HomeMy WebLinkAboutSenate Bill-Municipal Liability JUDITII T. TERRY
TO ;',N CLFRK
REGISTRAR OF VITAL STATISTICS
OFFICE OF THE TOWN CLERK
TOWN OF SOUTHOLD
Town Hall, 53095 Main Road
P.O. Box 1179
Southold, New York 11971
TELEPHONE
(516) 765-1801
April 9, 1986
Marlo M. Cuomo, Governor
The State Capitol, Executive Chamber
Albany, New York 12224
Dear Governor Cuomo:
The Southold Town Board, at a regular meeting held on April
8, 1986, adopted a resolution urging you to favorably support proposed
legislation, passed by the Senate, and awaiting a vote in the Assembly,
calling for long-term solutions to the municiPal liability insurance crisis,
vitally needed for reform of the entire municipal liability system, and
absolutely essential to assure the financial survival of our local govern-
ments and school districts. (Senate Bill S.6769A)
Very truly yours,
Judith T. Terry
Southold Town Clerk
JUDITII T. TERRY
TOWN CLERK
REGISTRAR OF VITAL STATISTICS
OFFICE OF THE TOWN CLERK
TOWN OF $OUTHOLD
Town Hall, 53095 Main Road
P.O. Box 1179
Southold, New York 11971
TELEPHONF,
~516) 765-1801
April 9, 1986
Honorable Stanley Fink
Speaker of the Assembly
Legislative Office Building
Albany, New York 12248
Dear Speaker Fink:
The Southold Town Board, at a regular meeting held on April
8, 1986, adopted a resolution urging you to favorably support proposed
legislation, passed by the Senate, and awaiting a vote in the Assembly,
calling for long-term solutions to the municipal liability insurance crisis,
vitally needed for reform of the entire municipal liability system, and
absolutely essential to assure the financial survival of our local govern-
ments and school districts. (Senate Bill S.6769A)
Very truly yours,
Judith T. Terry
Southold Town Clerk
JUDITII T. TERRY
TOWN CLFRK
~EGISTRAR OF VITAL STATISTICS
OFFICE OF THE TOWN CLERK
TOWN OF SOUTHOLD
April 9, 1986
Town Hall, 53095 Main Road
P.O. Box 1179
Southold, New York 11971
TELEPHONE
(516) 765-1801
Honorable Joseph Sawicki, Jr.
New York State Assemblyman
Legislative Office Building
Albany, New York 12248
Dear Joe:
The Southold Town Board, at their regular meeting held on April
8, 1986, adopted a resolution urging Governor Marlo Cuomo and Assembly
Speaker Stanley Fink to favorably support proposed legislation, passed
by the Senate, and awaiting a vote in the Assembly, calling for long-term
solutions to the municiPal liability insurance crisis, vitally needed for
reform of the entire municiPal liability system, and absolutely essential
to assure the financial survival of our local governments and school
districts.
The Board's resolution also urges you to support this Senate Bill
S.6769A in bringing it to the floor of the Assembly for an immediate
favorable vote.
Very truly yours,
Judith T. Terry
Southold Town Clerk
' NEW'YQRK
STATE
SENATE
ALBANY. NEWYORK 12247
WARREN M, ANDERSON
PRESIDENT PRO TEM
MAJORITY LEADER
March 25, 1986
Ms. Judith T. Terry
Town Of Southold
Town Hall Main Road
Southold, New York 11971
Dear MS. Terry:
The insurance crisis which local governments and school
districts are experiencing throughout the State of New York
continues unabated.
Along with Senator Kenneth P. LaValle, I have sponsored
legislation which responds to this crisis. This legislation,
S.6769A, passed the Senate on February 11, 1986. Yet as Of this
writing, this bill is languishing in the Assembly due to the
failure of Governor Cuomo and Assembly Speaker Fink to take
positive action.
The legislation has been endorsed Dy the New York State
Association of Counties, the New York State Conference of Mayors,
the New York State Association of Towns, the New York State
School Boards Association, and others concerned with this
problem. A description of this bill is enclosed, along with a
recent "Insurance Update,, which provides background on the
overall problem.
This bill addresses the vital need for reform of the entire
municipal liability system. Its passage is absolutely essential
to assure the financial survival of our local governments and
school districts.
Sadly, Governor Cuomo and Speaker Fink adamantly refuse to
allow the Assembly to vote on this bill. Ail we have heard from
the Governor and the Speaker has been talk of more studies and
commissions.
