New York State may be on the verge of making the same mistake that has driven Florida auto insurance premiums through the roof, and the same happened in California until its High Court learned the error of its ways.
The legislation, currently running through the New York State Assembly, would largely give responsibility for the police’s unfair claim-settlement practices on behalf of the Department of Financial Services and the Tote System. Legislative Assembly Bill 5623 It would be easy to sue insurance companies for alleged “bad faith”, including erecting third parties to bring direct causes of action against the insurers.
The measure was cleared by the Assembly Insurance Committee by 14–6 votes on 14 July and the Assembly Code Committee by 15–6 votes on 17 July. The Assembly Rules Committee voted 22-7 on July 22 to move legislation on the assembly floor. a Companion bill The Senate currently sits before the Insurance Committee.
The motion recounts the California experience since 1979 in a California Supreme Court ruling Royal Globe Insurance Company v. Superior Court, Which found that third-party claimants could take direct action to settle contracts alleging bad faith by insurers that the claimant was not a party.
The anticipated outcome of that regime was seen almost immediately. Between 1980 and 1987, the number of auto liability claim filings in Superior Court of California increased by 82 percent and their severity increased by a factor of four. Personal injury lawsuits involving auto claims doubled between 1982 and 1987, with 91,450 cases reported. Those Trends reversed sharply When the California Supreme Court overturned Royal globe Decision in 1988.
Perhaps a more direct comparison can be found in Florida, which employs a no-fault auto insurance system similar to that of New York. In no-fault states, which rely primarily on personal injury protection (PIP) coverage, claims for bodily injury liability are rare. This is not the case in Florida, just one of five states that do not name third parties in insurance contracts to bring bad faith claims against insurance companies.
a 2018 report The Insurance Research Council explores how bodily injury claims have ceased after the 1993 decision in Florida, which created third-party bad faith, and specifically how the frequency occurred in New York, New Jersey, and Compares the no-fault states of Pennsylvania.
This difference in the rates of claims and lawsuits is also clearly visible in the price of auto insurance. according to Most recent survey By Insure.com, Florida consumers now pay the third highest auto insurance rates in the United States, with an average premium of $ 2,239. New York, by contrast, is 37Th, With an average premium of $ 1,320. Should AB 5623 continue its path through the Legislative Assembly and be signed by the government. Andrew Cuomo, New York should expect a quick climb in the rankings.
The purpose of insurance is to compensate the policyholder, making them complete. It is not meant to provide enrichment for the plaintiff or their lawyers. New York lawmakers should learn the lessons of California and Florida before it is too late.