Docstoc

New York State Education Department

Document Sample
New York State Education Department Powered By Docstoc
					                           CHAPTER      /2]
    LAWSOF20    6~

SENATE BILL   8' I, _                   ASSEMBLY BILL                 _




STATE OF NEW YORK

                                 8119


                           IN SENATE
                             June 7, 2006


Introduced by Sen. BALBONI -- read twice and ordered printed, and when
  printed to be committed to the Committee on Rules

AN ACT to amend the insurance law, in relation to the limitation of risk




                                         DATE RECEIVED BY GOVERNOR:

                                                          ::' : 12005
                                         ACTION MUST BE TAKEN BY:
                                                                I J 20Gb


                                         DATE GOVERNOR'S ACTION TAKEN:
                                                          p   1:: 200L
SENATE VOTE     Y   N   HOME RULE MESSAGE   Y   N


DATE                _


ASSEMBLY VOTE   Y   N


DATE
RETRIEVE BILL                                                                  Page 2 of3


                              NEW YORK STATE SENATE
                     INTRODUCER'S MEMORANDUM IN SUPPORT
                     submitted in accordance with Senate Rule VI. Sec 1

BILL NUMBER: S8119

SPONSOR: BALBONI


TITLE O];'BILL:
An act to amend the insurance law, in relation to the limitation of risk


PURPOSE:
 -------
To add domestic insurers, whose primary liability arises from the busi-
ness of medical malpractice insurance, to those insurance providers who
are exempt from the provisions of subsection (a) of section 1115 of the
Insurance Law.


SUMMARY OF PROVISIONS:
Section 1 amends subsection (b) of section 1115 of the insurance law by
adding domestic insurers, whose primary liability arises from the busi-
ness of medical malpractice insurance, to the list of insurance provid-
ers who are exempt from the limitation of risk provision found in
subsection (b) of section 1115 of the Insurance Law.

Section 2 establishes an effective date .

.:JU_STIF_ICA'rION:
In 1985, as part of the Governor1s Medical Malpractice Reform Proposal,
the Legislature enacted subsection (c) of section 2343 of the Insurance
Law. This section provides that no domestic insurer whose primary
liability arises from the business of medical malpractice insurance
shall be declared insolvent or charged with failure to maintain the
required minimum surplus policyholders. It was thought that subsection
 (c) was necessary since the reform proposal deferred rate determinations
and mandated that future determinations were to take into account the
future effects of the reforms even before they were actually quantified.
In 1986, the Superintendent of Insurance. pursuant to the provisions of
section 40 of chapter 266 of the Laws of 1986. was authorized to estab-
lish rates for physicians and surgeons medical malpractice insurance.
The Superintendent's mandate was to establish such rates at the lowest
possible level consistent with the solvency of insurers. Since the rates
were to be deemed adequate with consideration given to future surcharges
as provided in the legislation, an·d since the established rates were to
make no provision for increasing or maintaining surplus, it became clear
that, over time, the surplus of companies writing such coverage would
diminish.
Subsequently, in 1989, subsection (c) of section 1104 of the Insurance
Law was enacted. These provisions authorize the Superintendent to
suspend the license or limit the premium writings of insurers whose
surplus is lIinadequate lt in relation to its writings. However, certain
insurers were exempt in recognition that such insurers 1 maintenance of
surplus was, in large part, beyond their control.
What was overlooked in the foregoing evolution of this statutory process
directed at medical malpractice writers was the fact that section 1115
of the Insurance Law prohibited an insurer doing business in New York




http://nyslrs.state.ny.us/NYSLBDCI/bstfrme.cgi?QUERYTYPE=SPECIAL+&SESSYR=...    6/2212006
                                                     03
                                                n.n··.... IJ
                                                iJ'-f+-v
RETRIEVE BILL                                                                  Page 3 of3


from writing a single risk in excess of ten percent of its surplus to
policyholders. Since sections 2343 and 1104 already recognize the fact
that the maintenance of surplus by medical malpractice writers is beyond
their control and its diminution is part of the regulatory process, it
is clear that it was an oversight not to have similarly amended section
III S. This legislation seeks to rectify this oversight.

LEGISLATIVE HISTORY:
New bill.

FISCAL IMPLICATIONS:
----_._---------
None to the state.

EFFECTIVE DATE:
This act shall take effect immediately.




http://nyslrs.state.ny.usINYSLBDCI/bstfrme.cgi?QUERYTYPE=SPECIAL+&SESSYR=...    6/22/2006
                                          I'Ll ,"''"'   0A
B-203                                               BUDGET REPORT ON BILLS           Session Year 2006

SENATE:                                              NO RECOMMENDATION             ASSEMBLY:
No. 8119                                                  BALBONI                  No.




