On December 31, New York’s Governor Kathy Hochul signed into law a change to the insurance disclosure requirements that applies to all civil cases filed in New York state’s courts. CPLR section 3101(f). The new statute by its terms applies to both pending cases and new filings, with continuing disclosure obligations through appeals, and places heavy burdens on defendants and their counsel, going far beyond the previous insurance disclosure rules for New York state courts and the rules that apply in federal courts.
In signing the statute, which had flown under the radar since being worked up by the legislature last spring, however, the governor signaled that changes were needed [Signing Memorandum], but it was unclear which of the many new requirements of the statute were the focus of her concern. As of this week, however, we have some insights. On January 18, the Senate Rules Committee took up Senate Bill 7882, and the Assembly’s Committee on Judiciary took up the parallel Assembly Bill 8852, containing a raft of amendments that would, if passed and signed by Governor Hochul, substantially limit the scope of the statute she signed less than a month ago. Most significantly, the statute would no longer apply to cases pending prior to the statute’s effective date, only to those commenced on or after its effective date. S7882/A8852 section 4.
Narrowing new insurance disclosure requirements
For any potentially responsive “insurance agreement,” the statute requires production within 90 days of the defendant’s answer of:
all primary, excess and umbrella policies, contracts or agreements issued by private or publicly traded stock companies, mutual insurance companies, captive insurance entities, risk retention groups, reciprocal insurance exchanges, syndicates, including, but not limited to, Lloyd’s Underwriters as defined in section six thousand one hundred sixteen of the insurance law, surplus line insurers and self-insurance programs sold or delivered within the state of New York insofar as such documents relate to the claim being litigated;
The drafting of subparagraph (i) is not a model of clarity. The statute’s disclosure requirements can be read to apply only to policies “sold or delivered within” New York, a limitation that did not appear in the prior version of the statute and continues in S7882/A8852. The rationale for such a limitation is hard to fathom since many defendants in New York civil proceedings are not based in New York and may buy their insurance in other markets. Further, this portion of the statute might discourage use of New York insurance brokers. On the other hand, the “sold or delivered” phrase may only modify “surplus line insurers and self-insurance programs,” which also makes little sense.
Subparagraph (ii), which had required production of “a complete copy of any policy, contract or agreement …, including … declarations, insuring agreements, conditions, exclusions, endorsements, and similar provisions” that may respond to a judgment in favor of the plaintiff, now requires “proof of the existence and contents of any insurance agreement in the form of a copy of the insurance policy in place at the time of the loss” that may respond to a judgment for the plaintiff on the claims at issue in the case. Given the different types of insurance and differing triggering provisions of those different policy forms, this added phrase is hard to follow. While some policies are triggered by injury or damage during the policy period, others are triggered by a claim made or reported during the policy period or reporting period, and others are triggered by an event or occurrence reported during the policy period or reporting period. It is not clear whether any of the triggering event options – injury/damage, claim made/reported, or occurrence/event reported – constitutes a “loss” in the context of liability insurance.
As in the prior version, signed on December 31, plaintiffs can consent to production of declaration pages alone, with the reservation that they can seek more fulsome insurance disclosures later in the litigation when more detailed information might be needed.
The December 31 law, in a reversal from the previous statute, provided that “an application for insurance shall be treated as part of an insurance agreement and shall be disclosed.” Section 3101(f)(3). This provision – which proved to be one of the most controversial because of the likelihood that extremely sensitive information, to which plaintiffs might not otherwise be entitled, may be included – has been removed; reverting to the prior version of section 3101(f): “For purposes of this subdivision, an application for insurance shall not be treated as part of an insurance agreement.” S7882/A8552.
Three subparagraphs – (iv), (v), and (vi) – in the statute as enacted required disclosure of “the amounts available” under such policies to pay any judgment, as well as details of any erosion of such limits, whether by payment of indemnity or defense costs. These provisions were highly problematic and have been pared back considerably in S7882/A8852; in fact, only (iv) survived in any form. Removed were provisions requiring disclosure of other lawsuits covered by implicated policies and settlements, and disclosure of defense cost payments under policies where defense costs erode limits. This was another instance of requiring defendants to disclose to plaintiffs information that they would not otherwise be entitled to receive, giving them visibility into litigation that they would not otherwise see. Still, S7882/A8852 continues to require disclosure of “total limits” defined as “the actual funds, after taking into account erosion and any other offsets …”
Certification requirement is MIA
The December 31 law contained a requirement of certification both by defendants and their counsel, which caused considerable consternation. The statute required a “certification”:
sworn in the form of an affidavit or affirmation where appropriate, stating that the information is accurate and complete, and that reasonable efforts have been undertaken, and in accordance with paragraph two of subdivision (f) of section thirty-one hundred one of this article will be undertaken, to ensure that this information remains accurate and complete
This provision is nowhere to be found in S7882/A8852. It is not clear whether it was overlooked in the redlining, or would survive if S7882/A8852 were enacted.
Finally, the continuing obligations of defendants under section 3101(f) have also been softened. While defendants must make “reasonable efforts” to provide accurate information to plaintiffs, the new bill focuses on critical moments in the litigation when defendants would be required to go back to check that the insurance information provided is still accurate: “at the filing of the note of issue, when entering into any formal settlement negotiations conducted or supervised by the court, at a voluntary mediation, and when the case is called for trial…”
In light of the fact that this is a fast-moving situation and that the time to make the required disclosures under the December 31 iteration of section 3101(f) is March 1 for every civil defendant with a case pending as of January 1, it is important that every defendant discuss these requirements with both defense counsel and insurance coverage counsel and keep an eye out for further revisions to this legislation. It is not clear how fast the Senate and Assembly will act and whether further changes will be made to S7882/A8852.
February 18, 2022 update
On February 14th, more than two weeks after passage by the Senate, S.7882 appears to have been sidetracked. The Senate’s website states:
VOTE RECONSIDERED – RESTORED TO THIRD READING
Returned To Senate
Recommitted To Judiciary
RECALLED FROM ASSEMBLY
On the same date, a new bill – S.7882A – appeared. That bill is apparently identical to the old S.7882 except that the problematic phrase “sold or delivered in New York State,” which I highlighted as creating ambiguity, has been stricken. It does not appear that any other changes have been made.
The March 1 deadline is fast approaching. It’s anyone’s guess whether this bill gets passed and signed in time.