Ch. 2, PART 3: New York’s Comprehensive Insurance Act: Another Fine Mess

You know you’re off to a bad start when New York’s Governor and Legislature acknowledge that they have passed a poorly written Act but assure us that they will move quickly to fix it. Then, you know you’re off to an even worse start when they do nothing to correct their obvious mistake. Behold the 2022 Comprehensive Insurance Act (“Act”) and Traveling Discovery Circus in NY Courts.

In a nutshell, under this new law (which took effect 1/1/2022), within in sixty days of filing an Answer, the Defendant (not its insurer) must produce proof of its insurance policies (by producing copies), the name and contact information of the adjuster on the file, and whether the policy is eroding. The Act also requires that a Defendant identify any other lawsuits that may affect the policy limits. This is an automatic disclosure provision, and the Plaintiff need not make a separate demand for this insurance information. If an action was pending before the statute was enacted, all insurance information shall be produced by March 1, 2022.

The Act contains no specific penalties if production of this information does not occur. So, at this point, any sanction may be considered a discovery violation with inconsistent consequences (if any) applied by the Court. No clear guidance just yet, we will have to stay tuned on that issue.

The Act does contain two very messy provisions that are not getting as much coverage in the industry. First, the Act requires Defendants to produce its insurance applications. Your SDL cannot understand how a Defendant’s insurance applications (which likely contain proprietary and financial information) can be relevant in a personal injury lawsuit (or any action for that matter). We do not know how the Court will treat this requirement, but your SDL suggests getting your confidentiality stipulations ready.

The second potential disaster is that the Act requires production of the amount of attorney’s fees paid (and to what firm) that erode the policy. The law also requires that this reduction in coverage be updated to the Plaintiff counsel on an ongoing basis. This disclosure requirement is fundamentally unfair. 

Consider this, if a Defendant must reveal all attorneys retained on eroding policies, this disclosure could reveal whether other counsel or firms are involved in cases besides the defense attorney who has appeared in litigation. Several firms are often used in complex products liability cases and by Defendants with a national presence. This information would reveal to the Plaintiff’s counsel what firms a target Defendant may rely on it for its overall litigation strategy and increase discovery demands. 

Since the Act just took effect, your SDL will be watching to see how the courts deal with this fine mess. It may be time to take out our collective “belts and suspenders” and dig in on a few issues.