The consequence of the Cuomo/Fink position is that the
crisis will continue indefinitely. We cannot afford to let this
happen. We need your immediate support to get this bill to the
floor of the Assembly.
I urge you to make your voice heard Dy urging the Sovernor
and Spea~er to support the Senate bill as the best way to bring a
prompt end to this crisis. I also urge you to contact your local
Assemblyman to request support for the Senate bill.
With every good wish, I am
Sincerely yours,
WMA:jf
Encl.(2)
MUNICIPAL AND SCHOOL DISTRICT LIABILITY INSURANCE
Highlights of Senate 6769A
Little has changed since the Senate passed a bill in December of 1985 to provide
long-term solutions to the municipal liability insurance crisis. Solutions are still
needed. To address the problems of soaring municipal liability insurance costs and
the problem of unavailability of municipal liability insurance, the Senate passed the
same bill, with minor amendments, that had been passed in December.
The Senate's original bill covered villages, towns, counties, cities, schools,
BOCES and volunteer fire companies and other special districts. The amendments
helped to explicitly spell out that volunteer fire companies were covered and added
coverage for certain not-for-profit corporations and for independent school bus
contractors providing services to school districts. Our bill would make some basic
changes in how municipal liability insurance is offered and how claims are handled.
The bill would:
-- Set minimum standards for municipal liability insurance policies of: 60-days
notice for increases, 60-days notice of non-renewal and one year for length.
-- Establish new, separate insurance classifications for municipal policies that
are separate from commercial classifications, providing protection for municipalities
from fluctuations in the marketplace while providing more consistency and
predictability for rates.
-- Establish a special term of State Supreme Court to hear claims against public
entities. A judge, rather than a jury, would make the decision.
-- Limit awards that must be paid by the municipal units to their equitable
share of the award. This means that if a municipality is found to be 10 percent at
fault, it only would be liable for 10 percent of the award. Although this sounds
only fair, it has been a sticking point with the Assembly. Currently, a municipality
could be forced to cover all of a jury award that cannot be paid by other
defendants. In legal terms this principal is called joint and several liability.
-- Require periodic payment of awards, similar to the current requirement for
medical malpractice awards.
-- Require loss of income awards to be lowered if it can be shown that a
plaintiff is receiving income from other sources, such as Workers' Compensation or
Social Security.
-- Establish a schedule for maximum fees that would be allowed for attorneys,
similar to the schedule allowed for fees in medical malpractice cases.
-- Allow the courts to award the successful party reasonable costs and
attorney's fee of up to $10,000 for frivolous suits.
-- Permit municipalities to enter into reciprocal insurance agreements, under the
supervision of the Dept. of Insurance.
-- Establish a risk management credit for public entities that establish a risk
management program that is certified by the Dept. of Insurance.
INSURANCE
UPDATE
from the Senate Committee on Insurance
Liability Insurance Crisis: The Senate Takes Action
The Chairman Comments:
A crisis situation has been reached in professional,
corporate and governmental liability insurance. Liability
insurance has either increased dramatically (as much as
fivefold) or such insurance has become totally unavailable.
Virtually all levels of government and many businesses are
scrambling to find adequate and affordable coverage.
The Senate realizes that the liability crisis is not only an
insurance issue or civil justice issue, but that it is also ulti-
mately a matter of concern to all our citizens; the taxpayers
of New York State -- through property taxes, school taxes
and the cost of goods and services -- foot the bill.
In this first Insurance Update we will examine muni-
cipal liability insurance. In a future Update, we will look at
the liability insurance problems of business and others.
There is much that needs to be done by the Senate
Insurance Committee and the Legislature in the current
session. Insurance must be made available and affordable
to ensure that society does not become bankrupt in the
process. Now is the time for action, not for further study.
Sequence of Events
The property/casualty insurance business is highly
cyclical. It has experienced severe underwriting losses in
the past and has rebounded each time. Even though the
last two years were the worst ever, with a pre-tax loss of
$7.5 billion, one could normally conclude that the insurance
industry will right itself again, without legislative action.
Unfortunately, that is not the case. The future looks bleak,
if not disastrous, for all citizens of New York State without
meaningful and effective legislative long-term solutions
put into place this Session.
