New York State Department of Financial Services expects insurers to cooperate fully with the Child Victims Act

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 the time that alleged victims are 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 alleged to have responsibility for the acts or harm claimed by the victims.

By the end of the day on August 14, 2019, 427 "revived" claims under the CVA had been filed across New York State. To date, over 900 lawsuits have been filed under the CVA, many involving multiple plaintiffs. According to an article last month in "Business Insurance", New York filings could climb to as high as 3,000 by the time the window closes in 2020.

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.

The circular cites the affirmative duties and prohibitions found in Insurance Law § 2601 and Insurance Regulation 64. Specifically, as the quotations from the circular in the bullets below indicate, the Department states that when handling CVA-related claims insurers should:

• Have as your basic goal the prompt and fair settlement of all claims.
• Assist the claimant in the processing of a claim.
• Do not demand verification of facts unless there are good reasons to do so. When verification of facts is necessary, it should be done as expeditiously as possible.
• Clearly inform the claimant of the insurer's position regarding any disputed matter.
• 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:

• Act promptly, not extending unnecessarily to the maximum time periods permissible.
• Exert 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 review such policies, interpreting such contracts so as to resolve any ambiguities in the policyholders' favor.
• Assess the applicable coverage, including any applicable exclusions or other limitations.
• Affirmatively contact 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.
• Perform on duties to defend policyholders.

The circular also focuses on the insurers' record retention obligations and encourages that all go above and beyond the statutory minimum requirements. The circular concludes by making 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."

Read the circular in its entirety.