On December 31, 2021, New York imposed draconian new insurance disclosure requirements on defendants in New York state courts when Gov. Kathy Hochul signed the Comprehensive Insurance Disclosure Act (Senate Bill 7052) into law. The new law, amending Section (f) of New York Civil Practice Law and Rules (C.P.L.R.) § 3101 and adding New York C.P.L.R. § 3122-B, imposes insurance disclosure requirements so severe that, just two weeks after its enactment, the New York Senate introduced an amendment, Senate Bill 7882, that reduces – but does not eliminate – the burden resulting from these new disclosure requirements. Gov. Hochul has signaled her support for Senate Bill 7882.

If approved and signed into law, Senate Bill 7882 moderates § 3101’s new onerous disclosure obligations on defendants, third-party defendants, and cross-claim and counter-claim defendants, but the obligations remain burdensome and problematic, as discussed further below.

Before the legislature amended C.P.L.R. § 3101(f) through Senate Bill 7052, § 3101(f) permitted parties to seek insurance information through discovery:

“A party may obtain discovery of the existence and contents of any insurance agreement under which any person carrying on an insurance business may be liable to satisfy part or all of a judgment which may be entered in the action or to indemnify or reimburse for payments made to satisfy the judgment. Information concerning the insurance agreement is not by reason of disclosure admissible in evidence at trial. For purpose of this subdivision, an application for insurance shall not be treated as part of an insurance agreement.”

Senate Bill 7052 amended C.P.L.R § 3101(f) to require defendants to disclose insurance information. Defendants must:

  • Provide proof of insurance to the plaintiff and any other party in a New York state case within 60 days after service of an answer;
  • Disclose the insurance information for policies and programs sold or delivered within the state of New York in place at the time of the loss (putting aside any ensuing confusion between claims-made and occurrence policies) for a dizzying array of insurance structures (as stated in section f(1)(i)): “all primary, excess and umbrella policies, contracts or agreements issued by private or publicly traded stock companies, mutual insurance companies, captive insurance entities, risk retention groups, reciprocal insurance exchanges, syndicates, including, but not limited to, Lloyd’s Underwriters as defined in section six thousand one hundred sixteen of the insurance law, surplus line insurers and self-insurance programs;”
  • Disclose the contact information, including the telephone number and email address, of the assigned claims adjustor and third-party administrators (TPA), including the person at the insurer to whom the TPA reports (a remarkable interjection of a plaintiff into an insured’s relationship with its insurers);
  • Disclose any lawsuits that may erode or reduce the policy, and any lawsuit and attorneys’ fee amounts that have eroded or reduced the policy; and
  • Ensure the accuracy of their disclosures due to an “ongoing obligation to make reasonable efforts to ensure that the information remains accurate and complete” and to update information within 30 days of receipt – the obligation continues until 60 days after entry of final judgment after all appeals.

Senate Bill 7052 also amended C.P.L.R § 3101(f) by deeming an insurance application to be part of the insurance policy (before amendment, § 3101(f) considered an insurance application not part of the insurance policy).

Finally, Senate Bill 7052’s amendments to C.P.L.R § 3101(f) were immediate and retroactive – applying to all pending suits, with compliance required within 60 days.

Pending Senate Bill 7882 moderates some of Senate Bill 7052’s drastic changes to C.P.L.R § 3101(f) by:

  • Allowing defendants 90 days rather than 60 days from filing an answer to provide the insurance information and permitting production of the declaration page only if the plaintiff consents (neither bill required defendants to disclose proof of insurance after filing a motion to dismiss in lieu of an answer);
  • Adding the phrase “insofar as such documents relate to the claim being litigated” to the disclosure required for policies and programs sold or delivered within New York;
  • Requiring disclosure of only the name and email address of the assigned claims adjustor;
  • Eliminating the required disclosure of any lawsuits and attorneys’ fee amounts that may or have eroded or reduced the policy;
  • Requiring defendants to disclose any updated insurance information, including when “filing of the note of issue” (a notice to the court that the case is trial ready), at the commencement of court-ordered settlement negotiations, at voluntary mediation, at trial, and for 60 days after entry of final judgment or settlement after all appeals;
  • Exempting personal injury protection cases from these disclosure requirements;
  • Returning to the former § 3101(f) language recognizing that an application is not part of an insurance agreement; and
  • Making these new requirements prospective (not retrospective) from the effective date of Senate Bill 7052 (thus superseding the prior amendment and eliminating the severe administrative burden of imposing the requirements on all pending cases and eliminating the more severe requirements enacted by Senate Bill 7052, which is now the law of New York).

