E&O Report | November 2023 | Volume 38, Number 11
A new law became effective in New York on August 1, 2023, that requires auto insurers to provide supplemental spousal liability insurance coverage in their policies. Since the enactment of this law, we have received numerous questions from New York insurance agents and brokers about how this change in the law works and what they should be doing in connection with it. Accordingly, in this issue of The E&O Report we will review some of the elements of this new law and how a NY insurance agency or brokerage should deal with it going forward.
Insurance Law Section 3420(g) requires insurance companies to automatically provide supplemental spousal liability insurance coverage on all New York auto insurance policies. Supplemental spousal liability insurance provides coverage for a spouse that suffers serious injuries or death in an accident where their spouse was at fault. It also provides coverage in an accident where their spouse was not at fault, but the driver of the other vehicle that was responsible for the accident had insufficient coverage. Under the law, this coverage must be equal to, or greater than, the bodily injury liability coverage that is provided under the policy. The Law requires insurers to provide this coverage in every auto insurance policy issued in New York State, even if the insured is unmarried.
Spousal liability coverage was previously available to New York insureds, but it was not automatically provided on all auto policies by the insurers. Instead, the insured previously had to elect to have this type of coverage added to their insurance policy. Now that this coverage is automatically included in a New York auto insurance policy, an insured that does not want this coverage included in their policy must provide a written request for it to be deleted from the policy.
In connection with this change in the Law, the New York State Department of Financial Service (NYDFS) has prepared a Supplemental Spousal Liability Insurance Declination form which should be used when an insured is declining this coverage. The form, which is available on the NYDFS website, provides as follows:
New York State law requires an insurer issuing or delivering a policy that satisfies the requirements of New York Vehicle and Traffic Law Article 6 provide supplemental spousal liability insurance in such policy unless the named insured elects, in writing, to decline and refuse such insurance in the insured's policy.
Supplemental spousal liability insurance provides bodily injury liability coverage under a motor vehicle insurance policy when a person is injured or killed in a motor vehicle accident caused by the negligence of the person's spouse. If you decline this coverage, then the injured or deceased spouse would not be covered under the bodily injury liability coverage in the policy.
Supplemental spousal liability insurance is included within the policy's bodily injury liability limits and does not increase the amount of those limits.
The additional premiums for supplemental spousal liability insurance is $XX.XX. If you do not decline this insurance in writing, supplemental spousal liability insurance is automatically included in your motor vehicle insurance policy.
If you are unsure whether this coverage is appropriate for you, you should speak with your insurance company representative or a licensed insurance producer.
__ I hereby decline supplemental spousal liability insurance.
__________________________________ _____________
SIGNATURE OF NAMED INSURED DATE
Many insurance companies charge an additional premium for including spousal liability insurance coverage on their auto policies. The premiums charged by insurers for including this coverage on an auto policy is usually relatively small. In the event an additional premium is charged for this coverage, the insured that elects not to have this coverage included in their auto policy should receive a reduction in their policy premiums equal to its cost. However, some insurers are also automatically providing this coverage on their policies without an increase in premiums for its inclusion. In this situation, an insured who elects not to have the coverage included would not receive any type of reduction in their premiums.
If you have an insured that asks about the deletion of the spousal liability coverage from their auto insurance policy, you should be certain to explain to them how it works and what it would mean to them if it is deleted and they are involved in an accident where it would potentially provide coverage. As with any type of discussion such as this, it is prudent to document it in the insured's file within the agency management system. If, after discussing this with the insured, they ultimately decide to delete the spousal liability coverage from their auto insurance policy, the above referenced form should be signed and dated by the insured and retained within the insured's file. The insurance agency or brokerage that handles questions about this coverage, or its deletion from their insurance policy, in this manner will not only be providing good service to their customer but will also help protect the agency or brokerage from a potential E&O claim or lawsuit in the process.
Submitted by:
James C. Keidel, Esq.
Keidel & Cunningham, LLP
Keidel & Cunningham, LLP concentrates its practice in the defense of insurance agents and broker's errors and omissions claims and litigation, errors and omissions loss control counsel and education, insurance coverage analysis and litigation and insurance regulatory matters. Please direct any comments or questions to James C. Keidel, Esq. by mail to the main office of Keidel & Cunningham, LLP, at 925 Westchester Avenue, Suite 400, White Plains, NY 10604, telephone at (914) 948-7000 or e-mail at jkeidel@kwcllp.com. The law firm also maintains offices in Syracuse, New York; New York City, New York; Wilton, Connecticut; Fair Lawn, New Jersey; Warwick, Rhode Island, Philadelphia, Pennsylvania, Williston, Vermont and Naples, Florida.