Insurers Want Veto, Lawyers Cheer Passage of NY Insurance Bill

The passage of an insurance bill at the end of New York’s legislative session last month has sparked both cheers of support and cries of opposition as Gov. Andrew Cuomo considers the proposal’s finalization.

A10784 changes rules governing policyholders’ participation in supplementary underinsured/uninsured motorist coverage (SUM), requiring now that all policies automatically include it and that policyholders can opt-out if they don’t want the added cost. Before, it was not automatically included.

Currently, all policies offered by auto insurance companies in New York include uninsured motorist coverage. This type of insurance covers crash-related medical expenses racked up by policyholders, family members, household members and passengers when the accident was caused by an uninsured or unidentified driver.

SUM coverage is an optional add-on that beefs up the protections offered through the uninsured motorist portion of a policy. SUM coverage extends the uninsured coverage protections to out-of-state accidents, provides such coverage equal to the liability limits if the policyholder raises them above the minimum required by law and provides coverage when the person who caused the accident’s liability limits are too low to cover all damages.

A10784 passed the state Senate on June 21 and was supported by legal organizations including the New York State Trial Lawyers Association (NYTLA). NYTLA organization member and law firm Flanzig & Flanzig applauded the bill’s passage, calling it a “common-sense” measure informing motorists about a type of coverage they should be more aware of.

“The bill preserves consumer choice, protects drivers and will save taxpayers money as fewer accident victims are forced to rely on Medicaid and other public benefits after accidents involving under- or uninsured drivers,” the law firm stated on its website.

Optional added SUM protection is currently available through additional premiums with limits of $250,000 per accident per person and $500,000 per accident, although many insurers provide higher SUM limits, according to a guide from the New York Department of Financial Services.

However, insurers in the state have cried foul over the legislation, saying its opt-out requirement flies in the face of the “more transparent process of opting-in.”

“The potential effect of this legislation on rates would be devastating to consumers,” the New York Insurance Association (NYIA) said in a July 2 statement pressing Cuomo to veto the bill. “Individuals could end up paying a lot more for coverage that they didn’t even choose to have as part of their auto insurance policy.”

The NYIA also scolded lawmakers for failing to pass “comprehensive legislation reforms” of the state’s no-fault system, which compensates motorists for crash-related expenses regardless of fault, adding that fallout from implementing A10784 would be “compounded by the Legislature not passing meaningful no-fault reform this year.”

State senators passed three bills governing criminal classifications related to no-fault coverage, including S1685, which would make staging car accidents a felony punishable by up to seven years in prison. The legislation was sponsored by Sen. James Seward (R-Oneonta). Seward also sponsored the Senate version of the SUM bill, titled S7787.

S1685, along with the two other no-fault bills, all went to Assembly committees after their Senate passage but saw no further action.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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