ANSWERS TO THE MOST FREQUENTLY

ANSWERS TO THE MOST FREQUENTLY

ASKED QUESTIONS ABOUT REGULATION 64

Edward C. Kizenberger, Executive Director

Richard W. Skora, President

Eugene R. Anderson, Esq. Gary M. Fader, Esq.

Anderson, Kill & Olick, P.C. Lawyer and Insurance Consultant

Attorneys and Counselors at Law 19 Rhoda Avenue

1251 Avenue of the Americas Nutley, N.J. 07110

New York, N.Y. 10020-1182 (201) 667-7373

(212) 278-1751

TABLE OF CONTENTS

PAGE

Introduction...................................................................... 1

Answers to the Most Frequently Asked Questions About Regulation 64

Part 1: Partial Losses

I. Choosing the Repair Shop................................ 3

II. Inspecting the Damages.................................... 9

III. The Designated Representative...................... 12

IV. The Insurance Company's Estimate............... 15

V. Non-original Equipment Parts........................ 19

VI. Discovering Hidden Damage.......................... 22

VII. Allowable Deductions..................................... 23

VIII. Getting Paid...................................................... 25

Part 2: Total Losses

I. Cash Settlement Methods............................... 29

II. Vehicle Replacement....................................... 33

III. Allowable Depreciation................................... 34

IV. Right of Recourse............................................ 36

V. Salvage Value.................................................. 38

VI. The 30-Day Settlement Rule and its Exceptions 40

VII. Loss of Use....................................................... 42

VIII. .......................................................... Subrogation 42

IX. Losses Due to Theft......................................... 45

TABLE OF CONTENTS (Cont'd)

PAGE

Part 3: Third Party Damage Claims

I. Initial Claims Processing................................ 49

II. Comparative Negligence................................. 50

III. Requesting Additional Information............... 51

IV. Informing the Policyholder............................. 52

V. Acceptance or Denial of a Claim.................... 53

VI. Permissible Delays.......................................... 54

Part 4: Record keeping Requirements

I. Record keeping Requirements........................ 55

Part 5: Text of Regulation 64

§216.0 Preamble........................................................... 56

§216.1 Definitions........................................................ 59

§216.2 Applicability.................................................... 60

§216.3 Misrepresentation of policy provisions......... 61

§216.4 Failure to acknowledge pertinent communications 62

§216.5 Standards for prompt investigation of claims 63

§216.6 Standards for prompt, fair and equitable settlements 64

§216.7 Standards for prompt, fair and equitable settlement

of motor vehicle physical damage claims...... 67

§216.8 Verification and reporting requirements applicable

to losses arising under automobile physical

damage policies and reporting of third‑party

property damage losses................................... 90

TABLE OF CONTENTS (Contd.)

PAGE

§216.9 Written notice to claimants of payment of

claim in third‑party settlements...................... 97

§216.10 Standards for prompt, fair and equitable settlement

of third‑party property damage claims arising

under Motor vehicle liability insurance contracts 98

§216.11 Examinations................................................. 101

§216.12 Forms.............................................................. 103

Index.............................................................................. 110

INTRODUCTION

When an automobile in New York State is damaged, the first thought is: "fix it" and the second thought is: "insurance". The "fix it" part is familiar to the members of the New York State Auto Collision Technician's Association (NYSACT). The "insurance" part is not.

Insurance in New York is regulated by state law. A number of statutes and regulations apply to automobile body repair insurance claims, including what is referred to as "Regulation 64."

Why is understanding Regulation 64 and the other state laws important? Insurance companies know that every dollar paid out in claims, every dollar spent on auto body repairs, is a direct hit to the insurance company's bottom line. Insurance companies also know that the automobile owners, the policyholders, are unaware of their rights when faced with an auto body repair claim. Without the protection of, and an understanding of, the state laws governing insurance, the policyholders and the members of the NYSACT are at a disadvantage.

This pamphlet is a source of information for NYSACT members about the "insurance" part of automobile body repair claims. It answers frequently asked questions about procedures to be followed and provides, with each question, the text of the law that relates to that question. All of the questions are numbered. A complete copy of Regulation 64 is also provided.

Answers to questions can be found either by referring to the Table of Contents or the Index. The Index is arranged by subject, with the number of the question and the page number listed after the subject.

ANSWERS TO THE MOST FREQUENTLY

ASKED QUESTIONS ABOUT

REGULATION 64

PART 1: PARTIAL LOSSES

I. CHOOSING THE REPAIR SHOP

1. Q: Can an insurance company compel a policyholder to use a particular repair facility?

A: No. Any insurance company attempting to do so would find itself in direct violation of Section 2610 of the New York Insurance Code [N.Y. Ins. L. §2610 (McKinney 1997)]. It would then not only be subject to severe penalties from the Insurance Department, but it would expose itself to a civil suit by the policyholder for unfair and fraudulent trade practices.

N.Y. Ins. L. §2610

(a) Whenever a motor vehicle collision or comprehensive loss shall have been suffered by an insured, no insurer providing collision or comprehensive coverage therefor shall require that repairs be made to such vehicle in a particular place or shop or by a particular concern.

(b) In processing any such claim (other than a claim solely involving window glass), the insurer shall not, unless expressly requested by the insured, recommend or suggest repairs be made to such vehicle in a particular place or shop or by a particular concern.

This is further supported by a requirement in the Motor Vehicle Repair Shop Registration Act [N.Y. Veh. & Traf. L. §398-d.4.(a)].

N.Y. Veh. & Traf. L. §398-d

4. (a) Every motor vehicle repair shop shall display in a conspicuous place in such shop a sign stating: PURSUANT TO SECTION 2610 OF THE INSURANCE LAW AN INSURANCE COMPANY MAY NOT REQUIRE THAT REPAIRS BE MADE TO A MOTOR VEHICLE IN A PARTICULAR PLACE OR REPAIR SHOP. YOU HAVE A RIGHT TO HAVE YOUR AUTOMOBILE REPAIRED IN THE SHOP OF YOUR CHOICE.

In addition, every insurance company drive-in (including mobile units) must post this sign because they must also be registered as repair shops.

2. Q: Can an insurance company suggest one or more repair shops?

A: This Regulation has recently changed. Contact LIABRA for clarification.

This is further supported by a requirement in the Motor Vehicle Repair Shop Registration Act [N.Y. Veh. & Traf. L. §398-d.4.(a)].

N.Y. Veh. & Traf. L. §398-d

In addition, every insurance company drive-in (including mobile units) must post this sign because they must also be registered as repair shops.

3. Q: How will I know that the policyholder made such a request?

A: The insurer must retain such a request in its claim file. [Reg.64 Sec. 216.7 (15) (iii)

Sec. 216.7 (15) (iii) shall retain in its claim file a signed section 2610 of the Insurance Law Disclosure Statement (NYS APD I‑a), contained in section 216.12 of this Part, or other written documentation that the insured requested recommendation of a repair facility. If the insured has verbally requested a recommendation of a repair facility prior to the issuance of the prescribed Notice of Rights form, the requirement for written proof of referral shall be satisfied by a notation in the claim files as to the date of such request and the identity of the person to whom such request was made. The requirement of this subparagraph shall not be applicable to a claim solely involving window glass.

4. Q: What about verbal requests for recommendations?

A: Verbal requests are acceptable, but the insurance company must note the request in its file along with the date it was made and to whom it was made. [Reg. 64, Sec. 216.7(b)(15)(iii) see above]

5. Q: What if the insurer and insured/DR cannot reach an agreed price?

A: Only than can the insurer recommend a back-up shop after the insured is furnished with a prescribed Notice of rights letter (NYS APD 1), contained in section 216.12 of this part.

Sec. 216.7 (14) (i)(ii) And Sec. 216.7 (15) (i)(ii)(iii)

Sec. 216.7(14) (i) If after negotiations an agreed price cannot be reached, the insurer must furnish the insured with a prescribed Notice of Rights letter (NYS APD 1), contained in section 216.12 of this Part. The requirement of this subparagraph shall not be applicable to a claim solely involving window glass.

INSURER LETTERHEAD

NOTICE OF RIGHTS UNDER YOUR

PHYSICAL DAMAGE INSURANCE POLICY

INSURED______________________

CLAIM #______________________

POLICY #_____________________

DATE OF ACCIDENT_____________

Dear Insured:

We have been unable, after negotiating in good faith, to reach an agreed price with you, your Designated Representative and/or your repairer _______________________, the repairer of your choice.

Pursuant to Regulation 64 of the New York Insurance Department, we are supplying you with the following information and optional waiver.

Our offer of $________ plus your deductible of $_________ and $__________ of betterment or previous damage deduction is sufficient to repair your vehicle to its pre‑accident condition at a repair shop located reasonably convenient to you. We are able to provide you with the identity of the repair shop that will repair your vehicle at our estimate, but under the Insurance Law we may not recommend a repairer unless you expressly request such information. Unless you have already asked us to recommend a repair shop, you must sign the attached Section 2610 of the Insurance Law Disclosure Statement in order to enable us to make such recommendation.

If your vehicle is repaired at a repair shop recommended by us, the repair shop must issue a written guarantee that any work performed in repairing your vehicle meets generally accepted standards for safe and proper repairs. If our recommended repairer does not honor its written guarantee, we will restore your vehicle to its pre‑accident condition within a reasonable time at no additional cost to you.

