NY law adds costlier auto coverage to businesses' insurance policies

Because of the state law, commercial auto insurance policies that protect businesses are also generally automatically enrolled in the expanded coverage.

In many instances, carrying the "supplemental spousal liability insurance" will not make any sense for businesses, according to insurance industry officials.

In others, a commercial vehicle carrying such coverage would provide a business protection, according to a Buffalo trial lawyer who specializes in insurance law.

Many insurance companies opposed the law. But as The Buffalo News reported last week, the state law that took effect Aug. 1 forces insurance companies to enroll every New Yorker holding a personal car insurance policy in "supplemental spousal liability insurance" — even those who are unmarried.

If a driver has the coverage and is at fault for an accident causing serious injury to their spouse, the injured spouse may sue their significant other, who was driving, and seek insurance payment from the driver's insurer for non-economic damages. Otherwise, the injured spouse cannot bring a lawsuit and then win payment from their spouse's insurance company.

The new law automatically enrolls both married and unmarried New Yorkers in the coverage — even though the coverage provides no possible benefit to an individual who is single.

People or businesses whose policies are automatically enrolled because of the new law may opt out. But first they must know about the law, contact their insurance company and sign a form declining it.

Under prior state law, insurance companies had been required to offer the supplemental coverage to policyholders. But the policyholder had to proactively opt-in to get the coverage.

Commercial policies covered

Commercial auto insurance policies insure businesses against liability stemming from accidents involving vehicles used for business purposes.

Dan Kohane, a trial lawyer who specializes in insurance law at Buffalo-based Hurwitz Fine and an adjunct professor at University at Buffalo School of Law, believes the spousal supplement would provide a benefit to businesses.

If a company employee's spouse was seriously injured in a car accident caused by the employee, the spouse could sue the company for damages, he said. The spousal supplemental would provide the company insurance against such a lawsuit, he said, citing a 1991 state appellate court ruling as an example of past case law in the area.

But spousal liability coverage is unlikely to provide a benefit for companies in many instances, according to Douglas Benz, principal and founder of New Buffalo Insurance Agency, an independent insurance agency and brokerage. He said most employers, especially large companies, limit "pleasure use" of take-home commercial autos, and that their handbooks describe personal use as being prohibited.

"Many of our commercial auto fleet clients have all their vehicles locked up at their facility at the end of day," Benz said.

For white-collar companies, personal use of a company car may be more common, Benz said.

In Western New York, the cost of the spousal supplemental could run approximately $100 per year for every vehicle insured by a company, Benz said.

The spousal supplemental cost is generally about 5% of the amount of the larger bodily injury premium, according to the state Department of Financial Services.

The state law that took effect Aug. 1 was signed by Gov. Kathy Hochul in December. When auto insurance is issued, renewed or modified in New York, companies must now add the supplemental coverage to a person or company's plan and provide the consumer written notification of the addition.

Still, insurance companies worry that consumers may not notice, and that insurers will be blamed when customers do eventually notice higher premiums.

For at least one insurance company, the new law has not brought any change to how individuals' policies are handled.

According to a spokeswoman for Travelers Insurance, since 2020, the company of its own volition began automatically including the spousal liability coverage in all individuals' policies. The added coverage is factored into the customer's premium.

Whether or not the customer is married, Travelers automatically includes the coverage in a customer's policy.

Political fallout

The chairman of the Senate Insurance Committee, Sen. Neil Breslin, sponsored the supplemental insurance bill in 2022. The Democrat told The News last week, however, that he was potentially open to changing it because he doesn't "want people unknowingly paying for coverage that would provide them no benefit."

The bill passed the Democratic-controlled State Assembly last year by a margin of 110-39, and more easily in the Democratic-controlled Senate, 60-3.

While 17 out of 20 members of the Senate Republican conference voted in favor the bill last year — including Senate Minority Leader Robert Ortt — the GOP still sought political gain from the issue last week.

The Senate Republicans' Twitter account sent out a link to The News' story, and tweeted: "#OnePartyRule strikes again, burdening hardworking New Yorkers with higher car insurance costs."

The bill was pushed through last year by two groups representing state trial lawyers, among Albany's most powerful interest groups. Since the beginning of 2021, the State Trial Lawyers Association's political action committee has donated more than $1.5 million to state politicians.

While a significant majority has gone to Democrats that control the levers of power in Albany, Republicans have also received funding. The association's political action committee, LAWPAC, has donated $55,000 during that period to the campaign arm of Senate Republicans, and $50,000 to Assembly Republicans.

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