STATE OF NEW YORK
25 BEAVER STREET
NEW YORK, NEW YORK 10004
|George E. Pataki
Gregory V. Serio
The Office of General Counsel issued the following information on January 7, 2004, representing the position of the
New York State Insurance Department.
RE: Insurers Deposit of a Settlement Payment into a Checking Account
In lieu of issuing a settlement check to a claimant, or to the claimant and his or her attorney, may an insurer deposit the settlement amount into an interest bearing checking account and then issue a checkbook to the claimant?
Provided that the relevant time frames contained in N.Y. Comp. Codes R. & Regs. tit.,11, §§ 216.0-216.12 (2003) (Reg. 64) are complied with, an insurer may offer that option to the claimant, but may not require it.
An opinion requestor stated that he settled a personal injury action on behalf of his client for a sum in excess of $10,000. The general release had been executed. The insurer is refusing to issue a settlement check to the requestors client. Rather, the insurer is requiring that the payment be deposited into an interest bearing checking account with delivery of a checkbook to the client.1
N.Y. Comp. Codes R. & Regs. tit. 11, §§ 216.0 - 216.12 (2003) (Reg. 64), entitled Unfair Claims Settlement Practices and Claim Cost Control Measures contains the time frames in which settlement payments must be made to insureds and claimants. Certain insurers have instituted the practice of depositing the payment into a checking account and issuing a checkbook to the beneficiary.2 The Department has not objected to this practice, provided that it is done in accordance with any applicable time frames for paying settlements, that it is fully explained, and that it is voluntary on the part of the recipient. I note that paragraph 14 of the Safe Haven Signature Form, which was submitted by the requestor, states: "I/We freely and voluntarily accept the Safe Haven Account as the method of payment for the proceeds of my/our settlement." Accordingly, the insurer may not impose this payment option on the claimant or insured.
For further information you may contact Supervisory Attorney Joan Siegel at the New York City Office.
1 The insurer is offering to issue the checkbook jointly in your name and your clients name or in each name individually.
2 This was first introduced by life insurers for the payment of life insurance proceeds to beneficiaries.