United States: New York Ends Year With Onerous New Insurance Coverage Disclosure Rules for Defendants in Product Liability Litigation
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On December 31, 2021, New York Governor Kathy Hochul closed the year by signing into law Insurance Full Disclosure Act (S7052) to impose sweeping changes to the rules set forth in section 3101(f) of the New York Civil Laws and Rules of Practice (CPLR) regarding the disclosure of insurance coverage for defendants in New York litigation .
The amendments are not favorable to corporate defendants in product liability litigation. They are onerous, they will prove difficult to comply with, and they will likely result in a boon to the plaintiffs’ bar.
Under the Act, a defendant within 60 days of filing its response must provide evidence of “the existence and content of any contract of insurance under which any person or entity may be required to satisfy in whole or in part any judgment which may be given in the action or to indemnify or refund payments made to comply with the registration of the final judgment.This obligation may seem benign and not so different from a defendant’s obligation under the previous iteration of CPLR 3101(f), but it is the following that should cause sleepless nights for defendants, their lawyers and their insurers:
- All primary, excess and umbrella policies must be disclosed
- A complete copy of all policies (including declarations, conditions and exclusions) must be provided
- The insurance claim is considered part of the insurance contract and must be disclosed.
It’s getting worse. Under the Act, defendants must now provide:
- Contact details of the adjuster or third party administrator of the case and the person within the insurance entity to whom the TPA is required to report
- The amounts still available under the insurance policy to satisfy or reimburse the judgment
- Detailed information that identifies lawsuits that have reduced or eroded the limits of any available insurance
- Information about the amount of any attorney’s fee payments that have reduced or eroded the limits of any available insurance (i.e., in the case of “hot” policies).
The law does not stop there. The law also provides:
- The new obligations apply to any defendant, mis en cause or defendant in counterclaim or counterclaim.
- New obligations are ‘ongoing’, so respondent must make ‘reasonable efforts’ to ensure information remains accurate and complete by providing ‘updated information’ within 30 days of receiving information which render the previous disclosure inaccurate or incomplete.
- The above “continuing” obligations exist for the duration of litigation and for 60 days after any settlement or entry of final judgment, including any appeal.
Under a new section 3122-b of the CPLR, disclosure under the law must be accompanied by two forms of “certification”: one in the form of an affidavit from the defendant and one from the defendant’s attorney in the form of a statement.
The law took effect immediately and expressly applies to all pending disputes. Finally, “the information required by this law which has not been provided previously in pending cases must be provided within sixty days” of its entry into force.
Your head is still spinning? It should be.
With a typical defense litigator in New York handling perhaps dozens of active cases at a time, think about the amount of work that will be required to fully comply with some of the basic provisions of the new law. Determining whether the defendant/client has excess or umbrella policies in place (in addition to the primary policy, which may provide the defence) will on its own require coordination with the defendant/client, its internal risk managers, its broker and the main insurer. Accurately identifying and calculating policy limit erosion, as required by the new law, will likely be a mind-boggling exercise in data collection and math, especially when claims have been paid out over a period of years.
Officially justified in legislation to address “often delayed” insurance disclosure in personal injury litigation and “confusing and often contradictory” case law on the subject, the potential problems associated with the Act’s new requirements, and the policy advantages that the law offers plaintiffs to the bar in New York, are limited only by the imagination.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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