New York State may be on the verge of making the same mistake that broke Florida’s insurance premiums through the roof and did the same in California until its high court found out it was wrong.
The legislation, which is now passing through the New York State Assembly, will radically shift responsibility to unfair financial practices from the Department of Financial Services and to the tort system. Assembly Bill 5623 will facilitate litigation against insurance companies for alleged “bad faith”, including by filing a lawsuit against third parties to file direct reasons for a lawsuit against insurers.
This measure was approved by the Assembly Insurance Committee on 14 July by a vote of 14-6 and by the Assembly Codes Committee by a vote of 15-6 on 17 July. The Assembly’s Rules Committee voted on 22-7 July 22 to move the legislation to the floor of the Assembly. The accompanying bill is currently being considered by the Senate Insurance Committee.
The proposal is reminiscent of the California experience after the landmark decision of the California Supreme Court in 1979 Royal Globe Insurance Co. against the Supreme Court, in which it was established that third-party applicants may file direct claims for bad faith of insurers in the settlement of contracts to which the applicant was not a party.
The expected consequence of this decision was noticed almost immediately. Between 1980 and 1987, the number of car liability lawsuits in California’s higher courts increased by 82 percent, and their severity quadrupled. Claims for personal injury related to car lawsuits doubled between 1982 and 1987, peaking at 91,450 cases. These trends changed rapidly when the California Supreme Court overturned Royal globe decision in 1988.
Perhaps a more direct comparison can be found in Florida, where, as in New York, there is a no-fault car insurance system. In wine-free states, which rely primarily on protection against physical injury (PIP), liability claims for personal injury should be rare. This is not the case in Florida, one of the five states that allows third parties not listed in the insurance contract to file lawsuits about bad faith claims against insurers.
The 2018 Insurance Research Council report shows how lawsuits for injuries have increased in Florida since the 1993 decision, which led to unfair actions by third-party developers, and in particular how the frequency of these claims is compared to New York, New Jersey and Pennsylvania without guilt.
This difference in the rates of claims and lawsuits is also clearly reflected in the price of car insurance. According to a recent Insure.com poll, Florida consumers now pay the third-highest auto insurance rate in the United States, with an average premium of $ 2,239. Instead of New York 37him, with an average premium of $ 1,320. If AB 5623 continues its way through the Assembly and is signed by Governor Andrew Cuomo, New York must expect a rapid rise in the rating.
The purpose of insurance is to compensate the losses to the insured, to make them intact. It does not enrich the plaintiffs or their lawyers. New York lawmakers need to learn the lessons of California and Florida and get back before it’s too late.
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