Excess Line Policies Submitted With ‘Most Favored Nation’ Punitive Damage Insurability Clause Will Be Suspended and Reported, Excess Line Association of New York (ELANY) Warns
Jul 1, 2015
Any excess line policy submitted to the Excess Line Association of New York (“ELANY”) that contains the so-called “Most Favored Nation” punitive damage insurability clause or similar language will be suspended and reported to the New York Department of Financial Services (“DFS”) for whatever action it deems necessary, ELANY warned in a bulletin issued today, July 1, 2015.
This prohibition does not extend to language such as approved ISO forms for certain lines of coverage that permits insuring punitive damages under a policy in a state where such coverage is not prohibited by that state’s laws.
ELANY reports that recently, some excess line brokers submitted excess line policies containing language stating that punitive damage is covered ” . . . to the extent insurable under the law of any applicable jurisdiction most favorable to insurability.”
DFS subsequently reviewed this so-called “Most Favored Nation” punitive damage insurability clause and advised ELANY that the referenced language is not acceptable, has not been approved in the admitted market and that punitive damage coverage remains prohibited in New York.
The DFS reminded that its Office of General Counsel had issued an August 27, 2008 opinion addressing the legality of placing punitive damages coverage in the excess line market insuring New York risks. The opinion reiterated the DFS’ longstanding position, citing several high court rulings that insuring punitive damages violates New York’s public policy and is therefore prohibited. Further, the opinion expressly states that a licensed broker may not place a punitive damage cover with an excess line insurer, nor hire a third party outside of New York to do so.
To view today’s ELANY Bulletin 2015-14 online, click here.
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