New York courts have consistently barred insureds from instituting private causes of action under New York’s unfair claims practices statutes, specifically Insurance Law §2601: Unfair Claim Settlement Practices and NY Insurance Regulation §216: Unfair Claims Settlement Practices. See Rocanova v. Equitable Life Assur. Soc’y, 83 N.Y.2d 603 (N.Y. 1994). Rather, the courts have held that alleged violations of these statutes may more properly be addressed administratively by the Superintendent of Insurance, who is charged by law with the regulation of the insurance industry, rather than private litigants. See Kapeleris v. Colonial Penn Ins. Co., 163 A.D.2d 918 (N.Y. App. Div. 4th Dep’t 1990).

However, On March 6, 2013, N.Y. State Assemblywoman Helene Weinstein introduced legislation (A. 05780) that would definitively create a private cause of action against insurers for property damage claims in regions where the Governor has declared a disaster emergency, permitting the insured to seek to enjoin the unfair claims activity and for actual damages. In addition, the Act provides the Court may, in its discretion, award punitive damages and attorney’s fees to a prevailing plaintiff where the insured willfully or knowingly violated the statute. As justification for the proposed amendment, the memorandum accompanying the proposal explains, in relevant part:

“Unfortunately, there is evidence that some insurers have taken advantage of insured as concerns the adjusting of losses sustained in disaster emergencies declared by the Governor pursuant to section twenty-eight of the Executive Law.

“Insurers have every right to attempt to lawfully deny claims, but all too often these attempts create unreasonable situations for homeowners attempting to simply access the benefits to which they are entitled. This is especially acute in situations where the homeowner may have lost most or even all of their possessions due to a storm declared emergency.

“This bill would allow insureds to institute claims against their insurers for unfair claims practices proscribed by the Insurance Law. More importantly, this bill would amend section 2601 of the Insurance Law to allow insured homeowners who have suffered property loss to take direct action against their insurers for unfair claims practices where the claimed losses were sustained within the area declared as a disaster emergency. A private right of action is necessary, in addition to the possibility of administrative action, to make certain that insurers are held responsible for unfair claims practices.”

Abrams Gorelick Newswire will monitor this important piece of legislation and provide updates on its status in the legislature.