DOS-38-15-00003-A Rules Relating to Insurance and Bond Requirements

12/23/15 N.Y. St. Reg. DOS-38-15-00003-A

NEW YORK STATE REGISTER

VOLUME XXXVII, ISSUE 51

December 23, 2015

RULE MAKING ACTIVITIES

DEPARTMENT OF STATE

NOTICE OF ADOPTION

 

I.D No. DOS-38-15-00003-A

Filing No. 1042

Filing Date. Dec. 08, 2015

Effective Date. Dec. 23, 2015

Rules Relating to Insurance and Bond Requirements

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:

Action taken:

Repeal of section 160.9; and addition of new section 160.9 to Title 19 NYCRR.

Statutory authority:

Executive Law, section 91; General Business Law, sections 402(5) and 404

Subject:

Rules relating to insurance and bond requirements.

Purpose:

To enhance protections to workers by adding new provisions requiring wage coverage.

Text of final rule:

19 NYCRR § 160.9 Bond or liability insurance

(a) An owner must maintain proof of minimum financial security in the following amounts:

(1) for accident and professional liability, at least $25,000 per individual occurrence and $75,000 in the aggregate; and

(2) for payment of wages and remuneration legally due employees who provide nail specialty services pursuant to the following schedule:

(i) if owner employs the equivalent of two to five full time individuals who provide nail specialty services, at least $25,000 or in such other amount as directed by the Secretary;

(ii) if owner employs the equivalent of six to ten full time individuals who provide nail specialty services, at least $40,000 or in such other amount as directed by the Secretary;

(iii) if owner employs the equivalent of 11 to 25 full time individuals who provide nail specialty services, at least $75,000 or in such other amount as directed by the Secretary; or

(iv) if owner employs the equivalent of 26 or more full time individuals who provide nail specialty services, at least $125,000 or in such other amount as directed by the Secretary.

(b) Such proof may be satisfied by purchasing:

(1) accident and professional liability insurance, or general liability insurance; or

(2) a bond with a corporate surety, from a company authorized to do an insurance business in this state, payable in favor of the people of the state of New York; or

(3) any combination of (1) or (2) as provided in this Subdivision provided that the coverage amounts set forth in Subdivision (a) of this Section are satisfied.

(c) Proof of bond and liability insurance coverage, as applicable, must be filed with the Secretary and may be terminated only in accordance with the following provisions:

(1) A bond shall not be cancelled, revoked, or terminated by the owner, nor shall the owner take action that would result in the cancellation, revocation, or termination of such bond, except after notice to, and with the consent of, the Secretary at least forty-five days in advance of such cancellation, revocation, or termination. The bond shall include a provision requiring the surety to provide forty-five days' notice to the Secretary prior to terminating the bond, except in the case of termination for nonpayment of premium in which case such notice shall be provided to the Secretary upon termination.

(2) A liability insurance policy obtained pursuant to this Section shall not be cancelled, revoked, or terminated by the owner, nor shall the owner take action that would result in the cancellation, revocation, or termination of such insurance policy, except after notice to the Secretary at least forty-five days in advance of such cancellation, revocation, or termination, in a form prescribed by the Secretary.

(d) Proof of such bond or liability insurance policy must be maintained on the business premises. Such proof shall be accessible by all employees at all times that the business is open.

Final rule as compared with last published rule:

Nonsubstantive changes were made in section 160.9(b)(2), (c)(1) and (e).

Text of rule and any required statements and analyses may be obtained from:

David Mossberg, NYS Dept. of State, 123 William St., 20th Fl., New York, NY 10038, [phone], email: [e-mail]

Revised Regulatory Impact Statement

Changes made to the text of the last published rule do not necessitate revisions to the previously published Regulatory Impact Statement.

After reviewing the sole public comment and consulting with other agencies as part of Governor Cuomo’s Task Force to Combat Wage Abuse in the Nail Salon Industry, the Department made the following text changes to this rule: 1) amended text to conform to proper terminology used by the Department of Financial Services (“DFS”); 2) amended text to reduce paperwork and notification requirements for surety companies; and 3) amended text to remove references to expired grace periods. These changes do not require a revised Regulatory Impact Statement.

The original rule on this matter required a bond to be obtained from a “business authorized to do business in this state.” DFS has informed the Department that the proper term of art used in the insurance industry is “authorized to do an insurance business in this state.” Giving deference to DFS, the Department changed the text to use the correct terminology. This is a technical change which does not require a revised Regulatory Impact Statement.

