June 30, 2011
By: Kymberly Kochis and Francis X. Nolan IV
This article is an interpretation of current law and is offered for informational purposes only. This material is not legal advice and should not be construed or used as a substitute for the advice of an attorney.
On June 23, 2011, the New York State Assembly passed Bill A8464-2011, which, if signed into law, will exempt many insurers of large commercial policyholders from having to obtain prior approval of certain policy forms from the state's insurance regulator. It is anticipated that Governor Andrew Cuomo will sign the bill into law.
Under current New York law, insurers are permitted exemptions for special risk policies designated as "Class 1" and "Class 2." The new bill would create a "Class 3" of commercial and special risk policies, allowing another exemption for qualifying large commercial policyholders. Specifically, the new bill would permit exemption for Class 3 commercial policyholders from filing requirements with respect to rates and policy forms. Class 3 commercial policyholders are defined as entities that generate annual commercial risk insurance premium, other than for medical malpractice insurance, in excess of $25,000. Entities must also meet at least one of the following criteria to qualify as a commercial policyholder: 1) a net worth of at least $7.5 million; 2) gross assets of more than $10 million and a net worth of at least $1.5 million; 3) an annual gross revenue exceeding $15 million and a net worth of at least $1.5 million if it is a for-profit entity; 4) gross assets exceeding $10 million and gross revenues of over $15 million if it is a for-profit entity; 5) an annual budget of over $20 million if it is a not-for-profit organization or public entity; 6) at least fifty employees; or 7) a population of more than 50,000 if it is a municipality.
Supporters praised the bill's passage, citing much needed reform to what they claim is a long and tedious process for approval of commercial rates and forms. Proponents of the bill argue that deregulation is warranted as large and sophisticated institutions experienced in the complexities of special risk policies need less legislative protection. They are also hopeful that the reform will attract companies back to the New York market, as in recent years institutions have sought easier standards elsewhere.
We will continue to provide updates on this legislation as they develop.
For further analysis of this issue or other matters related to the defense of insurers and their business practices, please contact Kymberly Kochis at 212-233-2906 or via email at kkochis@nldhlaw.com or Frank Nolan at 212-233-3144 or via email at fnolan@nldhlaw.com.
