New York urges insurers with potential exposure to legal claims stemming from the Child Victims Act to act promptly and in good faith.
The New York Child Victims Act (“CVA”) was signed into law on February 14, 2019. Among other things, the CVA extended the civil statute of limitations for sexual abuse claims against alleged perpetrators and institutions to age 55, and opened a revival “window” on August 14, 2019 for expired claims against alleged perpetrators, the organizations that employed these individuals at the time of the claimed abuse, and other persons or organizations that are alleged to have responsibility for the acts or harm claimed by the victims.
Since the revival window opened on August 14 of this year, over 900 lawsuits have been filed under the CVA, many involving multiple plaintiffs. According to an article in Business Insurance, it is anticipated that New York filings could climb to as high as 3,000 by the time the window closes in 2020. See Business Insurance: Insurers Try to Measure Exposure to Childhood Sex Abuse Claims (August 20, 2019).
The New York Department of Financial Services has now joined the fray. On September 12, 2019, the Department issued Insurance Circular Letter No. 11, which was addressed to “All Authorized Property/Casualty Insurers, Licensed Insurance Producers, Adjusters, and Reinsurers.” The stated purpose of Circular No. 11 is to inform these entities that the Department “expects” these companies “to cooperate fully with the intent of the Child Victims Act [ ].” The Department makes particular reference to the likelihood that many of the insurance policies that will be called upon to respond to claims brought under the CVA are part of run-off operations:
All of the Addressees that issued policies to potential defendants (hereinafter “Insurers”) are therefore on notice that legal claims may arise for which Insurers may have liability under those policies. Additionally, over time, some Insurers have been acquired by, or merged into, other companies. In such cases, the successors-in-interest to the Insurers that issued the policies with such exposures may have assumed such liabilities and are similarly on notice. Addressees who assumed business from such Insurers similarly should assess their exposures and act in good faith to address their liabilities, as should retrocessionaires. Additionally, over time, some Insurers have been acquired by, or merged into, other companies. In such cases, the successors-in-interest to the Insurers that issued the policies with such exposures may have assumed such liabilities and are similarly on notice. Addressees who assumed business from such Insurers similarly should assess their exposures and act in good faith to address their liabilities, as should retrocessionaires.
The circular cites the affirmative duties and prohibitions found in Insurance Law § 2601 and Insurance Regulation 64. Specifically, the Department states that when handling CVA-related claims insurers should:
- have as their basic goal the prompt and fair settlement of all claims;
- assist the claimant in the processing of a claim;
- refrain from demanding verification of facts unless there are good reasons to do so, and, when verification of facts is necessary, do so as expeditiously as possible;
- clearly inform the claimant of the insurer’s position regarding any disputed matter; and
- respond promptly, when response is indicated, to all communications from insureds, claimants, attorneys, and any other interested persons.
In addition to citing the above regulatory requirements, the circular also “encourages” insurers to “act in utmost good faith” by, among other things, doing the following:
• acting promptly, not extending unnecessarily to the maximum time periods permissible;
• exerting diligence to seek out copies of relevant policies of current and prior policyholders that the insurer knows or has reason to know may be subject to CVA-related legal claims;
• fairly reviewing such policies, interpreting such contracts so as to resolve any ambiguities in the policyholders’ favor;
• assessing the applicable coverage, including any applicable exclusions or other limitations;
• contacting the relevant policyholders with such assessments promptly (even before a claim is filed, whenever possible) to assist policyholders in considering their coverage, such that the insurer and policyholders can cooperate in addressing complaints as they are filed; and
• performing on duties to defend policyholders.
The circular also focuses on the insurers’ record retention obligations and encourages that they go above and beyond the statutory minimum requirements. Finally, the circular makes clear that the Department “expects” insurers “with exposures to CVA-related legal claims promptly to assess their exposures and adjust their loss and loss expense reserves . . . as should all reinsurers, and retrocessionaires.”
The full text of the Circular can be found at https://www.dfs.ny.gov/industry_guidance/circular_letters/cl2019_11. Shortly after Circular was published, the Department issued a Policyholder and Victim Guidance, which advises policyholders and victims that the Department is prepared to serve as a helpful resource in determining the existence of insurance coverage: https://www.dfs.ny.gov/industry_guidance/policyholder_and_victim_guidance