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

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following opinion on February 3, 2003, representing the position of the New York State Insurance Department.

RE: Payment of Settlement Amount – Architect’s Fees

Question Presented:

In the case of a fire loss, after a settlement that includes costs for an architect’s fees has been reached, may the insurer withhold payment of such fees until proof of payment to the architect has been received?

Conclusion:

No. Pursuant to N.Y. Comp. Codes R. & Regs. tit. 11, § 216.7(f) (1/31/98) (Reg. 64), the insurer is required to "pay any amount finally agreed upon in settlement of all or part of any claim not later than five business days from the receipt of such agreement by the insurer. . . ."

Facts:

A homeowner’s public adjuster submitted a building repair estimate that includes architect’s fees and settlement was negotiated with the insurer that also included architect fees. The insurer is refusing to pay the agreed estimated costs for the architect’s fees until proof of payment of these fees is submitted by the insured.

Analysis:

N.Y. Comp. Codes R. & Regs. tit. 11, § 216.7(f) (1/31/98) (Reg. 64) provides:

Every insurer shall pay any amount finally agreed upon in settlement of all or part of any claim not later than five business days from the receipt of such agreement by the insurer, or from the date of the performance by the claimant of any condition set by such agreement, whichever is later, except as provided in section 331 of the Insurance Law as respects liens by tax districts on fire insurance proceeds.

Where the insured and the insurer have settled upon all or part of the claim, the insurer is required to pay the amount agreed upon not later than five business days from the receipt of such agreement. Whether or not the insured ultimately repairs or replaces the damaged property is irrelevant to the insurer’s obligation to pay the settlement amount. In the instant case, the insurer has agreed to pay the architect’s fees as a component of the settlement and must do so in accordance with the regulation.

For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.