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New York Insurance Regulation 64 Aims at Prompt and Fair Settlement of Claims Arising From a Riot or Civil Commotion

New York
September 12, 2019
June 18, 2020
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In New York, insurers are now urged to act and resolve claims in shorter time frames and mediate claims at the claimant’s request, in light of recent events in the time of COVID-19.  On June 4, 2020, the Superintendent of the Department of Financial Services declared as an emergency measure the Seventeenth Amendment to 11 NYCRR 216 (Insurance Regulation 64), entitled “Unfair Claims Settlement Practices and Claim Cost Control Measures.”  

According to the Superintendent, in the midst of the recent “peaceful protests against police brutality and racial discrimination,” there were individuals who took advantage of these events and “looted and vandalized” properties across New York State, resulting in loss and damage. (See Statement of Reasons for Emergency Measure, dated June 4, 2020.)  Regulation 64 sets forth the standards for insurers to settle claims promptly and fairly.  

Regulation 64 applies to “any claim filed on or after May 30, 2020 for loss of or damage to real property, loss of or damage to personal property, or other liabilities for loss of, damage to, or injury to persons or property resulting from a riot or civil commotion in this State.”  The Superintendent refers to “the looters and vandals” as individuals who “have infiltrated and used the peaceful protests” to “commit these destructive and damaging acts.”

With decreased time frames to investigate claims, and the possibilities of varied interpretation and application of the provisions governing the mentioned events, Regulation 64 does not make it easier for insurers that strive to settle claims promptly and fairly, to do so.  

Rather, the words used to describe the events that are included under the Regulation may likely lead to disputes and legal questions regarding whether a claimed loss or damage resulted from a “riot or civil commotion.”  What is a “civil commotion?”  Is a riot or civil commotion a state of affairs, or is it specific actions taken by individuals?  Does a lone looter or vandal who acts in an area of the city, emboldened by peaceful protests in another area of the city miles away, qualify as being part of “a riot or civil commotion,” and the looting “resulting from” the riot or civil commotion?  Is “a riot” or “civil commotion” a discrete event in a single day or can it be a condition or situation that spans several days or weeks with intermittent activity?  

Regarding the recent protests against police brutality, it seems that the riot or civil commotion refers to the actions of the looters and vandals apart from the peaceful protests that they infiltrated and used to do harm.  Regulation 64 does not mention the words “looting,” “vandalism,” or “protest,” but its provisions appear to apply to loss or damage that encompass these events and more.

Additionally, many of the businesses that were looted and vandalized were closed to comply with the Governor’s Executive Orders to reduce the spread of COVID-19.  A concern is that Regulation 64 may be used by businesses doubly affected by the looting and vandalism and closure due to COVID-19, to request insurance coverage for losses that stem in part from COVID-19.  The separation of the losses and damage due to a riot during a health pandemic are not clear-cut because the impetus behind people’s actions are not easily categorized.  A question arises – before the protests existed, would loss or damage resulting from a riot or civil commotion due to looting and vandalism arising from COVID-19 be covered under the Regulation, when many insurers have stated that there is no coverage for losses due to COVID-19 under their policies?  

Because these impacted businesses provide individuals with jobs and are vital to the local economies in New York, the State has taken emergency action to assist these insureds rebuild their businesses expeditiously.  Regulation 64 decreases the time frames within which an insurer must act in investigating a claim related to a riot or civil commotion in New York.  The Regulation “allows claimants to make immediate repairs to certain parts of damaged real property, if necessary, to protect health and safety; and to submit proof of loss by photographs or video recordings.  This emergency regulation also offers individual and small business claimants the option to resolve disputes through an impartial mediation process, paid for by the applicable insurer.”  The claimant may pursue other legal remedies if no agreement is reached at mediation.

Whether Regulation 64 is an effective claim cost control measure depends in part on whether these and other questions are resolved successfully in the early investigation of the claims, during mediation of disputed or unresolved claims, or in litigation.