2005, veto memo 37. It would have applied when a vehicle had been seized and impounded because law enforcement officers believe it was stolen. If the owner could be located, the bill would have provided that the insurer be identified from DMV records and permitted to take possession of the vehicle.
Vicarious liability repeal (federal). On Aug. 10, 2005, President Bush signed a federal transportation bill (H.R. 3) that included the elimination of vicarious liability in auto leasing. The issue had remained unresolved in the state Legislature despite attempts by auto leasing companies to repeal New York's doctrine establishing their vicarious liability for accidents involving the vehicles they had leased to others. The federal repeal took effective immediately, applicable to legal actions commenced on or after Aug. 10, 2005, regardless of whether the loss or alleged negligence occurred before that date.
In-vehicle data recording devices. S.850 requires vehicle manufacturers to disclose to buyers when the vehicle is equipped with an event data recorder, including sensing and diagnostic modules. It also prohibits access to the data recorded by such devices by anyone other than the vehicle owner or lessee, with certain exceptions. Signed Sept. 20, 2005, effective immediately and applicable to all motor vehicles manufactured on or after Sept. 20, 2006.
Online defensive driver courses. Opposed by PIANY, S.5801 will establish and fund a five-year pilot program to study using Internet technology as a training method for the administration and completion of accident provision courses approved by the DMV for reducing points and earning insurance discounts. Signed Oct. 18, 2005, effective 180 days after signature and sunsets five years after the date the pilot program is actually launched.
Company finances
Derivatives. A.2843 extends the authorization for domestic insurance companies including life, property/casualty, reciprocal, mortgage guaranty, cooperative property/casualty and financial guaranty insurers, to enter into derivative transactions for hedging purposes and for certain limited income generation to engage in derivative and replication transactions until June 30, 2007. Signed June 30, 2005, Chapter 141.
Life company foreign investments. A.2840-a increases the permissible foreign investments of life insurance companies. Signed July 19, 2005, Chapter 251, effective immediately.
Life company surplus. A.7559-b makes adjustments to the rules governing maximum surplus accumulation by domestic life insurers. Signed July 26, 2005, Chapter 340, effective immediately but with a Dec. 31, 2007, sunset.
Homeowners/property
NYPIUA, homeowners protections extenders. A.8818 extended for an additional year (until June 30, 2006) the authority of the New York Property Insurance Underwriting Association, plus provisions in Section 3425 protecting homeowners against insurers' market withdrawals. Signed June 30, 2005, Chapter 156.
Homeowners protected by volunteer fire departments. A.4972-a prohibits discrimination by insurers against homeowners solely based on their residing in an area protected by a volunteer fire company (unless actuarially justified). Takes effect 120 days after signature. Signed July 19, 2005, Chapter 259.
Dog attacks. A.4433-a increases fines for negligence leading to dog-bite injuries but allows fines to be offset by restitution paid to injured parties. Signed Aug. 16, 2005, effective 90 days after signature.
Toxic Mold Task Force. S.1771-b establishes a task force to study the health and environmental effects of toxic mold, and ways to mitigate them, including any legislative recommendations. The task force is jointly chaired by the health commissioner and the secretary of state. A report is due by Nov. 30, 2006. Signed Aug. 2, 2005, effective immediately.
Licensing
Birth-date licensing expirations; higher fees. The state budget contained changes to producer licensing. Budget bill S.3669/A.6843 became a vehicle for those items because of their revenue impact from higher licensing fees and planned changes in licensing periods.
Birth-date based license expirations for individual licensees will start with licensing periods commending in 2007. This is one of several uniform producer licensing standards developed by the National Association of Insurance Commissioners (NAIC), due to goals set by the Gramm-Leach-Bliley Act for greater uniformity in state producer licensing procedures. NAIC aims to enable a streamlined, electronic license renewal procedure for multiple state licenses simultaneously.
Changes in individual licensees' renewal dates take effect with the first renewal (or new license) issued on or after Jan. 1, 2007. This change affects every agent and broker license held by the individual.
All of a person's life and property/casualty licenses, whether as an agent or a broker, will have the same renewal date. Biennial licensing periods will begin and expire as of the licensee's birth date. Individuals born in even-numbered years will renew all their licenses in even-numbered years. Those born in odd-numbered years will renew all their licenses in odd-numbered years. Individual insurance consultants and resident reinsurance intermediaries will hold these licenses, too, for biennial periods based on their birth dates.
Business entity licenses. Unlike individuals, licenses granted to business entities will continue to have common renewal dates. "Life agent" licenses still will expire on June 30 of odd-numbered years. Property/casualty agent licenses will expire on June 30 of even-numbered years. All broker licenses held by business entities will expire on Oct. 31 of even-numbered years—both traditional broker licenses and the newer "life broker" license.
However, excess line licenses held by business entities would be issued for a term expiring with the expiration date of the qualifying broker.
Licensing fees. Fees for license renewals doubled, effective immediately upon signature (April 13, 2005). The fee went from $20 to $40 per year (or part thereof), i.e., $80 per license for each biennial licensing period. The increased fee applies to agent and broker licenses. The bill contained no increase in the license fee for excess line brokers, insurance consultants or resident reinsurance intermediaries.
