Hochul signs New York auto insurance reforms into law

(The Center Square) — New York Gov. Kathy Hochul has signed a bill to crack down on auto insurance fraud, including "runaway litigation" and staged accidents that state officials say are driving up rates for drivers.

The legislation, signed late Tuesday, sets limits on court-ordered damages for drivers engaging in "criminal behavior" at the time of crash, such as uninsured motorists, drunk drivers and fraudsters, with the goal of preventing "jackpot" payouts.

The package of reforms also includes expanded oversight of insurance rates and limits on excess profits. It sets a legal threshold to prevent excess profits and return savings to consumers, and safeguards against insurers raising rates without approval from state regulators.

Hochul said the legislation includes "common-sense steps to battle fraud, limit damages paid out to bad actors and ensure that consumers, not insurance companies, are prioritized."

"Outdated laws, special interest loopholes and jackpot insurance payouts to bad actors have long forced New Yorkers to pay some of the highest car insurance rates in the nation," she said in a statement. "These hard-fought reforms are a win for every New Yorker who depends on a car to go to work or drop their kids at school."

New Yorkers pay some of the highest car insurance rates in the nation, totaling just over $4,000 annually on average, nearly $1,500 above the national average, according to state and federal data.

In 2023, there were 1,729 staged crashes in New York, which ranked second-highest in the nation for staged fraud, according to the latest data from the state Department of Financial Services.

Government and industry groups say insurance rates are driven up by a combination of fraud, litigation, legal loopholes and enforcement gaps.

"With support from a diverse coalition of unions, nonprofits, small businesses, and local governments — everyone except the trial lawyer lobby — Gov. Hochul won a hard-fought battle to disrupt a business model that rewards fraud and drives up the cost of everything," Tom Stebbins, executive director of the Lawsuit Reform Alliance of New York, said in a statement.

"While more work remains to fix the Empire State's broken civil justice system and combat the trial lawyers' costly agenda, we commend the Governor for her tenacity and political courage in taking on Albany’s most entrenched special interest to create a more affordable New York."

Stebbins said the new requirements will reduce fraudulent lawsuits and bogus claims, which means "billboard lawyers will have fewer opportunities to get rich while the rest of us pay higher prices and inflated bills."

"The shady lawyers, funders, and other unscrupulous actors involved in staged accident rings can finally be brought to justice, not just the drivers who are often victims themselves," he said.

The New York State Trial Lawyers Association opposed Hochul's proposed auto insurance reforms, calling them as a "victim tax" that would strip away the legal rights of crash victims and benefit insurance companies.

To be sure, the final version of Hochul's reform package was stripped of a provision lowering the monetary thresholds required to prosecute first- and second-degree insurance fraud, as well as a plan to revive the Motor Vehicle Theft and Insurance Fraud Prevention Board to target fraudsters.

Hochul, a Democrat who is seeking another term in office in the November elections, made auto insurance reform a key plank of her legislative agenda for the year, often tying it to broader efforts to reduce the state's high cost of living. The governor pushed hard for its passage during closed-door negotiations with legislative leaders over the budget, which is more than a month late.

"I’ve heard from farmers who say these reforms will lower the cost of getting their goods to market and from construction supply companies who say this will lower the cost of building," Hochul said Wednesday. "This is how we are delivering on the promise to tackle the affordability crisis head on."