MEMORANDUM IN OPPOSITION

A.11541 (Weinstein) – Assembly Rules
S.8610 (DeFrancisco) – Senate Rules

An ACT to permit a direct action against another party’s insurer prior to a determination of liability (Notice of Claim)

On behalf of NYTortReformNow.org, a broad based coalition of businesses, professionals, municipalities, not-for-profits and concerned citizens, I am writing in OPPOSITION to the above referenced bill.

Generally, an insured facing a claim for personal injury or death is required to provide an insurer timely notice of claim.  In the event the insurer denies coverage, alleging late notice of claim, the policy holder may commence a declaratory judgment action to compel a judicial determination of whether or not the notice of claim was timely.  This legislation would for the first time under New York Law permit a third party to commence a declaratory judgment action to address the late notice issue.  While the legislation represents a compromise from earlier bills permitting third party declaratory judgments on multiple grounds, the instant bill remains flawed and constitutes an unacceptable precedent which may lead to future mischief.

Current law provides that a plaintiff may bring a direct action for coverage only after there is a judgment against the insured defendant which has gone unsatisfied for thirty days.  The current law is consistent with the law in virtually every other state and strikes the right balance between the parties.  Insurance policies are private contracts.  Third parties—hostile third parties-- should not be able to interject themselves at will into the private contractual relationship between a defendant and its insurer. 

The purpose of the trial is to determine on a factual basis the extent of the liability, if any, and the remedy required. The existence and extent (or non-existence) of insurance coverage have absolutely no connection whatsoever to the merits of the case.  What next?  Will potential defendants have to turn over bank statements and property inventories at the whim of a hostile party? This type of legislation takes New York completely out of the mainstream of accepted legal practice.  Only two states, Louisiana and Wisconsin, permit a property and casualty insurer to be named as a direct party in a tort action.

At one time New York State permitted plaintiffs to bring an action directly against an insurer and establish jurisdiction via an insurance policy in New York. (See Seider v. Roth 17 NY2d 111 (1966).)  The legal theory underlying this approach improperly elevated a third party indemnity obligation to a property right and was subsequently rejected the United States Supreme Court (Rush v. Savchuk 444 US 320 (1980). In simple terms one should not put the cart before the horse. Conceptually this legislation is founded upon a similar error and should not condoned.

For all of the foregoing reasons NYTortReformNow.org urges that this and similar bills be held.

Respectfully,

Mark C. Kriss
Executive Director
NYTortReformNow.org