Important insurance legislation passes the NYS Senate

STATUS:

S5076-B DEFRANCISCO Same as A 10462-A Morelle (MS)

Insurance Law

TITLE....Relates to standard fire insurance policies

04/25/07

REFERRED TO INSURANCE

05/21/07

1ST REPORT WITH AMENDMENTS CAL.1261

05/21/07

PRINT NUMBER 5076A

05/22/07

2ND REPORT CAL.

05/29/07

ADVANCED TO THIRD READING

06/04/07

PASSED SENATE

06/04/07

DELIVERED TO ASSEMBLY

06/04/07

referred to insurance

01/09/08

died in assembly

01/09/08

returned to senate

01/09/08

REFERRED TO INSURANCE

05/20/08

1ST REPORT CAL.1465

05/21/08

2ND REPORT CAL.

05/27/08

ADVANCED TO THIRD READING

06/02/08

PASSED SENATE

06/02/08

DELIVERED TO ASSEMBLY

06/02/08

referred to insurance

06/18/08

RECALLED FROM ASSEMBLY

06/18/08

returned to senate

06/18/08

VOTE RECONSIDERED - RESTORED TO THIRD READING

06/18/08

AMENDED ON THIRD READING 5076B

06/23/08

REPASSED SENATE

06/23/08

RETURNED TO ASSEMBLY

06/23/08

referred to insurance

VOTING:

06/23/08 S5076-B Senate Vote Aye: 62 Nay: 0

06/02/08 S5076-A Senate Vote Aye: 59 Nay: 0

06/04/07 S5076-A Senate Vote Aye: 60 Nay: 0

SUMMARY:

DeFRANCISCO

Amd SS3404 & 3408, Ins L; amd S7601, CPLR

Allows court to compel the parties to submit to the appraisal process as set out in a standard fire policy regardless of any dispute raised concerning scope of coverage or scope of loss.

BILL TEXT:

STATE OF NEW YORK


___________________________________________________________________

5076--B

Cal. No. 1465

2007-2008 Regular Sessions

IN SENATE

April 25, 2007

Introduced by Sen. DeFRANCISCO -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance -- reported favorably from said committee with amendments and ordered reprinted as amended and when reprinted to be committed to the order of first report -- recommitted to the Committee on Insurance in accordance with

Senate Rule 6, sec. 8 -- reported favorably from said committee, ordered to first and second report, ordered to a third reading, passed by Senate and delivered to the Assembly, recalled, vote reconsidered, restored to third reading, amended and ordered reprinted, retaining its place in the order of third reading AN ACT to amend the insurance law and the civil practice law and rules, in relation to standard fire insurance policies The People of the State of New York, represented in Senate and Assembly, do enact as follows:

1 Section 1. Subsection (g) of section 3404 of the insurance law, as

2 added by chapter 27 of the laws of 1990, is amended to read as follows:

3 (g) Notwithstanding any other provision of law to the contrary, the

4 Provisions of the appraisal clause set out on the second page of the

5 standard fire policy and the provisions of section three thousand four

6 hundred eight of this [chapter] article, including determinations as to

7 the amount of loss or damage rendered thereunder, shall be binding on

8 all parties to the contract of [fire] insurance evidenced by the policy

9 and may be enforced by either the insurer or the insured by application

10 made pursuant to subsection (c) of section three thousand four hundred

11 eight of this article.

12 § 2. Section 3408 of the insurance law is amended by adding a new

13 subsection (c) to read as follows:

14 (c) In the event of a covered loss, whenever an insured or insurer

15 fails to proceed with an appraisal upon demand of the other, either

16 party may apply to the court in the manner provided in subsection (a) of

17 this section for an order directing the other to comply with such

EXPLANATION--Matter in italics (underscored) is new; matter in brackets

[ ] is old law to be omitted.

LBD03039-07-8

S. 5076--B 2

1 demand. If an appraisal is so ordered, it shall be limited to a determi-

2 nation of actual cash value and/or replacement cost, or the amount of

3 loss which shall be determined as specified in the policy and shall

4 proceed pursuant to the terms of the applicable appraisal clause of the

5 insurance policy and not as an arbitration.

