IIABNY Heads Off Draconian Penalty Increases in State Budget

Budget agreement also includes IIABNY-supported ride-sharing measures

Dewitt, New York—Thanks to the efforts of the Independent Insurance Agents & Brokers of New York (IIABNY), insurance producers have been spared drastically larger penalties for violating the state’s insurance law. The state budget the New York Legislature adopted over the weekend dropped the governor’s proposal for increased penalties.

Current law permits the New York State Department of Financial Services (DFS) to fine violators up to $1,000 per offense. Gov. Andrew Cuomo’s proposed budget would have allowed DFS to assess fines up to the greater of:

• $10,000 per offense
• Double the aggregate damages attributable to the violation
• Double the aggregate economic gain the individual made from the violation

IIABNY lobbied extensively over the past couple months against the measure, calling it unwarranted. It told the Legislature that an agency that forgets to renew one of its four licenses may face a $10,000 fine for each policy it sells while the license is lapsed. Fines of this size could put a small agency out of business because of an oversight. Insurance agencies are busy counseling clients and helping them obtain the right coverage at a reasonable cost. Disproportionate penalties like these hurt consumers and business owners by reducing the number of trusted advisors they may have.

IIABNY Interim President and CEO Lisa K. Lounsbury, CAE, AAI, AIS said, “We are very pleased that the State Assembly and Senate rejected these onerous proposals. Driving well-meaning insurance agencies out of business over simple mistakes would do no favors for New York’s small businesses and households, who rely on their advice. The Legislature’s decision requires those who break the law to pay penalties that are proportionate to the offense, but no more than that.”

The final budget does not include any increase or change in the current penalties under the Insurance Law. It also leaves out other proposals IIABNY opposed. These included expanded DFS authority to sue violators of the insurance law and authority to ban people from the insurance business for life.

The budget also includes approval of ride-sharing services in upstate New York. IIABNY has been involved in discussions to allow ride-sharing, also known as transportation network companies (TNCs), to operate in areas outside of New York City. The group’s primary concern has been potential ambiguities or gaps in the insurance covering TNC drivers and their passengers.

The budget agreement sets minimum amounts of liability insurance that TNC drivers must carry while they are available to give rides, and higher amounts when they have passengers. They can obtain the insurance themselves or rely on coverage the TNC provides. The TNC must also provide $1.25 million in Supplementary Uninsured / Underinsured Motorists Coverage, which covers drivers’ and passengers’ bodily injuries caused by other drivers with no or insufficient liability insurance.

The budget agreement makes it clear that a personal automobile insurance policy does not have to cover a driver’s TNC activities. TNCs must inform drivers about the insurance coverages they provide and that the driver’s own personal insurance may not provide any coverage for the driver’s TNC activities.

The Independent Insurance Agents & Brokers of New York, Inc. has represented the common business interests of independent insurance professionals since 1882. More than 1,750 agencies and their 13,000 plus employees currently rely on the DeWitt, New York-based not-for-profit trade association for legislative advocacy, continuing education and other means of industry support. In addition, most IIABNY members proudly identify themselves as Trusted Choice® agents and brokers, a national consumer brand uniting more than 21,000 independent agencies across the United States.