Assembly passes bill limiting insurers' requests for personal financial records in theft claims

Assemblymember Dinowitz defended legislation (Assembly No. 1450) on the Assembly floor Tuesday that would make it an unfair claim settlement practice for insurers to demand personal, financial or tax information from claimants in theft investigations except when "special articulable circumstances" directly relate to the claim.

The bill, which the Assembly passed 93'44, would place the limitation in statute rather than leave it only to Department of Financial Services (DFS) regulations, Dinowitz told colleagues in a floor explanation. "This bill would establish that it shall be an unfair claim settlement practice for an insurer to demand personal, financial, and tax information while investigating a theft claim, except if there are special articulable circumstances which exist directly relating to the particular individual facts of such theft and which warrant the making of such demand for the specific purpose of determining if such claim is fraudulent," he said.

Why it matters: Supporters said the bill protects claimants from intrusive and irrelevant information requests that can delay settlements and impose privacy costs. Dinowitz listed examples of information the bill would shield in most cases: tax returns, bank statements, loan applications, voter registration and other personal records. "It's none of their **** business," he said of demands such as voter-registration checks, adding insurers should not ask for material "which really doesn't have much relevance to the theft."

Opponents, including members of the minority conference and the insurance industry, argued the measure could impede routine fraud detection and investigation. Assemblymember Walsh questioned whether putting a rule into statute was necessary when existing DFS claim-practice principles already direct insurers not to seek verification without good reason: "Why would we want to hamstring or tie the hands of insurance companies trying to maybe root out, fraudulent claims?" she asked. Walsh also warned that contested demands could lead to court actions and greater costs if companies and insureds do not resolve disputes.

Dinowitz acknowledged he had no hard statewide data on the frequency of intrusive information requests but said the bill would encourage insurers to act "appropriately" and would simplify recourse for claimants. He told the chamber that, in his view, the law would help resolve meritorious claims more quickly and fairly, and that courts or the state agency would remain available for disputes.

The Assembly recorded a party-line minority opposition: the minority conference announced it would vote no; the clerk then recorded the final tally as Ayes 93, Nos 44. The act states it "shall take effect January 1." The Assembly stood at ease following the vote.

Key details from the floor debate: Dinowitz framed the bill narrowly for theft claims and emphasized statutory force rather than regulation; Walsh pressed on whether the bill was necessary and on possible court congestion and industry objections; Dinowitz and supporters said enumerated disclosures (tax returns, bank statements, loan applications, voter registration, certain licenses and other "personal, financial, tax or private nature" records) are often irrelevant and requested without a demonstrated, case-specific reason.

What happens next: With the Assembly's passage, the measure goes to the next step in the legislative process (as specified by New York's procedure). The bill text on the floor sets an effective date of Jan. 1.