Your policy covers you for reasonable expenses you incur in order to protect your motor vehicle from further damage after a loss. Contact us immediately for information as to what extent such expenses are covered. NYS APD I

[INSURANCE COMPANY LETTERHEAD]

SECTION 2610 OF THE INSURANCE LAW

DISCLOSURE STATEMENT

Section 2610 of the New York State Insurance Law provides that the insurance carrier shall not require that repairs be made in a particular place or shop or by a particular concern.

The Law further provides that the Insurance Company shall not recommend or suggest repairs be made in a particular place or shop or by a particular concern, unless expressly requested by you.

I acknowledge receipt of a copy of this notice.

_________________________________ _______________

DATE SIGNATURE

INSURED/VEHICLE OWNER

I have read the above notice and understand the Insurance Company cannot require or recommend that repairs be made in a particular place or by a particular person unless I expressly request such recommendation. I hereby, of my own volition, request that the Insurance Company or its representative recommend a repair shop.

__________________________ ________________

DATE SIGNATURE

INSURED/VEHICLE OWNER

(ii) The insurer must furnish the insured or the designated representative, at the express request of either, with the name and address of a New York State registered motor vehicle repairer, properly equipped to complete the repairs on the damaged motor vehicle (back‑up shop), at a location reasonably convenient to the insured, who will repair the damaged motor vehicle at the insurer's estimated cost of repair. A location reasonably convenient to the insured shall mean: in Nassau, Suffolk and Westchester Counties and cities with 100,000 or more population, 10 miles‑and in all other areas of the State, 25 miles‑from the place where the motor vehicle is principally garaged; or the location of the insured's repair facility. This mileage limitation shall not apply when a repair facility properly equipped to complete the repairs is not available within the above geographical area. In such a case a properly equipped facility must be selected at a location as close as possible to the above definition of reasonably convenient to the insured. The insurer must furnish the insured, upon request, with a statement from the back‑up shop that it will repair the vehicle in a manner consistent with the insurer's estimate for the amount estimated by the insurer to repair the damaged vehicle.

Sec. 216.7(15) (i)(ii)(iii)

If the insured's motor vehicle is repaired at a repair shop recommended by the insurer, for a sum estimated by the insurer as the reasonable cost to repair the vehicle, the insurer:

(i) shall select a repair shop that issues written guarantees that any work performed in repairing damaged motor vehicles meets generally accepted standards for safe and proper repairs;

(ii) shall cause the damaged vehicle to be restored to its condition prior to the loss, at no additional cost to the insured and within a reasonable time, if the repair shop it recommended does not repair the damaged motor vehicle in accordance with generally accepted standards for safe and proper repair; and

(iii) shall retain in its claim file a signed section 2610 of the Insurance Law Disclosure Statement (NYS APD I‑a), contained in section 216.12 of this Part, (see page 6) or other written documentation that the insured requested recommendation of a repair facility. If the insured has verbally requested a recommendation of a repair facility prior to the issuance of the prescribed Notice of Rights form, the requirement for written proof of referral shall be satisfied by a notation in the claim files as to the date of such request and the identity of the person to whom such request was made. The requirement of this subparagraph shall not be applicable to a claim solely involving window glass.

II. INSPECTING THE DAMAGES

6. Q: Must the insurance company inspect a damaged vehicle prior to repair?

A: Surprisingly, the answer is no. This is a right, not an obligation, although most insurance companies do exercise the right.

7. Q: If an insurance company wishes to inspect the damage, when must the inspection take place?

A: Within six (6) business days (i.e. days other than Saturdays, Sundays, and legal holidays) from the notification to the policyholder that an accident has taken place. The inspection must be at a time and place reasonably convenient to the policyholder. [Reg. 64, Sec. 216.7(b)(1)]

§216.7(b)(1)

(b) Adjustment of partial losses. (1) If, upon notification of a loss, the insurer intends to exercise its right to inspect damages prior to repair, it shall have six business days following receipt of notice of claim to inspect the insured's damaged motor vehicle, which is available for inspection, during normal business hours at a place and time reasonably convenient to the insured. In addition, negotiations shall commence and a good faith offer of settlement, sufficient to repair the vehicle to its condition immediately prior to the loss, shall be made within the aforesaid six‑day period to the designated representative, and it may also be made to the insured. If there is no designated representative, the offer shall be made to the insured within the six‑day period.

8. Q: What happens if the insurance company fails to inspect the damages during the six-day window of opportunity?

A: Assuming that the vehicle was available for inspection during normal business hours throughout the six days, then the insurance company forfeits its rights to inspect the damages prior to their repair. In addition, the insurance company's negotiation rights are limited to labor and the price of parts. It cannot dispute the existence of damages or the method of repair. [Reg. 64, Sec. 216.7(b)(8)]

§216.7(b)(8)

(8) If the insurer fails to inspect the damaged motor vehicle during the aforementioned six business‑day period, it shall forfeit its right to inspect the damaged vehicle prior to repairs. Unless the insured or designated representative shall permit an inspection after the six‑day period, negotiations shall be limited to labor and the price of parts and shall not, unless objective evidence to the contrary is provided by the insurer, involve disputes as to the existence of damage or the chosen manner of repair. For the above forfeiture‑of‑inspection provision to apply, the damaged vehicle must be available for inspection during normal business hours for the entire aforementioned six‑business‑day period.

9. Q: Can an insurance company require that the policyholder obtain the estimate?

A: Yes, but the insurance company is responsible for the reasonable cost of such estimate, if any. In some cases, especially if there is minor damage, the insurance company may pay off the cost of the repair shop's estimate. [Reg. 64, Sec. 216.7 (c)(9)(e)]

§216.7(c)(9)(e)

(e) Repair estimates. If an insurer requires that its insured obtain an estimate or estimates of vehicle damage, the reasonable cost, if any, of such estimates shall be borne by the insurer.

10. Q: Assuming there was an inspection, when must the insurance company make its monetary offer to cover the repairs?

A: Also within the six business day period. The offer must be made in good faith, meaning that it must be large enough to restore the vehicle to its condition immediately prior to the accident. [Reg. 64, Sec. 216.7(b)(1)]

§216.7(b)(1)

11. Q: To whom is the offer made?

A: Either to the policyholder or the Designated Representative (D.R.) [Reg. 64, Sec. 216.7(b)(1)].

§216.7(b)(1)

III. THE DESIGNATED REPRESENTATIVE

12. Q: Who can become a Designated Representative (D.R.)?

A: A Designated Representative may be the policyholder's broker, but it is more likely that it will be the repairer chosen to fix the vehicle. [Reg. 64, Sec. 216.7(a)(2)]

§216.7(a)(2)

(2) Designated representative (DR) shall mean an insured's broker of record or an insured's intended repair shop designated by the insured to represent the insured shop in negotiations with the insurer in an attempt to settle the claim. Such designated representative may legally act on the insured's behalf. If the designated representative is the insured's intended repair shop, such repair shop, if located within New York State, must be registered pursuant to the provisions of the Motor Vehicle Repair Shop Registration Act (article 12‑A, Vehicle and Traffic Law), and may only represent the insured in negotiation of the amount necessary to repair the insured's damaged vehicle. The designation form must contain the repairer's registration number.

13. Q: How do I become a Designated Representative?

A: Register with New York State under the Motor Vehicle Repair Shop Registration Act (Article 12-A of the New York Vehicle and Traffic Law). Get written proof from the policyholder that you are acting on their behalf as the D.R. and forward the written proof to the insurance company. [Reg. 64, 216.7(a)(2)]

§216.7(a)(2)

14. Q: Does New York State prescribe the wording of the designation form?

A: No. However, NYSACT has distributed the recommended wording to its membership, which is as follows:

Designated Representative Authorization

_______________________, owner of a_____________________________

(owners name) (Year & make of vehicle)

License Plate#__________Appoints________________________#___________

(Repair facility) ( registration #)

Located at_____________________________________Phone_______________

as my designated representative, as provided for in Regulation 64 of the New York State Insurance Law, only as to my motor vehicle damage

This is not an authorization of repairs

________________________________ ______________

(signature) (date)

15. Q: What is the significance of becoming a Designated Representative?

A: The Designated Representative may legally negotiate on behalf of the policyholder as respects the extent of the damage to the vehicle and the amount necessary to repair it. [Reg. 64, Sec. 216.7(a)(2)]

§216.7(a)(2)

16. Q: Must the insurance company negotiate with me after I send it the Designated Representative form?

A: Yes. [Reg. 64, Sec. 216.7(b)(2)]

§216.7(a)(2)

IV. THE INSURANCE COMPANY'S ESTIMATE

17. Q: What must the insurance company's estimate include?

A: The insurance company's or their representative's estimate shall include the following information at a minimum:

(1) the name of the policyholder and or owner/claimant;

(2) the owner/claimant's address and telephone number;

(3) the name of the insurance company and the name, address, license number and telephone number of the adjuster;

(4) the year, make, model, body style, mileage, VIN number, color and condition of the damaged vehicle;

(5) the claim number;

(6) the date of accident; and

(7) the date the vehicle was inspected.

