SPECIAL EDITION
New York Adopt “Opt Out” Protocols for SUM (Underinsurance) Coverage
Volume XIX, Special Edition (No. 497)
Wednesday, December 20, 2017
A Biweekly Electronic Newsletter
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NEWSLETTER EDITOR
Dan D. Kohane
[email protected]
ASSOCIATE EDITOR
Agnes A. Wilewicz
ASSISTANT EDITOR
Jennifer A. Ehman
LAWS OF NEW YORK, 2017
CHAPTER 490
AN ACT to amend the insurance law, in relation to limits on certain supplementary insurance; and providing for the repeal of such provisions upon expiration thereof,
Became a law December 18, 2017, with the approval of the Governor.
Analysis:
Under legislation signed into law on December 18, 2017, the rules relating to underinsured motorists coverage have changed dramatically for New York policyholders. While policyholders must purchase insurance coverage to protect them for injuries sustained by negligent uninsured, unknown or hit-and-run drivers, coverage for inadequately insured drivers – known as “underinsured” or “SUM coverage” – is optional. Under current law, like other optional coverages, when a policyholder purchases an automobile insurance policy, he or she makes the decision to purchase or not purchase that coverage, depending upon their needs and choices. Under the bill just signed into law by Governor Cuomo, that coverage will now be automatically provided in auto policies, in an amount equal to liability coverage purchased, unless the policyholder affirmatively signs, or electronically signs, a waiver rejecting the coverage or purchasing a lower limit.
Supplementary Uninsured/Underinsured Motorists coverage, known as SUM coverage, is an optional insurance coverage available to New York policyholders. It protects motorists who suffer serious injuries in accidents where the negligent driver carries inadequate insurance.
The new change, which applies to new policies purchased after June 18, 2018, automatically includes that insurance in every new policy issued, in an amount equal to liability coverage purchased. Liability coverage protects the policyholder from claims by others.
The statute applies to any new insurance policy issued after June 18, 2018, but not to policies entered into prior to June 18, 2018, and renewed afterwards.
The statute provides that SUM coverage remains optional and can be purchased up to the amount of liability insurance purchased to protect others. However, for these new policies, SUM coverage is automatically provided unless the policyholder, through a written waiver signed, or electronically signed, chooses to decline the coverage.
If the insured elects to reject that coverage or selects a lower limit of SUM coverage than he or she has in liability coverage, the rejection of the coverage or the selection of lower limits must be made on a written or electronic form provided to the named insured. The insurer must provide the insured with a notice, in 12-point bold type, on the form, that the coverage is automatically provided unless the waiver is signed declining the coverage or purchasing a lower limit.
An insured written waiver shall apply to all supplemental renewals of coverage or any modifications of coverage and is binding on all who qualify as insureds under the policy.
In addition, the legislation provides that at the INSURER’s option, the insured’s SUM coverage limit may be required to equal the insured’s liability limits.
The legislation has a sunset provision and automatically expires on June 30, 2020, unless the Legislature chooses to extend it.
Text of Legislation:
LAWS OF NEW YORK, 2017
CHAPTER 490
AN ACT to amend the insurance law, in relation to limits on certain
supplementary insurance; and providing for the repeal of such
provisions upon expiration thereof
Became a law December 18, 2017, with the approval of the Governor.
Passed by a majority vote, three-fifths being present.
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Subsection (f) of section 3420 of the insurance law is amended by adding a new paragraph 2-a to read as follows:
AN ACT to amend the insurance law, in relation to limits on certain
supplementary insurance; and providing for the repeal of such
provisions upon expiration thereof
Became a law December 18, 2017, with the approval of the Governor.
Passed by a majority vote, three-fifths being present.
