On December 31, 2021, the Comprehensive Insurance Disclosure Act became the law of the land in New York. The Disclosure Act amends CPLR 3101(f) by significantly expanding the insurance-related information that a defendant must produce to other parties in civil litigation in New York state court. As explained below, the requirements of the new Disclosure Act will place an extreme burden on corporate defendants, requiring them to disclose information about other, unrelated litigation and complete copies of insurance policies, which often contain sensitive information.
However, relief may be on the horizon. When Governor Hochul signed the Disclosure Act into law, she made proposed amendments in the form of a redline. On January 18, 2022, Senator Andrew Gounardes introduced Senate Bill 7882, which incorporates Governor Hochul’s proposals. The bill would significantly reduce the Act’s disclosure requirements.
While the Senate considers this bill, the clock is ticking for corporate defendants. The Act applies immediately and, importantly, mandates that defendants in pending cases comply with the Act’s disclosure requirements on or before March 1, 2022.
What insurance documents are defendants required to produce under the current version of the Act?
The current version of the Act requires defendants to produce the following insurance documents within sixty (60) days of filing an answer to a complaint:
- A complete copy of all primary, umbrella, and excess insurance policies (including those issued by captive insurers);
- Contact information for insurance adjusters, including third-party claims adjusters;
- The amounts available under the policies to satisfy a judgment in the action;
- The identity of any other lawsuits that have decreased (or may decrease) the amount of coverage available under the policies, including:
- The caption of any such lawsuit
- The date the lawsuit was filed
- The identity and contact information of all counsel for all represented parties in the lawsuit
- The amount of any attorneys’ fees that have reduced the amount of coverage available under the policies and the names and addresses of all attorneys who received such payments; and
- Insurance applications.
Moreover, defendants and their legal counsel must provide affidavits that attest: (1) the insurance disclosures are accurate and complete and (2) reasonable steps were taken, and will continue to be taken, to keep the disclosures accurate and complete.
What is the deadline for compliance with the current version of the Act?
Defendants must disclose the necessary documents sixty (60) days after serving an answer, or, for cases where an answer has already been filed, by March 1, 2022.
The Act also imposes a continuing obligation on defendants to update their disclosures within thirty (30) days after learning new information that renders their prior disclosures inaccurate or incomplete. This continuing obligation extends for sixty (60) days after a settlement or final judgment.
What are the major amendments to the Disclosure Act proposed in Senate Bill 7882?
The proposed amendments to the Disclosure Act would significantly lessen many of its onerous requirements. These amendments include:
- Eliminating the retroactive disclosure requirements (meaning defendants in litigation pending prior to December 31, 2021 would be relieved from complying with the Act)
- Extending a defendant’s time to make disclosures from sixty (60) days after service of the answer to ninety (90) days after service of the answer;
- Allowing defendants to produce the declarations page of policies, instead of complete copies, if the plaintiff agrees in writing;
- Limiting a defendant’s disclosure requirements to policies related to the claim at issue in the litigation;
- Eliminating a defendant’s obligation to disclose information about unrelated litigation, including information about other lawsuits and attorneys’ fees expended.
- Instead, defendants would only have to disclose the total policy limits available under the policy in question.
- Replacing defendants’ obligation to supplement disclosures within thirty (30) days of learning new information with a requirement that defendants only amend their disclosures when entering formal settlement negotiations, when a case is called for trial, and sixty (60) days after settlement or final judgment.
- Eliminating defendants’ obligation to disclose policy applications.
What does this mean for companies facing litigation (or potential future litigation) in New York state courts?
Defending a lawsuit in New York state court is now a more expensive and complicated matter. Because there’s no guarantee that the Senate will pass the proposed amendment to the Disclosure Act any time soon (or even at all), those facing looming deadlines to comply with the new requirements should start the information-gathering process early. For example, if the company does not maintain complete copies of its policies on file, it will need to request copies from its insurance broker. This process can often take a month or more. Moreover, if a company with a large and complex insurance portfolio faces litigation nationwide, for policies where defense costs are within the insurance limits, it must calculate the erosion of policy limits, which will be arduous and time consuming.
Determining the scope of a corporation’s insurance program can be a complex undertaking. Coordinating with the company’s in-house risk management team, insurance broker, and insurance companies will help streamline the process. Companies should consider engaging insurance coverage counsel to coordinate efforts across necessary parties and streamline collection of information needed to comply with the current version of the Disclosure Act.
Venable has the requisite experience and skill needed to help clients navigate these complex issues. Stay tuned as we monitor developments relevant to the Disclosure Act and offer updates.