Poor underwriting results have been a fact for several
years. However, because of the availability of high interest
rates some insurers began engaging in what is known as
"cash-flow" underwriting. That is, they consciously priced
their insurance products below cost, intending to make up
the losses with the high interest that could be earned on
premiums before the money had to be used to pay claims.
Other insurers, even though they recognized the dangers
of "cash-flow" underwriting, were forced to underprice
their products, too, or else risk losing their customers to
the more aggressive competition. As a result, it was not
long before most of the property-casualty insurance in-
dustry was engaging in the practice, and buyers of
continued
At an Insurance Commit-
tee meeting, Insurance
Superintendent James
Corcoran talks to com-
mittee members. Pic-
tured are (1 to r): (center
at table) Senator Joseph
Bruno, Superintendent
Corcoran, Senator James
Donovan, Senator Mar-
tin Connor and Senator
Richard Schermerhom.
insurance paid bargain rates as comp~cd to today.
While this was occurring, still other forces were at
work. Reinsurers (insurance companies that absorb part of
the risks assumed by regular insurance companies), many
of whom are based in London, were encountering un-
precedented losses on the liability business written in the
United States. This is primarily due to the changes taking
place in our court system. Insurers are called upon to pay
claims that were thought to be excluded from their
contracts (policies). New and novel theories of liability
have been accepted by the courts. This eroded the
confidence that reinsurers once had: that it was possible to
accurately predict future losses on American liability risks
-- especially in states such as New York with unlimited
liability exposure.
Faced with huge losses, lack of confidence for the
future, and better opportunities to write reinsurance on
other than U.S. liability business, many simply withdrew
from the market, others drastically raised the rates they
charged the regula~nsurers. This, in turn, has f~rce~
others to retrench and withdraw altogether f~ofn writing
certain kinds of insurance.
That is why this cycle is different from previous ones,
and why a long-term legislative solution is imperative. It is
apparent that the current situation necessitates some
refinement and adjustments in the social contract that
determines rights and rsponsibilities of government and
its citizens and also in the way in which insurance is
delivered in this state.
Senate Proposes Lon, g-Te. rm
Solutions at Special esslon
Of December 1985
This fall, the Senate Insurance, Education, Local Gov-
ernment and Cities Committees held a series of hearings
Questions and Answers About Tort Reform
L Wlmt is tort ~,eform and why is it necessary?
A "tort" is a civil wrong. Negligence is the most
visible tort reason for which people sue each other.
Under our system of civil laws, torts can be mitigated
by the awarding of money damages through the legal
and court system. But this system has been over-
burdened by a dramatic surge in lawsuits.
In 1940 there were a total of 35,000 civil cases filed
in the federal district courts. By 1982, that number
had risen to over 206,000 civil cases. In 198Z 26,000
more civil cases were filed before the courts than in
1981 -- a 14% increase. Across the nation, state court
filings have reached an unprecedented level of
12,000,000, or one lawsuit for every 13 adults.
As the court dockets are jammed with increas-
ingly complex cases, delays mount. In 1950, only 20
civil trials in federal courts lasted longer than 20 days.
By 1981 that number had risen to 180 cases. Delays in
state ~:our~g ca~n be c6unted in 3~ears.
Several factors have contributed to this surge in
litigation.
· Changing social concepts on address'rog wrongs:
The trend in court decisions favors compensating the
victim, with less emphasis on establishing the exact
source of the wrong.
Changes m knowledge and technology: As sctence
is able to determine the physical effects of materials
and goods on our physical health, usually after 20, 30
or 40 years of medical experience, manufacturers and
users of these materials are now being held respon-
sible for things done and used in the past.
· New responsibilities for the courts: Chief Justice
Warren Burger has noted that the declining influence
of church, family and community has forced in-
dividuals to turn to the courts "for relief from a range
of personal distresses and anxieties."
· Oversupply of lawyers: From 1970 to 1984 the
number of lawyers in the United States increased 106
percent.
· The "Deep Pockets" Concept: In efforts to com-
pensate injured parties, the attorneys have tended to
seek redress where financially feasible, rather than
where fault exists. As a result, corporations, munici-
palities and wealthy individuals with their "deep
pockets" are more likely to be chosen as targets for
lawsuits and are more likely to be held liable. Thus,
even if found to be 10% responsible for a tort, a "deep
pockets" defendant can be assessed for up to 100% of
the monetary award if the primarily responsible
party has inadequate funds to cover his 90% of the
award,
· Allowing lawyers to advertise: This has opened up
a floocl of calla to the public to litigate their com-
plaints rather than settle them amicably. Law offices
now compete and advertise on television and in the
news media to attract clients who might otherwise
never have considered a lawsuit.
