The New York State Department of Financial Services has issued new guidance to auto insurance entities, implementing reforms in this year's state budget designed to help lower insurance rates and combat fraudulent claims. Governor Kathy Hochul says the enacted budget delivers sweeping reforms to address key factors driving up auto insurance premiums, including insurance fraud and excessive litigation costs. According to Hochul, the new guidance is an important step to translate the reforms into meaningful cost savings for New Yorkers.
Reforms addressed in the guidance include:
- Expanded definition of "Fraudulent Insurance Act." Prosecutors are now able to seek criminal penalties against all individuals responsible for organizing or facilitating a staged accident, not just the individual behind the wheel.
- Limiting damages for individuals engaging in unlawful behavior at the time of an accident. Damages are capped for drivers engaging in criminal behavior at the time of an accident to ensure that drivers who violate the law, including uninsured motorists, drunk drivers and drivers in the act of committing a felony, do not receive disproportionate financial recoveries at the expense of policyholders.
- Tightening the serious injury threshold. The enacted budget modifies the definition of "serious injury" so that damages for pain and suffering or emotional distress are reserved for those persons able to objectively demonstrate that they have suffered serious injuries.
- Limiting damages for individuals who are "mostly" at fault in causing an accident. Drivers found to be primarily responsible for causing an accident are now unable to sue other parties for outsized damage payments. This change puts New York in line with most other states.
- Updates to approval authority over auto insurers' rates. New limits have been put in place requiring companies to seek express prior approval from DFS before any upward rate changes.
