A Superstorm Sandy Retrospective: How the Actions of New York Regulators May Shape Responses to Future Natural Disasters

November 1, 2013

Author: Carl J. Pernicone

A year after Superstorm Sandy came ashore, the New York Department of Financial Services (Department) issued Circular Letter No 8 of 2013 to inform New York licensed property/casualty insurers of the regulatory standards they should expect to encounter the next time a federal or state disaster emergency is declared. This regulatory guidance echoes the various actions that the Department implemented prior to the onslaught of Superstorm Sandy and for several months thereafter.

While the Department outlines the various regulatory guidelines it may impose when a State Disaster Emergency is declared, the Circular Letter also cautions that the Department may implement additional standards based on the specific circumstances of the emergency, including but not limited to tornados, flooding and earthquakes. The Circular Letter then details the types of actions that the Department may take in a future disaster. These actions are substantively similar to the actions that the Department took in the wake of Superstorm Sandy, as noted below.

Premium Payments
Specifically with respect to the difficulties involved in making premium payments during a state of emergency and pursuant to New York Insurance Law Section 3425 (p), the Department states that it is empowered to impose a moratorium on the termination, cancellation and renewal provisions of that law for a period not to exceed three months. A three-month extension period is also permitted under the statute. As to Superstorm Sandy, the Department began a moratorium of this nature effective October 26, 2012, and pursued its mandate into February 2013. Further, the Department reiterated the position it maintained earlier this year in Circular Letter No. 1 of 2013, requesting insurers to allow policyholders in disaster areas flexibility in terms of making premium payments.

Prompt Action Required
Additionally, the Circular Letter provides that insurers should take prompt action upon receipt of a notice of claim, particularly where the claim is a direct result of the disaster. The Department sets forth a number of steps that the insurer should take in a prompt fashion, including informing claimants of necessary documentation, providing fast and accurate responses to claimants, and promptly reimbursing them for additional living expenses and temporary repairs. Again, the Department warns insurers that additional claims-handling procedures may be initiated based on the nature of the Disaster Emergency. As to Superstorm Sandy, the Department relaxed certain standards relative to documentation needed for proof of loss, per Circular Letter No. 8 of 2012.

Claims Data Reporting
The Department states that it not only might require claims data reporting in accordance with the form and requirements adopted by the Northeast Zone of the National Association of Insurance Commissioners but also impose additional data reports to supplement this information. Such reporting can be required on a daily, weekly or other schedule, based on the specific circumstances of the disaster. The data would be used to compile insurer “report cards” such as the ones assembled following Superstorm Sandy.

Mediation Program
Also, the Department announced that a mediation program may be established to aid in the resolution of disputed claims. Such a program may not be available for certain types of claims, including claims involved in civil actions, claims made under the National Flood Insurance Program and claims made where there is a dispute as to coverage. With respect to Superstorm Sandy, a mediation program was instituted pursuant to a special amendment to New York Insurance Regulation 64 governing Sandy-related claims.

Expedited Licensing Procedure
Finally, the Circular Letter states that the Department may develop an expedited licensing procedure for independent and public adjusters. An expedited process was employed to address the need for adjusters after Superstorm Sandy, which, among other things, permitted adjusters licensed in other states to apply for a temporary adjuster’s licenses in New York.

What actions should Insurers take based on this new regulatory guidance?
Given the Department’s issuance of Circular Letter No. 8 of 2013, insurers should consider taking the following actions to promote compliance in the event of a future disaster emergency:

  • Insurers should review the various issues related to premiums, claims and administrative procedures experienced as a result of Sandy-related claims. This review process should identify the areas where the insurer would have difficulty complying with the standards set forth in the Circular Letter.
  • The insurer should then develop and incorporate into its disaster plans processes and procedures aimed at addressing any compliance issues. These processes and procedures should include an internal monitoring system for the adjudication of disaster-related claims to facilitate reporting to the Department, particularly where such reporting is required on a daily or weekly basis.

For more information concerning Superstorm Sandy and other Client Alerts regarding the diverse legal and regulatory issues arising from the disaster, visit or our Superstorm Sandy Resource Center.

 Visit our Superstorm Sandy Resource Center.

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