· High compansation awards: The number of million-
dollar verdicts awarded each year rose from one in
1962 to 251 in 1982. Also, punitive damage awards
and attorney's contingency fees can considerably
increase the cost of insurance.
2. Who bears the brunt of litigation costs?
For one, consumers bear the costs. When a person
bringing a suit wins a large award and the defendant
is insured, the insurance company pays the award.
Higher prices for insurance premiums are the result.
Taxpayers pay through increases in court bud-
gets. Individuals pay because the costs associated
6n the subject of liability insurafiEe. After thorough
investigation, the problems associated with the availability
and affordability of liability coverage were documented.
One of the hearings focused on the most vulnerable
entities -- school districts and municipalities. The Senate
has made it a priority to provide liability insurance relief to
these entities, across the state, that are supported by the
taxpayers.
During the 1985 Special Session (called by the Gover-
nor primarily to deal with liability issues), Senators
Anderson, Bruno, Donovan, Cook and Flynn introduced
the "Public Entity Liability Insurance Reform Act of 1985",
a long-term solution designed to lower rates and to induce
insurers to return to the municipal and school insurance
marketplace. This proposal contains new regulation of the
insurance industry and the adoption of civil justice reform,
also referred to as tort reform. This measure and other
Senate measures directed at medical malpractice insur-
ance were rejected by the Assembly and not supported by
the Governor.
Instead, the Governor and Assembly proposal at the
Special Session would serve only to give the appearance of
solutions to the problems that municipalities and school
districts are fighting with today. Their suggestion was to
have public entities insure each other by pooling their
risks. Under this concept, two or more municipalities or
school districts would agree to set aside monies in a
reserve fund to share the cost of claims. With millions el
dollars in law suits filed against municipalities and schools
every day, there is a very real possibility that these reserve
funds would suffer a shortfall or cause a municipal
bankruptcy, without the regulatory safeguards and guide-
lines provided by the State Insurance Department. If that
were to happen, the taxpayers would bear the sole
responsibility el making up the difference.
Such an approach does not provide the safeguard of
the Property/Casualty Insurance Security Fund. Presently,
continued
with filing a suit and/or appealing a lower court
decision are truly phenomenal -- up to $9,000 if a case
is appealed to the U.S. Supreme Court.
3. What kind of tort reform is needed?
Proposed tort reforms include the following:
· A separate rating classification for liability insur-
ance purchased by public entities. Currently classi-
fied along with commercial lines by the property/
casualty insurance companies, public entities may
have better loss records and should be separately
identified.
· Credits for risk management programs instituted
by public entities. Communities that reduce their
exposure to risk should be rewarded with premium
reductions.
· Prohibit midterm cancellations except under spe-
cial circumstances and provide reasonable notice for
notices of non-renewal and premium increases.
where l~ability is limited to a defendant's equitable
share of the judgment. A number of states have
modified or abolished this common law doctrine.
New York State and the State of Louis~ are the
only two states that subject a public entity to
unlimited exposure.
· Establishment of structured awards,to.permit per-
iodic, as opposed to lump sum, payments of a
judgment. Because of favorable tax treatment, this is
beneficial to claimants as well
· Permit the offsetting of any judgment by any
collateral sources of insurance for the same hurt, such
as Workers' Compensation or other disability
benefits.
· Provision for penalties against a plaintiff who
brings a frivolous lawsuit.
® Creation of a special Supreme Court term to hear
all contract or tort actions against a public entity. This
would remove a public entity's liability assessment
from a jury, which history has shown to be sym-
pathetic to a plaintiff's injury.
· Revamping the contingency fee schedule for a
plaintiff's attorney. The current f~e schedule rewards
successful attorneys out of proportion to the effort
expended.
· Permit a public entity to subscribe to a reciprocal or
pooling insurance arrangement that would be super-
vised by the Superintendent of Insurance.
These reforms seem only fair. In 1985, the Gov-
ernor and the Legislature passed alaw which provided
tort reform to doctors with their medical malpractice
insurance. Aren't the towns, villages and cities in
which we live and pay taxes as important? How can
we provide one class of people with protection, but
no others? Transit systems, libraries, schools, BOCES,
volunteer fire departments. Ail these entities that
provide protective, educational and cultural facilities
are as deserving as physicians and dentist. The time
has come.
