The Office of General Counsel issued the following opinion on August 17, 2006, representing the position of the New York State Insurance Department.
Act of violence insurance
1. Must an insurer include insurance provided under new N.Y. Ins. Law § 3450 in its policies providing coverage for theft and loss or is such coverage optional?
2. Does the new law apply to policies currently in effect?
1. Insurance provided under new N.Y. Ins. Law § 3450 is optional.
2. The new law does not apply to existing policies. An insurer must first obtain approval of policy forms and rates before it may offer or add the new coverage to its policies.
The Department was asked about the practical application of new legislation that was recently signed into law by the Governor. No specific facts were provided.
Chapter 294 of the Laws of 2006 amended N.Y. Ins. Law § 1113(a)(7) and added a new § 3450 to the New York Insurance Law, entitled "Insurance for expenses incurred as a result of an act or threatened act of violence." The purpose of the law, as stated in the State Senate sponsors bill memorandum for S-2633C, which was the bill that was enacted, was "[t]o amend the definition of burglary and theft insurance under section 1113 of the Insurance Law in order to permit insurance companies to offer coverage for financial losses an individual or family may suffer as the result of actual or threatened violent acts such as car jacking, child abduction, stalking or home invasion."
New N.Y. Ins. Law § 1113(a)(7)(D) provides that burglary and theft insurance includes:
(D) Insurance covering a ransom or reward payment incurred as the result of an abduction or the theft of property; travel and lodging expense and lost wages incurred as the result of an act or threatened act of violence; expense incurred to locate or identify a missing or abducted person; or other expenses to respond to a violent act or threatened act or to prevent a reoccurrence thereof.
New § 2350 states in relevant part that:
(a) Insurance authorized by subparagraph (D) of paragraph seven of subsection (a) of section one thousand one hundred thirteen of this chapter may be written only as provided in this section, except for ransom or reward payment coverage incurred as the result of the theft of property.
(b) As part of a homeowners' insurance policy, as such term is defined in section two thousand three hundred fifty-one of this chapter, or motor vehicle physical damage insurance policy, an insurer may provide insurance for loss to any person as the result of an act or threatened act of violence against an insured person.
Although the legislative summary for the bill states that it "[p]rovides that burglary and theft insurance covers expenses for acts or threatened acts of violence," the new law does not mandate that burglary and theft insurance provide such coverage. It is an optional coverage that an insurer may offer but is not required to, and, except for the ransom or reward payment coverage, only as part of a homeowners policy or a motor vehicle physical damage insurance policy. If an insurer chooses to offer the coverage, it may choose to do so either by offering it as part of the basic coverage under the policy or as an optional endorsement. In either case, the insurer would have to first file the rates and forms for such coverage with the Insurance Department, in accordance with the requirements of N.Y. Ins. Law Art. 23.
For further information you may contact Principal Attorney Paul A. Zuckerman at the New York City Office.