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Insurance Dept. Opinions: Wrap-Ups, Credit Cards, & More on Same-Sex Married Couples

The flow of advisory legal opinions coming out of the New York Insurance Department’s Office of General Counsel has slowed to a trickle. Here’s what they had to say in December:

• An insurer may limit credit card use to the payment of only a certain percentage of premiums, so long as the percentage is the same for all classes of applicants and insureds under a particular insurance product.
• An owner or general contractor that has given a subcontractor a change order on a non-public construction project, which is insured by a wrap-up policy, may not require the subcontractor to increase the credit it applied to its bid.
• A retail employee may not sell optional insurance coverage to a customer who opens a store credit card, but she may secure and furnish information for the purpose of certain types of insurance, provided she does not receive a commission from the insurance sale.
• Nothing in the Insurance Law or regulations addresses whether an insurer may settle no-fault cases with one attorney when the insurer is specifically aware that another attorney is the attorney of record.
• The department’s circular pertaining to recognition of same-sex marriages performed in other states applies to group policies including long-term disability, short-term disability and term life.
• An insurer must negotiate directly with an insured prior to issuing a notice of rights letter when the insurer has negotiated with a repair facility that has not been designated by the insured, and was unable to reach a settlement with that facility. The insurer’s letter must be issued when choice of repair facility was not explicitly a subject of negotiation with the motor vehicle repair facility. An insurer in a negotiation is not required to shift from its initial negotiating position on labor rates, or any other negotiable issue, so long as its initial position is taken in good faith.

The department issued other opinions pertaining to adjuster licenses, insurer-to-insurer payments in no-fault claim situations, and assets of insolvent insurers. Look for these and all other department opinions issued this decade on its Web site.

Need Help With Grammar? Ask Grammar Girl!

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We work in a communication-intensive business. Success in underwriting, sales, and claim handling depends on the ability to communicate clearly. Grammar rules are nothing more than "the rules of the road" for clear communications. If you've been caught more than once dangling a participle in public, the Grammar Girl podcast just might be for you!

New Flood Maps Hiking Premiums? Don’t Forget the ‘Grandfathering’ Rules

Communities all over New York State are experiencing the effects of the National Flood Insurance Program’s flood zone re-mapping project. Homeowners who thought they lived in low-hazard flood zones have discovered that they have a much higher risk. In accordance with basic insurance principles, higher risks translate into higher premiums. However, the NFIP rating manual offers a source of potential relief for affected insureds – the “grandfathering” rules.

Under these rules, renewals of existing policies can use the new rates if they are lower than the expiring ones. If the new rates are higher, the policy may be renewed and rated based on the map and/or base floor elevation in effect when the policy was initially rated. The original rates can be used only if coverage has been continuous and the building has not been altered to lower the base floor elevation. For new business applications, the old rates can be used if:

·         The building was built in compliance with the map in effect at the time of construction; and

·         The building has not been altered in any way that has resulted in a lowest floor lower than the base floor elevation on the old map; and

·         The building has not been substantially improved.

These new business rules also apply to buildings constructed on or before December 31, 1974 on or after the old map date.

Check with the NFIP or the insurer providing an insured’s flood policy to see if the insured qualifies for grandfathering.

Surcharging a Personal Auto Premium for a Claim in Reserve

Question from IIABNY member: Hoping you can answer a question on personal auto for me. Can the company charge for an accident if nothing has been paid but reserve has been set up?

Answer: This is what N.Y. Insurance Regulation 100 (Noncommercial Private Passenger Automobile Insurance Merit Rating Plans) says (11 NYCRR 169.1(c)): 

Claims for bodily injury: A surcharge may be imposed for an occurrence involving bodily injury (including a no-fault injury subject to article 51 of the Insurance Law) provided the motor vehicle was in operation and the insured was at fault. The establishment of a residual bodily injury liability reserve shall not in itself imply that the insured was at fault. An additional surcharge may not be imposed for bodily injury, if the accident which resulted in the bodily injury is already surchargeable under subdivision (a) of this section.

Subdivision (a) sets the property damage threshold for chargeability of PD claims (i.e., losses with dollar amounts below the threshold are not chargeable).

Based on this regulation, an insurer can surcharge for a bodily injury accident if the insured was at fault. Nothing prevents an insurer from surcharging for an accident for which a reserve is set up, but the insurer cannot point to the reserve as being proof that the insured was at fault. Examples:

1. Insured strikes a pedestrian in a crosswalk and is ticketed for running a red light. Insurer sets up a $50,000 reserve but has paid nothing at the time of the next renewal. The insurer can surcharge for this because a reasonable person could look at the facts and conclude the insured was at fault.

2. Insured, while making a left turn, strikes another vehicle making a left turn. The other driver suffers a neck injury, and the insurer puts up a $25,000 reserve. The facts are unclear as to which vehicle had the right of way. Unless the insurer has some other reasonable basis for determining that its insured was at fault, it may not surcharge for this accident.