Of course, victims of torts would not receive any
less for their medical expenses. But who has the right
to enrich themselves at taxpayer expense? Not I. Not
you.
Tort reform would once again provide stability to
the insurance market and .give insurance companies
the confidence they need to charge realistic pre-
miums and write reasonable contracts that provide
reasonable coverage by restoring re-insurers' con-
fidence in the American insurance market. Without
this increase in capacity, the only way insurance
companies have to provide enough coverage is to
charge larger premiums.
Tort reform is the key issue of 1986. Without tort
reform, we will all be victims without hope of
compensation.
insurance policies that are purchas~ from companies
licensed to sell insurance in New York are protected by a
security fund in the event that the insurance company
becomes insolvent.
The Senate considers this a "band-aid" approach that
does not solve the real problems but could place great
financial burden on municipalities. What community could
afford to be pooled with a "Love Canal" of tomorrow?
1986 Legislative .Session, to Date:
The Senate Again Ready to Act
During this current Session, the Senate will continue to
press for legislation that will enable public entities to
obtain liability insurance -- this includes villages, towns,
counties, cities, schools, volunteer fire departments,
BOCES, not-for-profit day care centers and other public
benefit corporations -- at reasonable rates.
The Governor, meanwhile, has established a com-
mission to study the liability insurance crisis, with empha-
sis on municipal liability. He has given the panel a free
hand and directed it to submit its recommendations by
April 1, 1986.
Further study is not what is required at this time. What
is required is for the Assembly to negotiate with the Senate
and enact tort (civil justice) reform. What is needed from
the Governor is leadership to resolve this crisis. Obviously,
without the cooperation of both, there will be no resolution.
The Senate is prepared to act now and urges all who are
concerned with the present crisis to support their effort for
prompt relief for municipalities and school districts. These
are difficult times and choices, but the stability of our local
governments, school districts and public benefit cor-
porations depend on timely and effective action by the
Legislature.
"The Public Entity Liability
Insurance Reform Act"
SPONSOR: Senate Majority Leader Warren M.
Anderson
PRIME SPONSORS: Joseph L. Bruno, Chairman of
the Senate Insurance Committee
James H. Donovan, Chairman of the Senate
Education Committee
Charles D. Cook, Chairman of the Senate
Local Government Committee
John E. Flynn, Chairman of the Senate
Cities Committee
CO-SPONSORS: Senators Hugh T. Farley, Norman
J. Levy, John R. Dunne, John J. Marchi, Caesar
Trunzo, Jess J. Present, Jay P. Rolison, Dale
M. Volker, Tarky J. Lombardi, Kenneth P.
LaValle, William T. Smith, L.S. Riford, L. Paul
Kehoe, Frank Padavan, Dean G. Skelos, James
J. Lack, John B. Daly, Mary B. Goodhue,
Michael J. Tully, John M. McHugh, Walter J.
Floss.
Senator Dean Skelos (1) and Senator William Smith (c) talked
over provisions of the Senate bill to provide long-term solutions
to the municipal liability insurance problem with Senator Joseph
Bruno, Chairman of the Senate Insurance Committee.
Support for
Senate Proposal
New York State School
Boards Assoc.
Independent Insurance
Agents Assoc. of New
York State, Inc.
New York State Assoc. of
Counties
New York State
Conference of Mayors
New York State Assoc. of
Large Towns
New York State
Insurance Assoc.
New York State School
Bus Contractors Assoc.
Assoc. of Towns of the
State of New York
The Assoc. of School
Business Officials of
New York
Council of School
Superintendents
Numerous Charitable
Groups Statewide
Support for
Governor's Proposal
Assembly Leadership
Trial Lawyers Assoc.
INSURANCE UPDATE is the official publication of the New
York State Senate Committee on Insurance, Room 814, Legis.
lative Office Building, Albany, N.Y. 12247. (518) 455-2346.
Joseph L~ Bruno, Chairman
Committee Members: Senators John R. Dunne, James H.
Donovan, Richard E. Schermerhorn, Kenneth P. LaValte, John
B. Daly, Frank Padavan, Dean C Sketos, Martin M. Solomon,
Howard E. Babbusl~, ~as ]. Bartosiewicz, lviartio Connor,
and Donald M. Hatperln.
Volume one, I-*lumber one February 1~6