6 § 3. Section 7601 of the civil practice law and rules is amended to

7 read as follows:

8 § 7601. Special proceeding to enforce agreement that issue or contro-

9 versy be determined by a person named or to be selected. A special

10 proceeding may be commenced to specifically enforce an agreement[, other

11 than one contained in the standard fire insurance policy of the state,]

12 that a question of valuation, appraisal or other issue or controversy be

13 determined by a person named or to be selected. [The] Except for the

14 provisions of the appraisal clause in the standard fire insurance policy

15 of the state which shall be enforced by appraisal pursuant to section

16 three thousand four hundred eight of the insurance law, the court may

17 enforce such an agreement as if it were an arbitration agreement, in

18 which case the proceeding shall be conducted as if brought under article

19 seventy-five of this chapter. Where there is a defense which would

20 require dismissal of an action for breach of the agreement, the proceed-

21 ing shall be dismissed.

22 § 4. This act shall take effect immediately.

SPONSORS MEMO:

NEW YORK STATE SENATE

INTRODUCER'S MEMORANDUM IN SUPPORT

submitted in accordance with Senate Rule VI. Sec 1

BILL NUMBER: S5076B

SPONSOR: DEFRANCISCO

TITLE OF BILL:

An act to amend the insurance law and the civil practice law and rules,

in relation to standard fire insurance policies

PURPOSE:

To authorize the Court, upon motion, to compel either party to a stand-

ard fire insurance policy to submit to the appraisal process in such

policy and to authorize either party to the standard fire insurance

policy to commence a special proceeding to specifically enforce certain

agreements in such policy.

SUMMARY OF PROVISIONS

Section One: Amends subsection (g) of Section 3404 of the Insurance Law

to give the Court discretion, upon motion of either party to a standard

fire insurance policy, to compel the parties to submit to the appraisal

process in a standard fire policy.

Section Two: Adds a new subsection (c) to Section 3408 of the Insurance

Law to provide that whenever either party to a fire insurance policy

fails to proceed with an appraisal on demand, then either party may

apply to court for an order directing compliance. In the event an

appraisal is ordered, then it shall be limited to a determination of

actual cash value and/or replacement cost, or the amount of loss which

shall be determined as specified in the policy and shall proceed pursu-

ant to the terms of the applicable appraisal clause of the insurance

policy and not as an arbitration.

Section Three: Amends Section 7601 of the Civil Practice Law and Rule

by removing the exemption currently granted to standard fire insurance

policies, and allows a party to such a policy to bring a special

proceeding to enforce an agreement as to questions of valuation,

appraisal or other issues or controversies covered by the appraisal

provision in said policy. This section further provides that any special

preceeding brought pursuant to the appraisal clause will go forward and

be enforced by appraisal and not as if it were an arbitration.

Section Four: Provides for an immediate effective date.

JUSTIFICATION:

The appraisal provision required by law in the standard fire insurance

policy is a vehicle to assist in quickly settling contract disputes

between the insured and insurer, rather than more time consuming liti-

gation. Without the appraisal process the insured is forced to accept an

offer from the carrier that they think is deficient or to pursue recov-

ery through litigation which is made cost prohibitive by the expenses of

bringing the action. A 2002 decision of the Supreme Court, Appellate

Division, Fourth Department (Thomas H. Fahrenholz v. Security Mutual

Insurance Company and the Kreiner Company, Inc.), pointed out that

further legislative action is required to eliminate the prohibition set

forth in CPLR 7601 against seeking specific performance of the appraisal

provision in the standard fire insurance policy. Section 7601 of the

Civil Practice Law and Rules which now allows an individual to start a

special proceeding to enforce a contract or agreement, exempts fire

insurance policies from such proceedings. This bill would remedy the

problems inherent in CPLR 7601 by providing clear language to allow

either party to utilize the appraisal process more frequently and there-

by avoid the high costs and delays inherent in protracted litigation.

LEGISLATIVE HISTORY:

S.324 of 2003-04; S.3012C of 2005-06 passed Senate in 2006; S.5076

passed Senate 2007.

FISCAL IMPLICATIONS:

None.

LOCAL FISCAL IMPLICATIONS:

None.

EFFECTIVE DATE:

Immediately.

 

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