Committee Reports

Comment on Legislation Regarding Supplemental Spousal Liability

SUMMARY

The Insurance Law Committee writes this report in support of legislation (the “Bill”), which would amend insurance law. The Bill has been approved in both chambers of the Legislature as of May 2024 and is pending Governor Hochul’s signature. The report urges Governor Hochul to sign the Bill, which would require automobile insurance carriers to offer supplemental spousal liability coverage to married persons on an opt-out basis, and to unmarried persons on an opt-in basis.

BILL INFORMATION

A.9407-A (AM Weprin) / S.9021-A (Sen. Breslin) – Provides supplemental spousal liability insurance coverage for the spouse of an insured who has indicated that such insured has a spouse on the insurance application (NYS 2023-24).

REPORT

REPORT ON LEGISLATION BY THE INSURANCE LAW COMMITTEE

A.9407-A (M. of A. Weprin)
S.9021-A (Sen. Breslin)

AN ACT to amend the insurance law, in relation to supplemental spousal liability insurance

THIS BILL IS APPROVED

The Insurance Law Committee of the New York City Bar Association welcomes this opportunity to comment on A.9407-A (AM Weprin) / S.9021-A (Sen. Breslin) (the “Bill”). The Bill has been approved in both chambers of the Legislature as of May 2024 and is pending Governor Hochul’s signature. We write in support of the Bill and urge the Governor to sign it. This proposal would require that automobile insurance carriers offer supplemental spousal liability coverage to married persons on an opt-out basis, and to unmarried persons on an opt-in basis.

By way of background, Chapter 735 of 2022 Laws of New York reversed the long-standing “opt-in” regime established by New York Insurance Law Section 3420(g). Historically, Section 3420(g) required that every automobile liability insurer doing business in New York make available supplemental spousal liability coverage in its automobile liability policies. This would cover one spouse in the event of injuries incurred as a result of a car accident caused by the other spouse. To take advantage of this coverage, an insured would have to affirmatively request such coverage and pay the incremental premium associated with it. Chapter 735, which became effective for policy issuances or renewals on or after August 1, 2023, reversed this regime from “opt-in” to “opt-out”. Under the opt-out regime, such spousal liability coverage is presumptively included in coverage unless the insured opts out by completing a form determined by the Superintendent of Financial Services. The opt-out requirement applies to all policyholders regardless of marital status and regardless of whether the policyholder is a legal entity or natural person. Under Chapter 108 of 2023 Laws of New York, this opt-out regime sunsets on July 31, 2027, when the requirements of Chapter 735 are deemed repealed.

The opt-out regime imposed by Section 3420(g) as amended by Chapter 735 results in many insureds receiving, and paying for, coverage that they neither want nor need. This is particularly true in the case of unmarried persons, who have no need for this coverage and will be forced to pay for coverage simply based on inaction.

The reform reflected by the Bill sensibly restricts the opt-out regime to married insureds, while making it clear that unmarried persons will not be required to accept this unwanted and unnecessary coverage or pay for it simply because they fail to fill out a form. Regardless of the merits of an opt-out regime, at a minimum it should not apply to persons who do not benefit from this coverage at all (e.g., unmarried persons).  The Insurance Law Committee supports this reform as implemented by the Bill.

Insurance Law Committee
Daniel A. Rabinowitz, Member

June 2024