Strategies for Compliance

Risk managers, in-house legal staff, and outside counsel should implement a coordinated strategy to ensure compliance with these disclosure requirements. To comply with C.P.L.R. § 3101(f), organizations should take the following steps:

  1. Coordinate with your broker to ensure that you have the responsive documents on hand.
  2. Centralize this disclosure process across all New York state cases through in-house counsel or a single outside counsel to ensure consistent responses.
  3. Require a confidentiality agreement or protective order before disclosing any insurance information.
  4. When disclosing, redact confidential information, but expect plaintiffs to challenge any redactions given the law’s scope.
  5. Identify only potentially responsive policies and programs using the following guidelines:
    • Sold or delivered in New York. Unfortunately, only litigation or further legislative action will clarify whether § 3101 (f)(1)(i)’s limitations to policies and programs “sold or delivered within the state of New York” limit the scope of the broader language of § 3101 (f)(1), which requires disclosure of “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 . . . or to indemnify or reimburse for payments made to satisfy entry of the final judgment.” Even if the disclosure obligations are limited to policies sold or delivered within the state of New York, organizations headquartered in the state and those using brokers located in the state must disclose their insurance information. Because many insureds utilize brokers headquartered in New York, the reference to “sold or delivered in New York” could be particularly problematic. Anticipate litigation over this issue.
    • Insofar as such documents relate to the claim being litigated. Determine whether the insurance information is relevant to the legal dispute; provide only insurance information that would provide coverage for the claim. If Senate Bill 7882 does not become law, this limitation will not be available. Even if it does, anticipate litigation over this issue.
    • Under which any person or entity may be liable. The amount of the potential liability determines the scope of mandatory disclosure. Once again, anticipate litigation over this issue because:
      • Primary policies with high deductibles may not respond.
      • Excess policies in insurance programs with high self-insured retentions may not respond.
      • Umbrella or excess policies may not respond depending upon the amount of the potential liability.
  • All primary, excess, and umbrella policies, etc. Responsive insurance information includes captive insurance, risk retention groups, insurance exchanges, syndicates, and self-insurance programs.
  1. Begin by disclosing declaration pages only. (Declaration pages are not certificates of insurance.)
  2. For automobiles subject to New York insurance laws, consider complying with New York’s financial responsibility laws by means other than through insurance policies.
  3. Monitor legislative developments and urge legislators and Gov. Hochul to further limit these overreaching insurance disclosure requirements.
  4. Consult with coverage counsel to ensure proper compliance with this law.

Wyoming Supreme Court Rules Refinery Company Can Seek Extracontractual Insurance Recovery Against Holdout InsurerIn a landmark victory for policyholders, the Supreme Court of Wyoming found that a subsidiary of Sinclair Oil can invoke statutory bad faith damages  after prevailing in a coverage dispute with its insurer, Infrassure. The court rejected the district court’s analysis that supported the insurer’s narrow interpretation of the state’s insurance code. On certification from the 10th Circuit, the court found that a policy was “delivered” in Wyoming because the policyholder and the covered risk were in Wyoming. Per the court’s decision, proof of physical delivery beyond the stated headquarters address, to a Wyoming address, was not required.