The higher fees apply to all licensing periods commencing after April 13, 2005. Because life agent renewals already were underway, the increase required life agents who already had applied for the 2005-07 licensing period to pay an additional $40.
Fees for late license renewal applications also doubled (from $5 to $10), effective immediately. These fees apply if an application or renewal is filed less than 60 days prior to the renewal date.
Licensing exams. A.8367 provides that, when a state licensing exam is scheduled for a day of religious observance, a special administration must be scheduled to accommodate affected applicants within 30 days before or after the scheduled exam. Signed Aug. 2, 2005, Chapter 422, effective immediately.
Medical malpractice
Medical malpractice risk management courses. A.8166 requires follow-up courses in connection with the state's excess medical malpractice program to be taken every other year instead of annually. Signed Aug. 2, 2005, Chapter 420, effective immediately.
Medical malpractice assigned risk plan. S.4096-a clarifies that the plan or plans authorized by the Legislature effective July 1, 2005, to be the market of last resort in connection with medical malpractice insurance for eligible physicians, dentist and podiatrists is not statutorily required to offer a second layer of excess medical malpractice insurance to such health care providers. According to its sponsor's memo, "The present situation engenders an anomaly whereby the Medical Malpractice Insurance Plan (MMIP) is required to provide a second layer of excess medical malpractice insurance in the involuntary market despite the fact that no MMIP-member insurer will provide in the voluntary market such coverage to its own policyholders." Signed Sept. 16, 2005, effective Jan. 1, 2006, and sunsets July 1, 2008.
Privacy
Breach of security—computerized data. A.4254-a imposes a new requirement on businesses and state agencies to notify people if their private information has been acquired by an unauthorized party through a breach of security procedures protecting an electronic database. The bill, entitled the "Information Security Breach and Notification Act," takes effect 120 days after signature. (A few amendments to this bill also passed as S.5827.) Signed Aug. 9, 2005, Chapter 442.
Summary. Insurance agents and companies are among the entities affected by this major piece of legislation. It is modeled on a California law enacted in 2003. In the wake of several high-profile thefts of personal information lodged in databases, a number of states through the country have considered and/or enacted similar legislation recently. Some states also have adoped "security freeze" provisions whereby affected individuals can place a freeze on their credit files at the major credit reporting bureaus; however, New York did not enact this type of provision.
New York's law requires any business or state agency that owns or licenses a computerized database including certain personal information to disclose any breach of the security protecting such information to any New York resident whose information may have been acquired by an unauthorized party. Here are some details on the portion of the law affecting business data (new Article 39-F of the General Business Law):
Information protected. The law does not apply to information publicly available to the general public from government records. It defines the information that requires a notice to be issued, if compromised, to mean "personal information" in combination with any one or more of the following "private information" elements:
- Social Security number;
- driver's license number (or state-issued I.D. card number); or
- account number, credit or debit card number in combination with any PIN number, password, etc., that would permit access to the account.
"Personal information" is defined as any information concerning a natural person which, because of name, number, personal mark or other identifier, can be used to identify the person.
If all the information was encrypted, the notice requirement does not apply unless the unauthorized part obtained the encryption key as well.
Breach of security notice. A security breach is considered to have occurred if there has been unauthorized acquisition of computerized data that comprises the security, confidentially or integrity of personal information maintained by a business. Good faith acquisition by an employee for business purposes is not a breach, unless an individual's private information is used or is disclosed to an unauthorized party.
Any person or business conducting business in New York that owns or licenses computerized data including private information must disclose any security breach to any state resident whose private information was or is reasonably believe to have been acquired by a personal without authorization
Time frame. Disclosure must be made in the most expedient time possible, without unreasonable delay. If the data is maintained by a third party, it must notify the owner or licensee of the information.
Notice content. The notice to affected individuals must include contact information for the business and a description of the information that was acquired.
Additional notifications. In addition, notice must be provided to the attorney general, the Consumer Protection Board and the state's Office of Cyber Security and Critical Infrastructure Coordination, including the timing of the individual notices and the approximate number of people affected. If more than 5,000 people are getting notices, an additional notice must be provided to consumer reporting agencies.
Methods. The disclosure to affected persons must be provided by written notice; electronic notice (if the affected person has voluntarily agreed to accept notice electronically); or telephone, documented by a phone log. If the cost of providing notice would exceed $250,000, then alternative methods may be permitted by the attorney general.
Enforcement. The law, including any suspected violations, will be enforced by the attorney general, who may ask a court to award damages for actual costs or losses incurred by a person entitled to receive notice. In addition, the court can impose a civil penalty of $5,000 or $10 per person not notified, whichever is greater, up to a maximum of $150,000.