Title: AN ACT to amend the insurance law, in relation to the limitation of risk

       The above bill has been referred to the Division of the Budget for comment. After careful
review, we find that the bill has no appreciable effect on State finances or programs, and/or this office
does not have the technical expertise to make a recommendation on the bill.

             We therefore make no recommendation.




Validation: OocumenllD: 410171-1
John F. Cape. Director NYS Division of the Budget
By Ronald l. Greenberg
Dat" 7/1712DDO tSO,DD PM



                                                               00C005
                                                                                                                 C12,1

                                           STATE OF NEW YORK
                                         INSURANCE DEPARTMENT
                                            ONE COMMERCE PLAZA
                                              ALBANY, NY 12257
George E.Pataki                                                                                Howard Mills
Governor                                                                                       Superintendent

                                                   July 20, 2006
Honorable Richard Platkin
Counsel to the Governor
Executive Chamber
State Capitol
Albany, New York 12224
                                                   Re: Senate 8119 (Balboni)
Dear Mr. Platkin:

          This letter responds to your request for our comments on the above-captioned bill, which has
passed both houses and is presently awaiting executive action. The bill, which provides for an immediate
effective date, amends Section 1115(b) of the Insurance Law to exempt a domestic insurer whose primary
liability arises from the business of medical malpractice insurance from the prohibition against exposing
more than 10% of its surplus to policyholders on anyone risk

         Last year, Section 2343 (c) of the Insurance Law was reinstated, and extended until June 30,
2007, to prohibit the Superintendent ofinsurance from placing a medical malpractice insurer into
rehabilitation or liquidation because of its insolvency or impairment (see, Chapter 58 of the Laws of
2005). In reinstating that statute, which had expired in 2001, the Superintendent was also prohibited from
restricting the writings of a medical malpractice insurer even though the carrier may be insolvent or
impaired (see, Section II 04 [cD. While the Superintendent may not be able to restrict the writings of a
medical malpractice insurer, the insurer continues to be subject to the 10% per risk limitation, which,
depending on the size of the insurer, can have a similar effect on the insurer's ability to write.

         It is our understanding that the reason for this legislation resulted from the poor financial results
that medical malpractice insurers have experienced in recent years. Insurers that have long been in
compliance with the 10% limitation of risk restriction set forth in Section 1115(a) have experienced
significant declines in surplus that may place some of these companies in technical violation of this
statute.

         Since this bill provides some flexibility to medical malpractice insurers in that they would not be
strictly bound to the capitalization requirements that may apply to other lines of insurance, and would be
consistent with the reinstatement of Section 2343 (c) and Section 1115 (b), the Department has no
objection to the provisions of this bill.
                                                    Very truly yours,




                                                   Howard Mills
                                                   Superintendent of Insurance




                                          http://www.ins.state.ny.us
                                                              00e006
   Physicians'                            111 East Shore Road, P.O. Box 4300, Manhasset, New York 11030



~*..                   U
                                                                                Brooklyn, Queens,
                                                                                    Staten Island     (7181   895-6033
                                                                                 Nassau & Suffolk     (516)   365-6690
                                                                                   Now York City      (212)   936-3050
         Reciprocal Insurers                                                            Toll Frea     (800)   632-6040

                                                 July 18, 2006



          Honorable George E. Pataki
          Governor
          Executive Chamber
          New York Capital
          Albany, NY 12224

                                        Re: S.8119(Balboni)/A.11882 (Carrozza)
                                            AN ACT to amend the insurance law,
                                            In relation to the limitation of risk


          Dear Governor Pataki:

                  Physicians' Reciprocal Insurers ("PRJ") is a doctor - owned reciprocal insurer
          that insures more than ten thousand (10,000) physicians, almost a thousand (1000)
          podiatrists and dentists and a number of hospitals in New York State, including the
          largest hospital system in the State. We are writing to you to express our strong support
          for the captioned bill.

                  Senate Bill 8119 amends Section llI5(b) of the New York Insurance Law to
          exempt domestic insurers whose primary liability arises from the business of medical
          malpractice insurance from the limitations of risk provisions provided in that Section.
          This exemption closes the loop with respect to other similar provisions that are already in
          effect with respect to New York medical malpractice insurers. Without this exemption,
          the previously adopted legislative initiatives dealing with medical malpractice insurers
          could be rendered moot.

                  In 1985, as part of the Governor's Medical Malpractice Reform Proposal, the
          Legislature enacted section 2343 (c) of the New York Insurance law. Section 2343 (c)
          provides that no domestic insurer whose primary liability arises from the business of
          medical malpractice insurance shall be declared insolvent or charged with failure to
          maintain the required minimum surplus policyholders. It was thought that Section 2343
          (c) was necessary since the reform proposal deferred rate determinations and mandated
          that future determinations were to take into account the future effects of the reforms even
          before they were quantified.

