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 July 7, 2003, representing the position of the New York State Insurance Department.

Re: No-Fault: Waiving of Interest on Denied or Overdue Claims

Question Presented

May an insurer accept an offer from an applicant for No-Fault benefits to enter into a settlement for payment of a denied or overdue claim submitted to the insurer, in which the applicant agrees to waive interest due from the insurer upon settlement of the disputed claim?

Conclusion

Yes. Where an applicant, upon his or her sole initiative, voluntarily offers to waive the payment of interest due from an insurer in a settlement of a disputed claim, there is no violation of the Insurance Law.

Facts

None presented.

Analysis

Pursuant to N.Y. Ins. Law § 5106(a)(McKinney 2003) "Payment of first party benefits and additional first party benefits shall be made as the loss is incurred. Such payments are overdue if not paid within thirty days after the claimant supplies proof of the fact and the amount of loss sustained… All overdue payments shall bear interest at the rate of two percent per month…". This statutory provision is implemented by N.Y. Comp. Codes R. & Regs. tit. 11 § 65-3.9(a)(Regulation 68), which provides that "All overdue mandatory and additional personal injury protection benefits due an applicant or assignee shall bear interest at a rate of two percent per month, calculated on a pro rata basis using a 30-day month…".

With respect to the payment of interest on a settled claim, Section 65-3.9(b) provides that "The insurer shall not suggest or require, as a condition to settlement of a claim, that the interest due be waived." Section 65-3.9(b) is intended to prevent an insurer from exercising economic coercion upon an applicant so that the applicant is pressured into waiving their right to the payment of interest owed them by the insurer, in return for settlement of a disputed claim. However, the regulation does not preclude an applicant from voluntarily and affirmatively offering, upon their own initiative, to waive their statutory right to receive interest upon payment of an overdue claim, so long as the insurer in no way suggests or attempts to influence a decision by the applicant to waive such right.

For further information one may contact Supervising Attorney Lawrence M. Fuchsberg at the New York City Office.