The original rule on this matter required 45 days’ notification prior to termination, cancellation or revocation of a bond regardless of the circumstances. The Department received a public comment from the American Insurance Association (“AIA”) which indicated that when a surety intends to terminate a bond for non-payment of premium, the bond is usually renewed in approximately 85% of the time upon notifying the holder to make a payment. The AIA suggested therefore that notification for non-payment of premium be made after termination is effective. The Department considered this recommendation, and found that changing the requirement to notify upon termination for non-payment would reduce paperwork and ease burdens on both the Department as well as surety companies. As this revision merely changes the time requirements for notifications which were otherwise required under the original rule, a revised Regulatory Impact Statement is not needed.

The original rule on this matter, filed on May 18, 2015, was superseded by a similar but different emergency rulemaking on June 10, 2015, the text of which first appeared in the July 1, 2015 edition of the State Register. On September 4, 2015, the Department simultaneously re-adopted the June 10th emergency regulation and proposed the regulation for permanent adoption by filing a Notice of Emergency/Proposed Rulemaking. On October 30, 2015, the Department filed a second emergency re-adoption of the rule that has been in effect since June 10th. The rule text, however, continued to include grace periods to provide businesses sufficient time to come into compliance. The Department has removed such grace period provisions because they have since expired.

The Department finds that the foregoing changes are not substantive and therefore do not require a Revised Regulatory Impact Statement.

Revised Regulatory Flexibility Analysis

Changes made to the text of the last published rule do not necessitate revisions to the previously published Revised Regulatory Flexibility Analysis.

After reviewing the sole public comment and consulting with other agencies as part of Governor Cuomo’s Task Force to Combat Wage Abuse in the Nail Salon Industry, the Department made the following text changes to this rule: 1) amended text to conform to proper terminology used by the Department of Financial Services (“DFS”); 2) amended text to reduce paperwork and notification requirements for surety companies; and 3) amended text to remove references to expired grace periods. These changes do not require a Revised Regulatory Flexibility Analysis.

The original rule on this matter required a bond to be obtained from a “business authorized to do business in this state.” DFS has informed the Department that the proper term of art used in the insurance industry is “authorized to do an insurance business in this state.” Giving deference to DFS, the Department changed the text to use the correct terminology. This is a technical change which does not require a Revised Regulatory Flexibility Analysis.

The original rule on this matter required 45 days’ notification prior to termination, cancellation or revocation of a bond regardless of the circumstances. The Department received a public comment from the American Insurance Association (“AIA”) which indicated that when a surety intends to terminate a bond for non-payment of premium, the bond is usually renewed in approximately 85% of the time upon notifying the holder to make a payment. The AIA suggested therefore that notification for non-payment of premium be made after termination is effective. The Department considered this recommendation, and found that changing the requirement to notify upon termination for non-payment would reduce paperwork and ease burdens on both the Department as well as surety companies. As this revision merely changes the time requirements for notifications which were otherwise required under the original rule, a Revised Regulatory Flexibility Analysis is not needed.

The original rule on this matter, filed on May 18, 2015, was superseded by a similar but different emergency rulemaking on June 10, 2015, the text of which first appeared in the July 1, 2015 edition of the State Register. On September 4, 2015, the Department simultaneously re-adopted the June 10th emergency regulation and proposed the regulation for permanent adoption by filing a Notice of Emergency/Proposed Rulemaking. On October 30, 2015, the Department filed a second emergency re-adoption of the rule that has been in effect since June 10th. The rule text, however, continued to include grace periods to provide businesses sufficient time to come into compliance. The Department has removed such grace period provisions because they have since expired.

The Department finds that the foregoing changes are not substantive and therefore do not require a Revised Regulatory Flexibility Analysis.

Revised Rural Area Flexibility Analysis

Changes made to the text of the last published rule do not necessitate revisions to the previously published Revised Rural Area Flexibility Analysis.

After reviewing the sole public comment and consulting with other agencies as part of Governor Cuomo’s Task Force to Combat Wage Abuse in the Nail Salon Industry, the Department made the following text changes to this rule: 1) amended text to conform to proper terminology used by the Department of Financial Services (“DFS”); 2) amended text to reduce paperwork and notification requirements for surety companies; and 3) amended text to remove references to expired grace periods. These changes do not require a Revised Rural Area Flexibility Analysis.

The original rule on this matter required a bond to be obtained from a “business authorized to do business in this state.” DFS has informed the Department that the proper term of art used in the insurance industry is “authorized to do an insurance business in this state.” Giving deference to DFS, the Department changed the text to use the correct terminology. This is a technical change which does not require a Revised Rural Area Flexibility Analysis.

The original rule on this matter required 45 days’ notification prior to termination, cancellation or revocation of a bond regardless of the circumstances. The Department received a public comment from the American Insurance Association (“AIA”) which indicated that when a surety intends to terminate a bond for non-payment of premium, the bond is usually renewed in approximately 85% of the time upon notifying the holder to make a payment. The AIA suggested therefore that notification for non-payment of premium be made after termination is effective. The Department considered this recommendation, and found that changing the requirement to notify upon termination for non-payment would reduce paperwork and ease burdens on both the Department as well as surety companies. As this revision merely changes the time requirements for notifications which were otherwise required under the original rule, a Revised Rural Area Flexibility Analysis is not needed.

