The office of General Counsel issued the following informal opinion on January 12, 2001, representing the position of the New York State Insurance Department.
Re: N.Y. Ins. Law §5105(a) (McKinney 2000).
Do the No-Fault loss transfer provisions in N.Y. Ins. Law §5105(a) (McKinney 2000), apply to a vehicle weighing 6,500 pounds or less that is owned by a business which uses the vehicle to deliver its product to its customers?
No. The phrase "a motor vehicle used principally for the transportation of persons or properly for hire" refers to vehicles hired to transport people and livery vehicles hired to transport property.
The inquiry was from a company that insures retail florists who deliver their products in their own vehicles to their customers. The vehicles of the florists weigh less than 6500 pounds. Reference was made to the decision in State Farm Automobile Insurance Co. v. Aetna Casualty and Surety Co., 132 A.D. 2d 930, 518 N.Y.S. 2d 263 (4th Dept., 1987), aff'd 71 N.Y.2d 1013, 530 N.Y.S. 2d 106 (Ct. App., 1988) to support the companys belief that N.Y. Ins. Law §5105(a) (McKinney 2000) does not apply to businesses that are transporting their own product to their customers in their own vehicles that weigh less than 6,500 pounds unloaded.
Under the facts presented, the potential right to recover in a loss transfer described in N.Y. Ins. Law §5105 (a) (McKinney 2000) does not arise merely because a vehicle, weighing less than 6,500 pounds unloaded, that is owned by a business which uses the vehicle to deliver its products, is involved in an accident.
N.Y. Ins. Law §5105 (McKinney 2000) addresses what is known as inter-company loss transfer, a process of mandatory arbitration which is available in limited circumstances to no-fault insurers. That statute's subsection (a) restricts an insurer's
... right to recover the amount paid from the insurer of any other covered person to the extent that such other covered person would have been liable, but for the provisions of this article, to pay damages in an action at law. In any case, the right to recover exists only if at least one of the motor vehicles involved is a motor vehicle weighing more than six thousand five
hundred pounds unloaded or is a motor vehicle used principally for the transportation of persons or property for hire....
Accordingly, the statute provides a loss transfer mechanism in instances involving vehicles hired to carry other people's property, not the situation here, where a florist uses its own vehicle to carry its own merchandise.
This "for hire" aspect of N.Y. Ins. Law §5105(a) (McKinney 2000) was clarified by State Farm , supra, at 264, wherein the New York State Supreme Court reversed the Special Term's decision, stating that the lower court's ruling
... that the words 'for hire' modify the words 'persons or property,' would frustrate this purpose ["to limit the right of insurance carriers to recover first party payments"] by permitting a loss transfer claim in almost all cases involving commercial deliveries by an owner of a vehicle. Although the statute is unartfully drafted, we believe that the words 'for hire' modify the word 'vehicle' and that the statute covers only those vehicles hired to transport people, such as taxis and buses, and livery vehicles hired to transport property.
Therefore, based on the facts presented, the florists' vehicles do not require the implementation of the loss transfer mechanism available under the statute. However, a loss transfer situation would arise if such vehicle is involved in an accident with a motor vehicle weighing more than 6,500 pounds or with a motor vehicle used principally for the transportation of persons or property for hire.
For further information you may contact Associate Attorney Jeffrey Stonehill at the New York City Office.