TO: All Members
FROM: Ed Kizenberger

SUBJECT:Allstate/ Geico Lawsuit:

As you may be aware on May 5th the Federal judge ruled in favor of
Allstate and Geico in a lawsuit brought against the New York State Insurance Dept. The suit claimed a portion of the insurance law violated the First Amendment right of free speech.

The judge’s ruling does not affect the state’s ban prohibiting Insurers from requiring repair work be done at a specific shop. As the following circular letter from the Insurance Dept clearly spells out Section 2610(a) of the Insurance law remains in full force.

As insurers may interpret this decision differently the Insurance
Department is clear with it’s directions to the companies that requiring, forcing or coercing a policy holder or claimant into a specific shop is still a violation of New York Insurance law.

There is a definite distinction between blatant steering and
recommending. Consumers retain the right to go to a repair shop of their choice. It will be up to us to document any claim where the consumer is led to believe they must follow any recommendation made by the insurer.

It is up to the State to decide if an appeal will be filed and we are in
contact with the State in regard to any actions they may take.

The circular letter follows:

STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004
Circular Letter No. 16 (2000)
May 10, 2000
TO: All Motor Vehicle Self-insurers and Insurers Licensed to Write Motor Vehicle Physical Damage Insurance in New York State
RE: Application of Section 2610(b) of the Insurance Law.
This is to advise all insurers licensed to write motor vehicle physical damage coverage in New York State of the decision issued by Judge Richard Conway Casey of the United States District Court (Southern District of New York) in the companion cases Allstate Insurance Co. v Serio and GEICO v. Serio on May 4, 2000. These actions challenged the constitutionality of Section 2610(b) of the New York Insurance Law, which prohibited insurers from recommending or suggesting that repairs to a damaged vehicle be made in a particular place or shop unless expressly requested to do so by their insureds.
Judge Casey ruled that Section 2610(b), as applied to Allstate and GEICO, violated the First Amendment of the United States Constitution as an unjustifiable burden on commercial free speech. In both instances, the use of the programs by insureds was voluntary.
It is clear from the decision that the First Amendment protection of
commercial speech would extend to recommendations made by insurers that were not parties to the above-referenced actions. It is equally clear that in the opinion of the court, attempts by the Department to enforce the provisions of Section 2610(b) run afoul of First Amendment protections. Insurers are, therefore, now free to recommend or suggest that repairs to a damaged vehicle be made in particular places or repair shops regardless of whether the
insured expressly requested such recommendations. In all such instances,
insurers are reminded that their insureds retain the right, pursuant to
Section 2610(a) of the Insurance Law, to choose which shop will repair their damaged vehicle. Section 2610(a) remains in full force. In addition, any new programs implemented as a result of this decision remain subject to the requirements of Article 23 of the Insurance Law.
This Circular Letter repeals and supersedes Department Circular Letter No. 4, dated April 7, 1994.
Any questions regarding this Circular Letter should be directed to Lawrence
Fuchsberg at (212) 480-5279.
Very truly yours,
_____________________________
Kevin M. Rampe
Senior Deputy Superintendent
and General Counsel