The People of the State of New York, represented in Senate and Assem-
bly, do enact as follows:
Section 1. Subsection (f) of section 3420 of the insurance law is
amended by adding a new paragraph 2-a to read as follows:
(2-a) (A) Notwithstanding paragraph two of this subsection, this para-
graph shall apply to any new insurance policy or contract entered into
after the effective date of this paragraph. This paragraph shall not be
deemed to apply to any policies originally entered into prior to the
effective date of this paragraph, but renewed after the effective date
of this paragraph. Any new insurance policy or contract entered into
after the effective date of this paragraph shall, at the option of the
insured, also provide supplementary uninsured/underinsured motorists
insurance for bodily injury, in an amount equal to the bodily injury
liability insurance limits of coverage provided under such motor vehicle
liability insurance policy; provided, however, that any named insured
may exercise the choice to decline such supplementary
uninsured/underinsured motorists insurance or select a lower amount of
coverage through a written waiver signed, or electronically signed, by
such insured, subject to the requirements of subparagraph (B) of this
paragraph. Supplementary uninsured/underinsured motorists insurance
shall provide coverage, in any state or Canadian province, if the limits
of liability under all bodily injury liability bonds and insurance poli-
cies of any other motor vehicle liable for damages are in a lesser
amount than the bodily injury liability insurance limits of coverage
provided by such policy. Upon written request by any insured covered by
supplemental uninsured/underinsured motorists insurance or his duly
authorized representative and upon disclosure by the insured of the
insured's bodily injury and supplemental uninsured/underinsured motor-
ists insurance coverage limits, the insurer of any other owner or opera-
tor of another motor vehicle against which a claim has been made for
damages to the insured shall disclose, within forty-five days of the
request, the bodily injury liability insurance limits of its coverage
provided under the policy or all bodily injury liability bonds. The time
of the insured to make any supplementary uninsured/underinsured motorist
claim, shall be tolled during the period the insurer of any other owner
or operator of another motor vehicle that may be liable for damages to
the insured, fails to so disclose its coverage. As a condition precedent
to the obligation of the insurer to pay under the supplementary
uninsured/underinsured motorists insurance coverage, the limits of
liability of all bodily injury liability bonds or insurance policies
applicable at the time of the accident shall be exhausted by payment of
judgments or settlements.
(B) In addition to the notice provided, upon issuance of a policy of
motor vehicle liability insurance pursuant to regulations promulgated by
the superintendent, insurers shall notify insureds, in writing, of the
availability of supplementary uninsured/underinsured motorists coverage.
Such notification shall contain an explanation of supplementary
uninsured/underinsured motorists coverage and the amounts in which it
can be purchased. Subsequently, a notification of availability shall be
provided at least once a year and may be simplified pursuant to regu-
lations promulgated by the superintendent, but must include a concise
statement that supplementary uninsured/underinsured motorists coverage
is available, an explanation of such coverage, and the coverage limits
that can be purchased from the insurer. If an insured elects to reject
supplementary uninsured/underinsured motorist coverage or select a lower
amount of supplementary uninsured/underinsured motorist coverage than
the bodily injury liability insurance limits of coverage provided under
the insured's motor vehicle liability insurance policy, the selection of
lower supplementary uninsured/underinsured motorists coverage or
rejection of such coverage must be made on a written or electronic form
provided to the named insured. Such form shall also advise that such
coverage is equal to the insured's bodily injury liability limits under
the motor vehicle liability insurance policy unless lower limits are
requested or the coverage is rejected.
-
The form shall be in at least 12-point bold type and shall state:
"SUPPLEMENTARY UNINSURED/UNDERINSURED MOTORISTS COVERAGE (SUM COVERAGE) PROVIDES INSURANCE PROTECTION FOR ANY PERSON INCLUDED AS INSURED UNDER YOUR POLICY IF HE OR SHE IS INJURED IN AN ACCIDENT INVOLVING ANOTHER MOTOR VEHICLE WHOSE OWNER OR OPERATOR WAS NEGLIGENT BUT WHO HAS EITHER NO BODILY INJURY OR LIABILITY INSURANCE, OR LESS THAN THE INSURANCE YOU CARRY. SUM COVERAGE SHALL BE EQUAL TO THE LEVEL OF THE BODILY INJURY LIABILITY COVERAGE OF YOUR MOTOR VEHICLE LIABILITY INSURANCE POLICY UNLESS YOU SIGN A WAIVER REQUESTING LOWER COVERAGE OR DECLINING THE COVERAGE. YOU ARE URGED TO CAREFULLY CONSIDER THIS DECISION."
(ii) An insured's written waiver shall apply to all subsequent
renewals of coverage and to all policies or endorsements which extend,
change, supersede, or replace an existing policy issued to the named
insured, unless changed in writing by any named insured.
(iii) the selection of lower supplementary uninsured/underinsured
motorists coverage or the rejection of such coverage by any one named
insured shall be binding upon all insureds under such policy.
(C) Notwithstanding the provisions of subparagraph (A) of this para-
graph, at the insurer's option, the insured's supplementary
uninsured/underinsured motorists coverage limit may be required to equal
the insured's bodily injury liability insurance limit under the motor
vehicle liability insurance policy.
(D) An insurer may provide the coverage described in this paragraph
available in an umbrella or excess liability policy if the umbrella or
excess liability policy expressly provides such coverage.
§ 2. This act shall take effect on the one hundred eightieth day after
it shall have become a law, and shall apply to new insurance policies
and contracts issued on and after such effective date and shall expire
and be deemed repealed June 30, 2020.