                 In 1986, the Superintendent of Insurance, pursuant to the provisions of Section 40
          of Chapter 266 of the Laws of 1986, was authorized to establish rates for physicians and
BOARD OF GOVERNORS
    HERMAN ROBBINS. M.D.                      MEHMET CETIN, M.D.                       HOWARD KOLODNY. MD.
          CHAIRMAN                                VICE CHAJRMAN                               SECRETAR:Y
   BARRY F. SCHWARTZ. M.D.                   PHILIP ROBBINS, M.D.                    SANFORD R. GOLDBERG, M.D.
          TREASURER                        ANTHONY J. BONOMO, ESQ.                     GERALD DOLMAN, ESQ.
     JOHN R. BYERS. ESQ.




                                                            OOC007
surgeons medical malpractice insurance. The Superintendent's mandate was to establish
such rates at the lowest possible level consistent with the solvency of insurers. Since the
rates were to be deemed adequate with consideration given to future surcharges as
provided in the legislation, and since the established rates were to make no provision for
increasing or maintaining surplus, it became clear that, over time, the surplus of
companies writing such coverages would diminish. Therefore, Section 2343 (c) was
extended.

         Subsequently, in 1989, Section 1104 (c) of the New York Insurance Law was
adopted. Section 1104 (c) authorizes the Superintendent to suspend the license or limit
the premium writings of insurers whose surplus is "inadequate" in relation to its writings.
Section 1104 (c) from its inception exempted insurers subject to Section 2343 (c) in
recognition that such insurers' maintenance of surplus was, in large part, beyond their
control.

         What was overlooked in the foregoing evolution of a statutory process directed at
medical malpractice writers was the fact that Section 1115 of the Insurance Law
prohibited an insurer doing business in New York from writing a single risk in excess of
ten percent of its surplus to policyholders. Since Sections 2343 (c) and 1104 (c) already
recognize the fact that the maintenance of surplus by medical malpractice writers is
beyond their control and its diminution is part ofthe regulatory process, it is clear that it
was an oversight not to have similarly amended Section 1115. The proposed legislation
rectifies such oversight.

        To put this in context, Section 2343 (c) prohibits the Superintendent ofInsurance
from placing a New York medical malpractice insurer into liquidation, Section 1104 (c)
prohibits the Superintendent from limiting the writings of such insurers, while present
Section 1115 prohibits such insurer from writing a single risk in excess of ten percent
(10 %) of their surplus. With the surplus of such insurers deliberately being allowed to
diminish, it is just a matter oftime, without this bill, before these insurers have
insufficient surplus to write an individual physicians' risk, which is $3.9 million in the
aggregate.

       For the foregoing reasons, we strongly urge Executive approval of this necessary
piece oflegislation.

                                       Very truly yours,



                                       Gerald Dolman
                                       Executive Vice President
                                       Administrators for the Professions, Inc.
                                       Attorney-in-fact for
                                       Physicians' Reciprocal Insurers




                                         Decooe
                                                                                                6 8/1 't
                       LEBOEUF, LAMB, GREENE & MACRAE LLP

IIIEW YORK                                  99 WASHINGTON AVENUE                                               LONDON
WASHINGTON,o.G.                                                                                        A MULTINATIONAL
                                                                                                          PARTNERSHIP
ALBANY                                             SUITE 2020                                                     PARIS
BOSTON
                                           ALBANY, NY 12210-2820                                           BRUSSELS
CHICAGO                                                                                             JOHANNESBURG
                                                    (518) e2e-QOOO                                             (PTYl l.TD.
HARTFORD
                                               FACSIMILE;   (~Ie,    C20-QOIO
HOUSTON                                                                                                       MOSCOW
                                                                                                                RIYADH
JACKSONVILLE                                                                                         ... ,.,.ILIATEO OfTICE
LOS A.NGELES                                                                                                  BISHKEK
PITTSBURGH                                                                                                     ALMATY
SAN FRANCISCO                                                                                                  BEIJING

                                                      July 24, 2006




         Honorable George E. Pataki
         Governor
         Executive Chamber
         New York State Capital
         Albany, NY 12224

                        Re:    S.8119 (Balboni)/A.11882 (Carrozza)
                               AN ACT.to amend the insurance law, in relation
                              ·to .the limitation of risk

         Dear Governor Pataki:

                        We represent the Medical Liability Mutual Insurance Company ("MLMIC"), a
         doctor-owned company that insures approximately nineteen thousand (19,000) physicians, four
         thousand (4,000) dentists and eighty-eight (88) hospitals in New York State. On behalf of our client,
         we are writing to you in strong support of the captioned legislation, and urge your Executive
         approval of the bill.