State do-not-call rules. A.7710 amends New York's do-not-call law to bring it into conformity with the federal do-not-call rules. In some respects, New York's law (enacted prior to the federal program) was less restrictive. Although the federal rules pre-empt less restrictive state requirements, continued existence of these inconsistencies caused confusion. A.7710 clarifies that customers with established business relationships can disallow sales call from firms with which they have such relationships. It also repealed a New York state exemption that originally allowed calls aimed at setting up appointments for sales presentations, even if the consumer had registered for the state do-not-call program; no such exemption appears in the federal rules. Signed July 12, 2005, Chapter 214, effective 60 days after signature.
Junk Fax Prevention Bill (federal). Signed July 9, 2005, the bill maintains the "established business relationship" exception that allows businesses, associations, etc., to send unsolicited commercial faxes to their members and clients. The bill also requires unsolicited commercial faxes to include an opt-out provision on the first page of the fax. It requires that a fax number be obtained either directly from the recipient or from a public source to which the recipient gave the number of publication; but it "grandfathers" fax numbers in the possession of the sender at the time of enactment. A summary of the law is available as QuickSource document No. QS90451.
Confidentiality—orders of protection. A.1377-c expanded protections already in place for victims of domestic violence. When insureds under a health insurance policy or HMO program have an order of protection against the policyholder they can require that their address, phone number and the identity of any health care provider treating them (or a child insured under the policy) be withheld from the policyholder. Includes agents in this confidentiality requirement. Signed July 19, 2005, Chapter 246, effective 120 days after signature.
Workers' compensation
Workers' Compensation Security Fund. Legislation was enacted on an emergency basis to deal with a near-collapse of the state's Workers' Compensation Security Fund. The bill, A.7708, by Assemblyman Alexander "Pete" Grannis, permits borrowing, up to $70 million, from the estates of liquidated domestic New York carriers in order to pay claims. These funds will be replenished by upping the assessment on workers' compensation premiums from 1 to 2 percent.
The Insurance Department is currently managing the estates of at least 34 insolvent carriers, with estimated liquid assets of over $783 million dollars. Some of these companies have been in liquidation for over a decade. If, as is likely, the superintendent of insurance runs into legal challenges against this borrowing going forward, a "Plan B" exists, whereby borrowing, up to $30 million, would come instead from the state's Property-Casualty Insurance Security Fund (the "big fund")—already encumbered by prior loans that went into the state's coffers.
A hearing called earlier in the year highlighted how little information is publicly available on the various insolvency funds created to protect New York policyholders. Under another provision of the bill, the superintendent of insurance must report to the Legislature on actual and anticipated receipts and disbursements of the Workers' Compensation Security Fund (WC), Property-Casualty Insurance Security Fund (PCF) and Public Motor Vehicle Liability Security Fund (PMV).
The PMV fund likewise has run out of money an has been neither defending nor paying claims against former policyholders of insolvent carriers that wrote for-hire business. An earlier version of the bill would have merged this fund into the "big fund"—a move opposed by insurers who are reluctant to pick up past and possible future insolvencies in the livery area.
The superintendent is required to study and report by Oct. 31, 2005, on recommendations for reform of the WC and PMV funds. The study will include an evaluation by an independent auditor of the funds, including their administration, an actuarial project of their capacity and future demands and reasons for impairment. Signed May 11, 2005, Chapter 33, effective immediately.
Payroll Limitation Program made permanent. S.2155 makes permanent the provisions that, in 1998, affected a comprise resolving the long-standing debate over "total payroll" vs. "hours worked" as the appropriate basis for the calculation of workers' compensation insurance premiums to be paid by construction industry employers. The law provided for a four-year phase-in of its provisions and a Dec. 31, 2005, sunset so that any unintended consequences it may have caused could be addressed. Signed June 7, 2005, Chapter 86.
Miscellaneous bills
ELANY extender. The Excess Line Association of New York needed period extension of its authority. ELANY was extended through July 1, 2009, by S.3819-a. Signed June 7, 2005, Chapter 90.
Surety. S.4061-b clarifies New York's definition of "surety" and adds new permissible types of surety bonds. It excludes from the definition of "surety" mortgage guaranty, financial guaranty and service contract reimbursement contracts. It also describes several additional permissible types of surety bonds including guarantees for: the performance of certain leases and rental agreements; certain types of indebtedness or insurance for deposits in financial institutions in excess of the FDIC protections. Signed Sept. 20, 2005, effective immediately.
Wireless communication coverage. A.8513 adds a new Section 3449 of the Insurance Law, containing provisions regarding the cancellation or amendment of coverage under a group policy providing coverage of wireless communication devices. Signed Aug. 2, 2005, Chapter 426, effective immediately.
Distributions in wrongful death case settlements. S.4853 addresses the practice of transferring an approved settlement in a wrongful death case to the Surrogate Court for distribution, resulting in significant delays in payment of proceeds and payment of expenses associated with the case, such as attorneys' fees, medical bills, funeral costs and other liens on the estate. Supporters of this bill said the delay can be as long as two years, causing hardship for professionals and businesses that have provided services and also to distributees who may bear expenses pending distribution. The court is directed in this bill to provide for deposit of the settlement proceeds in escrow account and further provide for the payment of expenses from the escrow account. Signed Oct. 11, 2005, effective immediately. 11/05
