If the recently proposed anti-concurrent causation bill in New York (Assembly No. A07455/ Senate No. S05581) is enacted, it is unclear what arguments will be made regarding its application. However, any arguments that the proposed anti-concurrent causation law can be retroactively applied to insurance policies in effect prior to the law’s enactment, including those which might respond to insurance claims arising from Sandy, appear to face an uphill battle under New York law.
Under New York law, “[i]t is a fundamental canon of statutory construction that retroactive operation is not favored by courts and statutes will not be given such construction unless the language expressly or by necessary implication requires it.” Majewski v. Broadalbin-Perth Cent. Sch. Dist., 696 N.E.2d 978, 980 (N.Y. 1998). An exception to this rule is that “remedial” legislation or statutes governing procedural matters should be applied retroactively. Id. However, classifying a statute as “remedial” does not automatically overcome the strong presumption of prospectivity since the term may broadly encompass any attempt to “supply some defect or abridge some superfluity in the former law.” Id.
Here, as reflected in the language of the proposed bill itself and the legislative intent behind the bill, the proposed anti-concurrent causation law appears to be forward looking in nature. Most notably, the bill clearly states that “[t]his act shall take effect immediately and shall apply to claims made on or after such effective date” (emphasis added). Thus, it would not apply to Sandy claims made before the legislation was enacted.
Further, the legislative “justification” for the proposed bill does not contain an express statement that the bill is to be retroactively applied to insurance policies already in place or to Sandy claims. Rather, the “justification” merely provides that “[i]n the aftermath of Superstorm Sandy, many homeowners were surprised when insurance companies denied their claims for perils that should have been covered under the policy (such as windstorm damage) because the perils occurred at the same time as a flood, which is excluded under most homeowners policies. As a result, these homeowners found themselves without adequate insurance coverage at a time when they needed it the most.” This “justification” concludes that “[t]his bill would rectify this by prohibiting insurance companies from denying claims under these circumstances.”
In addition, certain comments made at a February 26, 2013 public hearing held by the New York State Assembly Standing Committee on Insurance regarding insurance coverage issues arising from Sandy points to the future application of anti-concurrent causation legislation. At the outset of this hearing, New York Assemblyman Kevin Cahill noted that the purpose of the hearing was “to deal with future disasters.” During a discussion of the application of anti-concurrent causation clauses to Sandy claims, Benjamin Lawsky, the superintendent of New York’s Department of Financial Services, testified that “[i]f they get litigated, it’s a little unclear how things will shake out in New York, but it is, I think, for the future, something worth exploring about what we can do preemptively so at the very least people know what they’re signing up for when they have such clauses or possibly taking other action” (emphasis added). In responding to whether the Department of Financial Services could “by regulation, eliminate [the anti-concurrent causation clause] from future policies,” Mr. Lawsky stated that “[m]y guess is we probably could, but let me check and be sure” (emphasis added).
However, the analysis set forth above does not necessarily address the situation of a claim being made for a Superstorm Sandy loss after the statute is passed under a policy which was in force and effect prior to the statute’s effective date. In these circumstances, a policyholder might argue that the statute should apply to the claim “made on or after such effective date.” (One can also imagine policyholders withdrawing existing claims, submitting new claims and seeking the benefit of the statute.) In such a situation, the question becomes whether the statute can be applied retroactively to alter pre-existing contract rights.
New York’s highest court, the Court of Appeals, has held that newly enacted statutes or amendments to statutes “are, generally, not to be applied retroactively to policies already in force on the effective date of the statutory amendment.” Char-Mo Investors, Inc. v. Mkt. Ins. Co., 377 N.E.2d 478, 479 (N.Y. 1978) (amendment to standard fire policy suit limitation period). In addition, the Court of Appeals refused to retroactively apply certain amendments to labor law statutes because “[t]o reach a contrary result … would serve to impose new conditions upon and impair the obligations of a contract already existing, under which the parties had fully entered into the performance of their work...” Deutsch v. Catherwood, 294 N.E.2d 193, 195 (N.Y. 1973). Some New York courts have even gone so far to hold that “[e]ven express indication that retrospective application is intended cannot effectuate such application if the result be to impair the obligation of contracts.” Phillips v. Agway, Inc., 389 N.Y.S.2d 977, 979 (Sup. Ct. 1976). The concern regarding the retroactive application of a statute which modifies existing contract rights arises directly from the United States Constitution, which provides that “No State shall . . . pass any . . . Law impairing the Obligation of Contracts . . .” Article I, §10.
Since this proposed bill is in the early stages of the legislative process, the final language of the bill and any floor testimony or debate on the proposed bill may impact this analysis. We will continue to report on any future developments.