Each item must be detailed as to the paint, parts and labor hours it will require for that particular item. If the appraisal is made at a repair shop, the registration number of the shop must be included on the estimate form. [Reg. 64, Sec. 216.7(b)(13)]

§216.7(b)(13)

(13) Estimates of repairs prepared by insurers or their representatives shall contain the following information at a minimum: identity of policyholder and/or owner/claimant; owner/ claimant's address and telephone number; identity of insurer, including name, address, license number and telephone number of adjuster; year, make, model, body style, mileage, VIN, license number, color and condition of the damaged vehicle. The estimate must also contain the claim number, the date of accident and the date the vehicle was inspected. Each item of damage must be detailed as to the paint, parts and labor hours it will require to repair that particular item. If the appraisal is made at a repair shop, the registration number of the shop must be included on the estimate form.

The repair estimate must also include as a separate line item, the reasonable cost for proper disposal of liquid waste materials resulting from painting the vehicle and restrictions when the insurance company specifies the use of non-OEM crash parts (the latter is everything except windows and hubcaps). [Reg. 64, Sec. 216.7(b)(4) & (5)]

§216.7(b)(4) & (5)

(4) The insurer's repair estimate shall include, as a separate line item, the reasonable cost for proper disposal of waste material generated by painting the motor vehicle or crash part, in the following manner (or using another method that is acceptable to the superintendent as functionally equivalent):

(i) the cost per paint hour shall be calculated by dividing the repair shop's annual disposal fees for such waste material, after adjusting for reclaiming or recycling by the repair shop, by the number of hours expended annually to paint vehicles;

(ii) the reasonable cost for proper disposal of the waste material shall be calculated by multiplying the number of hours estimated to paint the vehicle by the cost per paint hour;

(iii) presentation of the manifest and invoice documenting a repair shop's disposal and disposal cost for hazardous waste may be required by an insurer as a condition for this separate line itemization, and the failure of the repair shop to provide such documentation shall relieve the insurer from any consideration or inclusion of such disposal cost on an itemized basis within the repair estimate;

(iv) the reasonable cost shall not exceed the prevailing cost for such disposal in the geographic area of such repair; and

(v) a new repair shop may use the prevailing cost for disposal of hazardous waste in its geographic area during its first year in business.

(5) If the insurer's repair estimate is based upon the use of any non‑OEM crash part:

(i) the estimate shall specify the non‑OEM, or non‑OEM supplier;

(ii) the insurer shall not, without consent of the insured or the insured's designated representative, specify non‑OEM crash parts from more than three different suppliers for any one repair;

(iii) the crash part shall equal or exceed the comparable OEM crash part in terms of fit, form, finish, quality and performance;

(iv) the crash part must be warranted by the non‑OEM at least to the extent and duration as the comparable OEM crash part;

(v) the insurer shall specify only certified crash parts, in regard to any part that has been duly certified by a qualified certifying entity acceptable to the superintendent;

(vi) if the crash part has not been certified by a qualified certifying entity acceptable to the superintendent, the non‑OEM must issue a written warranty, for at least the period of the insured's ownership of the vehicle, that the crash part equals or exceeds the comparable OEM crash part in terms of fit, form, finish, quality and performance; and

(vii) the insurer shall cause the damaged vehicle to be restored to its pre-loss condition consistent with the non‑OEM warranty, at no additional cost to the insured and within a reasonable time, if the non‑OEM fails to honor its warranty required in subparagraph (iv) or (vi) of this paragraph.

18. Q: Does the insurance company have to pay for the disposal of waste material?

A: Yes, this must be separately reflected in the repair estimate. [Reg.64, Sec. 216.7(b)(4)]

IMPORTANT: The insurance company is excused from this requirement if it requests the manifest and invoice documenting the disposal costs and you fail to provide it. [Reg. 64, Sec. 216.7(b)(4)]

§216.7(b)(4)

(ii) the reasonable cost for proper disposal of the waste material shall be calculated by multiplying the number of hours estimated to paint the vehicle by the cost per paint hour;

(iv) the reasonable cost shall not exceed the prevailing cost for such disposal in the geographic area of such repair; and

(v) a new repair shop may use the prevailing cost for disposal of hazardous waste in its geographic area during its first year in business.

19. Q: My shop is brand new. How can I provide figures reflecting annual disposal fees?

A: New repair shops are allowed to use prevailing costs in the geographic area. [Reg. 64, Sec. 216.7(b)(4)(v)]

§216.7(b)(4)(v)

(4) (v) a new repair shop may use the prevailing cost for disposal of hazardous waste in its geographic area during its first year in business.

V. NON-ORIGINAL EQUIPMENT PARTS

20. Q: Can an insurance company, in its estimate, require the use of non-original equipment manufacturer (non-OEM) replacement parts?

A: Yes. However:

(1) the estimate must specify either the non-OEM or the non-OEM supplier;

(2) the estimate may not specify non-OEM crash parts from more than three different suppliers unless you agree to this;

(3) the non-OEM crash parts must have a warranty at least as long and as extensive as that given by the original equipment manufacturer and the parts must equal or exceed the original equipment in terms of fit, finish and performance; and

(4) the insurance company shall specify only crash parts that have been certified by an organization approved by the Insurance Department (if you are in doubt, ask the insurance company to provide you with proof that the certifying agency has been so approved). [Reg. 64, Sec. 216.7 (b)(5)]

§216.7(b)(5)

(5) If the insurer's repair estimate is based upon the use of any non‑OEM crash part:

(i) the estimate shall specify the non‑OEM, or non‑OEM supplier;

(ii) the insurer shall not, without consent of the insured or the insured's designated representative, specify non‑OEM crash parts from more than three different suppliers for any one repair;

(iii) the crash part shall equal or exceed the comparable OEM crash part in terms of fit, form, finish, quality and performance;

(iv) the crash part must be warranted by the non‑OEM at least to the extent and duration as the comparable OEM crash part;

(v) the insurer shall specify only certified crash parts, in regard to any part that has been duly certified by a qualified certifying entity acceptable to the superintendent;

21. Q: What if the non-OEM part is not certified by an approved agency?

A: Amazingly, the insurance company can still require its use if the manufacturer issues an ironclad warranty that the crash part equals or exceeds the comparable OEM crash part in terms of fit, form, finish, quality and performance and the warranty lasts as long as the insured owns or leases the vehicle. [Reg. 64, Sec. 216.7(b)(5)(vi)]

§216.7(b)(5)(vi) and (vii)

(5) If the insurer's repair estimate is based upon the use of any non‑OEM crash part:

Just because the part comes with an ironclad warranty does not necessarily mean that the part meets or exceeds the comparable OEM crash part in terms of fit, form, finish, quality and performance. In that case, the insurance company shall cause the damaged vehicle to be restored to its pre-loss condition, consistent with the non-OEM warranty, at no additional cost to the policyholder, and within a reasonable time, if the non-OEM fails to honor its warranty as required in the regulation. [Reg. 64, Sec. 216.7(b)(5)(vii)]

§216.7(b)(5)(vi) and (vii)

(5) If the insurer's repair estimate is based upon the use of any non‑OEM crash part:

VI. DISCOVERING HIDDEN DAMAGE

22. Q: What if I discover additional damage once I start the work?

A: The insurance company can require that a second inspection be conducted in order to evaluate open items on the estimate or to confirm the existence of additional damage discovered after beginning the repair work. [Reg. 64, Sec. 216.7(b)(9)]

§216.7(b)(9)

(9) If a second inspection of the vehicle is required by the insurer in order to evaluate open items on the original estimate, or hidden damage discovered upon commencement of repairs, such inspection shall be performed within two business days following the date of notice of additional or hidden damage from either the insured or the DR. When repairs are sublet by the original repairer, thereby necessitating a reinspection at a location other than the original repairer's location, such reinspection must take place within four business days' notice, from either the insured or the DR, of additional or hidden damage. At the time of the subsequent inspection, the insurer shall furnish a copy of the insurer's detailed written estimate of the cost of repairing the damages resulting from the loss, specifying all appropriate deductions.

23. Q: When must the second inspection take place?

A: Within two business days, following the date, of the insurance company receiving notice of the discovery of additional damage. If the reinspection is for sublet repairs at a location different from the original repairer's location, the second inspection must take place within four business days of the notice. [Reg. 64, Sec. 216.7(b)(9)]

§216.7(b)(9)

VII. ALLOWABLE DEDUCTIONS

24. Q: Other than the policy's cash deductible, what deductions may the insurance company make ?

A: Insurance companies may take deductions for betterment or depreciation, but only for those parts normally subject to repair and replacement during the normal life of the vehicle. Also, bear in mind that the insurance company's deductions are generally limited to the amount by which the resale value of the vehicle is increased by the repair or replacement. [Reg. 64, Sec. 216.7(b)(11)]

§216.7(b)(11)

(11) Deductions for betterment and/or depreciation are permitted only for parts normally subject to repair and replacement during the useful life of the insured motor vehicle. Deductions for betterment and/or depreciation shall be limited to the lesser of:

(i) an amount equal to the proportion that the expired life of the part, to be repaired or replaced, bears to the normal useful life of that part; or

(ii) the amount by which the resale value of the motor vehicle is increased by the repair or replacement. Calculations for betterment, depreciation and normal useful life must be included in the insurer's claim file.

