Businesses, Individuals Face Onerous Insurance Disclosure Obligations In NY

A quiet bill passed in New York on the final day of 2021 threatens to have major consequences for the insurance industry.

The Comprehensive Insurance Disclosure Act requires defendants to provide plaintiffs with “complete” information for any insurance policy through which a judgment could be satisfied, within 60 days after serving an answer.

The legislation was ostensibly created counter delay tactics by compelling disclosures of all policies implicated by a claim, as well as other claims, contracts, or agreements that may deplete available coverage or residual limits of policies.

"Liability and coverage issues in cases are not always clear, which makes this requirement difficult and burdensome," wrote Richard W. Brown and Michael V. Pepe of the law firm Saxe Doernberger & Vita. "For example, a difference over the number of occurrences in another suit, or a judgment or settlement eroding completed operations aggregate limits, places the onus on defendants to increase overhead costs to assess and continually maintain this insurance information."

But legislators are already moving to blunt its impact. Several amendments are on the table to alter the rule, with the NY State Senate recently voting 60-1 on a bill to limit the impact of the CIDA.

The bill, sponsored by state Sen. Andrew Gounardes of Brooklyn, would make the following amendments to the CIDA, as explained by the law firm, Pillinger, Miller and Tarallo:

1. New insurance disclosure information only for lawsuits filed after the CIDA 12/31/21 effective date and not retroactive application to pending cases.
2. Disclosure of insurance policies or declaration pages within 90 days of the filing of an answer, instead of 60 days. With plaintiff’s consent, a defendant will only need to provide a copy of the policy’s declaration page, but the plaintiff can revoke consent at any time.
3. Disclosure of only the name and email address of the person adjusting the claim. A third-party administrator will not need to disclose the person at an insurance company to whom they are reporting.
4. A defendant to disclose the available limits of insurance remaining on its policies as eroded. A defendant will not be required to disclose information about other lawsuits that eroded the limits. For “eroding limits policies,” i.e., where defense costs reduce the available limits of insurance, a defendant will not need to disclose attorney identities regarding fees paid.
5. Supplemental disclosures when the note of issue is filed and during settlement negotiations or mediation.

While the CIDA might change and evolve, for now it is the law and takes effect March 1, said Dan D. Kohane, insurance coverage chair at Hurwitz & Fine.

"Don’t think for a minute that the statute is not currently the law or that because it may change, it ought to be ignored," Kohane wrote in a LinkedIn post.