New York Auto Insurance Now Automatically Includes Supplementary Uninsured/Underinsured Motorists Coverage, Per New Law
by Anthony D. Dodge
Last September, a drunk driver in Syracuse collided with a sedan carrying a 49 year-old man and his adult stepson. The father died at the scene; the son died a few hours later. The drunk driver carried Bodily Injury (BI) Liability insurance coverage with the state minimum limits of $50,000 for the death of one person, $100,000 for the deaths of multiple people.
The father, who owned the vehicle in which he and his son rode, did not have Supplementary Uninsured/Underinsured Motorists (SUM) coverage. The Syracuse Post-Standard reported that his disabled widow will end up with only $5,000 out of the $100,000. She faces tens of thousands of dollars in funeral and medical expenses. Her husband had a loan on the car that had to be repaid. She fears she may lose her home.
Starting on June 16, New Yorkers who switch auto insurance carriers or who buy a policy for the first time will automatically get financial protection against uninsured drivers. A pair of laws enacted in the past year will require insurers to sell SUM coverage with new auto insurance policies. Customers who do not want the coverage or want less of it will have to deliberately say so.
The law, signed by Gov. Andrew Cuomo last December and amended earlier this year, applies only to new personal auto policies with effective dates on and after June 16, 2018. It does not apply to renewals of policies first written before then, nor does it apply to commercial auto policies.
Policies covered by the law will automatically carry SUM Coverage with limits equal to the BI Liability limits. Suppose an insured purchases BI Liability limits of $250,000 per person and $500,000 for multiple people. The default SUM limits will also be $250,000/$500,000. Insurers may use umbrella or excess policies to meet the requirement.
The law requires insurers to provide their new insureds with a form that describes SUM coverage. It will tell them that:
• Their SUM limits are equal to their BI Liability limits
• They may choose to purchase lower SUM limits or reject the coverage altogether
• If they select lower limits or reject the coverage, that decision will apply to all subsequent renewal policies unless they change the decision in writing
Insurers must permit insureds to reject the coverage or possibly choose lower limits. A “first named insured” must sign a rejection of coverage or selection of lower limits before it can take effect. “First named insured” means the individual listed first in the policy Declarations or that person’s resident spouse also specified in the Declarations. The form of the rejection or selection can be written or electronic.
A signed rejection of coverage or selection of lower limits binds all insureds under the policy. If Mary Smith selects SUM limits of only $50,000/$100,000, her husband John cannot later argue that he should get the BI Liability limits of $100,000/$300,000.
The law allows insurers to require SUM limits to equal the BI Liability limits. Big I New York has heard of at least two insurers doing this. Recent emergency regulations state that these insurers must still allow insureds to reject SUM coverage entirely. If Carrier X requires SUM limits to equal BI Liability limits, John and Mary Smith can either purchase SUM coverage at $100,000/$300,000 (their BI Liability limits) or not buy the coverage at all.
When an insured rejects SUM coverage, the policy must still include Uninsured Motorists (UM) coverage. UM coverage provides basic limits of $25,000/$50,000. Those limits double for deaths of one or multiple people.
The law requires insurers to furnish insureds with the notice and waiver form. However, it does not prohibit them from delegating that responsibility to their agents. Agents should expect that insurers will ask them to provide the notices and collect signatures on waiver forms.
Many customers are unaware of SUM coverage. Since several will find themselves automatically buying it, agents and brokers should be prepared to explain its costs and benefits. The story at the beginning of this article would be a good place to start.
This law is temporary. It will expire on June 30, 2020 unless the New York State Legislature extends it beyond that date. Until then, New Yorkers will get this valuable coverage unless they consciously opt out. That may well mean fewer stories of people enduring both the losses of loved ones and financial ruin.