The original rule on this matter, filed on May 18, 2015, was superseded by a similar but different emergency rulemaking on June 10, 2015, the text of which first appeared in the July 1, 2015 edition of the State Register. On September 4, 2015, the Department simultaneously re-adopted the June 10th emergency regulation and proposed the regulation for permanent adoption by filing a Notice of Emergency/Proposed Rulemaking. On October 30, 2015, the Department filed a second emergency re-adoption of the rule that has been in effect since June 10th. The rule text, however, continued to include grace periods to provide businesses sufficient time to come into compliance. The Department has removed such grace period provisions because they have since expired.

The Department finds that the foregoing changes are not substantive and therefore do not require a Revised Rural Area Flexibility Analysis.

Revised Job Impact Statement

Changes made to the text of the last published rule do not necessitate revisions to the previously published Revised Job Impact Statement.

After reviewing the sole public comment and consulting with other agencies as part of Governor Cuomo’s Task Force to Combat Wage Abuse in the Nail Salon Industry, the Department made the following text changes to this rule: 1) amended text to conform to proper terminology used by the Department of Financial Services (“DFS”); 2) amended text to reduce paperwork and notification requirements for surety companies; and 3) amended text to remove references to expired grace periods. These changes do not require a Revised Job Impact Statement.

The original rule on this matter required a bond to be obtained from a “business authorized to do business in this state.” DFS has informed the Department that the proper term of art used in the insurance industry is “authorized to do an insurance business in this state.” Giving deference to DFS, the Department changed the text to use the correct terminology. This is a technical change which does not require a Revised Job Impact Statement.

The original rule on this matter required 45 days’ notification prior to termination, cancellation or revocation of a bond regardless of the circumstances. The Department received a public comment from the American Insurance Association (“AIA”) which indicated that when a surety intends to terminate a bond for non-payment of premium, the bond is usually renewed in approximately 85% of the time upon notifying the holder to make a payment. The AIA suggested therefore that notification for non-payment of premium be made after termination is effective. The Department considered this recommendation, and found that changing the requirement to notify upon termination for non-payment would reduce paperwork and ease burdens on both the Department as well as surety companies. As this revision merely changes the time requirements for notifications which were otherwise required under the original rule, a Revised Job Impact Statement is not needed.

The original rule on this matter, filed on May 18, 2015, was superseded by a similar but different emergency rulemaking on June 10, 2015, the text of which first appeared in the July 1, 2015 edition of the State Register. On September 4, 2015, the Department simultaneously re-adopted the June 10th emergency regulation and proposed the regulation for permanent adoption by filing a Notice of Emergency/Proposed Rulemaking. On October 30, 2015, the Department filed a second emergency re-adoption of the rule that has been in effect since June 10th. The rule text, however, continued to include grace periods to provide businesses sufficient time to come into compliance. The Department has removed such grace period provisions because they have since expired.

The Department finds that the foregoing changes are not substantive and therefore do not require a Revised Job Impact Statement.

Initial Review of Rule

As a rule that requires a RFA, RAFA or JIS, this rule will be initially reviewed in the calendar year 2018, which is no later than the 3rd year after the year in which this rule is being adopted.

Assessment of Public Comment

Since the most recent publication of this rule in the State Register, the Department received 1 comment from the American Insurance Association (“AIA”). The AIA recommended 2 changes to the rule text, one of which the Department agrees with and amended accordingly.

The original rule on this matter required 45 days’ notification prior to termination, cancellation or revocation of a bond regardless of the circumstances. The AIA indicated that when a surety intends to terminate a bond for nonpayment of premium, the bond is usually renewed in approximately 85% of the time upon notifying the holder to make a payment. The AIA suggested therefore that notification for nonpayment of premium be made after termination is effective. The Department considered this recommendation, and found that changing the requirement to notify upon termination for nonpayment would reduce paperwork and ease burdens on both the Department as well as surety companies. This change was therefore incorporated into the final rule.

The second proposal from the AIA was to change the notification for cancellations for any other reason besides nonpayment of premium, to a 15 day notice which could be provided simultaneously to both the insured and the Department. As cancellation for reasons other than nonpayment would generally present itself in instances of fraud or other illegality, the Department believes that 15 days’ notice is insufficient to protect workers. The Department believes that if notification is made that a holder’s policy is being canceled for fraud or other illegality, the Department could commence an investigation into the matter while the policy is still in effect if 45 days’ notice is provided. During that period the Department could potentially take appropriate action to ensure that the license is suspended to prevent operation without a required bond. In order to ensure that sufficient time is available to commence an investigation, this recommendation was not incorporated into the final rule.