25. Q: What about deductions for previous damage or the vehicle's prior overall condition?

A: These are permitted as well, but they must be measurable, discernible, itemized and specified as to dollar amount. They must be detailed in the claim file and, like deductions for betterment and depreciation, the amount deducted is limited to the amount by which the resale value of the vehicle is increased by the repair. [Reg. 64, Sec. 216.7(b)(12)]

§216.7(b)(12)

(12) Deductions for previous damage or prior condition of the motor vehicle must be measurable, discernible, itemized and specified as to dollar amount, and such deductions must be detailed in the claim file. Such deductions shall be limited to the amount by which the resale value of the motor vehicle is increased by the elimination of the previous damage or the correction of the prior condition.

VIII. GETTING PAID

26. Q: Does Regulation 64 address how and when payment of the claim is to be made?

A: Yes. The insurer must mail or hand deliver the check to the insured or to you (if you are the D.R.) within five business days after the insurance company's settlement offer has been accepted [Reg. 64, Sec. 216.7(b)(16)].

§216.7(b)(16)

(16) The insurer must mail or hand‑deliver its payment to the insured or the designated representative within five business days after the insured has accepted the insurer's offer, or three business days after the receipt of a completed proof of loss.

Even if you are not the D.R. you may be paid directly if:

(1) Your customer has directed the insurance company in writing to do so;

(2) You have completed the repairs; and

(3) You have filled out the Certification of Automobile Repairs form (NYS APD 2) below.

form (NYS APD2)]

CERTIFICATION OF AUTOMOBILE REPAIR

(TO BE COMPLETED BY INSURER)

INSERT: INSURED_________________________

INSURER'S NAME CLAIM #_________________________

INSURER'S ADDRESS POLICY #________________________

DATE OF ACCIDENT______________

DEDUCTIBLE $___________________

Section 3411 (i) of the NEW YORK INSURANCE LAW (NYIL) and Article 12‑A of the Vehicle and Traffic Law (V&TL) require that the following certification be completed and signed by both the insured and the automobile repairer. These laws also require submission of the repair invoice (Paid Bill) by the automobile repairer or the insured to the insurer whenever any repairs are made. The NYIL does not require an insured to repair the automobile as a condition of payment of a loss. This form must be completed and returned to the insurer within 45 days. A postage‑paid return envelope has been furnished for your convenience.

ANY PERSON WHO, KNOWINGLY ASSISTS, ABETS, SOLICITS OR CONSPIRES WITH ANOTHER TO MAKE A FALSE REPORT OF THE THEFT, DESTRUCTION, DAMAGE OR CONVERSION OF ANY MOTOR VEHICLE TO A LAW ENFORCEMENT AGENCY, THE DEPARTMENT OF MOTOR VEHICLES OR AN INSURANCE COMPANY, COMMITS A FRAUDULENT INSURANCE ACT, WHICH IS A CRIME, AND SHALL ALSO BE SUBJECT TO A CIVIL PENALTY NOT TO EXCEED FIVE THOUSAND DOLLARS AND THE VALUE OF THE SUBJECT MOTOR VEHICLE OR STATED CLAIM FOR EACH VIOLATION.

PART I

TO BE COMPLETED BY THE INSURED:

I, ______________________________________ certify, under penalties of perjury, that:

(print your name)

Check A or B

_____A. I have not made any repairs to my automobile as a result of this loss.

_____B. I have made repairs to my automobile and I have attached a copy of my invoice for repairs to my automobile as a result of the captioned loss.

IMPORTANT NOTICE TO INSURED

IF THIS CERTIFICATION IS NOT COMPLETED AND RETURNED, TOGETHER WITH A COPY OF THE ITEMIZED PAID BILL, IT WILL BE ASSUMED THAT YOU DID NOT REPAIR YOUR MOTOR VEHICLE. IF YOU HAVE A SUBSEQUENT LOSS, THE COMPANY MUST, TO THE EXTENT RELEVANT, DEDUCT SUCH UNREPAIRED ITEMS AS PREVIOUS DAMAGE IN SETTLING A FUTURE LOSS. IF YOU DO NOT REPAIR ALL THE DAMAGES ALLOWED BY THE INSURER, SUCH REPAIRS NOT PERFORMED MAY REDUCE YOUR SETTLEMENT OF ANY FUTURE LOSS. THEREFORE, IF AFTER SIGNING THIS CERTIFICATION, YOU REPAIR ANY DAMAGE CAUSED BY THIS ACCIDENT, YOU SHOULD NOTIFY THE COMPANY IMMEDIATELY. THE COMPANY MAY AT THAT TIME ELECT TO INSPECT YOUR AUTOMOBILE.

_________________________ _____________________________________________

DATE SIGNATURE OF INSURED

PART II

TO BE COMPLETED BY THE AUTOMOBILE REPAIRER:

I, ____________ owner or officer of____________________________ shop

(print your name) (print name of auto repair)

Auto Repair Shop Registration Number ______ ______, located at _________________ certify, under penalties of perjury, that I have made the repairs to the automobile owned by ______________________

(print name of insured),

as shown on the attached itemized invoice. I further certify that:

Check A or B

______A. I have repaired all the items allowed by the insurer, or, if not,

______B. I have repaired the automobile as described on the attached itemized invoice.

________________________ ________________________________________________

DATE SIGNATURE OF REPAIRER

(Owner or Officer)

The insurance company must provide a postage paid return envelope for you to send back the certification. [Reg. 64, Sec. 216.7(b)(16)-(18)]

§216.7(b)(16)-(18)

(17) The insured shall have the right to receive the proceeds of any settlement in accordance with policy provisions. However, if the insured agrees and this agreement is documented in the claim file, the insurer may make the check or draft payable to the insured and the lienholder and/or the insured's designated repairer. An insurer may not condition payment of a loss upon repair of the automobile or receipt of a completed Certification of Automobile Repairs.

(18) The following additional standards shall be applicable to the settlement of private passenger automobile physical damage claims:

(i) Subsequent to payment of the claim, the insurer, in accordance with the provisions of section 3411(i) of the Insurance Law, may request that the automobile be made available for inspection, whether or not the automobile is repaired. The inspection shall be conducted at a time and place reasonably convenient to the insured. The inspection report shall be retained in the insurer's claim file.

(ii) An insurer shall request submission of a Certification of Automobile Repairs (NYS APD 2), as contained in section 216.12 of this Part, signed and certified by the insured and the automobile repairer, under penalties of perjury, stating whether all items allowed by the insurer have been repaired and, if not, that repairs were made in accordance with the repairer's invoice. This form, together with a postage‑paid return envelope, shall be given to the insured or the insured's designated representative by the insurer during the course of negotiation of the settlement amount.

(iii) The provisions of section 3411(i) of the Insurance Law, with respect to certification and repair invoices, do not apply where the amount of damage to the insured automobile is less than the deductible applicable to the policy.

27. Q: Does the insurance company have a right to inspect the vehicle after repairs have been completed?

A: Absolutely. In fact, this right of inspection exists even if the repairs have not been made. The insurance company cannot condition payment of the claim upon repairs being made unless the policyholder orders that you be paid directly. [Reg. 216.7(b)(18)(i)]

§216.7(b)(18)(i)

(18) The following additional standards shall be applicable to the settlement of private passenger automobile physical damage claims:

PART 2: TOTAL LOSSES

I. CASH SETTLEMENT METHODS

28. Q: If the insurance company determines that the cost of repair exceeds the vehicle's current value, how is its offer of settlement calculated?

A: There are three possible methods:

(1) By averaging the retail values of a substantially similar vehicle as listed in The Redbook (National Market Reports, Inc.) and The N.A.D.A. Official Used Car Guide (National Automobile Dealers Used Car Guide Company) less applicable deductibles as well as up to $100.00 for dealer prep charges; or

(2) By obtaining a price quote from a qualified dealer located no more than 25 miles from the place where the totaled vehicle was principally garaged. However, the VIN must be communicated in writing to the policyholder and the dealer must make the vehicle available for purchase by the policyholder for three calendar days; or

(3) By obtaining a quotation from an Insurance Department-approved computerized data base. [Reg. 64, Sec. 216.7 (c)(1)(i-iii)]

§216.7(c)(1)(i)-(iii)

(c) Adjustment of total losses. (1) If the insurer elects to make a cash settlement, its minimum offer, subject to applicable deductions, must be one of the following:

(i) The average of the retail values for a substantially similar vehicle as listed in two valuation manuals current at the date of loss and approved by this department. Manuals approved for use are‑The Redbook, published by National Market Reports Inc., and The N.A.D.A. Official Used Car Guide, published by the National Automobile Dealers Used Car Guide Company. The use of other manuals may be approved by this department upon demonstration of need and suitability. If it is evident that an option has not been considered in either or both of the above valuation manuals, the insurer shall consider the value, if any, of such option in arriving at the vehicle's value and shall utilize the best available method to value such option. The insurer may deduct documented, reasonable dealer preparation charges, up to $100, from the average of the retail values. The insurer shall provide to the insured, no later than the date of payment of the claim, a detailed copy of its calculation of the insured vehicle's total loss value, including the valuation of options which are not considered in the base price of the vehicle.