Sinclair sought business interruption insurance recovery from Infrassure and other insurers after a 2013 fire and explosion at its petroleum refinery in Sinclair, Wyoming. The Swiss insurer spurned a settlement between Sinclair and the market of quota share participants and instead sought to litigate the loss. After a panel of appraisers affirmed that the loss value was actually higher than the market settlement that Infrassure rejected – a decision which Bradley later successfully defended on Sinclair’s behalf on appeal to the 10th Circuit – Sinclair sought to recover its attorney’s fees and enhanced interest at 10% under a provision in the Wyoming Insurance Code permitting a fee award and pre-judgment interest when an insurer “refuses to pay the full amount of a loss covered by the policy and that the refusal is unreasonable or without cause.” Although the policy insured a Wyoming company as additional insured and covered refining facilities located in Wyoming, the insurer argued that Sinclair could not invoke Wyoming’s bad faith remedies found in the insurance code, which excludes policies not “issued for delivery” or “delivered” in Wyoming. The Wyoming federal district court agreed with Infrassure’s contention that because there was no proof of physical delivery to the insured in Wyoming, Wyoming law did not apply. On appeal, the 10th Circuit accepted the suggestion from Sinclair’s appellate counsel (Marc James Ayers, with Bradley’s Appellate Practice Group), that the court certify the unsettled and novel question to Wyoming’s highest court to determine the applicability of the statute.

The Wyoming Supreme Court declined to adopt the insurer’s strict interpretation, finding after canvassing the law of many other jurisdictions, that the purpose of Wyoming’s insurance laws was to “protect public welfare and Wyoming residents from being taken advantage of by sophisticated insurance companies,” and that achieving this public purpose mandated a liberal interpretation of the law’s application to Wyoming interests. The court adopted a rule articulated by the New York courts, holding that a policy is “delivered or issued for delivery” in a state when it “covers both insureds and risks” located in that state. Because the Sinclair subsidiary and the insured refinery were in Wyoming, Sinclair was entitled to the protections mandated by the insurance law.

Although the Wyoming Supreme Court’s unanimous ruling directly addresses only Wyoming law, policyholders in other states should consider the impact of the ruling as persuasive authority for a broad application of favorable extracontractual remedies. Most jurisdictions permit fee shifting in at least some instances, and a strategy for recovering the policyholder’s legal expense in addition to the value of the insured loss should be considered at the outset of the litigation. Sinclair’s successful argument, as well as the strategy of seeking certification to a state’s highest court when appropriate, highlights tools that other policyholders may use in master commercial property insurance policies to maximize business interruption insurance recovery.

Insurers Assert Single Occurrence Defense to Duck Coverage for Nordstrom

Nordstrom, like other retailers, sustained property damage and business interruption expenses as a result of protests arising out of the Black Lives Matter movement. Although the retailer supports BLM, its insurers do not support Nordstrom. In a complaint filed in district court in the Western District of Washington (access here), Nordstrom alleges that its insurers contend that Nordstrom’s losses arise from discrete events that constitute multiple occurrences, thus subjecting the retailer to multiple deductibles. As Nordstrom’s complaint explains, “The insurers’ position is that Nordstrom’s civil unrest loss does not constitute “a [l]oss or series of losses or several losses, which are attributable directly or indirectly to one cause . . . or to one series of similar causes arising from a single event . . . irrespective of the period of time or area over which such losses occur,” in the language of most of the policies, or “any one loss . . . or series of losses arising out of one event,” as provided in two of the policies.”

This insurer defense is not unusual, but is misguided. Nordstrom’s insurance policies, and many other similar policies, treat related events as a single occurrence. Here Nordstrom’s policies define an occurrence to include a “series of losses or several losses,” provided that they are attributable to either one cause or a “series of similar causes.” Insurers prefer this broad definition of occurrence to minimize the available limits on policies with per-occurrence limits. But insurers favor a narrow reading of the same definition in policies with relatively high deductibles. Nordstrom’s policies provide $25 million in coverage above a $1 million per occurrence deductible. Nordstrom’s insurers may attempt to minimize their liability by treating each store, or each event in each city, as a separate occurrence. This interpretation disregards the causation language embedded in the occurrence definition in Nordstrom’s policies.

Watch this blog as we await the insurers’ response to the retailer’s complaint.