                         Senate Bill 8119 amends Section l1l5(b) of New York's Insurance Law to exempt
         domestic medical malpractice insurers from the limitation of insuring anyone risk in an amount
         exceeding ten percent of the insurer's surplus to policyholders. By establishing this exemption, the
         bill recognizes the unique nature of medical malpractice insurance, and is consistent with other
         provisions of the Insurance Law that serve to ensure the viability of the medical malpractice
         insurance system, thereby protecting the consumers of New York.

                        In particular, Chapter 266 of the Laws of 1986 authorizes the Superintendent of
         Insurance to establish premium rates for physicians and surgeons medical malpractice insurance.
         Under the law, the Superintendent must set medical malpractice insurance rates at an adequate level
         consistent with insurer solvency. These rates are deemed to be adequate when viewed together with
                                                               ...    "




                                                             000009
Honorable George E, Pataki
July 24, 2006
Page 2


future surcharges authorized by the law, whether or not any such annual surcharges are actually
imposed by the Superintendent.

                In consideration of the inability of medical malpractice insurers to establish their own
premium rates, the Legislature enacted Section 2343 of the Insurance Law, Intended to balance a
situation where an insurer has no control over its solvency through setting appropriate rate levels,
this statute exempts such insurers from the Superintendent's power to rehabilitate Or liquidate a
domestic medical malpractice insurer on the grounds of insurer insolvency or the failure by an
insurer to make good on a capital impairment under Section 7402 of the Insurance Law,

                In addition, Section 1104 of the Insurance Law, which authorizes the Superintendent
to suspend the license or limit the premium writers of insurers whose surplus to policyholders is
inadequate relative to its outstanding liabilities, exempts medical malpractice insurers from its ambit.
Paralleling the rationale for Section 2343's exemption for medical malpractice insurer's from
rehabilitation or liquidation in certain instances, Section 1104 provides a safeguard against medical
malpractice insurers being punished where their solvency is largely beyond their control.

                Senate Bill 8119 provides a similar exemption for medical malpractice insurers from
the strictures of writing a single risk in excess of ten percent of an insurer's surplus. The bill
implicitly acknowledges that over time a diminution of such insurers' surplus is inevitable under the
current rating structure, and that medical malpractice insurers require more flexibility in
underwriting given the current structure.

               For the foregoing reasons, we strongly urge Executive approval of this important bill.

                                                      Sincerely,

                                                      'C
                                                      Edmond Valente



cc:    Donald J. Fager
       Edward Amsler
       Jay B, Martin
       95451




                                                 00COI0
RETRIEVE BILL                                                                                               Page I of3




                                             STATE OF NEW YORK

                                                            8119


                                                     IN SENATE
                                                      June 7, 2006


         Introduced by Sen. BALBONI -- read twice and ordered printed, and when
           printed to be committed to the Committee on Rules

         AN ACT to amend the insurance law, in relation to the limitation of risk

              The People of the State o.f N:e;w            X9~lt_L ~Epresented    in Senate and            Assem-
         ~J.-.Y.I ..   _q.Q   ~nact   _as follows:

     1     Section 1.   Subsection   (b) of section 1115 of the insurance law, as
     2   amended by chapter 181 of the laws of 1990,     is amended to read as
     3   follows:
     4      (b) This section shall not apply to the insurance of marine risks,
     5   marine protection and indemnity risks, workers ' compensation, employers'
     6   liability risks, mortgage guaranty risks,    financial guaranty risks,
     7   risks insured for any dollar level of first party benefits provided
     8   pursuant to article fifty-one of this chapter,   certificates of title,
     9   guaranties of title or policies of title insurance, or those insurers
    10   _subject to the provision~9~ ~~~_e:9~~~:r:t (9)  of                     s~c;J:::!.Qfl_   two   t_tt2_~~_~.!}g
    11   J;.hree hundred _forty-_three 9~ t'h~S ch~_!:§~.
    12      § 2. This act shall take effect immediately.




           EXPLANATION--Matter in                ~_tal~~   (underscored) is neWi matter in brackets
                                               [-] is old law to be omitted.
                                                                                                  LBD17228-01-6




http://nyslrs.state.ny.usINYSLBDCllbstfrme.cgi?QUERYTYPE=SPECIAL+&SESSYR=...                                  6/22/2006

				
DOCUMENT INFO
Categories:
Tags:
Stats:
views:2
posted:5/16/2012
language:English
pages:11