(ii) A quotation for a substantially similar vehicle, obtained by the insurer from a qualified dealer located reasonably convenient to the insured. A reasonable location shall be within 25 miles of the place of principal garagement of the motor vehicle. The substantially similar available vehicle must remain available for purchase by the insured for a period of three calendar days subsequent to receipt of notice of its availability by the insured, and the insured must be able to purchase the substantially similar vehicle at the quoted dealer for the insurer's cash offer plus applicable deductions. The insurer must maintain in its claim file the dealer's name and location, the vehicle identification number, the dealer stock number, the mileage and the major options for the substantially similar vehicle which was the basis of its quote. The notice to the insured of the availability of a substantially similar vehicle must be sent by certified mail, return receipt requested, or be a sound‑recorded conversation reflecting the date of notice. The three calendar days commence on the date the insured acknowledges receipt of notice. The insured need not purchase the vehicle used as the basis of the insurer's quotation, since the quotation merely serves as a basis for the insurer's offer. The foregoing period is satisfied at the point an insured physically verifies the existence of the substantially similar available vehicle used as the basis of the insurer's quotation. Should the insurer's research of substantially similar vehicles determine that the retail values contained in the valuation manuals, prescribed in subparagraph (i) of this paragraph, are inadequate to purchase a substantially similar vehicle, the insurer's offer should be the amount determined by such research.

(iii) A quotation obtained from a computerized database, approved by the superintendent, that produces statistically valid fair market values for a substantially similar vehicle, within the local market area that meets all the following minimum criteria:

(a) it shall produce values for at least 85 percent of all makes and models of private passenger automobiles, as defined in section 67.1(a) of this Title, for the last 15 model years, and shall take into account the values of all major options for such vehicles:

(b) it shall rely upon values derived from licensed dealers, which have minimum sales of 100 motor vehicles per year in the local market area for all vehicles of seven model years or less of age, and be based upon the physical inventory of vehicles sold within the 90 days prior to the loss and vehicles which are available; and

(c) it shall monitor the average retail price of private passenger automobiles when there is insufficient data or inventory available from licensed dealers to ensure statistically valid local market area values.

29. Q: What is meant by a substantially similar vehicle?

A: A substantially similar vehicle is a vehicle of the same make, model, year and condition (including all major options) as the insured vehicle. A substantially similar vehicle's mileage must not exceed that of the insured vehicle by more than 4,000 miles or 10% of the mileage on the vehicle as of the date of the loss, whichever is greater. [Reg.64, Sec. 216.7 (a)(4)]

§216.7(a) (4)

(4) Substantially similar vehicle shall mean a vehicle of the same make, model, year and condition, including all major options of the insured vehicle. Mileage must not exceed that of the insured vehicle by more than 4,000 miles or 10 percent of the mileage on the vehicle at the date of loss, whichever is greater.

30. Q: Must the policyholder buy the replacement vehicle from the dealer that provided the quote?

A: No. This merely serves as the basis for the insurance company's offer. [Reg. 64, Sec. 216.7 (c)(1)(ii)]

§216.7(c)(1)(ii)

31. Q: What happens if the totaled vehicle was purchased less that 180 days before the loss and the use of any of the above three valuation methods would result in a settlement greater than the original price including options?

A: When this unusual event occurs, the insurance company has the right to limit the settlement to the actual purchase price. [Reg. 64, Sec. 216.7 (c)(1)(iv)]

§216.7(c)(1)(iv)

(iv) If the method used in subparagraph (i), (ii) or (iii) of this paragraph would result in a settlement offer greater than the purchase price plus the cost of substantiated improvements paid by the insured for a vehicle purchased within the 180 calendar days prior to date of loss, the insurer's offer of settlement may be limited to the purchase price, plus the cost of any substantiated improvements, less the deductible. This method of settlement shall not be applicable to motor vehicles acquired by the insured through a private sale or as a gift. A private sale is one in which the seller does not engage in the sale of motor vehicles as an occupation.

II. VEHICLE REPLACEMENT

32. Q: Does the insurance company have the right to physically replace the vehicle, as opposed to issuing a check for its actual value at the time of the total loss?

A: Yes, but only if the replacement vehicle is immediately available. The insurance company cannot compel the policyholder to wait weeks before a substantially similar vehicle is located. [Reg. 64, Sec. 216.7 (c)(2)].

§216.7(c)(2)

(2) If the insurer elects to replace the vehicle, the replacement vehicle must be an immediately available, substantially similar vehicle that is both furnished and paid for by the insurer, subject to the deductible if any.

III. ALLOWABLE DEPRECIATION

33. Q: Since new vehicles, with rare exceptions, lose value as soon as they are driven away from the dealership, are insurance companies entitled to deduct an amount for depreciation from the final settlement?

A: In almost all instances, the answer is yes. Assuming the vehicle was a private passenger type (a four-wheel car, sport utility vehicle, noncommercial van, pick-up truck, etc.) that, when purchased, was yet to be replaced by a newer model prior to the time of loss, then the insurance company may take depreciation into account as follows:

Purchase Price Depreciation/Mile

Up to $10,000 $.15

$10,001 to $15,000 $.20

$15,001 to $20,000 $.25

$20,001 to $25,000 $.30

$25,001 to $30,000 $.37

$30,001 to $35,000 $.45

More than $35,000 $.53

[Reg. 64, Sec. 216.7 (c)(3)]

§216.7(c)(3)

(3) A private passenger automobile of the current model year means a current model year automobile that has not been superseded in the marketplace by an officially introduced succeeding model, or an automobile of the previous model year purchased new within 90 days prior to the date of loss. If the insured vehicle is a private passenger automobile of the current model year, the insurer shall pay to the insured the reasonable purchase price to the insured on the date of loss of a new identical vehicle, less any applicable deductible and an allowance for depreciation in accordance with the schedule below, except where the utilization of this method of settlement would result in a lower claim payment as compared with the utilization of the methods described in subparagraphs (1)(i), (ii) and (iii) of this subdivision.

DEPRECIATION SCHEDULE

Purchase price Depreciation per mile

Up to $10,000 $.15

$10,001 to $15,000 .20

$15,001 to $20,000 .25

$20,001 to $25,000 .30

$25,001 to $30,000 .37

$30,001 to $35,000 .45

More than $35,000 .53

34. Q: Does the above schedule apply if, say, a 1997 Pontiac was bought new after the 98 models came out?

A: Yes, as long as the total loss occurred within 90 days of the purchase. [Reg. 64, Sec. 216.7 (c)(3)]

§216.7(c)(3)

35. Q: Are there any instances in which an insurance company is barred from depreciating the value of a new car that has been totaled?

A: Yes, but only if the use of the depreciation schedule would result in a lower settlement than that called for under one of the three valuation methods described in Section 1 of this Part. [Reg. 64, Sec. 216.7 (c)(3)]

§216.7(c)(3)

IV. RIGHT OF RECOURSE

36. Q: What if the policyholder claims that he cannot buy a comparable vehicle for the amount of the received settlement check?

A: Then the insurance company must either:

(1) Offer the policyholder an amount sufficient to close the gap;

(2) With the permission of the policyholder, locate a comparable vehicle and make up the difference, if any.

The insurance company has the discretion to decide which of these two options to elect. [Reg. 64, Sec. 216.7 (c)(4)]

§216.7(c)(4)

(4) Right of recourse. If, within 35 calendar days after mailing of the claim payment, the insured notifies the insurer in writing that the insured cannot purchase a comparable vehicle for the market value, as determined under the provisions of subparagraph (1)(i), (ii), (iii) or (v) or paragraph (3) of this subdivision, the insurer shall reopen its claim file and shall offer, in its discretion and subject to applicable deductions, one of the following options to the insured:

(i) the insurer shall identify and offer for settlement an amount sufficient to purchase a substantially similar vehicle, as provided in subparagraph (1)(ii) of this subdivision; or

(ii) the insurer shall pay the insured the difference between the amount of its claim payment and the cost of a substantially similar vehicle, as provided in subparagraph (1)(ii) of this subdivision, located by the insured, or the insurer, upon consent of the insured, may purchase that vehicle for the insured.

37. Q: Does the policyholder have to take any actions to preserve this right of recourse?

A: Yes. The policyholder must notify the insurance company in writing that a comparable vehicle cannot be purchased for the amount of the settlement check. This notice must be given within five weeks (35 days) of the date that the settlement check was mailed by the insurance company. In addition, if the insurance company had previously located a comparable vehicle, had informed the policyholder of this fact in writing (including the VIN), and the vehicle was available for purchase for a full three days, then the policyholder will be deemed to have forfeited this right of recourse. [Reg. 64, Sec. 216.7 (c)(4) & (5)]

§216.7(c)(4)&(5)

(i) the insurer shall identify and offer for settlement an amount sufficient to purchase a substantially similar vehicle, as provided in subparagraph (1)(ii) of this subdivision; or

(5) The insurer shall not be required to take action under paragraph (4) of this subdivision if its documentation to the insured at the time of its final offer included written notification of the availability of a substantially similar vehicle, as provided in subparagraph (1)(ii) of this subdivision, which shall have been available for at least three calendar days subsequent to the insured's receipt of that offer. The documentation shall include the vehicle identification number, the stock number or order number.

