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Coverage Pointers - Volume XIX, Special Edition

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

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ASSISTANT EDITOR

Jennifer A. Ehman

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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.

 

  1. 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.

     

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