Permits an insurer to rescind or retroactively cancel a policy in circumstances involving an accident staged to defraud an insurer

• Republican2

◆ The sponsor's argument

Why Jamaal Bailey says this is needed

Automobile no-fault states have higher average premiums than tort states. One of the reasons for this is that fraud tends to be more prevalent in no-fault systems, as the rules under which they are imple- mented make it relatively easy for bad actors to submit fraudulent claims. Additionally, an accident can create a multiplicity of lawsuits, since providers and collection attorneys may initiate a lawsuit for each and every bill. New York's generous no-fault benefits, with minimal oversight, provide huge incentives for unbundling of services and supplies. Staged accidents are one type of fraudulent claim that is becoming more and more prevalent in New York. Staged accidents begin with bad actors procuring an automobile insurance policy with the intent of submitting a fraudulent claim. In many cases, they procure a policy by submitting a bad payment (either using a nonexistent bank account or stolen credit card information). Most states allow the retroactive cancellation of a policy in the case of a reversed payment to prevent this type of activ- ity. New York, however, does not permit retroactive cancellations; rath- er cancellations are currently only prospective in nature. That turns into a gold mine where no-fault is involved. The time between the policy is "purchased" to the time it is cancelled provides ample opportunity for no-fault fraud. This bill allows for retroactive cancellation in New York of newly issued automobile insurance policies to prevent this type of fraud. This would bring New York in line with the other large no-fault states. In fact, only seven other states (AZ, CO, KS, ME, MD, NC and SD) do not allow for retroactive cancellation. Innocent victims of uninsured driv- ers (i.e., mandatory uninsured motorist coverage) would be covered under their own policy or the Motor Vehicle Accident Indemnification Corpo- ration. The proposal would allow retroactive cancellation, of the automobile policy, in the first thirty days, where the payment is made with insuf- ficient funds or the identity used to procure the policy turns out to be fraudulent. The automobile insurer would be allowed to cancel a policy retroactively in these cases. By permitting retroactive cancellations, New York would join the great majority of other states and would remove many of the incentives for staged accidents.

This is the sponsor's own case for the bill, quoted from their memorandum. It is not Agora's description of what the bill does.