V. SALVAGE VALUE

38. Q: When may an insurance company deduct from the final settlement the salvage value of the totaled vehicle?

A: The insurance company may deduct the salvage value if it obtains the name and address of a licensed or certified salvage dealer who agrees to purchase the wreck for the amount deducted, with no additional charges to the policyholder. This information must be provided to the policyholder upon request. [Reg.64, Sec 216.7 (c)(6)]

§216.7(c)(6)

(6) If the insurer in the process of adjusting a total loss makes a deduction for the salvage value of the insured vehicle, the insurer must furnish the insured, upon the insured's request, with the name and address of a licensed or certified salvage dealer or dismantler who will purchase the salvage for the amount deducted with no additional charges to the insured by the salvage dealer or dismantler.

39. Q: Can the policyholder retain title to the totaled vehicle as part of the claim settlement?

A: Absolutely, as long as the salvage value of the vehicle amounts to more than 10% of the actual cash value of the vehicle immediately prior to the loss. When this is not the case, then the insurance company is legally entitled to have title endorsed over to it after payment of the claim. However, if the insurance company is satisfied that the policyholder intends to retain the vehicle for his or her own use, it can permit the policyholder to keep the totaled vehicle as part of the claim settlement whether or not the salvage value exceeds 10% of the vehicle's actual cash value. [Reg. 64, Sec. 216.8 (f)(1)]

§216.8(f)(1)

(f) Salvage. Insurers shall, except where the insured is permitted to retain the automobile as part of the claim settlement, take possession of the certificate of title, properly endorsed to them, and take possession of the salvage, if any, whenever a loss is determined by the insurer to be a total loss or a constructive total loss. Insurers, in disposing of the salvage, shall fully comply with the requirements of section 429 of the Vehicle and Traffic Law.

(1) An insured shall not be permitted to retain the insured vehicle if the salvage value of the vehicle after the loss aggregates 10 percent or less of the actual cash value of the vehicle prior to the loss, unless the insurer is satisfied that the insured intends to retain the automobile for the insured's own use.

VI. THE 30-DAY SETTLEMENT RULE AND ITS EXCEPTIONS

40. Q: Is the time frame for settling total losses the same as the 30-day time frame for settling partial losses?

A: Yes, except if there has been a total loss due to theft, the insurance company has an additional five days to settle up. The additional five days come into play when the policyholder has failed to provide all requested information to the insurance company by the 25th calendar day after the theft is discovered. If that is the case, then the insurance company has up to five additional days from receipt of all of the requested information to make its offer of settlement. [Reg. 64, Sec. 216.7 (c)(7)]

§216.7(c)(7)

(7) All applicable provisions of subdivision (b) of this section ("adjustment of partial losses") also shall apply to the adjustment of total losses, except that the insurer shall be allowed an additional five business days to comply with the requirements of paragraph (1) of subdivision (b) of this section. In the case of an unrecovered theft loss, except as provided in section 216.8 of this Part, the insurer shall make its offer for the total loss no later than the 25th calendar day following the notice of loss, if the insured has provided all information that has been requested by the insurer that is necessary to value the claim. If the insured has not provided such information by the 25th calendar day following the notice of loss, the insurer shall make its offer no later than the 5th business day following receipt of such information.

41. Q: How is the 30-day period measured?

A: The insurance company has up to 30 calendar days (not business days) from the date it first receives notice of the loss to either mail the settlement check or replace the damaged vehicle. [Reg. 64, Sec. 216.7 (d)(1)]

§216.7 (d)(1)

(d) Unreasonable delay. (1) Unless clear justification exists, no more than 2O percent of a representative sample of the physical damage claims selected by Insurance Department examiners at any office or offices of the insurer shall have a payment period in excess of 30 calendar days. A payment period is the period between the date of receipt of notice of loss by the insurer and:

(i) the date the settlement check is mailed; or

(ii) the date on which the damaged motor vehicle is replaced by the insurer.

If an insurer is in violation of this overall standard, then each such claim in excess of 30 calendar days may be treated as a separate violation.

42. Q: When may an insurance company take more than 30 days to resolve a claim?

A: If it provides the policyholder with a written explanation for the delay and the explanation is for a good faith reason. Unless the claim is in litigation, letters updating the situation shall be sent every 30 calendar days until the claim is resolved. [Reg. 64, Sec. 216.7 (d)(2)]

§216.7(d)(2)

(2) If any element of a physical damage claim remains unresolved more than 30 calendar days from the date of receipt of notice by the insurer, the insurer shall provide the insured with a written explanation of the specific reasons for delay in the claim settlement. Unless the matter is in litigation, an updated letter of explanation shall be sent every 30 calendar days thereafter until all elements of the claim are either honored or rejected.

VII. LOSS OF USE

43. Q: Is the policyholder entitled as a matter of right to be reimbursed by the insurer for any additional transportation expenses, such as car rental, after a partial or total loss?

A: No: the policyholder would have had to purchase this additional coverage. However, after the accident it is the insurance company's duty to notify the policyholder in writing of the policyholder's benefits under the insurance policy. [Reg. 64, Sec. 216.7 (f)]

§216.7(f)

(f) Loss of use. In the event of the theft of the entire vehicle, it shall be the duty of the insurer at the time of notification of loss to advise the insured of his right under the policy to be reimbursed for transportation expenses. Such notification must be confirmed in writing immediately after receipt of notice of theft. All conditions and benefits related to this coverage as stated in the policy must be contained in the notification to the insured.

VIII. SUBROGATION

44. Q: Is the policyholder entitled as a matter of right to share any recovery that the insurance company may get from the third party responsible for the physical damage loss? [This is called "subrogation"]

A: Yes. If the policyholder has received his or her settlement less the policy deductible, then the policyholder must share in the net recovery. [Reg. 64, Sec. 216.7 (g)(1)]

§216.7(g)(1)

(g) Subrogation agreements. (1) Where an insured has received payment under a physical damage coverage that is subject to a deductible, the insured shall share, pro rata, with the insurer any net recovery received by the insurer from third parties. Within 30 calendar days of such recovery, the insurer must mail or hand‑deliver to the insured its payment for the insured's pro rata share of the recovery.

45. Q: How is the policyholder's share of the net recovery computed?

A: It is a two-part formula as follows:

Net Recovery=Total Amount of the Recovery Minus Insurance Company's Allocated Loss Adjustment Expenses

Insurance Company's Share of Net Recovery=Policy Deductible Divided By Amount of the Total Loss; this is then Multiplied By the Net Recovery. [Reg. 64, Sec. 216.7 (g)(2)]

§216.7(g)(2)

(2) Net recovery shall be the total recovery less the insurer's allocated loss adjustment expenses attributable to such recovery. The formula for computing net recovery and the insured's share of recovery of the deductible may be stated as follows:

(i)

TOTAL RECOVERY ‑ ALLOCATED LOSS ADJUSTMENT EXPENSES = NET RECOVERY

(ii)

DEDUCTIBLE/TOTAL LOSS X NET RECOVERY = INSURED'S SHARE OF NET RECOVERY

Application of Formula: Assume a loss of $500 subject to a $100 deductible with $50 in allocated loss adjustment expenses:

(a) if there is full recovery of $500:

computation of net recovery: $500 ‑ $50 = $450

computation of insured's share of recovery: $100/$500 x $450 = $90

(b) If there is a partial recovery of $300:

computation of net recovery: $300 ‑ $50 = $250

computation of insured's share of recovery: $100/$500 x $250 = $50

Here is an example of how it works: Assume that Policyholder Ted's car was rear ended by Bill's pickup truck. Total amount of the damage was $500.00. Ted had a $100.00 collision damage deductible in his policy with Ajax Mutual. Ajax paid $400.00 towards the vehicle repair and then recovered the total amount of the damage ($500.00) from Bill's insurer. In doing so, Ajax incurred $50.00 in expenses. Thus, the net recovery is $450.00.

Policyholder Ted is entitled to a portion of this $450.00 net recovery as follows: The deductible amount ($100.00) is divided by the amount of the total loss ($500.00). This yields 20 cents. Then multiply that by the net recovery ($450.00). This amount, $90.00, goes to Policyholder Ted, so he ends up recovering 90% of his deductible. Ajax meanwhile recovers $360.00 of the $400.00 it had paid out on the claim, also 90%.

46. Q: Must the insurance company keep the policyholder notified as to the status of the claim for subrogation?

A: Yes. Within 120 days from the date of the claim payment to the policyholder, the insurance company shall mail out a status report. Updates shall be mailed out every 120 days thereafter. [Reg. 64, Sec. 216.7 (g)(5)]

§216.7(g)(5)

(5) If an insurer has paid a physical damage claim that is subject to a deductible and it is pursuing its subrogation claim, the insurer shall notify its insured in writing of the status of its claim 120 calendar days after the date of the claim payment to its insured. An updated status letter shall be sent every 120 calendar days thereafter until the claim is either honored or rejected.

47. Q: When is the insurance company legally obligated to attempt recovery?

A: When the liability of the other driver is clear. The only way that the insurance company can get out of this obligation is if it returns the full amount of the deductible to the policyholder. [Reg. 64, Sec. 216.7 (g)(3)]

§216.7(g)(3)

(3) Unless the insurer returns its insured's full deductible, it shall attempt to effect full recovery in clear liability cases and shall not enter into any inter-company agreements that provide for the acceptance of lesser amounts on a formula basis.

