The legislators suggest in their sponsors' memo that this current framework causes “substantial delay” and is an inefficient use of judicial resources. They say passage would allow “a more streamlined litigation process, along with certainty and prompt payment for a plaintiff.”

They continued that insurers should not be able to deny a claim under the late-notice provision because it has “no negative effect on the insurer's ability to respond to the claim. Such denials amount to a windfall to the insurer based upon a technicality.”

Mr. Monteleone said that New York courts have been fairly stringent in dismissing claims based on late notice.

“I have seen cases as short as three weeks where the court has said, 'That's late notice.'” He added, “That's pretty harsh.”

The National Association of Mutual Insurance Companies (NAMIC), the American Insurance Association (AIA) and the Property Casualty Insurers Association of America (PCI) applauded Gov. Spitzer's veto, contending that the bill would have resulted in higher insurance costs and more litigation.

In a statement, AIA said the declaratory judgment provision of the bill would have “permitted plaintiffs to directly sue a defendant's insurance company to uncover and resolve all issues related to insurance coverage before the plaintiff proved that the defendant owed him anything.”

Paul Margaril, regional manager and counsel for PCI, added that the bill was unnecessary and would have put New York in the “distinct minority of states” that have such declaratory judgment provisions.

Mr. Margaril also said the late-notice provision would have resulted in increased insurance fraud in New York.

Paul Tetrault, NAMIC's state affairs manager for the northeast region, also took issue with the bill's late-notice provision. He said that requiring an insurer to show it had been “materially prejudiced” in order to deny a claim for late notice “creates a heavy, unbalanced and improper burden.”

In vetoing the bill, Gov. Spitzer did not take issue with the bill's content, but rather the manner in which it was passed. His message called the late-notice provision an “important reform,” and the declaratory judgment provision a “commendable goal.” However, he noted, the bill was passed without sufficient feedback from all parties regarding the potential impact of the provisions.

In his veto message he said it was passed within three weeks of introduction and those who were most affected did not have time to respond to it and make their views known to the Legislature. He indicated his interest in revisiting the bill after all interested parties have an opportunity to review and comment on it.

“This bill's dual goals–streamlining litigation and prohibiting the denial of coverage for mere technicalities–are sound, and hopefully we can enact a new bill that accomplishes these important goals in a manner that protects the interests of claimants, policyholders and insurers alike,” he said.

Mr. Margaril said PCI is willing to find a way to address Gov. Spitzer's concerns while also protecting insurers. “Clearly these are issues [Gov. Spitzer] wants to revisit,” he said.

Mr. Margaril added, “We have indicated to the governor that we are very willing to sit down with the insurance department and the administration to try and come up with a bill that would address their concerns while maintaining the ability of the insurer to prevent fraud.”