Understanding New York’s Comprehensive Insurance Disclosure Act
On December 31, 2021, New York Gov. Kathy Hochul signed the Comprehensive Insurance Disclosure Act (the “Act”) into law. The Act, which is effective immediately, modifies C.P.L.R. § 3101(f) to require that any defendant (including a third-party defendant, or defendant on a cross-claim or counterclaim) provide certain insurance information soon after filing an answer. The Act may have significant implications for both insureds and insurance carriers.
In its current form, the Act requires that a defendant provide a personal injury claimant with the following information, within 60 days of filing its answer to a lawsuit:
- A complete copy of any insurance policy under which any person or entity may be liable to satisfy part or all of a judgment that may be entered.
- The contact information, including telephone numbers and email addresses, of adjusters and third-party administrators.
- The amounts available to satisfy a judgment under the policy/policies.
- Information pertaining to any lawsuits that have reduced the amounts available under the policy/policies, including the caption of the lawsuit, the date the lawsuit was filed, and the identity and contact information of the attorneys for all represented parties therein.
- The amount of any payment of attorneys’ fees that have eroded the amounts available under the policy, along with the name and addresses of any attorney who received such payments.
- The application(s) for insurance.
Despite its onerous requirements, the Act provides no indication of what consequences would flow from a defendant’s failure to produce the required information.
The Act also has the following important features: (i) it applies only to policies sold or delivered within the State of New York; (ii) defendants must ensure that the information they have provided remains up-to-date; (iii) both a defendant and their attorney must certify that the information provided is correct and complete; (iv) the Act applies to all pending litigations and any defendant in a pending action must provide the required information by March 1, 2022; and (v) as the Act modifies the C.P.L.R., it will only apply to defendants litigating in New York State Courts.
There are reports that Gov. Hochul has redlined certain provisions of the Act, in order to make it less onerous on businesses, defendants, and insurers. Reportedly, the Governor’s intent is to make amendments that tailor the scope of disclosures to its intended purpose – ensuring that the parties in a litigation are correctly informed about the limits of potential insurance coverage.
Based on available information, the Governor’s redlines make several changes, including:
- Changing the deadline for a defendant to provide insurance information from 60 days to 90 days, after the filing of its Answer.
- The disclosure of policy applications would not be required.
- Stating that the only policies that must be disclosed are those that relate to the claim being litigated.
If the New York State Assembly and Senate vote to pass Gov. Hochul’s proposed amendments, the Act, as amended, may ultimately be far less burdensome on defendants and insurance carriers than it is currently.
Understanding the Requirements
The Act, as it stands, imposes disclosure requirements on defendants to a litigation, not on their insurance carriers. Nevertheless, the Act presents new issues and potential challenges, of which insurers should be aware.
First, the Act will likely cause insurance companies to incur increased administrative time and costs. Much of the information requested in the Act is not readily in the possession of many defendants. As such, insurance companies may see an influx of requests for this information. This consideration may be compounded by the fact that the Act applies not only to new lawsuits, but also to all pending lawsuits. By the current terms of the Act, defendants to all pending lawsuits must provide the required information by March 1, 2022.
Second, although the Assembly has indicated that the purpose of the Act is to assist injured plaintiffs in obtaining relevant insurance information, the language of the Act does not indicate that insurer defendants to a declaratory judgment action, or any other type of action, would be exempt from its requirements. The Act requires proof of the “existence and contents of any insurance agreement under which any person or entity may be liable to satisfy part or all of a judgment that may be entered in the action or to indemnify or reimburse for payments made to satisfy the entry of judgment.”
Third, the disclosure of policy applications may be burdensome, but more significantly, those disclosures raise issues regarding proprietary and confidential information. Policy applications typically include detailed financial information pertaining to an insured’s assets, revenue, and number of employees, as well as the insured’s knowledge of claims or other issues that may give rise to claims. These types of details may be wholly irrelevant to a pending litigation, but could provide a plaintiff with damaging or prejudicial information as to the insured and its business. It remains to be seen whether redaction of applications for issues of relevancy and privacy concerns becomes the norm.
In the same vein, the requirement of disclosure of related lawsuits that have eroded policy limits can present challenges. If the allegations of unrelated lawsuits are particularly unflattering, or the result particularly unfavorable, a claimant may attempt to use this information to paint a defendant in a negative light. Additionally, the disclosure of available policy limits may reveal confidential settlement information, if policy amounts were reduced by settlement.
Finally, there is an overarching consideration of whether this Act is necessary in the first instance. Under current discovery rules, parties are required to produce insurance information, including policies, where requested during the course of discovery. The Act, however, makes the disclosure of policies automatic. Arguably, this automatic disclosure of policy information is unnecessary, because such information is routinely already exchanged during the course of discovery, when requested.
Given these considerations, and the possibility of future amendment(s), defense counsel and insurers should keep a close eye on developments concerning the Act.