48. Q: What is the insurance company's obligation when the liability of the other driver is not clear?

A: Then the insurance company has the discretion whether to pursue a claim for subrogation. If it elects not to do so, then the insurance company must notify the policyholder in writing of this within 60 days of its paying the claim. If the insurance company fails to do this, and the statute of limitations for pursuing the claim against the third party has run out, then the insurance company is liable for refunding the full amount of the deductible to the policyholder. [Reg. 64, Sec. 216.7 (g)(6)]

§216.7(g)(6)

(6) If an insurer has paid a physical damage claim that is subject to a deductible and it elects not to pursue its subrogation claim where the possibility of recovery exists, the insurer shall so notify its insured in writing within 60 calendar days after it has paid the claim, except that the notification shall be given at least 30 days prior to the running of any applicable statute of limitations or period required for notice of claim. If an insurer does not notify its insured within the time periods prescribed above and the statute of limitations or period required for notice of claim has expired, the insurer shall forthwith remit to its insured the full amount of the insured's deductible.

IX. LOSSES DUE TO THEFT

49. Q: Must insurance companies report auto theft losses to anyone other than local law enforcement?

A: Yes. All auto insurance companies doing business in the state of New York are required to become members of the National Insurance Crime Bureau (NICB). Insurance companies must report to NICB any thefts of its insured vehicles valued at $5,000.00 or more prior to the loss. The report to NICB must be made within two business days following notice of the claim. First and third party physical damage losses, where the amount of the damage exceeds $2,500.00, must be reported to NICB as well, but these reports need not be made until within five calendar days following payment of the claim. [Reg. 64, Sec. 216.8 (a)-(d)]

§216.8(a)-(d)

§ 216.8 Verification and reporting requirements applicable to losses arising under automobile physical damage policies and reporting of third‑party property damage losses.

(a) Preamble. The purpose of this section is to implement the provisions of section 3412 of the Insurance Law, which provides for measures to be applied by insurers and a central organization engaged in loss prevention in order to prevent payment of fraudulent claims arising under automobile physical damage policies. Such measures shall include: reporting of data on private passenger automobiles involved in total losses to a central organization engaged in loss prevention, as designated by the superintendent; verification procedures to be applied by insurers prior to the payment of total theft losses; restrictions on the insured's retention of salvage; restrictions and procedures for insurer's disposition of salvage; the insurer's right to retrieve located stolen or abandoned vehicles; and notification by insurers to law enforcement agencies, when the insurer or the central organization suspects improper or fraudulent action on the part of the insured, or others involved in the loss settlement process.

(b) Applicability. This section shall apply to all losses involving private passenger automobiles of the current model year and the preceding six model years and older private passenger automobiles with an actual cash value of $5,000 or more, prior to the loss. A private passenger automobile shall mean a four‑wheel private passenger vehicle, station wagon, van, jeep‑type vehicle or pickup truck.

(c) Central organization. The central organization is hereby designated to be the National Insurance Crime Bureau, hereinafter referred to as NICB. All insurers licensed to write automobile physical damage insurance in this State are hereby required to become members of the NICB, for the purpose of compliance with this section.

(d) Reporting and follow‑up requirements. Insurers shall report all private passenger automobiles involved in losses to the NICB, as follows:

(1) All total theft losses shall be reported immediately, but no more than two business days following notice of claim, as defined in section 216.1(d) of this Part. If the insurer has not received any acknowledgment or communication from the NICB within 10 calendar days following its submission of the total theft report to the NICB, the insurer shall immediately communicate with the NICB to determine the status of its report.

(2) All other first and third‑party losses, however sustained, where damage to the claimant's vehicle exceeds $2,500 shall be reported to the NICB no later than five calendar days after the sale of salvage or, if the insured or claimant is permitted to retain the vehicle, no later than five calendar days after the date of loss payment.

50. Q: Are insurance companies excused from the claim settlement time frames of Reg. 64 when the loss is due to theft?

A: Yes, and this is due to the reporting and verification procedures involving NICB. The insurance company is required to defer paying the theft claim to the policyholder for five (5) calendar days after acknowledgment by the NICB of the insurance company's theft report. If the insurance company hears nothing further from NICB during this five-day period, then it may continue with the processing of the claim. [Reg. 64, Sec. 216.8 (e)]

§216.8(e)

(e) Verification procedures required prior to paying a total theft loss. Notwithstanding the provisions of section 216.7(b) and (c) of this Part, an insurer shall comply with NICB verification procedures prior to its payment of a total theft loss, subject to the rules provided for in this section.

(1) The insurer shall defer the payment of a claim for five calendar days following receipt of the acknowledgment from the NICB of the insurer's total theft report. If no further communication is received from the NICB during this five‑day period indicating unresolved questionable circumstances, the insurer shall continue with the processing of the claim in accordance with the provisions of this Part.

(2) If the NICB verification procedure indicates insurance coverage by more than one insurer or a previously unrecovered theft loss, the insurers shall promptly investigate and resolve such discrepancy.

(3) If the NICB verification procedure reveals an erroneous vehicle identification number (VIN) and the NICB is unable to clear up such discrepancy internally, a questionnaire will be sent to the insurer by the NICB. This questionnaire shall be returned to the NICB within five business days of receipt by the insurer. Should NICB and insurer efforts, after due diligence, be unsuccessful in resolving the VIN error after a 30‑day period from date of report of loss to the insurer on a vehicle that has been inspected pursuant to Part 67 of this Title, the insurer shall proceed with the processing of the loss in accordance with the provisions of this Part.

(4) Subject to the provisions of subdivision (h) of this section, if the NICB certification procedure indicates that the theft loss may be fraudulent, the insurer shall suspend processing of the loss. The NICB shall then cooperate in promptly investigating the matter.

51. Q: What if the insurance company, after filing its report, fails to receive any acknowledgment from the NICB?

A: After ten (10) days have elapsed, the insurance company is obligated to follow up with the NICB as to the status of the matter. [Reg. 64, Sec. 216.8 (e)]

§216.8(e)

PART 3: THIRD PARTY DAMAGE CLAIMS

I. INITIAL CLAIMS PROCESSING

52. Q: If the policyholder is accused of causing property damage to a third party due to the policyholder's own negligence, what steps must the insurance company take upon receipt of the claim by the claimant?

A: The insurance company must, within fifteen (15) days of receiving the notice of the claim, either send a written acknowledgment to the claimant or pay the claim. [Reg. 64, Sec. 216.10 (a)]

§216.10(a)

§ 216.10 Standards for prompt, fair and equitable settlement of third‑party property damage claims arising under motor vehicle liability insurance contracts.

This section is applicable to claims arising under motor vehicle liability insurance contracts affording coverage for claims of property damage by third parties caused by the alleged negligence of the insured. The following provisions of this Part shall also be applicable to these claims: sections 216.0(a), (b), (d), (e) ; 216.1; 216.2 (preamble); 216.3; 216.4(b), (c), (d), (e); 216.5; 216.6(a), (b), (e)‑(g); 216.7(a), (b)(4)‑(6), (II)‑(13), (c)(1), (3), (4); and 216.11.

(a) Within 15 business days of receipt of notice of claim, the insurer shall send either written acknowledgment of the receipt of notice of claim, or payment, to the claimant or the claimant's representative.

(1) When notice of a claim is received from a claimant or the claimant's representative, and the insurer is of the opinion that it is not liable for any payment, then its sole obligation shall be to advise the claimant in writing that it is the insurer and furnish the claimant with its policy number and deny the claim, setting forth the reasons therefor.

53. Q: What happens if the insurance company argues that its policyholder is not at fault?

A: All the insurer need do is notify the claimant in writing of its reasons for denying payment. [Reg. 64, Sec. 216.10 (a)(1)]

§216.10 (a)(1)

II. COMPARATIVE NEGLIGENCE

54. Q: What is the comparative negligence rule in New York?

A: It is the rule that allows an insurance company to reduce its offer to the claimant based on the percentage of fault attributable to the claimant. Thus, if the total amount of the damage was $2,500.00 and the insurance company is of the opinion that the claimant was 30% responsible for the accident, then the insurance company will offer only $1,750.00 in settlement. An explanation of the comparative negligence rule must be included in the insurance company's claim acknowledgment. [Reg. 64, Sec. 216.10 (a)(3)(i)]

§216.10(a)(3)(i)

(3) (i) In all other claims, the written acknowledgment by the insurer shall inform the claimant that the insured has a policy which, to the extent of the insured's negligence, provides coverage for property damage, including the loss of use of damaged property and any other out‑of‑pocket expenses reasonably attributable to the accident. The acknowledgment shall also state that in no event will the recovery against the insurer exceed the maximum amount of the policy. The acknowledgment shall contain an explanation of the comparative negligence rules in New York, to the effect that, should the insurer's investigation determine that its insured is only partially liable, coverage of the property damage, loss of use and other expenses will only be partially reimbursed in accordance with the percentage that the insured is found to be at fault in the accident.

III. REQUESTING ADDITIONAL INFO

55. Q: Assuming that the insurance company needs additional information from the claimant to process and evaluate the claim, when must this additional information be requested?

