Violation of Insurance Department Regulation 64 in Investigating Claim Held not to Preclude Insurer From Asserting Policy Exclusions
The New York Court of Appeals recently affirmed a decision of the Appellate Division, Second Department. In Maxine Mallory, As Executor of the Estate of Matthew Mallory v. Allstate Insurance Company, 90 A.D.3d 621 (2d Dep’t 2011), affirmed, 2012 N.Y. LEXIS 1986 (August 28, 2012), the issue presented was whether an insurer’s failure to comply with the requirements of 11 NYCRR 216.6(c), also referred to as Insurance Department Regulation 64, in investigating and processing a property insurance claim following a fire, is sufficient to preclude the insurer from asserting policy exclusions in defense of an action by the policyholder. The decisions of the Appellate Division and the Court of Appeals do not recite the factual background of the claim. However, a review of the appellate briefs shows that the action involved a fire which destroyed the plaintiffs’ residence on May 27, 2008, following which the loss was reported to Allstate. Plaintiff alleged that Allstate failed to communicate with the insureds despite repeated requests for information regarding the status of the claim and failed to advise them that the claim was being denied or coverage disclaimed.
Insurance Department Regulation NYCRR 216.6 provides specific rules which insurers must apply in the processing of first party insurance claims. The Regulation provides that within 15 business days of receipt of a proof of loss or all items and information requested by the insurer, the insured must be advised in writing of the acceptance or rejection of the claim unless the insurer needs additional time, in which case it must notify the insured or her representative and set forth the reasons that additional time is required for the investigation. After 90 days from the date of the initial letter, the insurer must advise the insured of the reasons additional time is needed for the investigation. If the claim is accepted or rejected, the insured must be notified in writing of the acceptance or rejection.
The defenses relied upon by Allstate involved exclusions pertaining to the requirement that the insured reside at the subject premises, breach of policy conditions pertaining to increase in hazard and submission of proof of loss.
Allstate contended that there were delays on the part of the insureds in responding to requests for information from the company which prevented the company from making a determination as to coverage for the loss until after suit was instituted.
The Second Department had previously ruled in De Marinis v. Tower Insurance Company of New York, 6 A.D.3d 484 (2d Dep’t 2004), that a failure to comply with this regulation did not preclude the insurance company from relying on a policy exclusion to disclaim coverage. The Second Department declined to overrule De Marinis. The Court of Appeals affirmed, allowing Allstate to rely upon its exclusions even though there was an allegation of a violation of a regulation.
This is a significant ruling by the Court of Appeals on this issue which often arises in instances involving alleged failure by an insurer to comply with Regulation 64.
If you require further information regarding the information presented in this Legal Alert and its impact on your organization, please contact any of the members of the Insurance Coverage & Regulation Practice Area.
Insurance Coverage & Regulation Practice Area News
Hiscock & Barclay’s Insurance Coverage & Regulation Practice Area is pleased to announce its expansion with the addition of two new attorneys - Vanria P. DeMay and Sanjeev Devabhakthuni. Both reside in the firm’s Rochester office. Vanria, a graduate of SUNY Buffalo Law School, has assisted attorneys in our Insurance Coverage practice for the past two summers as a Summer Associate. Sanjeev, a graduate of Albany Law School of Union University, previously worked as an Appellate Court Attorney for the New York State Supreme Court, Fourth Department.
For more information on Vanria and Sanjeev, or to contact them directly, please click on the links below:
Vanria P. DeMay: http://www.hblaw.com/profiles/Vanria-P-DeMay
Sanjeev Devabhakthuni: http://www.hblaw.com/profiles/Sanjeev-Devabhakthuni
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