On December 31, 2021, New York Governor Kathy Hochul closed the year by signing into law the Comprehensive Insurance Disclosure Act (S7052) to impose sweeping changes to the rules embodied in New York Civil Practice Law and Rules (CPLR) section 3101(f) as they pertain to the disclosure of defendants’ insurance coverage in New York litigation.
The changes are not favorable for corporate defendants in Product Liability litigation. They are onerous, they will prove to be difficult to comply with and they will probably result in a windfall to the plaintiffs’ bar.
Under the Act, a defendant within 60-days of filing its Answer must provide proof of “the existence and contents of any insurance agreement under which any person or entity may be liable to satisfy part or all of a judgment that may be entered in the action or to indemnify or reimburse for payments made to satisfy the entry of the final judgment.” This obligation may seem benign and not all that different from a defendant’s obligation under the previous iteration of CPLR 3101(f), but it is what follows that should cause sleepless nights for defendants, their lawyers and insurers:
- All primary, excess and umbrella policies shall be disclosed
- A complete copy of all policies (including declarations, conditions and exclusions) shall be furnished
- The application for insurance is considered part of the insurance agreement and shall be disclosed.
It gets worse. Under the Act, defendants must now provide:
- The contact information of the matter’s adjuster or third-party administrator and the person within the insuring entity to whom the TPA is required to report
- The amounts still available under the insurance policy to satisfy, or reimburse for, the judgment
- Detailed information that identifies any lawsuits that have reduced or eroded the limits of any available insurance
- Information about the amount of any payment of attorneys’ fees that have reduced or eroded the limits of any available insurance (i.e., in the case of “burning limits” policies).
The Act does not stop there. The law also provides:
- The new obligations apply to any defendant, third-party defendant or defendant on a cross-claim or counter-claim.
- The new obligations are “ongoing,” such that the defendant must make “reasonable efforts” to ensure that the information remains accurate and complete by providing “updated information” within 30 days of receiving information that renders the previous disclosure inaccurate or incomplete.
- The above “ongoing” obligations exist during the entire pendency of the litigation and for 60 days after any settlement or entry of final judgment, including any appeal.
Under a newly created section 3122-b of the CPLR, disclosure under the Act must be accompanied by two forms of “certification”: one in the form of an affidavit from the defendant and one from the defendant’s attorney in the form of an affirmation.
The Act took effect immediately and expressly applies to all pending litigation. Finally, “information required by this act that has not previously been provided in pending cases shall be provided within sixty days” of its effective date.
Is your head spinning yet? It should be.
With a typical defense litigator in New York perhaps handling dozens of active cases at one time, think of the amount of legwork that will be required to fully comply with just some of the basic provisions of the new law. Determining whether the defendant/client has excess or umbrella policies in place (in addition to the primary policy, which may be providing the defense) alone will require coordination with the defendant/client, its in-house risk management people, its broker and the primary insurer. Identifying and accurately calculating erosion of the policies’ limits, as required by the new law, likely will be a mind-blowing exercise in data collection and mathematics, particularly when claims were paid over a period of many years.
Officially justified in the legislation to address “often delayed” insurance disclosure in personal injury litigation and “confusing and often conflicting” case law on the subject, the potential problems associated with the Act’s new requirements, and the strategic advantages that the Act provides to the plaintiffs’ bar in New York, are limited only by one’s imagination. Please check back with us in the next few weeks. We will explore some of those issues in our next blog post.