Question from an IIABNY member: We continually have major issues with the New York State Insurance Fund. One of the most confusing issues is cancellation of policies with them and their "30 days after notice is given" policy. When we send them a Lost Policy Release, it is noted in their system, but they will not cancel a policy for 30 days, leaving insureds with large bills and over-lapping coverages. Given this day and age of people changing insurance companies at the drop of a dime, it is very hard to explain to them that NYSIF will not cancel their policy for an additional 30 days despite a legal document authorizing them too.
I guess I am looking for a little guidance on whom to contact at NYSIF or how to go about raising this issue (I am positive it is not the first time it has come up) with them.
Answer: In this case, I have to let the State Insurance Fund off the hook and blame the New York State Legislature. The legislature writes the laws, and this is what they wrote in New York Workers’ Compensation Law Section 94:
Any employer may, upon (obtaining insurance coverage from a private carrier or providing proof of its ability to self-insure), withdraw from the fund by turning in his insurance contract for cancellation, provided he has given written notice to the fund of his intention to withdraw not less than thirty days before the effective date of such cancellation. Upon receipt of such notice the fund shall, at least ten days prior to the effective date file in the office of the chairman a notice of such cancellation date. (emphasis added)
In no event shall the insurance contract be deemed cancelled until at least ten days after the date of such filing, any earlier date mentioned in the notice to the contrary notwithstanding. (emphasis added again)
If an employer withdraws from the fund upon (obtaining coverage from a private carrier), the new insurance contract with the stock corporation, mutual corporation or reciprocal insurer shall be deemed not to take effect until the cancellation of such employer's contract with the state insurance fund has become effective.
Therefore, by law an employer cannot withdraw from the NYSIF without providing at least 30 days’ notice. Plus, the NYSIF must give at least 10 days’ notice to the Workers Compensation Board, and the policy is not cancelled until those 10 days are up. You don’t add these together – the Fund could receive a notice today advising of cancellation on Aug. 5, send the notice to the WCB tomorrow, and the cancellation will take effect on Aug. 5. Nothing in the law requires the Fund to wait. But the fact remains that the law requires the employer to give the 30 days’ notice.
Because this is a legal requirement, I don’t think the Fund is in a position to do anything about your insureds’ problem. By law, the replacing policy cannot take effect until the end of the 30-day notice period, so there really should not be dual coverage and premiums for the same time period.
This is so frustrating. I was once able to get the new carrier to send an indemnity agreement to State Insurance Fund to cancel flat when we advised of the cancellation within 30 days and they didnt process it. With this said, how exactly are we supposed to start a new policy with an unknown effective date? If that state gets their notice within 30 days and doesn't notify the board for another 30 days- and the insured should not have duplicate coverage, how exactly do you ask the new company to bind and hold until we have an effective date? Something must be done about this.
Posted by: Stacymarie LaVacca | September 21, 2011 at 09:42 AM
Stacymarie,
It does sound pretty frustrating. The way the law reads, an employer should be able to tell the State Fund on Sept. 22, "I'm out of here on Nov. 1," and the Fund would inform the Workers Comp Board in plenty of time to meet the 10 day advance notice requirement. If they're not doing that, the Department of Labor should be notified, as the Fund is part of that department. In the above case, you should be able to apply for coverage with a private carrier effective Nov. 1 without incident.
Posted by: Tim Dodge | September 22, 2011 at 01:59 PM