A: The initial request from the insurance company for additional information must be made with the acknowledgment of the claim or must be made by telephone or personal contact with the claimant. After receipt of the requested information, should the insurance company determine that more information is necessary, then that request of the claimant must be made within ten (10) business days of the first receipt of information. [Reg.64, Sec. 216.10 (a)(3)(ii)]

§216.10(a)(3)(ii)

(ii) Concurrent with the acknowledgment, the insurer shall send a claim form or shall request by telephone or personal contact any pertinent additional information necessary for the insurer to reach a final evaluation of the claim. Within 10 business days of acknowledgment of the claim or the receipt of the information requested when acknowledging the claim, the insurer must request any additional information required to process the claim. If, during the investigation, additional information will be required, the insurer must initiate a request for such information within 10 business days after the need for the information is established. If the insurer is advised by the claimant that the claimant is pursuing recovery under another policy, the insurer may suspend action on the claim.

IV. INFORMING THE POLICYHOLDER

56. Q: What happens if the notice from the third party claimant is the first notice that the insurance company receives concerning the accident?

A: Then the insurance company must notify its policyholder of the pending claim within seven days. The notice to the policyholder must state that failure to cooperate with the insurance company will result in a breach of the policy, thereby allowing the insurance company to legally refuse coverage on the pending claim. The result is that the policyholder will be held personally liable. [Reg. 64, Sec. 216.10 (b)]

§216.10(b)

(b) If a claimant has given notice of loss and the insurer has not received notice of the incident from its policyholder, then, within seven business days after notice by the claimant the insurer shall notify the policyholder that failure to give notice and to cooperate with the insurer may result in the company disclaiming liability and the possibility that the policyholder will be held personally liable. A form shall also be furnished to the insured for the insured's use in detailing the incident unless the insurer shall accept a prior telephone or personal contact which has resulted in securing the required information.

57. Q: If the insurance company determines that the policyholder is in breach and disclaims coverage, must it inform the claimant of this fact?

A: Yes, within five business days of its determination of the policyholder's breach. [Reg. 64, Sec. 216.10 (c)]

§216.10(c)

(c) If the insurer determines that there was no policy in force or that it is disclaiming liability because of a breach of policy provisions by the policyholder, the insurer shall inform the claimant in writing within five business days of such determination.

V. ACCEPTANCE OR DENIAL OF A CLAIM

58. Q: When must the insurance company inform the claimant of its determination with respect to the claim?

A: Within ten business days after it completes its investigation. [Reg. 64, Sec. 216.10 (e)]

§216.10(e)

(e) Within 10 business days of the completion of its investigation of a property damage claim, the insurer shall:

(1) make a written offer which is first computed in the same manner as would be used if the claim were made under a first‑party coverage by one of its insureds, and, if applicable, modified to give effect to the comparative negligence statute of this State, or any other state subject to policy limits. Any offer based on comparative negligence shall contain a factual and complete explanation of the insurer's basis for apportioning culpability. If the claim presented is greater than policy limits, then the claimant must be so advised; or

(2) deny the claim in writing, giving specific reasons therefor.

59. Q: What must the insurance company's response include?

A: If the insurance company accepts responsibility for the claim on behalf of its policyholder, then the offer must be for the full amount of the claim up to the limits of the policy (the policyholder is responsible for the difference, if any). If the insurance company determines the claimant is partly responsible for the damages, then the offer is reduced by the percentage amount that the insurance company determines is the claimant's fault. Any offer asserting the claimant's comparative negligence must be detailed and completely factual. [Reg. 64, Sec. 216.10 (e)(1)]

§216.10(e)

(e) Within 10 business days of the completion of its investigation of a property damage claim, the insurer shall:

VI. PERMISSIBLE DELAYS

60. Q: Generally speaking, how much time does the insurer have to either accept or deny the claim?

A: Sixty (60) calendar days is usually deemed sufficient. Should more time be needed, the insurer must send the claimant a written explanation for the delay. In no event should a decision take more than six (6) months unless, of course, the claim goes into litigation. [Reg. 64, Sec. 216.10 (f)].

216.10 (f)

(f) If the investigation is not complete 60 calendar days subsequent to the claimant's notice of loss, the insurer shall send a written explanation of the specific reasons for the delay in claim settlement. An updated letter shall be sent every 60 calendar days thereafter, but the insurer must within six months of the notice of loss advise the claimant of its decision pursuant to paragraph (e)(1) or (2) of this section. This requirement shall cease to be applicable after a claim has been placed into litigation or the insurer advises the claimant of its decision.

PART 4: RECORD KEEPING REQUIREMENTS

61. Q: What records must an insurance company maintain?

A: Insurance companies must maintain all communications, transactions, notes and work papers relating to the claim. All of these communications must be dated. The records enable Insurance Department Examiners to verify that insurance companies are in compliance with the law when these examiners do their periodic audits. Insurance companies are to maintain their files in such a manner that examiners can reconstruct the history of the claim. [Reg. 64, Sec. 216.11]

§216.11

§ 216.11 Examinations.

To verify compliance with this Part and related statutes, Insurance Department examiners will investigate the market performance of insurers. To enable department personnel to reconstruct an insurer's activities, all insurers subject to the provisions of this Part must maintain within each claim file all communications, transactions, notes and work papers relating to the claim. All communications and transactions, whether written or oral, emanating from or received by the insurer shall be dated by the insurer. Claim files must be so maintained that all events relating to a claim can be reconstructed by the Insurance Department examiners. Insurers shall either make a notation in the file or retain a copy of all forms mailed to claimants.

PART 5: TEXT OF REGULATION 64

CHAPTER IX UNFAIR TRADE PRACTICES § 216.0

PART 216

(Regulation 64)

UNFAIR CLAIMS SETTLEMENT PRACTICES

AND

CLAIM COST CONTROL MEASURES

(Statutory authority: Insurance Law, §§ 201, 301, 305[a], 2601, 2610, 3411, 3412)

Sec.

216.0 Preamble

216.1 Definitions

216.2 Applicability

216.3 Misrepresentation of policy provisions

216.4 Failure to acknowledge pertinent communications

216.5 Standards for prompt investigation of claims

216.6 Standards for prompt, fair and equitable settlements

216.7 Standards for Prompt, fair and equitable settlement of motor vehicle physical damage claims

216.8 Verification and reporting requirements applicable to losses arising under automobile physical damage policies and reporting of third‑party property damage losses

216.9 Written notice to claimants of payment of claim in third‑party settlements

216.10 Standards for prompt, fair and equitable settlement of third‑party property damage claims arising under Motor vehicle liability insurance Contracts

216.11 Examinations

216.12 Forms

Historical Note

Part (§§ 216.0‑216.6) filed Dec. 5, 1972; repealed, new (§§ 216.0‑216.11) filed May 12, 1982 eff. Aug. 15, 1982.

§ 216.0 Preamble.

(a) Section 2601 of the Insurance Law prohibits insurers doing business in this State from engaging in unfair claims settlement practices and provides that, if any insurer performs any of the acts or practices proscribed by that section without just cause and with such frequency as to indicate a general business practice, then those acts shall constitute unfair claims settlement practices. This Part contains claim practice rules which insurers must apply to the processing of all first‑ and third‑party claims arising under policies subject to this Part. In addition. specific rules are provided for the processing of first‑party motor vehicle physical damage claims and third‑party property damage claims arising under motor vehicle liability insurance contracts.

(b) This Part is issued for the purpose of defining certain minimum standards which. if violated without just cause and with such frequency as to indicate a general business practice. would constitute unfair claims settlement practices. This Part is not exclusive, and other acts. not herein specified, may also be found to constitute such practices.

(d) Section 3412 of the Insurance Law has been implemented by section 216.8 of this Part.

(e) Claim practice principles to be followed by all insurers. (1) Have as your basic goal the prompt and fair settlement of all claims.

(2) Assist the claimant in the processing of a claim.

(3) 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.

(4) Clearly inform the claimant of the insurer's position regarding any disputed matter.

(5) Respond promptly. when response is indicated, to all communications from insureds, claimants attorneys and any, other interested persons.

(6) Every insurer shall distribute copies of this regulation to every person directly responsible for the supervision, handling and settlement of claims subject to this regulation, and every insurer shall satisfy itself that all such personnel are thoroughly conversant with, and are complying with, this regulation.

Historical Note

Sec. filed Dec. 5, 1972; amd. filed Jan. 14, 1975; repealed, new filed May 12, 1982; and filed Sept. 4, 1984 eff. Oct. 1, 1984. Amended (a), (c) and (d).

§ 216.1 Definitions.

The definitions set forth in this section shall govern the construction of the terms used in this Part.

(a) Agent shall mean any person, firm, association or corporation authorized to act as the representative of an insurer and licensed pursuant to the provisions of article 21 of the Insurance Law. With respect to group life and group accident and health policies, the group policyholder shall be the agent of the insurer to the extent such policyholder has been authorized to act on behalf of such insurer.

(b) Claimant shall mean any person who attempts to obtain a benefit from an insurer.

(d) Business day shall mean a day other than Saturday, Sunday or a New York State legal holiday.

(e) Notice of claim shall mean any notification, whether in writing or otherwise, to an insurer or its agent, by any claimant who reasonably appraises the insurer of the facts pertinent to a claim.

Historical Note

Sec. filed Dec. 5, 1972; repealed, new filed May 12, 1982; amd. filed Sept. 4, 1984 eff. Oct. 1, 1984. Amended (a).