New York City is unique. More than eight million people live in New York City and it is home to over 800 different languages. It is also the only city in New York state that still requires certain property owners to complete an anti-arson application to purchase property insurance.
The current law
This unique requirement dates to the late 1970s when insurance fraud, because arson activity was on the rise in some major cities. This prompted the state Legislature to pass what would become New York Insurance Law Section 3403. That law requires insureds to complete an anti-arson application if they want their property to be covered from damage caused by fire or explosion.
Under the law, completing the anti-arson application is mandatory for all property insurance policies. It must be completed annually, and failure to complete the application results in the cancellation of the underlying insurance policy. That’s right, forgetting to complete the application means an insured will have his or her policy canceled. Many insureds either forget or simply fail to complete the form in time, forcing the insurance company to cancel the policy. Generally, this is not due to any fraudulent activity by the property owner, but simply an administrative lapse. Failure to complete the anti-arson application results in policy cancellation and higher costs for the policyholder.
The exceptions
Of course, like most laws there are exceptions. The requirement does not apply to owner-occupied real property that contains four dwelling units or fewer and is used for residential purposes predominantly.
Additionally, when the law originally passed it applied only to cities with a population of over 400,000 individuals as of the 1970 census. At the time that only applied to the city of Buffalo and New York City.
Why this law is outdated
In the more than 40 years since the law went into effect much has changed. The need for the anti-arson requirement was made irrelevant by legislation enacted in the 1990s, which required insurers to file fraud-prevention plans with the New York State Department of Financial Services regarding how insurers intend to detect, investigate, and prevent fraudulent insurance activities.
Since then, insurers have engaged in fraud-prevention methods that are far more effective than the application form. Now, the once-useful, anti-arson application has the potential to do more harm than good as the failure to complete the unnecessary application leads to policy cancellations.
What PIANY is doing about it
PIANY supported legislation during the 2017-18 legislative session to raise the population threshold to one million individuals. This legislation was signed into law and it removed Buffalo from the requirement for the anti-arson application.
Since that time, the city of Buffalo has not seen a spike in arson or insurance fraud. In fact, arsons in the city of Buffalo have dropped from 192 in 2017 to 121 in 2021.[1]
Recognizing the need to remove the antiquated anti-arson requirement from New York City, PIANY supports A.2811/S.3547. The legislation, sponsored by Assemblyman Daniel Rosenthal, D-27, and Sen. James Sanders Jr., D-10, which would do just that by completely repealing New York Insurance Section 3403.
[1] https://cde.ucr.cjis.gov/LATEST/webapp/#/pages/explorer/crime/crime-trend
Bradford J. Lachut, Esq.
Bradford J. Lachut, Esq., joined PIA as government affairs counsel for the Government & Industry Affairs Department in 2012 and then, after a four-month leave, he returned to the association in 2018 as director of government & industry affairs responsible for all legal, government relations and insurance industry liaison programs for the five state associations. Prior to PIA, Brad worked as an attorney for Steven J. Baum PC, in Amherst, and as an associate attorney for the law office of James Morris in Buffalo. He also spent time serving as senior manager of government affairs as the Buffalo Niagara Partnership, a chamber of commerce serving the Buffalo, N.Y., region, his hometown. He received his juris doctorate from Buffalo Law School and his Bachelor of Science degree in Government and Politics from Utica College, Utica, N.Y. Brad is an active Mason and Shriner.
