New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following informal opinion on April 1, 2002, representing the position of the New York State Insurance Department.

RE: Notice of Settlement Under Regulation 64

Questions Presented:

1) What is a "third party liability claim" under N.Y. Comp. Codes R. & Regs. tit. 11, § 216.9 (1995) (Regulation 64)?

2) Does N.Y. Comp. Codes R. & Regs. tit. 11, § 216.9 (1995) (Regulation 64) apply whether payment of $5,000 or more in settlement of a third party liability claim is paid to a claimant’s attorney or other representative by the insurer, or by the insured, who is reimbursed by the insurer?

Conclusions:

1) A "third party liability claim" under N.Y. Comp. Codes R. & Regs. tit. 11, § 216.9 (1995) (Regulation 64) refers to a claim brought under a liability insurance policy by a party other than the insured, where the claimant is a natural person.

2) N.Y. Comp. Codes R. & Regs. tit. 11, § 216.9 (1995) (Regulation 64) applies whether payment of $5,000 or more in settlement of a third party liability claim is paid to the claimant’s attorney or other representative by the insurer, either directly by the insurer or by its attorney, or by the insured, who is reimbursed by the insurer.

Facts:

An attorney with a law firm that represents a New York authorized insurer stated that his inquiries related to the filing of approximately 300 claims, presumably all of which were third party claims. The attorney stated that compliance with N.Y. Comp. Codes R. & Regs. tit. 11, § 216.9 (1995) (Regulation 64) would be very costly to his client, and he questioned the applicability of such regulation.

Analysis:

N.Y. Comp. Codes R. & Regs. tit. 11, § 216.9 (a) (1995) (Regulation 64) states:

Upon payment of $ 5,000 or more in settlement of any third-party liability claim, where the claimant is a natural person, the insurer shall cause written notice to be mailed to the claimant at the same time payment is made, by the insurer or its representative (including the insurer's attorney), to the claimant's attorney or other representative of the claimant by draft, check or otherwise.

The term "third party liability claim", as used in N.Y. Comp. Codes R. & Regs. tit. 11, § 216.9 (a) (1995) (Regulation 64), refers to a claim brought under a liability insurance policy by a party other than the insured, where the claimant is a natural person.

N.Y. Comp. Codes R. & Regs. tit. 11, § 216.9 (1995) (Regulation 64) was enacted at the request of the Clients’ Security Fund, who saw this regulation as a necessary response to documented instances of theft by attorneys who had forged their clients’ endorsements on settlement checks and pocketed the proceeds. It was determined that the opportunity for forgery and concealment of theft would be measurably reduced by providing the third party liability claimant with notice that a claim had been paid.

Under N.Y. Comp. Codes R. & Regs. tit. 11, § 216.9 (a) (1995) (Regulation 64), the insurer is responsible for mailing the written notice, although the insurer may delegate this task to its lawyer or other representative. However, delegation by the insurer does not relieve it of its ultimate responsibility for issuance of notice. An insurer may not circumvent this responsibility by allowing an insured to settle a claim with a third party liability claimant, or by permitting the insured to make payment on the claim and thereafter reimbursing the insured for the settlement payments made. The insurer is ultimately responsible for making payment on the negotiated settlement and, thus, must comply with the N.Y. Comp. Codes R. & Regs. tit. 11, § 216.9 (a) (1995) (Regulation 64) notice requirements.

For further information you may contact Senior Attorney Sally A. Geisel at the New York City Office.